DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop C2-21-15 
Baltimore, Maryland 21244-1850 
Center for Medicaid and State Operations 
SMDL #03-004 
April 8, 2003 
Dear State Medicaid Director: 

The purpose of this letter is to: (1) clarify CMS policy with respect to state recoupment of Medicaid 

payments a state has made to a provider for services rendered to a Medicare/Medicaid dual-eligible

beneficiary; and (2) remind states of a providers obligation to submit timely a demand bill. Because 

the guidance on recoupment of Medicaid payments contained in the December 3, 1999, State 

Medicaid Director (SMD) letter is being clarified herein, that letter is hereby rescinded. 

State Recoupment of Medicaid Payments

Medicaid is usually the payer of last resort. Except for certain statutory exclusions, you are required 

to cost avoid claims, rejecting those that may be payable by a third party.  If probable third party 

liability is not established or benefits are not available from a third party, you must pay the claim if 

the services are covered by Medicaid.  If the Medicaid agency learns of the existence of a liable third 

party after a claim is paid, or benefits become available from a third party after the claim is paid, you 

must seek recovery from that third party. 

When that third party is Medicare, neither the Medicare nor Medicaid statute, nor HHS's regulations 

or policies prohibit any state from recouping its Medicaid payment from providers in the situations 

where: (1) Medicare has determined that it is liable for the service at issue; or (2) a beneficiary, 

beneficiary representative, or state (as the beneficiarys subrogee) timely requests the provider to file 

a claim with Medicare and the provider fails to submit timely a complete claim to Medicare for the 

service at issue, and/or fails to submit such documentation (including medical records) that the 

provider has or should have in order for the intermediary to make a substantive coverage 

determination on the claim for such service. By submit timely we mean within the Medicare 

timely filing limits set forth in 42 CFR 424.44, or, where applicable, within such period as extended 

under 424.45.  By claim we mean a submission that is processable, i.e., one that meets the 

requirements of a Medicare claim as defined in 42 CFR 424.32(a). By timely requests we mean 

within a reasonable time prior to the expiration of the Medicare timely filing period contained in 

42 CFR 424.44(a). 

Provider Obligation to Submit Demand Bills

As noted above, the State Medicaid agency may be the subrogee of a beneficiary.  As such, a state 

may request the provider to submit a claim for Medicare payment and the provider must honor that 

request. Under Medicare policy, if a beneficiary, the beneficiarys representative or (in the case of

the dual eligibles) a state as the beneficiarys subrogee, timely requests a provider to file a claim for 

services rendered to the beneficiary, the provider is obligated to submit such a demand bill to the

appropriate intermediary. Under section 1866(a)(1)(A) of the Social Security Act and regulation 

42 CFR 489.21(b), a provider agrees not to charge a beneficiary (or the State as the beneficiarys 
 Page 2 - State Medicaid Director 
subrogee) for services for which a provider failed to file timely a claim with Medicare despite being 
timely requested to do so.  Thus, if a provider fails to submit timely a demand bill, the provider 
violates its provider agreement with Medicare if it charges the beneficiary (or the beneficiary's 
subrogee), or retains any charge already collected from the beneficiary or subrogee, for such services. 
Sincerely, 
/s/ 
Dennis G. Smith 
Director 
cc: 

CMS Regional Administrators 

CMS Associate Regional Administrators 

for Medicaid and State Operations 

Michele Mickey 

Acting Director, Health Policy Unit 

American Public Human Services Association 

Joy Wilson 

Director, Health Committee 

National Conference of State Legislatures 

Matt Salo 

Director of Health Legislation 

National Governors Association 

Brent Ewig 

Senior Director, Access Policy 

Association of State and Territorial Health Officials 

Jim Frogue 

Acting Director, Health and Human Services Task Force 

American Legislative Exchange Council 

Trudi Matthews 

Senior Health Policy Analyst 

Council of State Governments 

Chuck Grim 

Interim Director 

Indian Health Service 
 Page 3  State Medicaid Director 

J. T. Petherick 

Director, Legislative Affairs 

National Indian Health Board 

Jacqueline Johnson 

Executive Director 

National Congress on American Indians 

Beverly Russell 

Executive Director 

National Council on Urban Indian Health