[Federal Register Volume 59, Number 22 (Wednesday, February 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2116]


[[Page Unknown]]

[Federal Register: February 2, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 433

[MB-39-P]
[RIN: 0938-AF11]

 

Medicaid Program; Third Party Liability (TPL) Cost-Effectiveness 
Waivers

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise our rules concerning Medicaid 
agencies' actions where third party liability (TPL) may exist for 
expenditures for medical assistance covered under the State plan. We 
propose to allow the Medicaid agencies to request waivers from certain 
procedures in our regulations that are not expressly required by the 
Social Security Act. We would consider waiving nonstatutorily required 
procedures relating to identifying possible TPL where the agency finds 
that following a given required procedure is not cost-effective and is 
duplicative of another State activity. A nonstatutorily required 
activity would be eligible for a waiver if the cost of the required 
activity exceeds the TPL 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 States. This change 
would give States greater flexibility in managing their Medicaid 
programs.

DATES: To be considered, written comments must be mailed or delivered 
to the appropriate address, as provided below, and must be received by 
5 p.m. on April 4, 1994.

ADDRESSES: Mail comments (original and 3 copies) to the following 
address:

Health Care Financing Administration, Department of Health and Human 
Services, Attention: MB-39-P, P.O. Box 7518, Baltimore, MD 21207-0518.

    If you prefer, you may deliver your written comments (original and 
3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Ave., SW., 
Washington, DC 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore, 
MD 21207.

    Due to staffing and resource limitations, we cannot accept comments 
by facsimile (FAX) transmissions.
    Please address a copy of comments on information collection 
requirements to:

Laura Oliven, Office of Information and Regulatory Affairs, room 3002, 
New Executive Office Building, Washington, DC 20503.

