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to the difficulties in understanding and implementing the changes, CMS has issued inconsistent guidance and offers only outdated policy manuals that offer no assistance in implementing the changes (GAO Report, GAO-19-601, August 9, 2019).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.

States encouraged to maintain health benefits for temporary census workers

The Acting Director of the Center for Medicaid and CHIP Services (CMCS) encouraged states, to the extent permitted under the law, to exclude temporary income from employment in the 2020 Decennial Census when determining eligibility for public benefit programs. A new bulletin provides guidance on existing flexibility under state plans for modified adjusted gross income (MAGI) based systems and non-MAGI based systems. This includes the option of submitting a state plan amendment (SPA) to CMS (CMCS Bulletin, July 3, 2019).

Census workers and health benefits

The Census provides low-income individuals with an opportunity for employment and skills training. Many of these workers are eligible for Medicaid or in a household with Medicaid or CHIP eligible individuals. One element of successful recruiting efforts by the Census Board is ensuring the continued availability for Medicaid and CHIP coverage for workers and their families. During previous censuses, state Medicaid and CHIP agencies have been encouraged to ensure that temporary census workers and their families do not lose eligibility due to temporary census income. Previously, states were able to disregard temporary census income for all Medicaid and CHIP eligibility groups, but a move to a MAGI-based methodology no longer permits the use of income disregards. The bulletin describes existing authorities that may be used to exclude or minimize the impact from temporary census employment.

Existing State Plan Options

Under section 1902(e)(14)(D) of the Social Security Act, for non-MAGI populations, states may disregard in whole or in part, temporary census income and many states have already elected to disregard temporary census income for multiple eligibility groups in their state plan. States wishing to apply disregards of temporary census income for the first time or wish to add or modify the non-MAGI groups affected must submit an SPA to CMS.

Under MAGI-based methodologies, temporary census income is taxable as employment income and Medicaid and CHIP regulations prohibits the use of income disregards and this prohibition cannot be waived. States may elect under 42 C.F.R. §435.603(h)(3) to use a reasonable method for determining a prorated portion of reasonably predictable changes (RPC) to income as they do for fluctuating income such as from seasonal work or self-employment. States with approved RPC methodology for seasonal work may include temporary census income within its scope such that a new SPA submission would not be necessary. States that do not have an existing state plan authority to implement an RPC methodology may elect to do so through an SPA, although the methodology cannot be limited only to temporary census income.

Parents and Other Caretaker Relatives may retain specific coverage protections due to increased earned income through Transitional Medical Assistance (TMA). TMA is a required eligibility protection that states must apply, even under increased earnings due to temporary census employment. If census employment income triggers a transition to TMA, the Medicaid agency would redetermine the individual’s eligibility when census employment ends.

CMS is offering technical assistance on the options and requirements included in the informational bulletin as well as assistance on submitting the required state plan amendments.

Personal service care fraud; a growing problem for Medicaid

Medicaid personal care service (PCS) fraud cases made up a “substantial and growing” portion of cases investigated by the Medicaid Fraud Control Units (MCFUs) and greater oversight is recommended by the HHS Office of the Inspector General (OIG). In a report covering the PCS work of MFCUs over fiscal years 2012-2015, the OIG found that these cases comprised over 12 percent of the total investigations and accounted for 34 percent of the convictions (OIG Report, OEI-12-16-00500, December 6, 2017).

Background

Personal care services are those services that support consist daily living activities, including bathing and dressing, meal preparation, and transportation. PCS providers assist the elderly, people with disabilities, and individuals with chronic or temporary health conditions, allowing these persons to remain living in their homes and communities. PCS are typically delivered through either an agency-directed PCS or a self-directed PCS, through which beneficiaries hire and supervise their own provider. PCS are offered either as an optional benefit through a Medicaid State plan or through demonstration projects and waiver programs. States are required to develop their requirement and qualification standards for PCS providers, resulting in widely varying requirements across the country.

Growing percentage

The OIG found that during the three-year review period, PCS fraud cases made up a substantial and increasing number of MFCU cases and outcomes. In FY 2015, such cases made up 12 percent of total investigations and over the review period, they made up 38 percent of indictments, and 34 percent of convictions. Furthermore, during the review period, indictments increased 56 percent and convictions increased 33 percent. Payments to PCS providers represented $13 billion out of $524 billion total Medicaid expenditures during FY 2015.

Recommendations and challenges

MCFUs have recommended that State Medicaid either enroll PCS attendants as Medicaid providers, or include PCS attendants in a provider registry. This would allow for the assignment of unique provider identification number to PCS attendants to include on claims for reimbursement. Some form of enrollment or registration is needed, as the inability to identify individual PCS attendants restricts the ability to identify fraudulent providers. MCFUs have suggested that enrolling PCS attendants in Medicaid would better inform them about Medicaid procedures and requirements.

