Medicaid third-party liability changes a challenge for states

The U.S. Government Accountability Office (GAO) conducted a study to see the progress states have made in implementing the changes in third-party liability requirements since the Bipartisan Budget Act of 2018 was passed. The GAO found that the states are unclear on how to collect the required information, update their data systems, and implement the new policies. Adding to the difficulties in understanding and implementing the changes, CMS has issued inconsistent guidance and offers only outdated policy manuals that offer no assistance in implementing the changes (GAO Report, GAO-19-601, August 9, 2019).

Bipartisan Budget Act of 2018

Federal law requires states ensure that Medicaid is the payer of last resort by taking steps to identify Medicaid beneficiaries’ other potential sources of health coverage and their legal liability. The Bipartisan Budget Act of 2018 modified the required processes states must follow when paying claims with probable third-party liability for three types of services. Under the amended statute, states must apply cost avoidance procedures to claims for prenatal care services and pregnancy-related services when it is apparent that a third party is or may be liable at the time the claim is filed. Additionally, states are no longer required to pay claims for pediatric preventative services immediately and may instead require the provider to submit the claim to the third party and wait 90 days (wait-and-see period) for payment before seeking Medicaid payment. Finally, states must make payment for a child support enforcement (CSE) beneficiary’s claim if the third party has not paid the provider’s claim within a 100-day wait-and-see period.

State concerns

According to state officials, several changes to administrative tasks and the Medicaid Management Information System (MMIS) needed to be undertaken to implement the new third-party liability changes and some required research and discussion about the best methods to make these changes. Officials noted that they would need to identify the correct codes in their data systems, establish some sort of indicators in their system to identify which claims were for CSE beneficiaries or had been billed to a third party and when. Some of this additional information would require a data sharing agreement with the state entity maintaining the CSE information while other information would require providers to track down insurance information from a non-custodial parent. Some officials expressed concern that the system changes may require new hardware and system modifications and may make it difficult or impossible to implement the changes, while others discussed waiting for the new MMIS that they were already working to roll out in the future. There were also concerns that the technology changes and the increased administrative work may make the changes not cost-effective to implement.

Stakeholder concerns

Stakeholders were concerned that obtaining accurate information on third-party liability sources for Medicaid beneficiaries and resubmitting claims that result from incorrect or outdated information can be resource intensive and time consuming. Medicaid beneficiaries may be unaware or may not disclose other insurance policies, especially when there are multiple policies by custodial and non-custodial parents or transitions in insurance following birth. Some stakeholders were concerned that rural-based providers may not have the resources to deal with the increased administrative work and delays in payment for services that could result from the payment changes. This may lead some providers to be less willing to serve Medicaid beneficiaries, which would potentially reduce access to care or delay time-sensitive services for children and pregnant women. Some providers may also seek to identify sources of third-party liability before providing services to beneficiaries, which would also delay access to care.

Recommendations

Many states expressed the need for further guidance from CMS on how to implement some of these changes, however, the GAO noted that CMS has issued guidance that is inconsistent with the federal laws and some CMS guidance documents are out of date and not a reliable source of information for states to use in implementing the new requirements. Therefore, the GAO recommended that CMS ensure the agency’s Medicaid third-party liability guidance is consistent with federal law.

The GAO found that CMS has not taken steps to determine the extent to which state Medicaid agencies are meeting the new requirements and indicated that they expect states to comply and will not verify unless the agency is made aware of non-compliance. The GAO recommended that CMS determine the extent to which state programs are meeting federal third-party liability requirements and take actions to ensure compliance where appropriate.

State systems to track availability of psychiatric hospital beds vary

Recognizing the critical need for inpatient hospital and residential mental health and substance use disorder treatment settings, the HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) has released a report that examines how states make information on open beds available to consumers, the impact of effect that inpatient bed tracking has on patient access, and the challenges that remain with inpatient bed tracking systems. The researchers concluded that among the 17 states that track availability of psychiatric hospital beds, only five states allow for public access. In some states, systems to track the availability of psychiatric hospital beds have been challenged by the reluctance of hospitals to update information on open beds frequently enough to be useful given rapid patient turnover (ASPE Report, August 2019).

