Opinion ID: 63773
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Heading Rank: 4

Heading: Can Baton Rouge General seek third party reimbursement?

Text: For purposes of this section, we assume arguendo that when Alfaro became eligible for Louisiana Medicaid, whether or not the hospital availed itself of Medicaid coverage, the Medicaid regime applied to the hospital's reimbursement rights. We first consider whether a state agency alone can pursue third-party liability claims. Congress, in crafting the Medicaid legislation, intended that Medicaid be a `payer of last resort.' Ark. Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 291, 126 S.Ct. 1752, 1767, 164 L.Ed.2d 459 (2006). This means that all other available resources must be used before Medicaid pays for the medical care of an individual enrolled in a Medicaid program. Caremark, Inc. v. Goetz, 480 F.3d 779, 783 (6th Cir.2007). Because Medicaid is essentially a payer of last resort, federal law requires states to implement `third party liability (TPL) programs' which ensure that Federal and State funds are not misspent for covered services to eligible Medicaid recipients when third parties exist that are legally liable to pay for those services.' Wesley Health Care Ctr., Inc. v. DeBuono, 244 F.3d 280, 281 (2d Cir.2001) (quoting Medicaid Programs; State Plan Requirements and Other Provisions Relating to State Third Party Liability Programs, 55 Fed. Reg. 1423, 1423-24 (1990)). A third party is any individual, entity or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a State [Medicaid] plan. 42 C.F.R. § 433.136. The federal Medicaid statute requires that each state's Medicaid agency take measures to find out when third parties, such as private insurers and Medicare, are legally obliged to pay for services covered by Medicaid. Wesley Health Care Ctr., 244 F.3d at 281 (citing 42 U.S.C. § 1396a(25)(A)). Each state Medicaid plan must include a plan... for pursuing claims against such third parties. Id. If third party liability is found to exist after the agency has provided medical assistance, the state agency must seek reimbursement for such assistance. Id. (citing 42 U.S.C. § 1396a(25)(B)). The Centers for Medicare and Medicaid Services (CMS) [2] has issued implementing regulations that outline two methods for handling third party liability: cost avoidance and pay and chase. When the probable liability of a third party is established at the time a claim is filed, the state Medicaid agency must reject the claim and return it to the provider for a determination of the amount of third-party liability. 42 C.F.R. § 433.139(b)(1). The state agency must pay the difference if the third party's liability does not at least equal the amount the provider is entitled to under Medicaid. Id. This method of payment is called `cost avoiding;' it entails shifting to the provider the burden of securing payment from third parties. Wesley Health Care Ctr., 244 F.3d at 282. The other method of handling third-party liability is called pay and chase. Under this method, the state Medicaid agency pays the total amount allowed under the agency's payment schedule and then seeks reimbursement from the liable third party. Id. (quoting Medicaid Programs; State Plan Requirements and Other Provisions Relating to State Third Party Liability Programs, 55 Fed.Reg. 1423, 1425 (1990)). The pay and chase method is used if the probable existence of third party liability cannot be established or third party benefits are not available to pay the patient's medical expenses at the time a Medicaid claim is filed. See 42 C.F.R. § 433.139(c); 42 U.S.C. § 1396a(a)(25)(B). The federal regulations permit, or even require, the state Medicaid agency to use the pay and chase method in certain specific circumstances, for example, where labor, delivery, or postpartum care is involved. See 42 C.F.R. § 433.139(b)(2), (3). A state Medicaid agency may also use the pay and chase method when it is cost effective to do so and it receives a waiver from CMS. See 42 C.F.R. § 433.139(e). Louisiana law complies with these federal mandates. See LA.REV.STAT. ANN. § 46:446.2. In addition, Louisiana law requires providers to bill other insurers and third parties that are liable for a patient's medical expenses before they bill Medicaid. See LA.REV.STAT. ANN. § 46:437.12 (requiring Medicaid providers to enter into a provider agreement with the state Medicaid agency that requires the provider to [b]ill other insurers and third parties ... before billing the [state Medicaid program], if after reasonable inquiry it is known that the [Medicaid eligible patient] is eligible for payment for health care or related services from another insurer or person ....). Alfaro argues that Louisiana's requirement conflicts with federal Medicaid law concerning third-party liability. He contends that the federal Medicaid scheme entrusts the right and duty of recovering funds from third parties to the [state] Medicaid agencynot the health care provider upon a determination of eligibility. We find this argument unconvincing and, therefore, hold that Louisiana's law requiring health care providers to bill third-parties before billing Medicaid does not conflict with federal law. Alfaro first asserts that the responsibility of seeking reimbursement from a liable third party is entrusted to the state Medicaid agency, not the health care provider. To support his assertion, he cites the federal Medicaid statute's mandate that a state Medicaid plan require the state Medicaid agency to take all reasonable measures to ascertain the legal liability of third parties ... to pay for care and services available under the plan .... 42 U.S.C. § 1396a(a)(25)(A). [3] Louisiana law complies with this provision. LA.REV.STAT. ANN. § 46:446.2(C)(1). [4] Federal law does not explicitly entrust a state Medicaid agency with the sole responsibility of seeking reimbursement from third parties. Instead, it requires the agency to (a) collect information about third party liability so that the agency can pursue a claim against a third party if it needs to do so and (b) prepare a plan for pursuing such claims. 42 U.S.C. § 1396a(a)(25)(A)(i), (ii). Nothing in the statute prohibits a state from requiring a health care provider to bill a third party before it bills Medicaid. As further support for his argument, Alfaro cites the federal Medicaid provision stating that if a third party's liability for a patient's medical expenses is found to exist after a state agency has paid a provider's claim, the agency must seek reimbursement for such [medical] assistance to the extent of such legal liability. 42 U.S.C. § 1396a(a)(25)(B); see also 42 C.F.R. § 433.139(d)(2). Critically, the agency's responsibility to pursue the third party does not come into effect until after the Medicaid agency has paid a provider's claim. Congress chose not to mandate that a state agency seek reimbursement from a liable third party before it pays a Medicaid claim. Louisiana, therefore, is entirely free to delegate to a health care provider, rather than the state Medicaid agency, the obligation to seek reimbursement from a liable third party before it bills Medicaid. Next, Alfaro asserts that 42 C.F.R. § 433.139 requires a health care provider to bill a state Medicaid agency (and submit to whatever reimbursement limit Medicaid prescribes) as soon as a patient becomes eligible for Medicaid. But § 433.139 does not contain such a requirement. It merely describes the procedures that a state Medicaid agency must follow if a provider submits a Medicaid claim to it for reimbursement and a third party is liable for the patient's medical expenses. Moreover, this regulation does not prohibit a state from allocating to the provider the burden of collecting third-party payments before it bills Medicaid. As mentioned, § 433.139 states that if a provider submits a Medicaid claim and the probable liability of a third party is established at the time the claim is filed, the state Medicaid agency must, with limited exceptions, reject the claim and require the provider to chase the third party. See 42 C.F.R. § 433.139(b). [5] Louisiana's law is entirely consistent with this regulation: It simply authorizes a provider to collect from a third-party earlier in the payment process. [6] We conclude that even if Alfaro is deemed a Medicaid patient simply because of his eligibility for coverage, the hospital was within its rights under Louisiana and federal law to pursue the third-party tortfeasor before it sought Medicaid reimbursement.