Medicaid - The Payer of Last Resort

Why Medicaid is Billed Last

doctor checking patient's blood pressure
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Medicaid is a jointly funded state and federal program that helps with the medical costs of individuals with limited income. Medicaid recipients include adults with low income, children, and individuals with certain types of disabilities. While many individuals who receive Medicaid benefits do not have any other insurance, there are those who have another insurance payer, such as employer-sponsored insurance or Medicare, in addition to Medicaid.

If another payer exists, then Medicaid is always the payer of last resort. This simply means that Medicaid always pays last when other insurance is present. This is also called third party liability (TPL), with the other payer being the third party that is liable for the coverage. The other two parties are the patient and Medicaid.

Primary Insurance - Third Party Liability and Medicaid

A medical office or other health care provider may bill Medicaid for reimbursement for services. This can result in a denial returned to the provider advising them to bill the primary insurance. This happens because Medicaid has on file that the recipient has other insurance.

Recipients are required to keep Medicaid informed of any health insurance information. Providers are also responsible for notifying Medicaid of third party insurance they find out about, as well as informing Medicaid of any third party payments they receive on behalf of the recipient.

For example, a doctor's office asks a patient on each visit to list the health insurance providers who can cover their claim. If the patient responds that they have signed up with Acme Health Care, this is reportable to Medicaid. The doctor's office should send the claim to Acme and not to Medicaid.

State Medicaid agencies are required to reject claims wherever third party liability exists if they receive a claim without documentation of the primary insurance payment. Additional insurance coverage is not just limited to Medicare and health insurance. It also refers to liability insurance due to motor vehicle accidents and work-related injuries or illness.

Medicaid Payments with Third Party Liability

In instances that third party liability exists, if the Medicaid allowed amount for the service provided is greater than the third party payment, Medicaid will pay the difference up to Medicaid's allowed amount. However, in instances that the third party payment is more than what Medicaid allows, Medicaid makes a "zero payment". This means that the provider must accept the primary insurance payment as payment in full and cannot balance bill the patient.

For example, the Medicaid allowed amount for a procedure is $500. If the third party insurer only pays $400, Medicaid will pay the remaining $100. However, if the third party pays $500 or more, Medicaid will make a zero payment. This amount would otherwise have to come out of the pocket of the patient.

Denials Can Still Occur

It is important to keep in mind that Medicaid is not an insurer.

Medicaid is a program that makes medical payments on behalf of the recipient. If the provider or recipient fail to comply with any health insurance requirements that results in a denied payment, Medicaid can deny also due to noncompliance.

Medicaid is state-regulated. Therefore, each state has its own billing requirements. Billers must contact the Medicaid program in their own state to find out specific billing information.

Note that Medicaid was expanded under the Affordable Care Act, changing eligibility requirements and the amount of funding each state receives. However, as of 2016, there were still 19 states that opted out of this expansion.

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