Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Medicaid Recovery of Pharmacy Payments 
from Liable Third Parties 
AUGUST 2001 
OEI-03-00-00030  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them. This statutory mission is carried out through 
a nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General. It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public. 
The inspection reports provide findings and recommendations on the efficiency, vulnerability, 
and effectiveness of departmental programs. 
OEI's Philadelphia Regional Office prepared this report under the direction of Robert A. Vito, 
Regional Inspector General, and Linda M. Ragone, Deputy Regional Inspector General. 
Principal OEI staff included: 
REGION  HEADQUARTERS 
Isabelle Buonocore, Project Leader  Linda Frisch, Program Specialist

Nancy J. Molyneaux, Program Analyst

Tanaz Dutia, Program Analyst

To obtain copies of this report, please call the Philadelphia Regional Office at (800) 531-9562. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/oig/oei  E X E C U T I V E  S U M M A R Y  
PURPOSE 
This report (1) quantifies the Medicaid dollars at risk of being lost when Medicaid pays 
pharmacy claims for beneficiaries who have other insurance, and (2) describes States 
experiences with third-party payment of claims. 
BACKGROUND 
Millions of Medicaid beneficiaries have other pharmacy coverage through private health 
plans, employers, non-custodial parents, State programs such as workers compensation, 
or Federal programs such as Medicare. Because Medicaid is usually considered the 
payer of last resort, other insurance sources may be liable for claims providers send to 
Medicaid. In this report, other insurance sources are referred to as third parties. Since 
many third parties contract with pharmacy benefit management companies to provide a 
host of services including pharmacy-claims processing, we also use the term third parties 
for these companies. 
When claims have a liable third party, State Medicaid agencies either use a 
cost-avoidance system in which the claim is returned to the pharmacy to bill the third 
party, or they pay and chase, i.e., pay the claim and try to recover the payment from the 
third party. States are mandated to pay and chase claims under certain circumstances, but 
in general, payment for claims with third-party liability must be avoided unless the State 
has a Federal cost-avoidance waiver. The Centers for Medicare and Medicaid Services 
(CMS) may grant a cost-avoidance waiver for pharmacy claims if the State demonstrates 
that paying and chasing is cost effective. 
FINDINGS 
Thirty-two States are at risk of losing over 80 percent ($367 million) of the 
Medicaid pharmacy payments they tried to recover from third parties through the 
pay-and-chase approach 
Thirty-two States identified $440 million in potential recoveries, of which they recovered 
$73 million (17 percent). The remaining 18 States reported they could not identify the 
amount they paid and chased. 
i 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  However, the cost-avoidance approach prevented $185 million from being at risk 
in 17 States 
States that use cost avoidance say it is successful once a system is in place. States that do 
not use cost avoidance have concerns about it burdening pharmacies and beneficiaries. 
Almost three-quarters of States report third parties refuse to process or pay 
Medicaid pharmacy claims 
States said when they try to recover payments they are faced with the following 
problems: denials due to incompatible claim formats, unreasonable filing time limits, 
unprocessed claims with no explanation, vague denials, and the inability to identify the 
liable payer or claims processing entity. 
More States had problems with pharmacy benefit management companies than 
with all other types of third parties combined 
Thirty-two States experienced problems with pharmacy benefit management companies. 
In addition to having all the same problems with these companies as with other types of 
third parties, 14 States said pharmacy benefit management companies will not process 
Medicaid claims because their clients have not authorized them to do so. 
While States have difficulty recovering payments, methods such as sharing 
information with third parties, using effective billing practices, and taking legal 
action have been successful for some States 
State recommendations for solving recovery problems include universal claim 
formats, eligibility data matches, and new rules for pharmacy benefit 
management companies and insurers 
RECOMMENDATIONS 
To reduce the dollars at risk of being lost, we offer the following 
recommendations for CMS: 
Waivers.  Review States cost-avoidance waivers for pharmacy claims to determine if 
they are meeting the cost-effectiveness criterion. Our findings indicate that, overall, pay 
and chase is not a cost-effective policy. The CMS should also review State policies to 
determine if some States are paying and chasing pharmacy claims without a waiver. 
Best Practices.  Continue working together with States to identify, develop, and 
disseminate the most successful methods in both avoiding and recovering Medicaid 
pharmacy payments that are the responsibility of liable third parties. 
ii 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  Tracking.  Require States to track the dollar amounts they pay and chase and the 
amounts they recover on pharmacy claims if they have cost-avoidance waivers. This 
information is necessary to determine whether a States paying and chasing is cost 
effective. Furthermore, unless States know how much money third parties owe, they 
cannot use their collection resources to the best advantage. 
Claim format.  Clarify for States whether claim standardization requirements under the 
Health Insurance Portability and Accountability Act will be applied to pharmacy services 
in a third party environment. Since implementation of these requirements is at least 
1.5 years away, CMS should continue to assist States in seeking immediate remedies to 
get their claims processed. The types of roles CMS might play in this regard could be 
fact finder, technical advisor, or coordinator. 
Education.  Develop strategies, on a national level, to educate third parties about 
Medicaid and third-party pharmacy issues. In addition, CMS should collaborate with the 
Department of Labor to develop education targeted specifically to self-insured health 
plans regulated under the Employee Retirement Income Security Act (ERISA). 
Legislation.  Determine whether legislation is needed to: 
C  explicitly include pharmacy benefit management companies in the Medicaid 
programs definition of a third party, 
C  require third parties to match their eligibility files with Medicaids eligibility 
files, and 
C  allow Medicaid up to 3 years to recover payments from liable third parties. 
If legislation is determined to be needed, CMS should consider coordinating with the 
Department of Labor to discuss requiring similar items from ERISA-governed health 
plans. 
AGENCY COMMENTS 
The CMS concurred with our recommendations and stated they are committed to 
resolving issues that stand in the way of full recovery of Federal and State dollars. They 
plan to re-examine States cost avoidance waivers and will emphasize cost avoidance at 
the August 2001 National Third Party Liability Conference. In addition, they have 
worked with States and third parties to develop a claim format that Medicaid agencies 
can use for submitting electronic claims to third parties; they are helping to educate 
PBMs clients about Medicaid reimbursement issues; and they will review issues to 
determine if legislation is needed. While concurring with the premise of our 
recommendation to require tracking of dollar amounts paid and chased and dollar 
amounts recovered on pharmacy claims, CMS stated that tracking all pharmacy claims 
may not be the only method to substantiate cost-effectiveness of a waiver. We recognize 
that this data may not be the sole factor in determining the cost-effectiveness of a waiver. 
However, we still believe that upon receiving a waiver, a State should be required to 
track this information. 
iii 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  T A B L E  O F  C O N T E N T S  
PAGE

