Coordination of Benefitsand Third Party Liability(COB/TPL)In Medicaid2020

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AcknowledgmentThe COB/TPL Handbook was completed by the COB/TPL Team in the Division of Health Homes,PACE, and COB/TPL (DHPC), Disabled and Elderly Health Programs Group (DEHPG), Center forMedicaid and CHIP Services, with technical support and assistance provided by Manatt, Phelps,& Phillips, LLP, under contract with Mathematica Policy Research, Inc. Members of theCOB/TPL Team were Nancy Dieter, Technical Director; Barry Levin (2014), Cathy Sturgill, andGinger Boscas (2015 - ), Health Insurance Specialists. The COB/TPL Handbook was developed atthe direction of Nancy Klimon, Former Director, and Carrie Smith, Director, DHPC (2015 - 2019).The COB/TPL Handbook was revised in 2020 at the direction of former Director, Carrie Smith,and Mary Pat Farkas, Director, by the COB/TPL team in the DHPC, DEHPG, CMCS. Members ofthe COB/TPL team Cathy Sturgill, Technical Director; Ginger Boscas, Sara Rhoades (2016 2020), Trista Chester (2017 - ), Andrea Ormiston (2020 - ), Health Insurance Specialists.3

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ABOUT THIS HANDBOOK1. Purpose: The purpose of the Handbook is to provide an overview of COB/TPL policy on avariety of individual subjects.2. Intended Audience: The Handbook is intended for CMS Central Office (CO) and RegionalOffice (RO) staff working on COB/TPL issues, state Medicaid agency staff, and all otherparties interested in Medicaid COB/TPL policies.3. Content: The Handbook contains policy guidance on a variety of COB/TPL topics that iscurrent at the time of publication.An Acronyms and Abbreviations list is included immediately after this summary.TIP: Acronyms will appear in the Handbook as blue, underlined text. Position the cursor overthe acronym and the full term will be displayed.4. Updates: Changes to the Handbook may only be made by CMS CO COB/TPL Team staff.Requests for changes to current information, or addition of information to address newtopics should be forwarded to the Centers for Medicare & Medicaid Services, 7500 SecurityBlvd., Mail Stop S2-16-25, Baltimore, MD 21244, Attn: Technical Director (TD) forCOB/TPL/DHPC/DEHPG/CMCS.5. Organization of the Handbook:a. Chapters are major subject groupings and are designated with Roman numerals.b. Sections discuss major topics within chapters and are designated with capitalletters.c. Subsections discuss single topics within sections and are designated with numbers.d. Divisions discuss single topics within subsections and are designated with lowercase letters.e. The Table of Contents lists chapters, sections, subsections, and divisions, with pagenumbers.f. The Index lists all topics in alphabetical order, with location identified by chapter,section, subsection, and division references.g. A Reference section located at the back of the Handbook includes lists of statutesand regulations.5

h. An Appendix located at the back of the Handbook includes COB/TPL trainingpresentations.TIP: Topics in the Handbook can be accessed quickly from the Table of Contents.Position the cursor over the topic and press Ctrl Click to move directly to the topic.6. Questions about format or content of the Handbook should be directed to the TD forCOB/TPL.6

ACRONYMS AND ABBREVIATIONSAcronym(the) ERSDEHPGDHPCDMEPDHHSDMEPOSDODDRA of SMSPOAAOBRA 93OCSEPACEPBMQDWIAbbreviationSocial Security ActAmerican Indian/Alaska NativeAssignment of RightsBipartisan Budget ActChildren and Adults Health Programs Group, CMCS/CMSCode of Federal RegulationsChildren’s Health Insurance ProgramCenter for Medicaid & CHIP ServicesCenters for Medicare & Medicaid Services(CMS) Central OfficeCoordination of BenefitsCoordination of Benefits/Third Party LiabilityDivision of Eligibility and Enrollment (formerly DEEO, Division of Eligibility,Enrollment, and Outreach) (CAHPG)Defense Eligibility Enrollment Reporting SystemDefense Eligibility Enrollment Reporting SystemDivision of Health Homes, PACE, and COB/TPL (DEHPG)Division of Medicaid Eligibility Programs (formerly DEE, CAHPG)Department of Health and Human ServicesDurable Medical Equipment, Prosthetics, Orthotics, and SuppliesDepartment of DefenseDeficit Reduction Act of 2005Division of State Systems GroupEarly and Periodic Screening, Diagnosis and Treatment(Medicare) Full Benefit Dual EligibleFederal Emergency Management AgencyFederal Medical Assistance PercentageFederal Financial ParticipationFederal Poverty LevelIntermediate Care Facility/Individuals with Intellectual DisabilitiesIndian Health ServiceModified Adjusted Gross IncomeManaged Care OrganizationMedicaid Management Information SystemMedicare Savings ProgramOlder Americans ActOmnibus Budget Reconciliation Act of 1993Office of Child Support EnforcementProgram of All Inclusive Care for the ElderlyPharmacy Benefit Manager(Medicare) Qualified Disabled and Working Individual7

