[Code of Federal Regulations]
[Title 42, Volume 3]
[Revised as of October 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR433.139]

[Page 93-95]
 
                         TITLE 42--PUBLIC HEALTH
 
  CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF 
                  HEALTH AND HUMAN SERVICES (CONTINUED)
 
PART 433_STATE FISCAL ADMINISTRATION--Table of Contents
 
                     Subpart D_Third Party Liability
 
Sec. 433.139  Payment of claims.

    (a) Basic provisions. (1) For claims involving third party liability 
that are processed on or after May 12, 1986, the agency must use the 
procedures specified in paragraphs (b) through (f) of this section.
    (2) The agency must submit documentation of the methods (e.g., cost 
avoidance, pay and recover later) it uses for payment of claims 
involving third party liability to the CMS Regional Office.
    (b) Probable liability is established at the time claim is filed. 
Except as provided in paragraph (e) of this section--
    (1) If the agency has established the probable existence of third 
party liability at the time the claim is filed, the agency must reject 
the claim and return it to the provider for a determination of the 
amount of liability. The establishment of third party liability takes 
place when the agency receives confirmation from the provider or a third 
party resource indicating the extent of third party liability. When the 
amount of liability is determined, the agency must then pay the claim to 
the extent that payment allowed under the agency's payment schedule 
exceeds the amount of the third party's payment.
    (2) The agency may pay the full amount allowed under the agency's 
payment schedule for the claim and

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then seek reimbursement from any liable third party to the limit of 
legal liability if the claim is for labor and delivery and postpartum 
care. (Costs associated with the inpatient hospital stay for labor and 
delivery and postpartum care must be cost-avoided.)
    (3) The agency must pay the full amount allowed under the agency's 
payment schedule for the claim and seek reimbursement from any liable 
third party to the limit of legal liability (and for purposes of 
paragraph (b)(3)(ii) of this section, from a third party, if the third 
party liability is derived from an absent parent whose obligation to pay 
support is being enforced by the State title IV-D agency), consistent 
with paragraph (f) of this section if--
    (i) The claim is prenatal care for pregnant women, or preventive 
pediatric services (including early and periodic screening, diagnosis 
and treatment services provided for under part 441, subpart B of this 
chapter), that is covered under the State plan; or
    (ii) The claim is for a service covered under the State plan that is 
provided to an individual on whose behalf child support enforcement is 
being carried out by the State title IV-D agency. The agency prior to 
making any payment under this section must assure that the following 
requirements are met:
    (A) The State plan specifies whether or not providers are required 
to bill the third party.
    (B) The provider certifies that before billing Medicaid, if the 
provider has billed a third party, the provider has waited 30 days from 
the date of the service and has not received payment from the third 
party.
    (C) The State plan specifies the method used in determining the 
provider's compliance with the billing requirements.
    (c) Probable liability is not established or benefits are not 
available at the time claim is filed. If the probable existence of third 
party liability cannot be established or third party benefits are not 
available to pay the recipient's medical expenses at the time the claim 
is filed, the agency must pay the full amount allowed under the agency's 
payment schedule.
    (d) Recovery of reimbursement. (1) If the agency has an approved 
waiver under paragraph (e) of this section to pay a claim in which the 
probable existence of third party liability has been established and 
then seek reimbursement, the agency must seek recovery of reimbursement 
from the third party to the limit of legal liability within 60 days 
after the end of the month in which payment is made unless the agency 
has a waiver of the 60-day requirement under paragraph (e) of this 
section.
    (2) Except as provided in paragraph (e) of this section, if the 
agency learns of the existence of a liable third party after a claim is 
paid, or benefits become available from a third party after a claim is 
paid, the agency must seek recovery of reimbursement within 60 days 
after the end of the month it learns of the existence of the liable 
third party or benefits become available.
    (3) Reimbursement must be sought unless the agency determines that 
recovery would not be cost effective in accordance with paragraph (f) of 
this section.
    (e) Waiver of requirements. (1) The agency may request initial and 
continuing waiver of the requirements in paragraphs (b)(1), (d)(1), and 
(d)(2) of this section, if it determines that the requirement is not 
cost-effective. An activity would not be cost-effective if the cost of 
the required activity exceeds the third party liability recoupment and 
the required activity accomplishes, at the same or at a higher cost, the 
same objective as another activity that is being performed by the State.
    (i) The agency must submit a request for waiver of the requirement 
in writing to the CMS regional office.
    (ii) The request must contain adequate documentation to establish 
that to meet a requirement specified by the agency is not cost-
effective. Examples of documentation are costs associated with billing, 
claims recovery data, and a State analysis documenting a cost-effective 
alternative that accomplishes the same task.
    (iii) The agency must agree, if a waiver is granted, to notify CMS 
of any event that occurs that changes the

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conditions upon which the waiver was approved.
    (2) CMS will review a State's request to have a requirement 
specified under paragraph (e)(1) of this section waived and will request 
additional information from the State, if necessary. CMS will notify the 
State of its approval or disapproval determination within 30 days of 
receipt of a properly documented request.
    (3) CMS may rescind the waiver at any time that it determines that 
the State no longer meets the criteria for approving the waiver. If the 
waiver is rescinded, the agency has 6 months from the date of the 
rescission notice to meet the requirement that had been waived.
    (4) An agency requesting a waiver of the requirements specifically 
concerning either the 60-day limit in paragraph (d)(1) or (d)(2) of this 
section must submit documentation of written agreement between the 
agency and the third party, including Medicare fiscal intermediaries and 
carriers, that extension of the billing requirement is agreeable to all 
parties.
    (f) Suspension or termination of recovery of reimbursement. (1) An 
agency must seek reimbursement from a liable third party on all claims 
for which it determines that the amount it reasonably expects to recover 
will be greater than the cost of recovery. Recovery efforts may be 
suspended or terminated only if they are not cost effective.
    (2) The State plan must specify the threshold amount or other 
guideline that the agency uses in determining whether to seek recovery 
of reimbursement from a liable third party, or describe the process by 
which the agency determines that seeking recovery of reimbursement would 
not be cost effective.
    (3) The State plan must also specify the dollar amount or period of 
time for which it will accumulate billings with respect to a particular 
liable third party in making the decision whether to seek recovery of 
reimbursement.

[50 FR 46665, Nov. 12, 1985, as amended at 51 FR 16319, May 2, 1986; 60 
FR 35503, July 10, 1995; 62 FR 23140, Apr. 29, 1997]