MCFUs have also recommended the use of background checks for attendants. They found that the current, minimal, background check requirements could put vulnerable beneficiaries at risk. For example, a PCS attendant in Arizona pleaded guilty to theft and financial exploitation of a vulnerable adult, after having stolen checkbooks, cash, credit cards, and personal items belonging to the beneficiaries. The PCS agency checked for felony arrests and found none; the attendant had, however, numerous misdemeanor convictions and had previously lost her nursing assistant license.

The MCFUs have also recommended using additional documentation requirements, such as requiring require PCS attendants to provide detailed or standardized timesheets and to show the start and stop times for the services. The currently minimal PCS documentation means that PCS claims data may not contain the identity of the PCS attendant, the number of hours worked, or the time of day during which the services were provided.

Lastly, the MCFUs recommended that State Medicaid agencies implement a variety of controls regarding oversight of PCS providers and their services. These controls include more frequent in-home supervisory visits, training for PCS attendants and cross-reference attendant and beneficiary location. For a variety of reasons, beneficiaries may be reluctant to report abuses and more frequent in-home visits could curtail fraud.

Funding issues

The units reported that their efforts to protect beneficiaries are hamstrung by their ineligibility to receive Federal funding to investigate and prosecute complaints in nonfacility settings. Such complaints are often referred to other agencies. Those agencies often do not receive the same level of training on patient abuse and neglect that MCFU staff receives and may have severely strained resources.

Conclusions

The report found that the volume and increase of MFCU investigations and prosecutions indicates that PCS remain vulnerable to fraud. The report noted that the recommendations are similar to those made in previous reports and states that it is crucial that federal funding authority be expanded to allow MFCUs to investigate and prosecute cases of patient abuse and neglect in nonfacility settings.

States try to manage expectations for Medicaid managed care

When CMS updated regulations regarding Medicaid managed care in May 2016, it was the first significant update to these regulations since 2002. Over the past year, as speakers at the American Health Lawyers’ Association Institute on Medicare and Medicaid Payment on March 29, 2017, noted, states have started the multi-year process of complying with the new rules, while dealing with resources issues at the state level and political change in Washington, D.C.

About 80 percent of the 73 million Medicaid enrollees are in some kind of managed care program, according to Lindsey Browning with the National Association of Medicaid Directors. Thirty-nine states and the District of Columbia have contracted with managed care entities to deliver care to all or some of their Medicaid beneficiaries.

Four options

Prior to the issuance of the revised regulations (81 FR 27498, May 6, 2016) states had basically one option for putting a managed care plan in place—requesting a Medicaid state plan amendment from HHS. Under the revised regulations states now have four options to implement managed care waivers under various provisions of the Social Security Act: (1) a Sec. 1932 state plan waiver; (2) a Sec. 1915(a) waiver (waiving competitive procurement process); (3) a Sec. 1915(b) waiver, requiring all enrollees, including dual eligibles and children with special health care needs to enroll in managed care; and (4) a Sec. 1115 waiver (which may permit coverage of services not otherwise covered in Medicaid) (see CMS modernizes Medicaid managed care, Health Law Daily, May 6, 2016).

James Golden, director, Division of Managed Care Plans at CMS, noted that full implementation of the revised regulations will take three to five years, and that the key to success is how well states work with affected stakeholders—both managed care entities and beneficiaries. “CMS expects the states to take the lead in setting standards,” Golden said.

State challenges

Browning highlighted two key challenges that states face – setting up adequate networks of providers so managed care beneficiaries can actually access health care; and limited staff capacity to drive expansion of Medicaid managed care alongside a number of other Medicaid related regulations.

Impact of new administration

A further complication, Browning noted, is the new Trump Administration and new leadership for HHS and CMS. She noted that the new CMS Administrator, Seema Verma, indicated an interest in re-examining all recent rules related to Medicare and Medicaid during her confirmation hearing. Browning also pointed to the Executive Order issued by President Trump which requires all agencies to create a Task Force to review existing regulations with the goal of repealing many of them. Browning noted that both Verma and HHS Secretary Tom Price are interested in increased state flexibility around health programs.

In addition, Browning said that any changes to the Affordable Care Act (ACA) (P.L. 111-148) may impact the new Medicaid managed care regulations, for example, she noted that a key goal of the managed care rule was alignment with qualified health plan requirements under the ACA. Would this change if the ACA’s health insurance Exchanges are eliminated? Finally, she said that any structural changes to Medicaid would likely require revised managed care rules.