    In commenting, please refer to file code MB-39-P. Comments received 
timely will be available for public inspection as they are received, 
generally beginning approximately 3 weeks after publication of this 
document, in room 309-G of the Department's offices at 200 Independence 
Ave., SW., Washington, DC, on Monday through Friday of each week from 
8:30 a.m. to 5 p.m. (phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Mel Schmerler, (410) 966-5942.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 1902(a)(25) of the Social Security Act (the Act) requires 
that State or local Medicaid agencies take all reasonable measures to 
ascertain the legal liability of third parties to pay for care and 
services furnished to Medicaid recipients. A third party is any 
individual, entity, or program that is or may be liable to pay all or 
part of the expenditures for medical assistance furnished under a State 
plan. Medicaid is intended to be the payer of last resort; that is, 
other available resources must be used before Medicaid pays for the 
care and services of a Medicaid-eligible individual. These other 
resources are known as third party liability, or TPL.
    Further, provisions under section 1902(a)(25)(A)(i) of the Act 
specify that the Medicaid State plan must provide for the collection of 
sufficient information to enable the State to pursue claims against 
third parties. Examples of liable third parties include commercial 
insurance companies through employment-related or privately purchased 
health insurance; casualty coverage resulting from an accidental 
injury; payments received directly from an individual who has either 
voluntarily accepted or been assigned legal responsibility for the 
health care of one or more Medicaid recipients; and fraternal groups, 
union, or State workers' compensation commissions. TLP also includes 
medical support provided by a parent under a court or administrative 
order.
    Statutory provisions (sections 1137 and 1902(a)(25) of the Act) 
require States to obtain health insurance information at eligibility 
intake and redetermination interviews, perform the State Wage 
Information Collection Agency (SWICA) data match, safeguard recipient 
information, obtain recipient assignment of rights, and submit a TPL 
action plan for HCFA approval. These statutory requirements would not 
be affected by the provisions of this proposed rule.
    Nonstatutory requirements, specified in Section 433.138 (and 
subject to proposed waiver), include obtaining information (via data 
matching) with the State Workers' Compensation or Industrial Accident 
Commission files and State Motor Vehicle Accident report files. Another 
nonstatutory requirement is the requirement for agencies to identify 
all paid claims with trauma/diagnosis codes found in the ICD-9-CM 800-
999, except 994.6. In Section 433.139 (and subject to proposed waiver), 
State agencies are required to bill the third party resource within 60 
days after the last day of the month the State learns of the available 
resource and use the cost-avoidance method of paying.
    Under our regulations at Section 433.138, pertinent health 
insurance information must be obtained (1) from Medicaid applicants or 
recipients during the determination and redetermination process; (2) by 
securing data match agreements with specific Federal and State 
agencies; (3) by conducting diagnosis and trauma code edits; and (4) by 
following specified procedures regarding the frequency of these 
activities.
    Regulations at section 433.139 govern State payment of claims where 
TPL is involved. There are two methods of paying claims for recipients 
with known TPL: The cost-avoidance method and the pay-and-chase method. 
Under the cost-avoidance method, the Medicaid agency does not initially 
pay the claim, but rather returns the claim to the provider with 
information necessary for the provider to bill the third party. Under 
the pay-and-chase method, an agency may pay the total amount allowed 
under its payment schedule and then seek recovery from the liable third 
parties. The agency must initiate recovery within 60 days after the end 
of the month in which payment is made.
    Most States that implement the requirements in our regulations at 
section 433.138 achieve significant Medicaid savings. Whenever third 
party resources can be utilized instead of Medicaid, both Federal and 
State taxpayers save money. In some instances, however, TPL 
requirements are not cost-effective.
    Some States have reported very poor results in terms of identifying 
new TPL leads through trauma and diagnosis code edits. There are 
reports that some codes never yield TPL. Currently, States may obtain a 
partial waiver from HCFA of the requirement in section 433.138(e) to 
take action to identify those paid claims for Medicaid recipients that 
contain diagnosis codes 800 through 999 (except that no State has to 
pursue information concerning code 994.6, motion sickness). Under 
section 433.138(e), the State may obtain a waiver from complying with 
the requirements for specific codes.
    In section 433.139(e), we also permit a State to request a waiver 
from HCFA of the cost-avoidance method of paying if the State could 
document that the pay-and-chase method was at least as cost-effective 
as the cost-avoidance method. The State is required to revalidate its 
cost-avoidance waiver request every 3 years and notify HCFA of any 
event that may change the cost-effectiveness of the waiver.
    When these requirements were established by HCFA, the Medicaid TPL 
program was in its infancy. Many States were not pursuing TPL or only 
recovering TPL passively; that is, making recoveries when contacted by 
a provider or attorney who was making a third party settlement. We 
believed there were tremendous untapped TPL resources that were not 
identified by States. Therefore, the initial regulations were broad and 
did not allow States discretion to decide whether or not to perform 
required TPL activities based upon their cost-effectiveness. For this 
reason, we issued TPL regulations which we have now determined were too 
prescriptive and, at times, duplicative. On February 27, 1987, we 
published in the Federal Register (52 FR 5971) a response to State 
comments regarding cost-effectiveness of our discretionary regulations 
at sections 433.138 and 433.139. We stated that we would reevaluate 
these requirements if we received substantial complaints. This rule is 
consistent with that statement.
    Currently, the majority of the States have aggressive and 
comprehensive TPL programs and have reported substantial savings from 
TPL activities. However, program experience has identified situations 
where some activities required by our regulations duplicate some State 
agency requirements in identifying new TPL leads. Also, situations have 
been identified where some of our requirements in regulations are not 
cost-effective; that is, States can reasonably expect to spend more to 
perform a TPL activity than anticipated or realized savings in that 
activity. It is for these reasons that we now propose to offer States 
the opportunity to request waivers from the unproductive activities 
that are not mandated by statute, and for which States have superior 
methods for accomplishing the same objectives as our regulations.

