Medicaid and Private Insurance: Who Pays First?

When individuals have both Medicaid and private health insurance, a common question arises regarding which policy pays first. This dual coverage can create complexities in billing and claims processing. This article clarifies the general rules and processes for coordinating benefits between Medicaid and private health insurance.

Primary and Secondary Coverage Defined

“Primary insurance” refers to the main health insurance policy that pays for medical expenses first. This policy pays up to its coverage limits and according to its terms. The primary insurer processes the claim first. Once it has paid its portion, any remaining balance may then be submitted to a secondary insurer.

“Secondary insurance” provides additional coverage, stepping in after the primary insurer has processed a claim. It may pay for some or all of the remaining costs, such as deductibles, co-pays, and co-insurance, that the primary plan did not cover. Having secondary coverage can help reduce a patient’s out-of-pocket expenses.

The Standard Payment Hierarchy

When an individual has both private health insurance and Medicaid, private insurance almost invariably functions as the primary payer. This is rooted in the “Medicaid as Payer of Last Resort” principle, a federal regulation that mandates other sources of coverage to pay claims before Medicaid. Therefore, if a person eligible for Medicaid also has private coverage, that private plan must be billed first.

The rationale behind this rule is to conserve Medicaid funds, ensuring they are used for eligible individuals who do not have other means of coverage. It also prevents the shifting of costs from private insurers to government programs. Common types of private insurance that typically serve as the primary payer include employer-sponsored health plans, individual health plans purchased directly or through marketplaces, and TRICARE for military personnel.

Coordination of Benefits Process

The process of coordinating benefits begins when a healthcare provider submits a claim for services for an individual with both private insurance and Medicaid. The provider first sends the claim to the private insurer, which is the designated primary payer. This primary insurer evaluates the claim and pays its portion based on the policy’s terms, including any deductibles, co-pays, or co-insurance.

Once the primary private insurer has processed the claim and remitted its payment, any remaining balance is then forwarded to Medicaid, which acts as the secondary payer. Medicaid then assesses the remaining costs and may cover some or all of these expenses, depending on its own coverage rules and the services provided. This coordination ensures that both insurance plans contribute appropriately, maximizing coverage for the beneficiary.

Circumstances Where Medicaid Pays First

While private insurance generally serves as the primary payer, there are limited situations where Medicaid may pay first. One instance involves certain services provided under the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) program for children. This program ensures comprehensive health services for Medicaid-eligible children, and Medicaid might initially cover these services before seeking reimbursement from other liable parties.

Another scenario occurs if a private insurance policy has exhausted its benefits for a particular service or is not legally obligated to pay for a specific treatment. In such cases, if the service is covered under Medicaid, Medicaid may then become the primary payer for that specific instance. These situations are exceptions to the general rule, with federal regulations typically requiring other available third-party resources to fulfill their obligations before Medicaid pays.

Handling Payment Errors

If a claim is processed incorrectly, such as Medicaid erroneously paying for services that a private insurer should have covered first, mechanisms are in place to address these payment errors. Medicaid agencies have systems to identify and recover overpayments from the responsible primary insurer or, in certain circumstances, directly from the healthcare provider. This process, often referred to as “pay and chase” or recoupment, is a standard practice to ensure appropriate use of public funds.

Federal law requires states to attempt timely recovery of identified overpayments. Providers are generally required to return any money incorrectly collected, and failure to do so can lead to demands for repayment. To prevent such errors, patients and providers should ensure that accurate and up-to-date insurance information is always provided during billing.