AcronymQIQMBQMB OnlyRAROSLMBSLMB OnlySMASMMSSASSI(the) e) Qualifying IndividualQualified Medicare Beneficiary(See QMB)Remittance Advice(CMS) Regional OfficeSpecified Low-Income Medicare Beneficiary(See SLMB)State Medicaid AgencyState Medicaid ManualSocial Security AdministrationSupplemental Security IncomeMedicaid state planTechnical Advisory GroupTechnical DirectorTax Equity and Fiscal Responsibility Act of 1982Third Party LiabilityUnited States CodeDepartment of Veterans Affairs8

Table of ContentsABOUT THIS HANDBOOK. 5ACRONYMS AND ABBREVIATIONS . 7COB/TPL Overview . 13Chapter I: COB/TPL Core Concepts . . . 16A. Federal and State Partnership in COB/TPL Activities 16B.Federal Funding of COB/TPL Activities. 17C.Assignment of Rights (AOR) . 181.Relationship to Medicaid COB/TPL Activities. 182.AOR: General Requirements Related to Medicaid Eligibility . 18D. Payer of Last Resort . 201. General Requirements . 202. Exceptions . 20Chapter II: Coordination of Benefits (COB) 23A. State Plan Requirements . 231. Required Elements in State Plan . 232. State Laws Related to COB/TPL. 24B. Identifying Liable Third Parties . 251. Defining Third Party Payers . 252. Obtaining Health Insurance Information during Eligibility Determinations . 263. Exchanging Data with Other State Databases . 274. Diagnosis and Trauma Code Edits . 275. Incorporating TPL into Information Systems . 286. TPL Action Plans . 297. Waiver of Requirements . 30C. Payment of Claims . 311. Paying Claims with Established TPL . 312. Paying Claims with No Established TPL . 333. Suspension or Termination of Recovery Efforts . 344. Waiver of Requirements . 345. Never-covered services . 35D. Medical Child Support Payments . 371. Relationship to Medicaid COB/TPL Activities . 379

2. General Information. 373. Court-Ordered Health Insurance Coverage for Medical Child Support . 384. Court-Ordered Cash Payments for Medical Child Support . 385. Distribution of Collections . 39E. Dually Eligible Beneficiaries . 401. Introduction: Medicare and Medicaid Coverage for Dually Eligible Beneficiaries . 402. Medicare Coverage . 403. Types of Dually Eligible Beneficiaries . 414. Medicaid Coverage for Medicare Costs . 435. Medicaid Coverage for Medicare Advantage Plans (Medicare Part C) Enrollees. 446. Medicaid Payment Methodologies for Medicare Cost-Sharing. 467. Medicare Bad Debt Provider Enrollment . 51F. Managed Care . 521. General Requirements . 522. COB/TPL Activities by MCOs . 533. Other Managed Care Issues . 54G. Data and Systems . 561. State Systems . 562. State Medicaid Eligibility Determination Systems . 563. State MMIS . 56Chapter III: Liens and Recovery TPL 58A. Liens . 581. Description of Liens . 582. When Liens Are Permitted . 583. Restrictions on Placing Liens . 594. Termination of Liens. 59B. Estates . 611. General Overview of Estate Recovery. 612. What Services Must or May be Included in an Estate Recovery Claim . 623. When Recovery is Permitted. 634. What Assets May Be Recovered . 645. What Assets May NOT Be Recovered . 65C. Casualty/Tort Recovery . 6710

