Third Party Liability and the New Medicaid Rule
The Louisiana Department of Health and Hospitals (DHH) has approved a significant change to the Louisiana State’s Medicaid Program which will become effective on April 20th.

The new Rule, which has been approved by CMS, will allow medical providers who bill Medicaid to pursue collection of the “Medicaid write-off” or “difference” after receiving payments from Medicaid. Prior to this change, Louisiana’s Medicaid Program prevented the medical provider from collecting this difference.

The Louisiana Hospital Association, the Louisiana Medical Association and others in the healthcare service business have been pursuing this change since 1996.

In 1997, U.S. District Judge Eldon Fallon ruled “In Re: Gulf Marine Services, Inc.” that “federal law does not preclude the practice of providers pursuing payment in tort situations in excess of the Medicaid reimbursement…. because Charity Hospital, New Orleans is seeking reimbursement from a third party tort-feasor, not the indigent patient.”

In his Judgment, Judge Fallan refers to a CMS Memo dated June 1997, which states that “as long as certain conditions are met, the health provider may pursue what is commonly referred to as the difference or write-off.” The state “must assure that Medicaid is made whole and that the state must assure protection to the Medicaid beneficiary by prohibiting the provider from receiving monies that has been designated to go to the beneficiary.” The Memo further states “As long as states preservation of certain principles, federal law would not preclude the practice of providers pursuing payment in tort situations in excess of Medicaid reimbursement.” Judge Fallon’s 1997 ruling has not been followed by DHH until now. With the new Rule, these protections are written into the new Medicaid Rule for the State of Louisiana.

Other Medicaid programs in Texas, North Carolina, Florida and Montana currently permit such reimbursement.

In 2004, LSU-Healthcare Services Division (LSU-HCSD) estimated that if such a Rule would have been in place, it could have reimbursed the State Medicaid Program over $1.8 million from the Charity Hospital system alone. These funds would have gone back into the Medicaid Program to assist other Medicaid-eligible patients.

The new Rule (LAC 50:I.8341-8349) sets forth the procedure which must be followed, and what penalties may apply for failure to follow the procedure. A provider who has accepted Medicaid payment and wishes to pursue the difference must: (1) Establish his right to payment separate of any amounts claimed and established by the recipient such as in compliance with L.R.S. 9:4751, et seq. (Medical Lien Statute); or (2) Obtain a settlement or award in his own name separate from a settlement or award obtained by, or on behalf of, the recipient; or (3) Enter into a written agreement with the recipient, the recipient’s legal representative, or recipient’s attorney-in-fact that specifies the amount which will be paid to the provider separate from the settlement or award obtained by the recipient.

Further, a provider who has filed and accepted Medicaid payment and who wishes to pursue the difference shall submit written notification containing certain information relating to the existence, or possible existence, of the liable party to the Medicaid Third Party Recovery Unit within 365 days of the accident or incident.

A provider who has filed and accepted a Medicaid payment may accept or collect the difference from a third party and within 15 working days of the receipt of the difference, the provider or his agent shall notify the Medicaid Third Party Recovery Unit to determine whether it has received full reimbursement for all payments made to all providers for healthcare services rendered to a Medicaid recipient as a result of an accident or incident. A provider shall not disburse the difference until receipt of notification from the Medicaid Third Party Recovery Unit that it has been made whole. If Medicaid agrees to and accepts less than full reimbursement for all payments then Medicaid shall be deemed to have been made whole. Medicaid shall have 15 working days from receipt of the notice to notify the provider whether it has been made whole.

When Medicaid has not been made whole, the provider shall return the difference to the remitter within 15 days working days of the date of the Medicaid’s notice and shall also provide confirmation of the remittance to Medicaid.

Theodore M. Haik, Jr. is an attorney and senior partner with Haik, Minvielle, & Grubbs, LLP in New Iberia. Readers may contact Mr. Haik at for more information.

May 2008

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