The Future of Medicaid Secondary Payer Reporting Regimes (Part II) – Medicare Secondary Payer Reporting and Medicaid Liens

In my last post, I offered a general overview of the federal-state Medicaid partnership and the impact of the Affordable Care Act (ACA).  So now we know about the broad framework of Medicaid and how it’s funded.

Let’s switch gears and talk about a new subject – secondary payer issues.  Oftentimes, when someone requires medical care for an accident, some third party is legally responsible for the injury.  Some good examples are an employer being responsible for a workplace injury, or a toxic tortfeasor being held responsible for injuries it causes.  In that scenario, if Medicare or Medicaid pays for care related to the injury, the agency will have a statutory lien against any judgment or settlement obtained from the third party.

But a lien is worthless if no one knows about the settlement or judgment, right?  Historically, the Centers for Medicare and Medicaid Services (CMS) tried to overcome that obstacle by requiring Medicaid beneficiaries to refund any judgment or settlement owed to Medicare within 60 days.  The problem is that sort of “honor system” approach left a lot of secondary payment dollars on the table.  So, since 2007, CMS has used the Section 111 program (called that because it was enacted as Section 111 of the Medicare, Medicaid and SCHIP Extension Act) to require reporting of certain entities (mostly insurers) that are likely to pay money subject to a Medicare lien.  In other words, Section 111 effectively puts the burden on the payer – as well as the beneficiary – to report any settlement or judgment.  (There’s actually a lot of academic and practice-based criticism over Section 111, but since these posts are mostly about Medicaid, I’ll refrain from getting into them.)

As I mentioned above, state Medicaid programs have a similar requirement that the state agency must have a lien over any settlement or judgment intended to pay for medical treatment that was already paid for by Medicaid.  I should note – although it’s not directly relevant to my point – that in its 2006 Arkansas Department of Health and Social Services v. Ahlborn decision, the U.S. Supreme Court interpreted  the federal anti-lien statute to restrict the amount of the lien to the portion of the settlement attributable to health care costs.  Colorado’s, for example, is at C.R.S. 25.5-4-301 (I can’t link to the specific statute, but interested readers can click through here).  It allows:

When the state department has furnished medical assistance to or on behalf of a recipient pursuant to the provisions of this article, and articles 5 and 6 of this title, for which a third party is liable, the state department shall have an automatic statutory lien for all such medical assistance. The state department’s lien shall be against any judgment, award, or settlement in a suit or claim against such third party and shall be in an amount that shall be the fullest extent allowed by federal law as applicable in this state, but not to exceed the amount of the medical assistance provided.

Note:  The italicized phrase is what makes the statute consistent with Ahlborn, as the U.S. District Court for the District of Colorado recently observed (click through for a Word version of the decision).  Disclosure:  This case was litigated by my friend and former boss while I worked at the Colorado AG’s office, though I had no involvement with it.

So what’s the difference between the Medicare and Medicaid lien programs?  It’s Section 111 and the absence of anything remotely resembling it in virtually every state (with the notable exception of Rhode Island).  Most states have some sort of reporting requirement – Colorado, for example, requires Medicaid recipients and their representatives and attorneys to report any settlement or judgment that might be subject to a Medicaid lien.  But anything that relies on a beneficiary doing something that might take significant dollars out of his or her pocket is problematic at best.

One last thing:  Remember how Medicaid funding is structured from Part I?  It’s not all state money, not even close; instead, the federal government provides at least 50 percent and (depending on the state) as much as 75 percent of Medicaid dollars.  When a state Medicaid agency collects on a Medicaid lien, the feds want their share back as well.  Still, getting a quarter-to-half of a judgment or settlement back is better than nothing, right?  Discerning readers should see where I’m going with this.  Stay tuned.

Medicaid Maintenance of Effort and Program Cuts – How Is It Supposed to Work?