Need for inpatient bed tracking

ASPE conducted a study to examine how states make information on open beds available to consumers, the impact of effect that inpatient bed tracking had on patient access, and the challenges that remain with inpatient bed tracking systems. Inpatient hospital and residential mental health and substance use disorder (SUD) treatment settings are a critical component of behavioral health services care. Patients may require an inpatient hospital stay when they experience a psychiatric or SUD emergency, pose a threat to themselves or others, and need 24-hour medical monitoring and treatment. In the absence of a bed registry, emergency room staff, patients, or other providers must call multiple hospitals or residential settings to determine if there is a slot available that would be appropriate given the patient’s needs. This results in long waits in emergency departments.

Systems to track openings

The researchers conducted an environmental scan by identifying states that have systems to track openings in behavioral health treatment settings, such as hospital psychiatric beds and residential treatment beds. The study found among the 17 states that tracked this information, only five states allowed public access. The other 12 states kept the information about bed availability behind a firewall and only available to providers. The researchers found significant variation among states in how the registries were operating, the types of behavioral health providers they included, and perceptions of their usefulness. In some states, systems to track the availability of psychiatric hospital beds have been challenged by the reluctance of hospitals to update information on open beds frequently enough to be useful given rapid patient turnover.

Emergency department staff noted that the system does not negate the need for them to call hospitals to confirm that there is still an open bed that is appropriate for the patient’s needs and that relationships among hospitals and emergency departments and other crisis system staff may be more efficient than using the bed registries. However, some states reported that the registries were very helpful in locating open beds as well as in documenting the need for additional psychiatric beds.

Registries that post available openings in SUD residential, detoxification, and other non-hospital-based systems are less common than hospital bed registries. Connecticut has a publicly-facing registry that indicates openings in SUD treatment settings. Interviewees reported that patients with SUDs and providers like the system and find it useful. However, more effort is needed to make patients and family members aware of the system.

Future research

There have been no formal evaluations of the effect of bed registries on access to care. The report concluded that future research could help improve understanding of the characteristics and processes that make the bed registries most useful. Some avenues to explore include: (1) how financial, regulatory, contractual, and policy levers can be used to encourage participation in bed registry systems; (2) how many consumers are using the public registries and how to increase their usage; (3) whether technology can substitute for human data entry to track available treatment beds; and (4) whether registries reduce the time and effort required to locate an appropriate inpatient or residential bed.

Annual report to HHS for improving Medicare, Medicaid, and related services

HHS should undertake steps to (1) guard against fraud, waste, and abuse, (2) help beneficiaries and providers, and (3) implement better payment policies, according to the Office of Inspector General’s (OIG) annual report on the top unimplemented recommendations from the previous year. While the report ranged far and wide in its recommendations, including a suggestion to the FDA to improve food safety inspections, the bulk of the report was dedicated to addressing fraud, waste, and abuse in Medicare and Medicaid (OIG Report, July 22, 2019).

Background

Each year, the OIG creates a report that focuses on what it contends are the top recommendations for improvement in HHS programs that were not implemented over the past year. This report offers suggestions to both HHS and the FDA on where they should direct their reform efforts for maximum benefit.

The OIG made the following recommendation pertaining to fraud, waste, and abuse.

Inpatient rehab facilities 

In 2013, Medicare paid $5.7 billion to inpatient rehabilitation facilities (IRF) for care to beneficiaries that was not reasonable and necessary. The errors, the OIG said, were due in part to the fact that the payments to the IRFs were not properly aligned with the costs. The current system gives the IRFs a financial incentive to admit patients inappropriately. CMS is apparently evaluating the payment system, which includes a recently issued final year 2019 IRF prospective payment system final rule to update policies and payment rates for fiscal year 2019.

‘Least costly alternative’ Part B drugs

If the least costly alternative requirement had not been rescinded for Part B drugs, Medicare would have saved $33.3 million in one year ($264.6 to $231.3 million). Once the requirement was removed, utilization patterns shifted dramatically in favor of costlier products.

Part D drug oversight

Medicare Part D spending on compounded topical drugs soared from $13.2 million in 2010 to $232.5 million in 2016. Questionable billing practices seem to be concentrated in a few metropolitan areas. OIG has identified prescribers with troubling order patterns. States are hamstrung in their ability to prevent drug overpayments. State agencies need to know the 340B ceiling prices and which Medicaid claims are associated with 340B drugs to ensure that the claims are paid correctly.