1. General Overview of Casualty/Tort Recovery. 672. Ahlborn Limitations on Settlement Funds Subject to Recovery . 673. SMAs’ Ability to Reduce Total Recovery . 684. Tort Recovery in Global Settlements . 695. Settlement of Claims for Medicare/Medicaid Dually Eligible Beneficiaries . 69Chapter IV: Other Topics 71A. Adoption & Surrogacy . 711. Adoption . 712. Surrogacy . 71B. Indemnity Plans. 72C. American Indians/Alaskan Natives . 731. IHS is a Secondary Payer to Medicaid . 732. Estate Recovery . 733. Federal Share for Reimbursement of COB/TPL Collections . 73D. Department of Veterans Affairs (VA) . 741. COB: General Rule . 742. Exception to COB: Payment for Nursing Home Care . 743. Exception to COB: Payment for Emergency Treatment at Non-VA Facilities . 74E. Department of Defense (DOD)/TRICARE . 751. TRICARE for Life . 752. Timely Filing. 76F. CMS 64 Reporting . 771. 9A – Third Party Liability (TPL) Collections. 772. 9B – Probate Collections . 77G. Health Savings Accounts (HSA) . 77H. Contingency Fee Contracts . 771. SMM 2975.4A . 772. SMM 2975.5 . 773. 45 CFR 92.36(a) . 774. SMM 2975.1, section 1903(a)(7) of the Social Security Act, 42 CFR 433.15(b)(7). 785. 45 CFR 92.36(a) . 78REFERENCE . 79List of Statutory Provisions . 7911

List of Regulations . 81INDEX . 8312

COB/TPL OverviewCoordination of Benefits:Medicaid and Other Coverage: A Medicaid beneficiary may have a third party resource (healthinsurance, or another person or entity) that is liable to pay for the beneficiary’s health care.Who are “third parties”? Health Insurers (includes private or employer-based coverage, Medicare and TRICARE)Other government programsOther liable people or entitiesWhy identify third parties? To ensure that Medicaid does not pay more than required, and to help recover Medicaidpayments, when a third party is responsible to pay for all or some of the health carereceived by the Medicaid beneficiary.Third parties should pay to the limit of their legal liability. Third party payment reducesor eliminates Medicaid payment.Coordination of Benefits (COB): Primary and Last PayersWhen a person has Medicaid and there is another liable third party: Health insurance, including Medicare and TRICARE, generally pays first, to the limit ofcoverage liability.Other third parties generally pay after settlement of claimsMedicaid is last payer for services covered under Medicaid, except in those limitedcircumstances where there is a federal statute making Medicaid primary to a specific federalprogram. The statute must expressly state that the other federal program: Pays only for claims not covered by Medicaid; or,Is authorized, but not required, to pay for health care items or services.Types of Third Party PaymentsThird party payments include health insurance benefits, settlements or court awards forcasualty/tort (accident) claims, product liability claims (global settlements), medicalmalpractice, worker’s compensation claims, etc.13

Special types of third party payments include liens (TEFRA and other), and a claim against theestate of a deceased beneficiary.COB: Medicaid and Medicare CoverageBeneficiaries who have both Medicare and Medicaid are “dually eligible.”There are several types of dual eligibility: Full Benefit Dual Eligible beneficiaries (FBDE),Qualified MedicareBeneficiaries (QMB), Specified Low-Income Medicare Beneficiaries (SLMB), QualifyingIndividuals (QI), Qualified Disabled Working Individuals (QDWI), and QMB Plus & SLMB Plus(dually eligible beneficiaries who are also eligible in another Medicaid coverage group).Medicaid coverage of Medicare cost sharing (premiums, deductibles, coinsurance, andcopayments) varies by type of dual eligibility.When Do COB and Third Party Liability (TPL) Activities Take Place? Identification of third parties: when Medicaid eligibility is granted or shortly thereafter. “Cost avoidance” (requires providers to bill health insurance before billing Medicaid):before Medicaid pays a claim. COB (requiring cost avoidance before billing Medicaid for any remaining balance afterhealth insurance payment): when Medicaid pays a claim. “Pay and Chase” (the third party resource is not known when the claim is submitted toMedicaid, or the claim is for preventive pediatric care, including Early and PeriodicScreening, Diagnostic and Treatment (EPSDT), or for a child with IV-D enforcement inplace): when Medicaid pays a claim or becomes aware of the resource. Creation of Casualty/Torts, Liens, and Estate Recovery claims on behalf of the Medicaidprogram: after Medicaid pays a claim and determines, or is advised, that the beneficiarymay have a casualty/tort claim that includes the medical items and services thatMedicaid paid or the beneficiary has died.ReferencesStatute: Social Security Act (the Act) General COB/TPL: Section 1902(a)(25)Assignment of Rights: Section 191214