II. Proposed Revisions

    The provisions of this proposed rule would allow States to request 
a waiver from requirements in section 433.138(c), (d)(4), (d)(5), (e), 
(f), (g)(1), (g)(2), (g)(3), and (g)(4) or section 433.139(b), (d)(1), 
and (d)(2) that are not explicitly mandated by statute when it is found 
that performing the requirement is not cost-effective. A nonstatutorily 
required activity would be eligible for a waiver if the cost of the 
required activity exceeds the TPL 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.
    The proposed provisions would allow States to perform TPL 
operations more efficiently and at a greater savings to the Federal 
Government. Duplicative efforts (and higher costs) would be eliminated 
when States have already identified third party resources through 
another more cost-effective means. It should be noted that HCFA's 
financial participation in State Medicaid Management Information 
Systems costs, including costs related to data matches we require 
States to perform, may be as much as 90 percent. Therefore, it is not 
in the interest of the Federal Government to have States perform 
activities which are either duplicative or nonproductive.
    For example, our regulations currently require State Medicaid 
agencies to perform a review of diagnosis and trauma codes to identify 
injuries for which TPL exist. At the same time we require States to 
perform data matches with the State Department of Motor Vehicles (DMV) 
to identify TPL injuries resulting from car accidents. These two 
matches replicate some of the data.
    An example of this scenario was presented to HCFA by a midwestern 
State, which has performed the DMV data match while also performing the 
required diagnosis and trauma code editing. The DMV match resulted in 
9,000 case leads and, of those, 107 cases had TPL. Of those 107 cases, 
the State had already identified 100 through trauma code editing. The 
seven new cases yielded a return of $3,623 but the cost to Medicaid of 
the DMV match was $37,785. A large portion of those costs were 
reimbursed by HCFA in matching administrative funding, and in 
retrospect, we recognize that Federal and State funds could have been 
better spent. By allowing the State a waiver of the DMV data match, 
HCFA would allow the State to operate its TPL program in a more 
efficient and cost-effective manner and thus save tax dollars. Under 
existing regulations, there is no provision for waiver of this activity 
as long as a State is able to perform the match.
    Another example that involves a nonproductive effort has been 
presented by a southern State. The State has reported on its attempt to 
identify TPL through a quarterly data match with Workers' Compensation. 
The State averages 96 leads per match. Out of these leads, an average 
of 89 percent are denied by the carrier or Medicaid never receives a 
claim, 8 percent of the claims are under the threshold amount for 
pursuit of cost-effective recovery, and 1 percent are already known to 
the State. This leaves 2 percent of leads that can be pursued, at an 
average recovery of $319.18 per claim. The State has not realized any 
collections for this effort. The cost to the State is approximately 4 
to 5 man-days per quarter, plus significant systems expenses. 
Therefore, performing this data match does not seem to be cost-
effective, and it seems to exceed our statutory mandate of performing a 
``reasonable effort'' to identify TPL. This State also performs trauma 
code editing which serves to identify recipients injured on the job.
    Relief from regulatory requirements would come in the form of a 
waiver. The State would submit a formal request to the HCFA regional 
office (RO). The State would be required to provide documentation that 
demonstrates that the cost of the required activity exceeds the TPL 
recoupment and the required activity accomplishes, at the same or at a 
higher cost, the same objective as another activity which is being 
performed by the State.
    Documentation to support the waiver request could include past 
claims recovery data that demonstrate the administrative expenses 
involved in meeting that particular requirement, or a State analysis 
that documents a cost-effective alternative that accomplishes the same 
task. HCFA's ROs would consider the individual merits of each waiver 
request and would grant or deny the waiver request based on cost-
effectiveness and State alternatives presented.
    We would issue separate guidelines for developing and evaluating 
waiver requests for the new waivers. We currently have cost-
effectiveness guidelines in place to govern our existing cost-avoidance 
waiver process. These guidelines were developed by a national work 
group comprised of HCFA Central Office (CO) and RO staff, whose purpose 
was to make the guidelines comprehensive and to ensure consistent 
application throughout the country. They are found in section 3904.2 of 
the State Medicaid Manual. We would issue similar guidelines to review 
waivers resulting from this proposed rule. Sources of data would most 
likely include claims processing tabulations, State expenditure 
reports, and savings data from the TPL recovery units and the HCFA Form 
64.9a report.
    CO staff also would provide clarification to RO staff as needed 
through our regular teleconferences. Consultation on specific waiver 
requests would be provided routinely, as is currently done in the State 
plan amendment process, cost-avoidance waivers, trauma code edit 
waivers, and State TPL action plan submissions. As with our current 
waiver provisions, ROs would be required to report approvals and 
disapprovals to CO on an ongoing basis. When changes in waiver status 
occur, CO also would be notified.
    Implementation of this regulation would allow States flexibility in 
managing their individual Medicaid programs and would be consistent 
with Congressional concern for a Medicaid program to operate in a cost-
effective manner, while providing necessary medical care for the needy.
    Therefore, we propose to revise our rules to allow a State to 
request a waiver from any of the requirements specified in section 
433.138(c), (d)(4), (d)(5), (e), (f), (g)(1), (g)(2), (g)(3), and 
(g)(4), which concern obtaining health insurance information, obtaining 
other information, exchange of data, and diagnosis and trauma code 
edits, and follow-up activities for certain exchanges.
    We also propose to revise section 433.139, which concerns payment 
of claims, to allow a State to request a waiver of the requirements in 
paragraphs (b) and (d)(1) and (2) of this section. These paragraphs 
contain procedures concerning payment when probable liability is known 
at time of payment (cost avoidance), and a requirement to bill third 
parties within 60 days of the last day of the month the agency learns 
of the existence of TPL. However, new section 433.139(e)(4) requires 
that if a State requests a waiver of the requirement specifically 
concerning the 60-day limit, the State must submit documentation of 
written agreement between the State and the third party, including 
Medicare fiscal intermediaries and carriers, that extension of the 
billing requirement is agreeable to all parties.
    We would add a new section 433.138(l) and revise section 433.139(e) 
to permit the waivers. We would require the State to submit a written 
request for a waiver of the specified nonstatutory requirement(s) to 
the HCFA RO and submit adequate documentation to establish that the 
regulatory activity is not cost-effective. Where the agency wishes to 
substitute another action for the TPL activity in section 433.138 or 
section 433.139, it must document that the cost of the substitute 
activity does not exceed the cost of the activity to be waived. If HCFA 
approves the State's waiver request, these net rules would relieve the 
State of its obligation to comply with the requirements. These 
procedures would parallel those found in existing section 433.139(e) 
for States obtaining a waiver from using the cost-avoidance method.
    We would revise section 433.138(e), which already allows a waiver 
for specific trauma codes, to allow waivers for either the entire 
trauma code edit activity, or for waiver of editing specific codes, 
based on cost-effectiveness and duplication of effort.
    We would specify in section 433.138(j) an exception to the 
reporting requirement for data exchanges and trauma code edits (section 
433.138) when waivers are granted.
    We would revise section 433.138(a) to exclude from the basic 
requirements those waived under paragraph (l). We also would delete the 
waiver provision in section 433.139(b)(2)(i), since it would be covered 
by the proposed revised section 433.139(e).
    In addition, we propose to make conforming changes to section 
433.138(c), (d), (f), and (g) to reference the proposed waiver 
provisions.

