Legislation Needed to Improve Collections From Private Insurers

HRD-91-25: Published: Nov 30, 1990. Publicly Released: Jan 8, 1991.

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Pursuant to a congressional request, GAO reviewed problems that state Medicaid agencies experienced in collecting from third parties, focusing on out-of-state insurers and employee health benefit plans covered under the Employee Retirement Income Security Act of 1974 (ERISA).

GAO found that: (1) states lacked jurisdiction over insurers that operated only incidentally in the state; (2) states' limited authority over ERISA plans did not allow them to prohibit those plans from certain actions to avoid payments for recipients' covered costs; (3) state officials could not easily identify Medicaid losses through their payment systems, but federal agency information indicated that the losses could be substantial and were likely to increase; and (4) to minimize future losses, states will need federal legislation to clarify Medicaid's role as payer of last resort and enhance their ability to collect from out-of-state insurers and ERISA plans.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The Omnibus Budget Reconciliation Act of 1993 requires states to enact laws prohibiting insurers (including group health plans under ERISA, service benefit plans, and HMOs) from taking Medicaid status into account in enrollment or payment for benefits, and to enact laws giving the state rights to payments by liable third parties, effective October 1, 1993.

    Matter: Congress should amend federal law to explicitly state that Medicaid is payer of last resort, give states the authority needed to recover from all liable third parties, and provide effective mechanisms for enforcement.


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