EXECUTIVE SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  i

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

FINDINGS

Medicaid dollars at risk  ................................................... 6

Cost avoidance prevents dollars from being at risk .............................. 7

Third party non-payment of Medicaid claims .................................. 8

Problems with pharmacy benefit management companies  ....................... 10

Some successful methods of payment recovery  ............................... 11

State recommendations for solving payment recovery  problems  .................. 12

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

APPENDICES

A.  Technical Terms Used in This Report .................................... 16

B. 1999 Medicaid Pharmacy Data for 50 States ............................... 17

C.  Medicaid Pharmacy Dollars at Risk for 32 States  ........................... 19

D.  Centers for Medicare and Medicaid Services Comments  .................... 21

iv 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  I N T R O D U C T I O N  
PURPOSE 
This report (1) quantifies the Medicaid dollars at risk of being lost when Medicaid pays 
pharmacy claims for beneficiaries who have other insurance, and (2) describes States 
experiences with third-party payment of claims. 
BACKGROUND 
Medicaid Expenditures for Pharmacy Claims 
Medicaid is a program, created under Title XIX of the Social Security Act, that pays for 
medical and health-related assistance for certain vulnerable and needy individuals and 
families. It is administered by States but financed with State and Federal funds. The 
Federal Government provides 50 to 83 percent of the funding depending on the States 
per capita income. 
The annual Federal-State Medicaid expenditure for pharmacy claims is in the billions of 
dollars. In 1997 it was $11.9 billion, and in 1999 it was $16.4 billion. In 1999, over 32 
million beneficiaries were served under the pharmacy benefit. 
Medicaid Beneficiaries with Other Insurance 
Millions of Medicaid beneficiaries have other health insurance. Pharmacy coverage may 
be through private health insurance, employment-related health insurance, medical 
support from non-custodial parents, automobile insurance, State programs such as 
workers compensation, or Federal programs such as Medicare. In accordance with 
Federal regulations, Medicaid beneficiaries assign to the Medicaid agency their rights to 
medical support and to payment for medical care from any third party. [However,] the 
assignment of rights ... is effective only for services that are reimbursed by Medicaid 
(42CFR433.145). In other words, if Medicaid paid for a service that is covered by 
another source of insurance, Medicaid has a legal right to payment from that source. 
Most other insurance sources are considered primary payers in relation to Medicaid and 
may, therefore, be financially liable for claims. Medicaid is a payer of last resort with a 
few exceptions which are noted in the State Medicaid Manual, Section 3904.4A-B. 
Medicaid refers to other insurers as third parties and refers to claims for beneficiaries 
who have other insurance as third party claims. These and other technical terms are 
defined in Appendix A. 
i 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  Cost Avoidance 
The term cost avoidance is used to describe Medicaids avoidance of paying claims when 
beneficiaries have other insurance. Under cost avoidance, if a State Medicaid agency 
receives a claim, the agency must deny the claim and return it to the provider. The 
provider can then bill the third party for payment. Medicaid agencies also avoid paying 
claims by preventing them from being billed to them in the first place. Instead, the 
agencies alert pharmacies about the existence of the liable third party through their 
computer systems at the time of purchase. 
In order for Medicaid agencies to use cost avoidance effectively, they must take 
reasonable measures to determine the legal liability of third parties. At a minimum, the 
agencies must collect insurance information from prospective Medicaid beneficiaries 
during the initial eligibility interview and the redetermination process. State Medicaid 
agencies must also conduct data exchanges with Social Security Administration wage 
and earnings files; and the files of State agencies that keep information on wages, child 
support, welfare, motor vehicle accidents, and workers compensation. Any of these files 
might indicate the existence of other health insurance. 
Medicaid agencies are required to notify the Centers for Medicare and Medicaid Services 
(CMS) of the total amount they avoided paying for all services for beneficiaries who 
have other insurance. This notification is part of the States quarterly report of 
expenditures for their Medicaid program. The notification does not, however, distinguish 
the amount avoided for pharmacy services from the total amount avoided for all services. 
Waivers to Pay and Chase Pharmacy Claims 
The CMS grants cost-avoidance waivers for various services including pharmacy. 
Medicaid agencies with a cost-avoidance waiver for pharmacy services may reimburse 
pharmacies that serve beneficiaries who have other insurance. After paying the 
pharmacy, the agency seeks payment recovery from the third party. This process is 
known as pay and chase. Federal waivers from cost avoidance are granted if the State 
Medicaid agency can demonstrate that paying and chasing is cost effective. 
There are circumstances under which Medicaid agencies pay and chase even when they 
do not have a waiver. Federal law requires States to pay and chase claims when (1) 
coverage is through a parent whose obligation to pay support is enforced by the States 
child support enforcement agency, (2) the service is prenatal care for pregnant women, 
and (3) the service is preventive pediatric care. In addition, if a State learns of the 
existence of third-party insurance after the claim has been paid, the State will chase for 
payment recovery. 
When States submit their quarterly report of Medicaid expenditures to CMS, they include 
the total amount they recovered from pay and chase activity. The States are not required 
to notify CMS of the total amount they attempted to recover. Nor are the States required 
to report the amounts recovered on pharmacy services alone. 
2 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  Pharmacy Benefit Management Companies 
Payers of insurance benefits either process claims in-house or contract the processing to 
another entity. In the case of pharmacy benefits, many payers have contracts with 
pharmacy benefit management companies (PBMs). These companies provide numerous 
client-tailored services for health plans. The PBMs may be responsible for the entire 
management of the health plans pharmacy benefit, or they may provide one or more of 
the following services: process pharmacy claims, provide mail-order prescription 