III. Regulatory Impact Analysis

    Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612), we prepare and publish an initial regulatory flexibility 
analysis for proposed regulations unless the Secretary certifies that 
the regulations would not have a significant impact on a substantial 
number of small entities.
    Under the RFA, a small entity is a small business, a nonprofit 
enterprise, or a government jurisdiction (such as a county or township) 
with a population of less than 50,000. These proposed regulations would 
affect only States and individuals, which are not considered small 
entities.
    Also, section 1102(b) of the Act requires the Secretary to prepare 
a regulatory impact analysis for any proposed rule that may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. Such an analysis must conform to the provisions of 
section 603 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside a 
Metropolitan Statistical Area and has fewer than 50 beds.
    This proposed rule would require States to submit a formal waiver 
request to be relieved of compliance with certain TPL requirements that 
are in our regulations when the cost of implementing the regulation's 
requirement is not cost-effective. It is extremely difficult to give an 
exact estimate of the cost savings that would accrue with the 
implementation of this regulation. This is largely because the cost of 
any single TPL data match or other procedure, as well as its relative 
effectiveness, varies from State to State.
    In reviewing the need for this waiver, we recognized that some TPL 
claims reporting and payment regulations are expressly required by 
statute and that these and additional regulatory requirements are a 
valuable mechanism by which the Medicaid program has saved and 
recovered financial resources and that these regulations should be 
maintained. This waiver gives credence to valid concerns raised by 
States regarding the cost-effectiveness of certain portions of the TPL 
regulations in certain instances and allows States greater flexibility 
in managing their Medicaid programs.
    An alternative to these regulatory enhancements would be to force 
States to comply with all regulations and not allow for any waiver 
provisions. In this scenario, States would either comply and lose money 
or discontinue the inefficient practice and risk HCFA sanctions through 
the systems performance review. Clearly, it was not the intent of the 
Congress for HCFA to promulgate regulations designed to save the 
taxpayers money, and then penalize States when the regulations are 
found by experience not to be cost-effective. HCFA should not be put in 
a position of forcing States to comply in these situations. This is 
consistent with our response to comments published in the Federal 
Register dated February 27, 1987 (52 FR 5971) stating that if HCFA 
received substantial complaints from State Medicaid agencies regarding 
the cost-effectiveness of State workers' compensation or Motor Vehicle 
Accident File data matches and diagnosis and trauma code edits, HCFA 
would reevaluate the data requirement.
    We believe that implementation of this waiver would work towards a 
realistic and cost-effective TPL program. This change would also 
provide States with increased control over their individual TPL 
programs.
    Therefore, we have determined, and the Secretary certifies, that 
this proposed rule would not have a significant economic impact on a 
substantial number of small entities. Also, this rule would not have a 
significant impact on the operations of a substantial number of small 
rural hospitals. Therefore, we have not prepared a small rural hospital 
analysis, or an initial regulatory flexibility analysis.
    This rule was reviewed by the Office of Management and Budget (OMB) 
in accordance with Executive Order 12866.

