Medicaid Third Party Liability Act
Medicaid Third Party Liability Act would overhaul how states recover Medicaid costs from third parties and whom they can work with to do that. The bill removes some existing special rules for certain types of care, and it creates new, clearer authority for states to contract with health insurers and other health plans to handle third-party recovery. Starting in 2026, states could delegate or share their rights to recover payments and the related assignment of beneficiary payment rights with insurers and similar plans, subject to state law assurances. The bill also requires states to verify whether Medicaid applicants or recipients have private health coverage and imposes a federal funding condition: after 2026, Medicaid expenditures may not receive federal funds unless insurance status is verified. A transitional provision lets states delay certain requirements if their legislatures need to pass new laws.
Key Points
- 1Removal of special treatment for certain types of care under Medicaid third-party liability rules. The bill strikes subparagraphs that currently provide special rules, simplifying how third-party liability applies across all services and payments.
- 2New ability for states to contract with health insurers and other health plans to handle third-party liability. Beginning after January 1, 2026, states that provide Medicaid through contracts with insurers or plans (including group plans, self-insured, managed care organizations, pharmacy benefit managers, etc.) can specify whether they delegate all or part of their right of recovery and whether they transfer assignment rights to the insurer. States must ensure the insurer has authority to carry out these requirements.
- 3Flexibility for states to delegate and coordinate TPL with insurers, with assurances. For states electing to delegate TPL rights to a contracted insurer, the bill requires assurances that state laws that govern third-party recovery grant the insurer the necessary authority to carry out the specified duties.
- 4Enhanced verification of insurance status for eligibility and payment. The bill adds a requirement to collect information on whether a Medicaid applicant or recipient has private health coverage and the plan in which they are enrolled. It also tightens conditions for federal funding to support only those expenditures where insurance status has been verified.
- 5Federal funding condition tied to verification. Beginning in 2026, the federal payment (FFP) for Medicaid expenditures will be unavailable for amounts where the state has not obtained and verified third-party coverage information and the plan details.
- 6Transition provisions. If a state plan requires additional legislation to meet the new requirements, the state is not deemed noncompliant solely for failing to meet the new requirements before the first calendar quarter after the end of the state’s next regular session. This acknowledges varying state legislative calendars.