services, maintain pharmacy networks, conduct drug utilization reviews, and develop 
drug formularies. Organizations that contract with these companies include, but are not 
limited to, insurers, employers, and managed care organizations. 
It has been estimated that PBMs handle 70 percent of all prescription orders dispensed 
for ambulatory care, and that 10 PBMs account for the bulk of covered individuals. What 
this means for Medicaid is that many payments made on pharmacy claims have to be 
recovered from PBMs. For the purposes of this report we include PBMs in the term third 
party. 
Problems Recovering Pharmacy Payments from Third Parties 
In 1996, the Pharmacy Claims Reimbursement Team, made up of CMS and State 
Medicaid agency representatives, collaborated on a study called Medicaid Encounters 
Barriers to Recovering Payment for Pharmacy Claims from Third Parties. The study 
found that 58 percent of the States recover less than 40 percent of the money they 
pursue... and that a small number of PBMs and TRICARE (health plan for military 
personnel) stood out as creating the greatest obstacles for payment recovery. One PBM 
in particular was far and above the most uncooperative entity among third parties. The 
PBMs were not processing Medicaid claims and were not willing to identify the insurers 
and employers with whom they contract. 
Efforts to Overcome Payment-Recovery Barriers 
The Pharmacy Claims Reimbursement Team has been steadily gathering facts and 
working toward overcoming payment-recovery barriers. One effort of the team has been 
to identify third parties that contract with the PBM named in their 1996 study as the most 
uncooperative. Another major step was building a partnership between CMS and States 
so that information could be shared. A network of State pharmacy representatives was 
developed and information can now be disseminated to all States. 
The team has also been laboring to understand claim formatting problems which prevent 
the recovery of some pharmacy payments. To this end they have worked with a major 
PBM, the National Council for Prescription Drug Programs, and with Medicaid 
claims-processing contractors to find solutions. They are currently trying to help all 
States move to a commonly-used electronic format for their pharmacy claims. 
3 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  Request for Assistance 
Our inspection was requested by CMS staff. We were asked for assistance in resolving 
problems identified in the Pharmacy Claims Reimbursement Teams 1996 study. A 
particular concern was that PBMs would not disclose information about third parties that 
might be liable for Medicaid claims. 
METHODOLOGY 
We collected information from CMS, Medicaid agencies, insurers, and employers from 
December 1999 through March 2001. 
CMS Data 
We gathered information from CMSs Central Office concerning the Pharmacy Claims 
Reimbursement Teams 1996 study, and we received periodic updates regarding the 
teams continuing work. 
State Medicaid Agency Data 
We gathered information from representatives of Medicaid agencies in 49 States and the 
District of Columbia. These representatives had expertise in pharmacy, third-party 
liability, and operational issues. Data was not collected from the State of Tennessee 
because their representative informed us their entire Medicaid population is in managed 
care. In Tennessee, the States managed care contractors are responsible for determining 
third-party liability and for recovering payments. For the sake of brevity, we use the 
word "State" as a synonym for State Medicaid agency and "State Medicaid agency 
representative" throughout the findings section of this report. We refer to the District of 
Columbia as a State for the same reason. 
We collected a variety of data regarding outpatient pharmacy claims. The data we 
requested included total expenditures for pharmacy benefits; and total number of 
beneficiaries with third-party insurance, and the percentage of these beneficiaries with 
pharmacy coverage. The data on pharmacy claims with third-party liability included 
total dollars avoided; total dollars paid and chased; and total dollars recovered from pay 
and chase activity. We also requested information about agencies policies and 
procedures, and their experiences with third parties. 
While we collected data for calendar years 1998, 1999, and first quarter of 2000, the 
findings in this report are based on 1999 data. Some States did not have figures available 
for some of the items and time periods we asked about. Because 1999 was the most 
recent full year prior to our study, and because States had more data for 1999 than for 
1998 or 2000, our findings are for 1999 unless we specify otherwise. 
4 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  The financial data States provided had caveats. First, pharmacy payment amounts were 
not always limited to outpatient prescription drugs, or for the calendar year, as we 
requested. Some States provided data that included inpatient drugs, syringes, diabetes 
test strips, over-the-counter drugs, or small amounts of other health services. Some 
States provided fiscal year instead of calendar year data, and some provided estimated 
instead of actual figures. Finally, States said that the claims they paid and chased could 
have included claims that were not the liability of third parties if a Medicaid beneficiarys 
coverage changed, or if the third partys health plan did not cover a particular service. 
See Appendix B for the 1999 pharmacy data provided by each State. 
Insurer and Employer Data 
We requested information from a purposive sample of 170 insurers and 114 employers 
about their policies and practices regarding reimbursement of Medicaid pharmacy claims. 
The insurers included 149 members of the Health Insurance Association of America who 
were listed on the Internet and 21 insurers identified by CMS. The 114 employers were 
identified by CMS and States. 
We received information, anonymously, from 41 insurers and 47 employers who 
provided pharmacy benefits. Forty-four of the 47 employers were partially or fully self-
insured (i.e., employers who bear some of the risk for their employees health claims). In 
this report, we use the term self-insured plans to describe private employer health plans 
which are regulated by the U.S. Department of Labor under the Employee Retirement 
Income Security Act. 
____________ 
This study was conducted in accordance with the Quality Standards for Inspections 
issued by the Presidents Council on Integrity and Efficiency. 
5 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  F I N D I N G S  
Thirty-two States are at risk of losing over 80 percent
($367 million) of the Medicaid pharmacy payments they tried
to recover from third parties through the pay-and-chase
approach 
Thirty-two States were able to provide data quantifying the dollars at risk. These 32 
States identified $440 million in potential recoveries from third parties in 1999, of which 