This is interesting.  In 1996, the federal government passed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), which, among other things, eliminated Medicaid eligibility for a large swath of noncitizens.  PRWORA did, however, allow states to use state dollars to pay for these noncitizens’ health care if they so desired.  Maine did desire; Colorado didn’t.  Fast forward to 2012, when Maine passed a massive Medicaid overhaul, cutting eligibility for thousands.  (Maine actually sued in the First U.S. Circuit Court of Appeals to expedite the Centers for Medicare and Medicaid Services’ review of the cuts, but that lawsuit was summarily dismissed).  In January 2013, CMS approved some of these cuts, which included slashing noncitizen eligibility, and advocacy groups filed a class action challenging the measure on equal protection grounds.  In March 2013, the federal court denied the plaintiffs’ motion for a preliminary injunction, and they appealed to the First Circuit.

Since I’m a health lawyer, I’m not really interested in the merits of the equal protection claim.  But reading about the case and the background of the Maine Medicaid cuts brought to mind another issue that I’ve been thinking about a lot over the past few years – the so-called Medicaid maintenance of effort (MOE) requirement.  This is a provision included in the Affordable Care Act (ACA) that prohibits states from cutting Medicaid eligibility as it existed when the law was passed in 2010 until 2014 (for adults) or 2019 (for kids).  The purpose of the measure, which was an extension of a similar MOE requirement in the 2009 stimulus law, was twofold.  First, it was intended to ensure that states did not respond to the economic hardship in 2009 and subsequent years by cutting Medicaid eligibility, and second, it was meant to preserve eligibility for the near-poor until the subsidized state exchanges opened in 2014.

But here’s the thing.  There’s a lot of uncertainty surrounding the MOE requirement.  As a threshold matter, it’s unclear whether the provision – which was included in the Medicaid expansion part of the ACA – survived the Supreme Court’s 2013 decision in National Federation of Independent Business v. Sebelius, specifically the part that allowed states to opt out of that expansion.  The general consensus is that it did because NFIB didn’t actually invalidate the expansion – it just allowed states to opt out of it.  That’s never been tested, though (it would have been if the First Circuit had heard Maine’s lawsuit), so we just don’t know.

There’s another area of uncertainty surrounding the ACA’s MOE provision: What type of eligibility cuts does it encompass?  Something like Maine’s proposed plan to slash eligibility for a vast number of previously covered populations is a no-brainer.  Indeed, that seems to be pretty much what the MOE requirement was meant to address.  But what about the sort of judicial and administrative tweaking of in-place eligibility requirements that goes on all the time?  For example, in a case I was involved in, the dispositive issue was whether children with (solely) mental or behavioral disabilities were eligible for a program designed to assist children with medical disabilities severe enough to put them at risk for institutionalization in a nursing facility.  The court of appeals said they weren’t, but let’s pretend the decision came out the other way.  I don’t know for sure, but it’s possible that the state Medicaid agency would have wanted to amend its regulations to clarify that these kids weren’t eligible (unless anyone thinks the Colorado Department of Health Care Policy and Financing is heartless, the children were eligible for another program, albeit one with a waiting list).  Would the ACA MOE requirement have prevented the agency from doing that?  If so, you really have to ask if Congress intended the MOE provision to be used as a one-way ratchet, essentially locking in recipient-favorable state judicial determinations regarding eligibility.  It’s hard to believe that’s true.

I may revisit this issue, but for now let’s conclude by turning back to the Maine noncitizen eligibility case pending in the First Circuit.  I’m curious about one thing.  The plaintiffs’ position is that the noncitizen Medicaid program is part and parcel of the broader state Medicaid program (called MaineCare).  For reasons too complicated to address here (but read the district court’s preliminary injunction and 12(b)(6) decisions for the gory details), if it is, then the plaintiffs probably have a cognizable claim, but if it isn’t, they don’t.  Given that, why didn’t the plaintiffs’ attorneys raise the MOE requirement as separate grounds to invalidate the cuts?  It would seem to follow from their argument – cutting eligibility for an entire previously covered population appears to be what the ACA was meant to stop.  For that matter, why didn’t the state raise the fact that Maine didn’t see the need to submit the noncitizen eligibility cut to CMS for approval in 2012, and CMS didn’t see the need to address it when considering the other proposed Medicaid cuts in January?  Isn’t this prima facie evidence that the state and the feds see noncitizen coverage as something that’s separate and distinct from the traditional Medicaid program?  It makes me wonder if I’m missing something.

