An Estimated 13 Percent of Medicaid Beneficiaries Have Private Health Coverage

On the basis of self-reported health coverage information from the Census  Bureau’s annual CPS covering the 2002 through 2004 time period, an  average of 13 percent of respondents who reported having Medicaid  coverage for the entire year also reported having private health coverage  at some time during the same year. Most often, the  source of private health coverage was an employer or union. States Face Problems in Verifying Coverage and in Collecting from Third Parties

Problems states face in ensuring that Medicaid is the payer of last resort  fall into two broad categories: problems verifying whether beneficiaries  have private health coverage and problems collecting payments (or  “paying and chasing”) when such coverage exists. Third-party liability  provisions in the Deficit Reduction Act could help address some of these  problems, although two issues require resolution in order to aid states as  they implement the act. Nevertheless, state officials often  told us, one of the top three problems they faced in ensuring that Medicaid  was the payer of last resort was related to verifying beneficiaries’ other  coverage. For example, the new law adds to the existing list of entities  that may be considered third parties certain entities that were previously  not specifically listed, including “self-insured plans”; “managed care  organizations”; “pharmacy benefit managers”; and “other parties that are,  by statute, contract, or agreement, legally responsible for payment of a  claim for a health care item or service.” In addition, the law requires states  to have in effect laws requiring certain specified entities, as a condition of  doing business in their state, to    provide the state, upon request, with coverage and other data, including  information on the nature of coverage and the periods of time during  which individuals or their spouses or dependents were covered;   accept the states’ right of recovery for services and assignment of a  Medicaid enrollee’s right to payment by those entities or organizations; respond to inquiries by the state regarding a claim for payment submitted  within 3 years after the date a service was provided; and    agree not to deny a claim submitted by the state solely on the basis of the  date of submission of the claim, the type or format of the claim form, or  failure to provide proper documentation at the time of service, as long as  the claim is submitted by the state within 3 years of the service date and  the state enforces its rights with respect to the claim within 6 years of  submitting it. Because the Deficit Reduction Act requires states to have legislation in  effect to implement the new provisions, it is too soon to assess the extent  to which the act will address the problems that states reported to us. Further, we identified two issues that require resolution in order to aid  states in complying with the act’s requirements:    First, the time frame by which states must have their laws in effect is  uncertain because of an apparent inconsistency within the Deficit  Reduction Act concerning the effective date of that provision. With regard to both provisions, in June 2006, CMS officials said that they  were determining how best to help states implement the new  requirements. States have a key role in Medicaid’s successful  administration, including efforts to ensure, as Congress intended, that  Medicaid does not pay for services when other sources of health care  coverage are available. With an estimated 13 percent of Medicaid  beneficiaries having private health coverage available to them, significant  savings can accrue to both the federal government and the states when  states are able to avoid costs and recover payments from liable third  parties. In addition, CPS underreports Medicaid coverage  compared with enrollment and participation data from the Centers for  Medicare & Medicaid Services.
Why GAO Did This Study

Medicaid, jointly funded by the federal government and the states, finances health care for about 56 million low-income people at an estimated total cost of about $298 billion in fiscal year 2004. Congress intended Medicaid to be the payer of last resort: if Medicaid beneficiaries have another source of health care coverage--such as private health insurance or a health plan purchased individually or provided through an employer--that source, to the extent of its liability, should pay before Medicaid does. This concept is referred to as "third-party liability." When such coverage is used, savings accrue to the federal government and the states. Using data from the U.S. Census Bureau and the states, GAO examined (1) the extent to which Medicaid beneficiaries have private health coverage and (2) problems states face in ensuring that Medicaid is the payer of last resort, including the extent to which the Deficit Reduction Act of 2005 may help address these problems.

What GAO Found

On the basis of self-reported health coverage information from the Census Bureau's annual Current Population Surveys covering the 2002 through 2004 time period, an average of 13 percent of respondents who reported having Medicaid coverage for the entire year also reported having private health coverage at some time during the same year. This coverage most often was obtained through employment rather than purchased by individuals directly from an insurer: employment-based coverage averaged 11 percent nationwide, while individual coverage averaged 2 percent. Problems states have faced in ensuring that Medicaid is the payer of last resort fall into two general categories: verifying Medicaid beneficiaries' private health coverage and collecting payments from third parties. Officials from 27 of 39 states responding to GAO's request for information about the top three problems they faced reported problems in verifying beneficiaries' private health coverage--a key step states must take to avoid paying claims for which a third party is liable. In cases where states have paid claims before identifying that other coverage was available, states must seek payment for the claims they have already paid. Officials from 35 responding states had problems collecting such payments. Provisions in the Deficit Reduction Act of 2005 require states to have laws in effect that could help address some of the reported problems, but it is too soon to assess the extent to which the problems will be addressed. Further, GAO identified two issues that require resolution in order to aid states in complying with the Deficit Reduction Act's requirements, specifically, (1) the time frame by which states must have their laws in effect, and (2) which entities are subject to certain of the act's requirements. Regarding both issues, officials from the Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, said in June 2006 that they were considering how to interpret the law and how to best provide guidance to states to help them implement the requirements.