they recovered $73 million (17 percent). The total pharmacy expenditures for these 32 
States was over $12 billion. 
The 32 individual States paid and chased amounts ranging from $1,000 to $70 million. 
See Appendix C for dollars at risk in each of these 32 States. While the percentage of 
dollars at risk for these States ranged from 0 to 99 percent, only 5 States recovered more 
than half of the outstanding amounts. 
The other 18 States reported that they could not identify the amount they paid and chased 
for pharmacy claims. Thirteen of the 18 States could not identify the amount they 
recovered for pharmacy claims. The most common reason why the States could not 
provide financial data was that their systems do not isolate pharmacy claims from claims 
for other services. The total pharmacy expenditures for these 18 States was $4.2 billion 
in 1999. 
Regardless of whether a State used mainly cost avoidance or pay and chase, the 
overall recovery rate for pay and chase was low 
In 1999, 35 States used the pay-and-chase method for the majority of their pharmacy 
claims, and 15 States used the cost-avoidance method for the majority of their pharmacy 
claims. However, of the 32 States that were able to quantify dollars at risk, 24 used pay 
and chase and 8 used cost avoidance. As shown in Table 1 on the next page, regardless 
of which of these two methods States used for the majority of their claims, when they 
paid and chased, the overall recoveries from third parties were less than 20 percent. 
Whether a State pays and chases a large or small amount of claims, the results are the 
samea significant percentage of dollars are at risk of not being recovered from third 
parties. 
6 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  Table 1. PERCENTAGE OF DOLLARS AT RISK 
BY MAIN CLAIMS PROCESSING METHOD - 1999 
States Method for  Number of 
Processing the  States that  Percentage 
Majority of  Provided  Amount Paid  Amount  of Dollars 
Pharmacy Claims  Data  and Chased  Recovered  At Risk 
Pay and Chase  24  $404,286,020.39  $67,840,490.81  83% 
Cost Avoidance  8*  $35,870,979.91  $5,333,374.97  85% 
Totals  32  $440,157,000.30  $73,173,865.78  83% 
* One of these States only cost avoided claims that were over $50 
Source: State Medicaid agency data provided to OIG 
Three States paid and chased the majority of pharmacy claims without a waiver 
Three States paid and chased the majority of their claims without a cost-avoidance 
waiver. Two of the three States provided data on both the amounts they paid and chased 
and recovered. One of these States paid and chased $21 million and recovered $2.2 
million (11 percent). The other State paid and chased $800,000 and recovered $60,000 
(7 percent). The State which could not provide pay and chase and recovery amounts had 
the second highest total pharmacy expenditures among States ($1.8 billion). 
However, the cost-avoidance approach prevented $185
million from being at risk in 17 States 
Seventeen States were able to provide financial cost-avoidance data for pharmacy claims. 
These States avoided paying $185 million in 1999. The data comes from both the States 
that avoid payment and those that pay and chase the majority of their third party claims. 
However, only 9 of 15 States that avoided the majority of their claims could provide us 
with data. These nine States reported avoiding $80 million. 
The premise of cost avoidance is that it prevents the payment of claims that are the 
liability of third parties. Many of the claim dollars that are avoided cannot be tracked by 
States because the responsible third party has been billed first instead of Medicaid. 
Therefore, the total actual amount avoided is greater than the amount States are able to 
track. 
States that use cost avoidance say it is successful once a system is in place 
States that use cost avoidance believe that doing so is not difficult once a system is in 
place. But they said two things are key to making cost avoidance successful: (1) working 
with pharmacies or pharmacy associations prior to implementing the cost-avoidance 
system, and (2) maintaining accurate information on beneficiaries third-party coverage. 
They also said States should implement a system override that allows pharmacies to bill 
Medicaid when there is a discrepancy in a beneficiarys coverage. Six States cited cost 
7 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  avoidance as the most successful way to circumvent problems associated with paying and 
chasing. One State called it a silver bullet. 
States that do not use cost avoidance have concerns about it burdening 
pharmacies and beneficiaries 
Nineteen States that pay and chase a majority or all of their pharmacy claims believe cost 
avoidance places a financial burden on pharmacies. For example, States reported that 
some pharmacies have billing systems which prohibit them from billing two payers at the 
same time (i.e., billing the third party for the claim and Medicaid for the copayment). 
States also said (1) some third parties pay the policyholder and not the pharmacy; and (2) 
if coverage information is not accurate the claim could be denied by both Medicaid and 
the third party, which leaves the pharmacy without reimbursement. 
Eight States that pay and chase all of their pharmacy claims also said cost avoidance can 
negatively impact beneficiary access. They are concerned that pharmacies that are 
unable to bill two payers at the same time may refuse to serve Medicaid beneficiaries 
who have third-party insurance. Other State concerns are for beneficiaries in nursing 
homes who cannot use the third partys network pharmacy as required by the health plan, 
and for beneficiaries who cannot afford the copayment required by mail order programs 
that many health plans use. 
Despite these concerns, when we collected our data 12 States reported they were 
switching to cost avoidance, or were considering switching in the future because of all 
the problems associated with paying and chasing. 
Almost three-quarters of States report that third parties
refuse to process or pay Medicaid claims 
Thirty-six States said that when they try to recover payments, they are faced with the 
following problems: denials due to incompatible claim formats, unreasonable filing time 
limits, unprocessed claims with no explanation, vague claim denials, and the inability to 
identify the liable payer or claims processing entity. 
Incompatible claim formats often lead to the denial of Medicaid claims 
Twenty-nine States indicated that the lack of universal formatting and data elements on 
pharmacy claims leads to the denial of Medicaid claims. States said they usually do not 
have various pieces of information that are required by some third parties. For example, 
they may not have diagnosis codes, patients signature, patients relationship to the 
policyholder, or physicians Drug Enforcement Agency number. Third parties have 
different requirements which makes it even harder for States to submit correctly 
formatted claims. Data that we collected from insurers and employers indicates that 