Estates and Liens: Section 1917Regulations: Code of Federal Regulations (CFR) 42 CFR 433.36 Liens and Recoveries42 CFR 433 Subpart D Third Party LiabilityMedicaid State Plan (State Plan): Section 4.17 and Attachment 4.17-A, Estates and Liens (for additional informationplease refer to pages 53 and 53a – h of the state plan)Section 4.22, TPL (for additional information please refer to pages 69 and 70 of the stateplan)Supplement 1 to Attachment 4.19-B, Medicare Cost-Sharing Payment Methodologies(for additional information on a state’s Medicaid buy-in, please refer to page 29 and 29a– d of the state plan)COB/TPL Team in CMS Central Office – 2020Cathy Sturgill, Technical Director: 410-786-3345; [email protected] Boscas, Health Insurance Specialist: 410-786-3098; [email protected] Chester, Health Insurance Specialist: 410-786-0499; [email protected] Ormiston, Health Insurance Specialist: 410-786-1206;[email protected]

Chapter I: COB/TPL Core ConceptsA. Federal and State Partnership in COB/TPL ActivitiesMedicaid’s COB/TPL activities—like the rest of the Medicaid program—are administered through afederal–state partnership. Both the federal and state governments have the responsibility toensure that Medicaid is appropriately identifying potentially liable third parties and coordinatingbenefits to reduce Medicaid program costs.The federal government takes the lead with respect to the following COB/TPL activities: Interpreting federal statutes governing Medicaid Developing federal regulations and other guidance regarding requirements governingCOB/TPL Ensuring that state plans include the required program descriptions and assurances Providing technical assistance to states in administering COB/TPL programs Auditing state records to ensure compliance with COB/TPL rulesThe states generally perform the following functions: Enacting state laws and regulations, and developing other guidance needed to carry outCOB/TPL activities Drafting policies and procedures that comply with federal requirements and state laws Carrying out COB/TPL activities for Medicaid beneficiaries, including identifying thirdparty resources, coordinating benefits during claims payment, filing claims andrecovering payment for Medicaid benefits from settlements or awards made by liablethird parties, and making claims against the estates of deceased Medicaid beneficiarieswhen appropriate Advising CMS on current COB/TPL issues through the COB/TPL Technical Advisory Group(TAG) Reporting on recoveries, indicating the portion of recovered funds due to the federalgovernmentCOB/TPL Technical Advisory Group (TAG)The COB/TPL TAG is a forum for state Medicaid senior COB/TPL managers to discuss technical andoperational issues and share best practices with CMS, relating to Medicaid policy issues. The purposeof the TAG is to inform and advise CMS as it prepares guidance, identifies and resolves issues, reviewsoperational policies, and carries out its responsibilities with respect to Medicaid COB/TPLrequirements. The TAG also enables CMS to apprise members of current and planned initiatives inareas of interest. State members of the TAG include a Chairperson and 10 State Representatives, onefor each of the 10 CMS regions. Each State Representative is responsible to solicit subjects fordiscussion from the states in his region and share TAG meeting summaries and other communicationswith the states. The COB/TPL team and Regional Office staff attend monthly conference calls, andother program and state staff attend the TAG meetings, as appropriate.16