Managed care organization improvements

OIG believes that a significant amount of underreporting of fraud and abuse is occurring in Medicaid involving managed care organizations. For example, even where a managed care organization discovers fraud or abuse, OIG says that it will handle the situation by itself (terminating the contract) rather than report it to CMS. CMS must do more to ensure that the organizations identify and refer fraud and abuse to the state.

Help beneficiaries and providers

In addition, the OIG recommended that CMS analyze the impact of counting time as an outpatient toward the 3-night requirement for skilled nursing facility services (SNF). Beneficiaries with similar post-hospital care needs have different access to SNF services depending upon whether they were outpatients or inpatients because of the requirement that the beneficiary spend at least three nights as an inpatient to obtain post-hospital SNF Medicare coverage. Furthermore, CMS paid an estimated $84.2 million in improper payments between 2013 and 2015 because SNFs incorrectly determined whether the 3-night requirement was met. CMS should consider changes to make the system fairer, which could include counting time as an outpatient.

FDA

The OIG had a single recommendation for the FDA, noting that deficiencies exist in the FDA’s electronic recall data system. The FDA relies too much on voluntary corrections by facilities. Just over half the facilities that were inspected and should have received warning letters actually received warning letters. The FDA also frequently fails to conduct timely follow-up inspections to ensure compliance. The OIG suggested that the FDA act to address these shortcomings.

Court imposes 10-month deadline for pre-market tobacco applications

A federal district court in Maryland has set a deadline of 10 months for tobacco product manufacturers to submit pre-market applications and a one year deadline for FDA approval. The court previously concluded that the FDA violated the Administrative Procedure Act (APA) when it released guidance in 2017 extending the compliance deadline for the “Deeming Rule” which brought new tobacco products under the purview of the Family Smoking Prevention and Tobacco Control Act. Rather than remanding the issue to the FDA to determine a timeline for compliance or accepting the plaintiffs’ request of a four-month deadline for applications, the court accepted the FDA’s recommendation of a 10-month deadline. The court found that it has the authority to impose such a deadline under the extraordinary circumstances of the case, in which prompt action is necessary to combat the public health crisis caused by the rise in youth e-cigarette use (American Academy of Pediatrics v. FDA, July 12, 2019, Grimm, P.).

FDA tobacco rule compliance extensions

On May 10, 2016, the FDA issued the “Deeming Rule,” bringing approximately 25,000 new tobacco products, including various cigars, e-cigarettes, pipe tobacco products, and hookah within the purview of the Family Smoking Prevention and Tobacco Control Act. The Deeming Rule went into effect 90 days after its publication (see FDA clears the air, ‘deems’ e-cigarettes, hookah tobacco, cigars worthy of regulation, Health Law Daily, May 10, 2016). In May 2017, the FDA extended the compliance deadline by three months. In August 2017, the FDA extended the timelines to submit tobacco product review applications for deemed tobacco products that were on the market as of August 2016. In May 2019, the district court ruled that the FDA’s August 2017 compliance deadline extension violated the Administrative Procedure Act, as it was done without following notice and comment requirements. The court vacated the August 2017 Guidance and asked the parties to brief the court on potential remedies, given that the application deadlines in the Deeming Rule and May 2017 Guidance had passed.

Remedy

The court concluded that the case presented “extraordinary circumstances” that called for more than simply vacating the guidance and remanding the issue to the FDA (as was requested by manufacturers). It imposed a 10-month deadline for submissions and a one-year deadline for approvals, as suggested by the FDA. The plaintiffs had requested a four-month deadline for submissions, but the court rejected that solution because of the record from the FDA demonstrating that a four-month deadline would prevent them from timely approving or denying applications and could clear the market of e-cigarette products, thus creating a risk that adult smokers would switch from e-cigarettes to combustible tobacco products. The FDA also presented evidence that it plans to accelerate the premarket review requirements for the products that are most attractive to youth, such as flavored products.

The court concluded that without a deadline for filing, manufacturers would be unlikely to move forward with applications, because the record showed a purposeful avoidance by the industry of complying with the premarket requirements despite entreaties from the FDA that it can do so, and it establishes a shockingly low rate of filings.