Medicaid claims do not include all the information required by third parties. 
8 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  States reported that when their claims are denied for missing data they add the missing 
data if they have it and resubmit the claim. However, the constant reworking and 
resubmission of claims puts an added administrative and financial burden on States. We 
were told one PBM does not point out all the data elements missing from a claim the first 
time they deny it. After each resubmission the PBM may point out another missing data 
element from the same claim. States said this same PBM will also deny claims if the data 
elements are in the wrong sequence. Another State said PBMs were reimbursing their 
claims at a lower rate as a penalty for being in the wrong format. 
Unreasonable filing time limits make it difficult for States to recover payments 
Sixteen States said unreasonable filing time limits are a problem because if they submit 
claims past the third partys filing time limit the claims are automatically denied. States 
reported that common time limits are 30 to 90 days and the shortest was 7 days. States 
said they have a hard time meeting time limits when they pay and chase because their 
pharmacies may have 1 year or longer to submit claims. Therefore, by the time the State 
receives the pharmacys claim, pays it, and tries to recover payment from the third party, 
the third partys filing time limit may have passed. 
Unprocessed claims and vague denials keep Medicaid from recovering payments 
Twelve States said their claims were not processed or were returned with vague denial 
codes from third parties. Some States reported getting back claims with no explanation 
as to why they were not processed. Other unprocessed claims are never returned and 
there is also no explanation. States also said that some third parties will only process 
claims that are submitted by a provider or a policyholder. While some States speculate 
that third parties may not understand Medicaids pay and chase activity, or that Medicaid 
is the payer of last resort, 93 percent of the employers and insurers that provided us with 
data said they know that Medicaid is the payer of last resort. 
States reported that when a claim denial code is vague or represents several possible 
reasons for the denial, the State cannot determine what information needs to be corrected 
in order to resubmit the claims. This has the effect of terminating the States attempt to 
recover payments. One of these States reported receiving a batch of 21,000 claims from 
a PBM with such a denial code. 
Inability to identify liable payers and claims processing entities makes recovery 
of payments almost impossible 
Twelve States said that if liable payers and their claims processors are not identified 
correctly, States risk sending claims to the wrong entity and not recovering payments. 
Despite efforts to identify beneficiaries other insurance, States said that information in 
their third-party files can be incomplete or erroneous. This is because the State may not 
receive complete and accurate information about the beneficiarys other coverage; the 
State may not be notified of coverage changes; or the beneficiary may have more than 
9 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  one other insurer and the State may not know which one is primary and which is 
secondary. 
States also have difficulty identifying the liable payers claims processing entity. This is 
often due to insurers changing claims processors without notifying the State. In addition, 
States are sometimes given the name of an entity without the address. This is a problem 
because some entities have similar names and some have multiple billing addresses. 
Identifying the correct claims processor can be a problem for payers as well. One 
employer reported having multiple medical plan carriers. This employer said Medicaid 
claims do not identify the carrier and therefore the employer does not know which carrier 
is responsible for the claims. 
More States had problems with pharmacy benefit
management companies than with all other types of third
parties combined 
Thirty-two States experienced problems with pharmacy benefit management companies. 
As shown in Table 2 below, more States had problems with these companies than with all 
other types of third parties combined. In addition to having all the same problems with 
PBMs that they have with other third parties, 14 States said some PBMs will not process 
Medicaid claims because the PBMs clients have not authorized them to do so. 
Furthermore, States reported that these companies have not been willing to identify the 
names and addresses of the liable payers. This is a serious problem for Medicaid given 
the volume of pharmacy claims processed by pharmacy benefit management companies. 
When PBMs do not process Medicaid claims and will not identify the liable payer, States 
cannot recover their payments. 
Table 2. COMPARISON OF PROBLEM THIRD PARTIES 
Type of Third Party  Number of States that Experienced Problems 
PBM  32 
Insurer/Carrier  13 
TRICARE Standard*  6 
Self-insured plan  4 
Point-of-sale plan  1 
Medicare  1 
*The fee-for-service health care program for active duty and retired members of the uniformed 
services, their families, and survivors (formerly called CHAMPUS). 
Source: State Medicaid agency data provided to OIG 
10 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  The data we collected from insurers and employers indicates that 15 percent of those who 
contract with a pharmacy benefit management company had not given them authorization 
to process Medicaid claims. We have also learned that a list provided to CMS of over 
600 organizations that contract with one of the largest PBMs indicated that 75 percent of 
these organizations do not authorize the PBM to process Medicaid claims. 
Twenty-six States mentioned one particular pharmacy benefit management company as a 
problem. Two States said the company has not paid them for years. One of these States 
said they stopped sending claims to this pharmacy benefit management company because 
they just ignored them. Another State said they had talked with [the PBMs] 
attorneys and gotten a complete run around. The same State reported losing tens of 
millions of dollars because of this company. This company had also been identified as 
the biggest problem for States in the 1996 study by CMS and State Medicaid agencies. 
While States have difficulty recovering payments, methods
such as sharing information with third parties, using
effective billing practices, and taking legal action have been
successful for some States 
While 33 States reported that less than half their efforts to recover payments from third 
parties were successful, some States mentioned recovery methods that have been 
successful. These methods include sharing information with third parties, using effective 
billing practices, and taking legal action. 