B. Federal Funding of COB/TPL ActivitiesThe federal government pays a portion of the cost of health care items and services provided toMedicaid beneficiaries, as well as a portion of the costs of administering the COB/TPL activities ineach state.The rate of federal matching funds (the “Federal Medical Assistance Percentage,” or “FMAP”) forhealth care items and services varies by state, with 50 percent at the minimum. Foradministrative costs, including carrying out COB/TPL activities, the federal government covers 50percent of state Medicaid agencies’ (SMA) costs. 1Federal matching funds are not available for Medicaid payments if: 2 The SMA fails to comply with COB/TPL rules by failing to establish the liability of a thirdparty and seek reimbursement from that third party The SMA did not incur any costs since it received reimbursement from a liable thirdparty The SMA should prohibit private insurers from discriminating against Medicaidbeneficiaries. For example, a private health insurer is prohibited from limiting orexcluding payments on the basis of the individual is Medicaid eligible. If the SMA receives federal matching funds for a payment and is later reimbursed by aliable third party, the SMA should refund the federal government for its share of thepayment, less any amount needed for incentive payments. 3ReferencesStatutes & Regulations FFP and Payment of Federal Share. 42 CFR § 433.14042 CFR § 433.140(b).42 CFR § 433.140(a).342 CFR § 433.140(c).1217

C. Assignment of Rights (AOR)1. Relationship to Medicaid COB/TPL ActivitiesMedicaid’s AOR requirements are part of the eligibility determination process, but they alsosupport Medicaid COB/TPL activities. Specifically, AOR supports Medicaid’s payer of lastresort status by providing the basic authority for COB with beneficiaries’ health insurancecoverage and for recovery from settlements in casualty/tort cases of all types. Questionsabout AOR as it applies to COB/TPL should be directed to the DHPC, DEHPG.General information about AOR as it applies to Medicaid eligibility is provided below. Detailedquestions about AOR policy should be directed to the Division of Eligibility and Enrollment (DEE),Children and Adults Health Programs Group (CAHPG).2. AOR: General Requirements Related to Medicaid EligibilityIndividuals must assign to the Medicaid program their rights to medical support and payment ofmedical care from a third party. 4 The individual must assign his or her rights (as well as the rights of any other eligibleindividuals for whom the applicant has the legal authority to assign rights), andcooperate in identifying and providing information to assist the state Medicaid agencyin pursuing liable third parties, unless the individual has good cause not to do so. States must provide Medicaid to any otherwise eligible individual who 5:o Cannot legally assign his or her own rightso Would otherwise be eligible for Medicaid but for the refusal of a person legally ableto assign the individual’s rights or to cooperate on the individual’s behalf Except for poverty level pregnant women, an individual must cooperate with the stateMedicaid agency in establishing paternity and obtaining medical support or payments,unless the individual has good cause not to do so.Individuals who are able and required to assign their rights to medical support and payment ofmedical care, but fail to do so, are not eligible for Medicaid, and a state Medicaid agency maynot pay for any services for those individuals.45Social Security Act § 1902(a)(45); Social Security Act § 1912.42 CFR § 433.148.18

Medicare beneficiaries are not legally allowed to assign their rights to Medicare (except toallow payment directly to providers). As a result, individuals who are eligible for both Medicareand Medicaid will only assign their rights to Medicaid.In some states, individuals will need to affirmatively assign their rights as part of the Medicaidapplication. In other states, assignment of rights to the SMA is automatic under state law. Ifassignment is automatic, the state must inform the individual of the terms of the state law andthat accepting Medicaid coverage leads to assignment.6For Supplemental Security Income beneficiaries in some states (these states are referred to as“1634” states), the Social Security Administration (SSA) determines whether an individual iseligible for Medicaid. In these cases, the SSA will explain orally the requirement to assignrights to Medicaid. The SSA will also explain that the applicant must cooperate with the SMAin establishing paternity and providing information to assist the state in pursuing any liablethird party. The SSA will have the applicant sign a form to assign rights.ReferencesStatutes & Regulations Social Security Act § 1902(a)(45). Social Security Act § 1912. Rights Assigned; Assignment Method. 42 CFR § 433.146.l642 CFR § 433.146.f l bl§19

D. Payer of Last Resort1. General RequirementsMedicaid is generally the “payer of last resort,” meaning that Medicaid only pays claims for coveredit

DMEPOS Durable Medical Equipment, Prosthetics, Orthotics, and Supplies DOD Department of Defense DRA of 2005 Deficit Reduction Act of 2005 DSG Division of State Systems Group EPSDT Early and Periodic Screening, Diagnosis and Treatment FBDE (Medicare) Full Benefit Dual Eligible