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TRICARE and Medicaid Coordination of Benefits: The System is Broken

Published Date
Author Kristen Ballantine

TRICARE is the Department of Defense’s health benefits program for U.S. Armed Forces military personnel, veteran retirees and their dependents. According to the Medicaid and CHIP Payment and Access Commission (MACPAC), nearly one million TRICARE beneficiaries also have coverage through Medicaid.

Coordination of Benefits between Medicaid and TRICARE is a significant issue. This problem has marginalized underserved populations, while concurrently leaving state Medicaid programs at risk for paying hundreds of millions in claims that were TRICARE’s responsibility. Inequities between the Medicaid and TRICARE programs impact the underserved communities they serve, but also create inequity among healthcare programs and between the state and federal government.

Barriers to Medicaid/TRICARE Coordination of Benefits

Medicaid is the payer of last resort by law, meaning other liable parties must meet their legal obligation to pay for a claim before Medicaid pays for a claim. States are required to take every measure possible to assert Medicaid as the payer of last resort. This process is known as Coordination of Benefits (COB) or Third-Party Liability (TPL).

Although TRICARE must legally pay claims before Medicaid, states continue to face COB challenges. When it comes to TRICARE, three factors obstruct the TPL process:

  1. Data sharing. Between 1986 and 2017, the Department of Defense (DoD) and the Centers for Medicare and Medicaid Services (CMS) cooperated on TPL processing through a data sharing agreement. In 2017, however, CMS determined that it could not certify the data security provisions of the agreement, leaving TRICARE out of the TPL process. This has put the onus on state Medicaid programs to pay for claims that are legally required to be reimbursed by TRICARE.
  2. Filing deadlines. TRICARE has imposed a one-year timely filing deadline on Medicaid claims, assuring that states could not bill TRICARE for claims beyond a year of service being rendered. This stands in stark contrast to other liable parties who must honor TPL claims for up to three years of the service date. This inherent inequality in timely filing deadlines shifts costs to state Medicaid programs, burdening state budgets and by extension, Medicaid beneficiaries.
  3. Exclusion of Medicaid Managed Care Organization (MCO) claims. States that leverage MCOs to serve their Medicaid programs have no ability to coordinate benefits for individuals enrolled in those MCOs. MCOs account for approximately 70% of the total Medicaid population, yet TRICARE does not share data with or process claims from MCOs. Despite consistent legal TPL responsibilities for MCO claims, TRICARE does not recognize the statutory authority of MCOs to conduct TPL activities. This results in further cost shifting to states and creates inequities between Medicaid, TRICARE and other health payers, as well as between states and the federal government.

To Address These Issues, Advocacy Is Needed

The urgency to address these issues has increased over the last 18 months as the role of Medicaid and the impact to state budgets has increased. During the COVID-19 pandemic, Medicaid enrollment grew significantly. This will continue to drive higher healthcare spending in the Medicaid program, with significant implications for state governments which operate Medicaid and reimburse claims.

In addition, states are also expanding Medicaid programs in response to provisions in the American Rescue Plan Act of 2021 (ARP). State Medicaid Directors expect Medicaid enrollment to grow 8.2% this year and spending to increase by 8.4%.

Gainwell strongly urges Congress, the federal government, and other interested stakeholders to examine these issues and to ensure that TRICARE abides by the TPL standards that other third-party payers follow. A good first step would be a new data sharing agreement between CMS and DoD. By ensuring that the appropriate payer reimburses claims, Medicaid retains its payer of last resort status, strengthens program integrity and materially contributes to the long-term sustainability of this essential program.

For other policy perspectives and more information, please visit our Health Ideas page.