Sharing information with third parties 
Working with third parties can be a successful method for recovering payments 
according to 31 States. Some States said communication with third parties helps them 
keep beneficiary coverage information complete and accurate. This is done through a 
verification process or the matching of eligibility files. Under the verification process, 
States phone or write to the carrier to verify coverage information. The matching of 
eligibility files, on the other hand, can be done via tape sharing, database sharing, or 
on-line matching. Thirty-eight States said they match files with some insurers, 13 match 
with some self-insured plans, and 11 match with certain PBMs. Of the 88 insurers and 
employers that sent us data, 56 said they did not match their eligibility files with 
Medicaid files. Of those 56 respondents, 70 percent said they did not match files because 
Medicaid had not asked them to do so. 
Information sharing with third parties has advantages beyond updating beneficiary 
coverage. For example, one State said an insurance carrier notifies them when they 
change PBMs so that the State can submit claims to the right PBM. Another State said a 
PBM provided a list of group insurance plans which the States could bill directly. Open 
communication also makes follow-up regarding claim issues easier for States. 
11 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  Information does not always have to come from the third partyit can also come from 
providers. In one State, when a pharmacy learns that Medicaid beneficiaries have other 
insurance they note the third-party information on a card and mail it to the State. The 
State then uses this information to update their third-party database. 
Using effective billing practices 
Eleven States regard electronic billing as an effective way to recover payments. They 
said that once claim format and system compatibility issues are resolved, this is more 
efficient than paper claims. However, other States have been successful submitting paper 
claims that have been formatted to meet the requirements of third parties. 
Five States said billing the insurance carrier directly (i.e., bypassing the PBM) or using 
the automated group capture system were helpful in recovering payments. Under the 
automated group capture system, when a State discovers that an insurer uses a particular 
PBM in the case of one beneficiary, they automatically send claims for all beneficiaries 
covered by that insurer to that company. 
Taking legal action 
Three States spoke about legal steps they have taken to recover pharmacy payments from 
liable third parties. One State described reaching a settlement in which a sample of 
Medicaid claims was adjudicated and the result was projected to the universe of claims. 
This same State also told employers who were not paying Medicaid claims that the State 
would put a lien on their properties. A second State uses internal legal counsel to draw 
up contracts to obtain eligibility files of third parties. The contracts protect the 
confidentiality of the information. This State has also expanded State law to include 
PBMs in the definition of third parties that must match eligibility files with the State. If 
third parties refuse to match files they are subject to penalties. A third State said their 
State Attorney General got involved when a PBM was not responding to claims. The 
problem was resolved when the PBM was taken out of the loop. That State now sends 
Medicaid claims directly to the insurance carrier for processing. 
State recommendations for solving recovery problems
include universal claim formats, eligibility data matches, and
new rules for PBMs and insurers 
Universal claim formats and timely filing limits 
Twenty-five States said standardizing claim format and data elements for pharmacy 
claims is a solution to the problem of incompatible claim formats. Some States suggested 
that a universal claim format be mandated. Other States believe that the Health Insurance 
Portability and Accountability Act (Public Law 104-191), which requires a single 
12 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030   standardized format for all electronic claims, will solve the problem of incompatible 
claim formats. The compliance date for the requirement is October 2002 (2003 for small 
health plans). One State expressed the concern that the law may not result in a mandated 
claim format that allows for third-party coordination of benefits. 
Nine States suggested changes to the filing time limits. The suggestions include 
(1) establishing a universal filing time limit for all claims processing entities, (2) waiving 
or lengthening filing time limits for Medicaid and, (3) requiring third parties to respond 
to Medicaid claims within an established time frame. 
Eligibility data matches 
Nine States believe third parties should be required to match their eligibility data with 
Medicaid eligibility data so that Medicaid could have reliable coverage information. 
This would reduce the number of invalid claims going to third parties and make cost 
avoidance and pay and chase systems more effective. 
New rules for pharmacy benefit management companies and insurers 
Several States said they believe PBMs must be included in the definition of third-party 
payer in any legislation or regulation affecting third-party payers. This would alleviate 
difficulties States face in getting these companies to process and pay Medicaid claims. 
Other legislative recommendations were to (1) require all insurers, including self-insured 
employers, to authorize the processing of Medicaid claims, or (2) exempt Medicaid 
claims from authorization requirements. 
States also expressed the opinion that third parties should be required to pay Medicaid 
claims unless the claims are validly denied, making clear to payers and claims processors 
the factors that constitute a valid denial. This would address two problems: (1) the 
problem of third parties not processing Medicaid claims and not providing an 
explanation, and (2) the problem of vague denial codes. 
13 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  R E C O M M E N D A T I O N S  
To reduce the dollars at risk of being lost, we offer the following 
recommendations for CMS: 
Waiver.  Review States cost-avoidance waivers for pharmacy claims to determine if 
they are meeting the cost-effectiveness criterion. Our findings indicate that, overall, pay 
and chase is not a cost-effective policy. The CMS should also review State policies to 
determine if some States are paying and chasing pharmacy claims without a waiver. 
Best Practices.  Continue working together with States to identify, develop, and 
disseminate the most successful methods in both avoiding and recovering Medicaid 
pharmacy payments that are the responsibility of liable third parties. 
Tracking.  Require States to track the dollar amounts they pay and chase and the 
amounts they recover on pharmacy claims if they have cost-avoidance waivers. This 