The Future of Medicaid Secondary Payer Reporting Regimes (Part I) – The Federal-State Medicaid Partnership and the ACA

From the outset, I need to credit Mary Re Knack and David Farber for an excellent webcast they did on this subject on Oct. 1, 2013.  I subscribed to it even though I’ve got all of my general CLEs for the reporting period (though if anyone knows of any interesting ethics CLEs, I’d appreciate the heads-up).  I wasn’t disappointed.  It was hugely informative, and in main part, it’s the impetus for this series of posts.

So what is the federal-state Medicaid partnership and how has that arrangement been affected by the Affordable Care Act (which everyone calls the ACA)?

Medicaid is a program designed to help poor families and individuals.  It has federal and state components.  But how does that work?  The federal government (through the Centers for Medicare and Medicaid Services, which everyone calls CMS) tells the states the minimum groups that they must cover if they want to participate in Medicaid, and it identifies certain other groups that the states can elect to cover if they want to.  CMS also sets the mandatory and optional benefits that must (or may) be provided to eligible beneficiaries.  In exchange, the federal government provides a good chunk of the funding for the state Medicaid programs – anywhere from 50 percent up to 75 percent depending on the state.  Although a state theoretically could opt out of Medicaid, in practice, none have.

Each state that participates in Medicaid (again, all of them) is required to establish a “single State agency” to administer and supervise the state Medicaid plan.  In Colorado, that’s the Department of Health Care Policy and Financing.

The precise mechanics of the Medicaid reimbursement process are a bit complicated, but in general, a state will file a statement once a quarter that estimates its total Medicaid costs and certifies that it will be able to come up with its share of those expenses. Then the federal government hands over the matching funds.  At the beginning of the next quarter, the state files a reconciliation statement detailing what it actually spent.  CMS will adjust its payment of the matching funds for that period based on whether it owes (or is owed) additional money.  Trust me, you’ll see why this is important a couple of posts from now.

In addition to the traditional Medicaid-eligible populations and covered services, states are allowed and encouraged to experiment with test programs, called “waiver” programs (because states must get a waiver from CMS before implementing them).  For example, one typical waiver program is Colorado’s Children’s Waiver, which is designed to provide home-based care for physically disabled (but not mentally or behaviorally disabled, as the Colorado Court of Appeals has said) children who would otherwise be at risk of institutionalization in a nursing facility or hospital.

Enter the Affordable Care Act, aka Obamacare.  Among its many moving parts, it included an expansion of Medicaid eligibility to anyone under age 65 making less than 133 percent of the poverty level, regardless of whether they have children or a disability (in most states, childless, nondisabled adults were flat-out ineligible for Medicaid).  This is a pretty drastic expansion of the program, increasing the state rolls by more than 20 million, or about a third of the pre-expansion population.  In return, the federal government will pay 100 percent of the increased Medicaid costs until 2016, with the state share increasing to no more than 10 percent by 2020.

Originally, participation in the Medicaid expansion program was tied to a state’s ability to offer Medicaid in any form.  This means that if a state declined to expand Medicaid eligibility as contemplated by the ACA, it would lose all Medicaid funding.  However, the U.S. Supreme Court put a stop to that in its monumental 2013 National Federation of Independent Business v. Sebelius decision.  There, the court held that conditioning all federal Medicaid funds on a state’s decision to accept the ACA expansion was too coercive to pass constitutional muster, and it required the federal government to permit states to opt out if they so chose.  To date, more than half of the states have chosen to do just that.

Where does that leave us?  State-federal Medicaid partnership, check.  Federal matching funds, check.  ACA Medicaid expansion, check.  But what does that have to do with the Medicaid secondary payer reporting regime?  Stay tuned.