Third-party liability (TPL) — the legal obligation of third parties, including commercial insurers, Tricare and Medicare, to pay part or all of the costs for medical assistance primary to Medicaid — is vital to the sustainability of the nation’s safety net program. Preserving Medicaid dollars has never been more critical than in today’s pandemic crisis, in which millions are unemployed, uninsured and more concerned than ever for the health of themselves and their loved ones.
Equally, the challenges of coordinating benefits and maintaining program integrity have never been greater. At the provider level, patient volume and capacity issues are being exacerbated by a flood of coding, billing and regulatory changes while resources are strained. States are facing surging Medicaid enrollment despite a massive decline in the tax revenue that funds it. And this all comes as coverage is changing for many Americans, who, following loss of employment, are turning to the safety net or health insurance marketplace.
The following are some of the key areas in which states and healthcare organizations may be vulnerable to TPL errors and improper payments as well as strategies to help protect Medicaid as the payer of last resort.
1. Telehealth Expansion & Relaxed Regulations
In the early days of the pandemic, the Centers for Medicare and Medicaid Services (CMS) expanded telehealth coverage to help mitigate the spread of COVID-19 and protect vulnerable consumers. To facilitate the effort, CMS also relaxed several regulatory guidelines, including those governing the enrollment of out-of-state providers — specifically, that providers must be licensed in the state in which they are providing services.
The sudden expansion of, and surge in demand for, telehealth has in itself led to concerns about fraud, waste and abuse. Notably, the emergency rule promoting the use of out-of-state providers could have significant TPL implications resulting in a higher occurrence of improper payments. At both the organization and policy level, there must be adequate controls in place to ensure that all liable parties pay primary to Medicaid, regardless of whether a provider is out of state or out of network.
2. Mass Unemployment Driving Loss of Third-Party Coverage
Estimates for how many Americans will have lost employer-sponsored insurance due to COVID-19 vary as the pandemic continues to unfold. A new study from the non-partisan healthcare consumer advocacy group Families USA found that, between February and May 2020, 5.4 million laid-off workers lost their insurance. The Urban Institute projects that by December 2020, that number could exceed 10 million.
With the loss of employer-sponsored or other third-party coverage comes the loss of TPL and, ultimately, cost shifting to the Medicaid program. To help deflect these long-term costs, Medicaid would be well-served to facilitate COBRA coverage through premium assistance.
Identifying high-cost members who currently have access to third-party coverage and monitoring for coverage terminations enables Medicaid to proactively buy into members’ COBRA premiums as a cost avoidance measure.
3. Rise of Provider Sub-Capitation
Today’s providers are facing unprecedented financial challenges, with costs rising due to an influx of COVID-19 patients and revenues falling as a result of delayed or foregone elective procedures. This may lead to an increase in sub-capitation, or a fixed, all-inclusive fee as a means of helping hard-hit providers maintain revenue predictability, versus being dependent on fee-for-service consumption. Having a robust surveillance and TPL program in place to monitor and respond to these market changes will be critical to containing healthcare costs through today’s crisis and in its aftermath. This includes an experienced partner, but also fair and reasonable policies that govern the TPL amount when providers are sub-capitated.
Innovative, Yet Practical TPL Strategies
COVID-19 highlights the need to both innovate and advocate for policy, programmatic and operational solutions that address the unique challenges of today. In a high demand, low revenue environment, healthcare organizations must be able to frequently capture complete eligibility information from liable parties in order to prohibit unnecessary denials, ensure prompt payment of TPL claims, restrict carrier refunds and, ultimately, maximize Medicaid dollars.
HMS is actively developing solutions that address the widespread health and economic impact of the pandemic, while advocating for policies that protect the integrity of the nation’s healthcare system. We are exploring these areas and more in our Post-COVID-19 Healthcare Cost Containment series. Access our previous blog, Containing Healthcare Costs in the Age of COVID-19, here, and follow our blog to read more.