information is necessary to determine whether a States paying and chasing is cost 
effective. Furthermore, unless States know how much money third parties owe, they 
cannot use their collection resources to the best advantage. 
Claim format.  Clarify for States whether claim standardization requirements under the 
Health Insurance Portability and Accountability Act will be applied to pharmacy services 
in a third party environment. Since implementation of these requirements is at least 
1.5 years away, CMS should continue to assist States in seeking immediate remedies to 
get their claims processed. The types of roles CMS might play in this regard could be 
fact finder, technical advisor, or coordinator. 
Education.  Develop strategies, on a national level, to educate third parties about 
Medicaid and third-party pharmacy issues. In addition, CMS should collaborate with the 
Department of Labor to develop education targeted specifically to self-insured health 
plans regulated under the Employee Retirement Income Security Act (ERISA). 
Legislation.  Determine whether legislation is needed to: 
C  explicitly include pharmacy benefit management companies in the Medicaid 
programs definition of a third party, 
C  require third parties to match their eligibility files with Medicaids eligibility 
files, and 
C  allow Medicaid up to 3 years to recover payments from liable third parties. 
If legislation is determined to be needed, CMS should consider coordinating with the 
Department of Labor to discuss requiring similar items from ERISA-governed health 
plans. 
14 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  AGENCY COMMENTS 
The CMS concurred with our recommendations and stated they are committed to an 
aggressive strategy in resolving the issues and removing the barriers that stand in the way 
of full recovery of Federal and State dollars. They stated that they are planning to 
re-examine States cost-avoidance waivers, and that cost avoidance will be emphasized at 
the August 2001 National Third Party Liability Conference. In addition, they have 
worked with States, third parties, and the National Council for Prescription Drug 
Programs to develop a claim format that could be used by Medicaid agencies for 
submitting electronic claims to third parties; and they will advise States of progress made 
by the National Council for Prescription Drug Programs regarding claim standardization 
under the Health Insurance Portability and Accountability Act. The CMS further stated 
they are continuing to help educate PBMs clients about Medicaid reimbursement issues, 
and have invited the U.S. Department of Labor to attend the August 2001 National Third 
Party Liability Conference. 
The CMS concurred with the premise of our recommendation to require States with cost-
avoidance waivers to track the dollar amounts they pay and chase and the amounts they 
recover on pharmacy claims. The CMS stated that setting up a system to track all 
pharmacy claims may not be the only method to substantiate the cost-effectiveness of a 
waiver. We recognize that this data may not be the sole factor in determining the cost-
effectiveness of a waiver. However, we still believe that upon receiving a waiver, a State 
should be required to track this information. 
Regarding the need for legislation in the area of third-party liability, CMS will continue 
to review the issues to determine what, if any, legislation is needed. The complete text of 
CMSs comments are in Appendix D. 
15 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X   A 
Technical Terms Used in This Report 
Below is an alphabetical list of some of the technical terms used in this report. 
Cost avoidance: Method for processing claims for Medicaid beneficiaries who have other 
insurance. When Medicaid receives a claim from a provider, the claim is denied and the 
provider is informed that the beneficiary has another insurer who is financially liable for the 
claim. Cost avoidance also occurs when the provider knows of the Medicaid beneficiarys other 
insurer and sends the claims directly to that other entity and not to Medicaid. 
Cost-avoidance waiver:  When a Medicaid agency has been granted a cost-avoidance waiver 
it means that the requirement to use cost avoidance is waived, and the agency may pay for the 
claims and recover the payments from the liable insurers. Waivers are granted if the State can 
show that another method of processing claims is as, or more, cost-effective than cost avoidance. 
Pay and chase: A method for processing claims wherein Medicaid pays the claims for a 
beneficiary who has other insurance and then, later, tries to recover the payments from the liable 
party. 
Pharmacy benefit management company (PBM): Companies that manage prescription 
drug coverage for insurance carriers, self-insured employers, managed care organizations, and 
other entities. Services provided by PBMs include claims processing, pharmacy network 
development, drug utilization review, and formulary development. 
Point-of-sale plan:  An insurance plan which has a special electronic claims processing 
arrangement with pharmacies. The arrangement allows pharmacists to determine on-line, while 
a customer is waiting, whether the customers insurance plan will pay for the prescription. 
Self-insured plan:  Many employer insurance plans are self-insured, i.e., the employer bears a 
portion of the risk for employees medical claims. While health insurance plans are usually 
regulated by State Governments, self-insured plans are regulated by the U.S. Department of 
Labor under the Employee Retirement Income Security Act. 
Third party:  Any individual, entity, or program that is, or may be, liable to pay all or part of 
the medical cost for any medical benefit provided to a beneficiary. Third parties include private 
insurance plans or carriers, employer insurance plans, State insurance plans such as workers 
compensation programs, and Federal insurance programs such as Medicare. In this report the 
term third party also refers to PBMs. 
Third-party liability: A third partys financial responsibility for medical services provided to 
a Medicaid beneficiary. 
16 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X   B 
1999 Medicaid Pharmacy Data for 50 States 
States that pay and chase send claims to third parties they believe are responsible for the claims. 
However, due to Medicaid beneficiaries changing coverage, or health plans not covering certain 
services, third parties may deny some of the claims. Therefore, the amount paid and chased for 
third-party pharmacy claims in the table below includes claims that could be denied for valid 
reasons. 
Amount Paid and Chased for  Amount Recovered from 
State  Total Pharmacy Expenditures  Third-party Pharmacy Claims  Third Parties 
AK  $45,881,080.83  $5,183,492.88  $817,471.04 
d  cd  cd 
AL  $314,946,162.00 $5,018,902.00 $1,742,770.00
d  d  d 
AR  $202,913,489.62 $811,127.00 $60,411.00
AZ  $1,812,951.68  unavailable  $141.72 
CA  $1,825,318,419.00  unavailable  unavailable 
CO  $125,412,087.00  unavailable  unavailable 
c 
CT  $220,673,450.00 unavailable  unavailable 
c 
DC  $43,419,240.00 unavailable  unavailable 
DE  $56,065,026.00  unavailable  $840,089.46 
b  b 
FL  $1,164,493,522.00  $28,452,000.00 $3,625,500.00
c  bc  bc 
GA  $439,419,153.00 $21,091,378.38 $2,277,868.87
HI  $52,477,014.00  $1,208.00  $1,208.00 
IA  $179,987,630.03  $3,221,655.16  $1,929,713.16 
ID  $72,370,224.00  unavailable  unavailable 
d  d  d 
IL  $718,299,628.00 $70,512,870.00 $9,336,728.00
IN  $407,752,363.00  $27,170,728.00  $2,608,454.00 
KS  $152,053,655.00  $2,937,187.00  $885,738.00 
d  d  d 
KY  $384,078,336.00 $23,899,069.00 $2,143,461.00
LA  $430,423,799.00  $33,615,322.00  $2,278,064.00 
c  ce  c 
MA  $600,192,000.00 $13,272,730.00 $1,821,495.00
b 
MD  $180,000,000.00 unavailable  unavailable 
c  c  bc 
ME  $136,637,381.57 $5,090,000.00 $2,100,000.00
MI  $353,574,000.00  unavailable  unavailable 
MN  $215,926,180.34  $4,940,572.17  $2,258,155.66 
c  c  c 
MO  $468,598,424.00 $9,469,752.00 $1,152,785.00
MS  $294,754,745.46  $4,604,196.00  $1,594,088.00 
c  bc 
MT  $45,500,000.00 unavailable  $1,400,000.00
NC  unavailable  $28,902,407.19  $9,168,690.33 
17 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X   B 
Amount Paid and Chased for  Amount Recovered from 
State  Total Pharmacy Expenditures  Third-party Pharmacy Claims  Third Parties 
ND  $33,931,400.00  unavailable  unavailable 
NE  $126,866,802.45  $9,556,047.28  $3,869,239.38 
d  d  bd 
NH  $73,332,966.00 $4,713,111.00 $2,827,866.00
cd 
NJ  $499,216,374.00 unavailable  unavailable 
NM  $41,233,834.16  unavailable  unavailable 
NV  $41,447,640.91  unavailable  unavailable 
c  b  b 
NY  $2,026,870,651.00 $13,680,000.00 $1,280,000.00
d  d  d 
OH  $831,871,859.89 $3,109,904.11 $59,699.71
d 
OK  $175,195,447.00 unavailable  unavailable 
OR  $119,205,296.00  $8,176,048.00  $4,206,869.00 
c 
PA  $662,431,412.00 $9,393,597.00  $59,700.00 
RI  $79,285,625.88  $221,595.24  $143,580.29 
SC  $310,394,000.00  $12,262,009.50  $4,572,710.30 
d 
SD  $39,934,762.30 unavailable  $421,062.00 
b  b  b 
TX  $900,000,000.00 $45,000,000.00 $2,800,000.00
c  bcd 
UT  $89,374,417.00 unavailable  $2,802,415.26
b  b  b 
VA  $323,272,462.00 $11,905,623.00 $1,575,372.00
b  b 
VT  $75,241,758.00  $1,586,916.39 $645,293.31
d 
WA  $339,500,000.00 unavailable  unavailable 
WI  $298,783,778.00  $23,721,457.00  $4,815,255.00 
d  d  d 
WV  $196,538,451.09 $8,236,095.00 $387,116.00
b  b  b 
WY  $24,298,621.59 $400,000.00 $128,563.73
a 
50 $16,441,207,520.80  $440,157,000.30  $78,637,574.22 
a. We collected data from 49 States and the District of Columbia. Data was not collected from 
Tennessee because their entire Medicaid population is in managed care. 
b. Figure given is an estimate. 
c. Figure given is for the fiscal year. 
d. Figure given includes data for more than outpatient prescription drugs (e.g., inpatient pharmacy, over-
the-counter drugs, syringes). 
e. Figure given includes $8,652,082 that Massachusetts deemed unrecoverable. 
Source: State Medicaid agency data provided to OIG 
18 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X  C  
Medicaid Pharmacy Dollars at Risk for 32 States 
The table below shows the percentage of Medicaid dollars at risk in States that were able to 
provide the dollar amounts they paid and chased as well as the dollar amounts they recovered in 
1999. The table lists States in descending order by total pharmacy expenditures. 
States that pay and chase send claims to third parties they believe are responsible for the claims. 
However, due to Medicaid beneficiaries changing coverage, or health plans not covering certain 
services, third parties may deny some of the claims. Therefore, the amount paid and chased for 
third-party pharmacy claims in the table below includes claims that could be denied for valid 
reasons. 
Percent of 
State  Total Pharmacy  Amount Paid and Chased for  Amount Recovered  Dollars at 
Expenditures  Third-party Pharmacy Claims  from Third Parties  Risk 
b  a  a 
NY  $2,026,870,651.00 $13,680,000.00 $1,280,000.00 91% 
a  a 
FL  $1,164,493,522.00  $28,452,000.00 $3,625,500.00 87% 
a  a  a 
TX  $900,000,000.00 $45,000,000.00 $2,800,000.00 94% 
c  c  c 
OH  $831,871,859.89 $3,109,904.11 $59,699.71 98% 
c  c  c 
IL  $718,299,628.00 $70,512,870.00 $9,336,728.00 87% 
b 
PA  $662,431,412.00 $9,393,597.00  $59,700.00  99% 
b  bd  b 
MA  $600,192,000.00 $13,272,730.00 $1,821,495.00 86% 
b  b  b 
MO  $468,598,424.00 $9,469,752.00 $1,152,785.00 88% 
b  ab  ab 
GA  $439,419,153.00 $21,091,378.38 $2,277,868.87 89% 
LA  $430,423,799.00  $33,615,322.00  $2,278,064.00  93% 
IN  $407,752,363.00  $27,170,728.00  $2,608,454.00  90% 
c  c  c 
KY  $384,078,336.00 $23,899,069.00 $2,143,461.00 91% 
a  a  a 
VA  $323,272,462.00 $11,905,623.00 $1,575,372.00 87% 
c  bc  bc 
AL  $314,946,162.00 $5,018,902.00 $1,742,770.00 65% 
SC  $310,394,000.00  $12,262,009.50  $4,572,710.30  63% 
WI  $298,783,778.00  $23,721,457.00  $4,815,255.00  80% 
MS  $294,754,745.46  $4,604,196.00  $1,594,088.00  65% 
MN  $215,926,180.34  $4,940,572.17  $2,258,155.66  54% 
c  c  c 
AR  $202,913,489.62 $811,127.00 $60,411.00 93% 
c  c  c 
WV  $196,538,451.09 $8,236,095.00 $387,116.00 95% 
IA  $179,987,630.03  $3,221,655.16  $1,929,713.16  40% 
KS  $152,053,655.00  $2,937,187.00  $885,738.00  70% 
b  b  ab 
ME  $136,637,381.57 $5,090,000.00 $2,100,000.00 59% 
NE  $126,866,802.45  $9,556,047.28  $3,869,239.38  60% 
19 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X  C  
Percent of 
State  Total Pharmacy  Amount Paid and Chased for  Amount Recovered  Dollars at 
Expenditures  Third-party Pharmacy Claims  from Third Parties  Risk 
OR  $119,205,296.00  $8,176,048.00  $4,206,869.00  49% 
RI  $79,285,625.88  $221,595.24  $143,580.29  35% 
a  a 
VT  $75,241,758.00  $1,586,916.39 $645,293.31 59% 
c  c  ac 
NH  $73,332,966.00 $4,713,111.00 $2,827,866.00 40% 
HI  $52,477,014.00  $1,208.00  $1,208.00  0% 
AK  $45,881,080.83  $5,183,492.88  $817,471.04  84% 
a  a  a 
WY  $24,298,621.59 $400,000.00 $128,563.73 68% 
NC  unavailable  $28,902,407.19  $9,168,690.33  68% 
32  $12,257,228,247.75  $440,157,000.30  $73,173,865.78  83% 
a. Figure given is an estimate. 
b. Figure given is for the fiscal year. 
c. Figure given includes data for more than outpatient prescription drugs (e.g., inpatient pharmacy, over-
the-counter drugs, syringes). 
d. Figure given includes $8,652,082 that Massachusetts deemed unrecoverable. 
Source: State Medicaid agency data provided to OIG 
20 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X  D  
Centers for Medicare and Medicaid Services Comments

21 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X  D  
22 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X  D  
23 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X  D  
24 
Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030  A P P E N D I X  D  
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Medicaid Recovery of Pharmacy Payments  OEI-03-00-00030