IV. Paperwork Reduction Act

    Sections 433.138(l) and 433.139(e) of this proposed rule contain 
information collection requirements that are subject to OMB approval 
under the Paperwork Reduction Act of 1980 (44 U.S.C 3504, et seq.). 
Reporting burden for the collection of information in sections 
433.138(1) and 433.139(e) is estimated to be 8 hours per request for 
waiver. Individuals wishing to comment on this estimate should send 
their comments to the OMB as the address listed under ADDRESSES in this 
preamble.

V. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on a proposed rule, we are not able to acknowledge or respond 
to them individually. However, in preparing the final rule, we will 
consider all comments that we receive by the date and time specified in 
the DATES section of this preamble, and, if we decide to proceed with a 
final rule, we will respond to the comments in the preamble of that 
rule.

List of Subjects in 42 CFR Part 433

    Administrative practice and procedure, Claims, Grant programs-
health, Medicaid, Reporting and recordkeeping requirements.

    42 CFR Part 433 would be amended as follows:

PART 433--STATE FISCAL ADMINISTRATION

    1. The authority citation for part 433 continues to read as 
follows:

    Authority: Secs. 1102, 1137, 1902(a)(4), 1902(a)(25), 
1902(a)(45), 1903(a)(3), 1903(d)(2), 1902(d)(5), 1903(o), 1903(p), 
1903(r), and 1912 of the Social Security Act (42 U.S.C. 1302, 1320b-
7, 1396a(a)(4), 1396a(a)(25), 1396(a)(45), 1396b(a)(3), 1396b(d)(2), 
1396(d)(5), 1396b(o), 1396b(p), 1396b(r), and 1396k, unless 
otherwise noted.

    2. Section 433.138 is amended by revising paragraphs (a), (c), the 
introductory text of (d), (e), (f), and (j); by adding undesignated 
introductory language to paragraph (g), and by adding a new paragraph 
(l) to read as follows:


Sec. 433.138  Determining liability of third parties.

    (a) Basic provisions. The agency must take reasonable measures to 
determine the legal liability of the third parties to pay for services 
furnished under the plan. At a minimum, such measures must include the 
requirements specified in paragraphs (b) through (k) of this section, 
unless waived under paragraph (l) of this section.
* * * * *
    (c) Obtaining other information. Except as provided in paragraph 
(l) of this section, the agency must, for the purpose of implementing 
the requirements in paragraphs (d)(1)(ii) and (d)(4)(i) of this 
section, incorporate into the eligibility case file the names and SSNs 
of absent or custodial parents of Medicaid recipients to the extent 
such information is available.
    (d) Exchange of data. Except as provided in paragraph (l) of this 
section, to obtain and use information for the purpose of determining 
the legal liability of the third parties so that the agency may process 
claims under the third party liability payment procedures specified in 
Sec. 433.139(b) through (f), the agency must take the following 
actions:
* * * * *
    (e) Diagnosis and trauma code edits. (1) Except as specified under 
paragraph (e)(2) or (l) of this section, or both, the agency must take 
action to identify those paid claims for Medicaid recipients that 
contain diagnosis codes 800 through 999 International Classification of 
Disease, 9th Revision, Clinical Modification, Volume 1 (ICD-9-CM) 
inclusive, for the purpose of determining the legal liability of third 
parties so that the agency may process claims under the third party 
liability payment procedures specified in Sec. 433.139(b) through (f).
    (2) The agency may exclude code 994.6, Motion Sickness, from the 
edits required under paragraph (e)(1) of this section.
    (f) Data exchanges and trauma code edits: Frequency. Except as 
provided in paragraph (l) of this section, the agency must conduct the 
data exchanges required in paragraphs (d)(1) and (d)(3) of this section 
in accordance with the intervals specified in Sec. 435.948 of this 
chapter, and diagnosis and trauma edits required in paragraphs (d)(4) 
and (e) of this section on a routine and timely basis. The State plan 
must specify the frequency of these activities.
    (g) Follow-up procedures for identifying legally liable third party 
resources. Except as provided in paragraph (l) of this section, the 
State must meet the requirements of this paragraph.
* * * * *
    (j) Reports. The agency must provide such reports with respect to 
the data exchanges and trauma code edits set forth in paragraphs (d)(1) 
through (d)(4) and paragraph (e) of this section, respectively, as the 
Secretary prescribes for the purpose of determining compliance under 
Sec. 433.138 and evaluating the effectiveness of the third party 
liability identification system. However, if the State is not meeting 
the provisions of paragraph (e) of this section because it has been 
granted a waiver of those provisions under paragraph (1) of this 
section, it is not required to provide the reports required in this 
paragraph.
* * * * *
    (l) Waiver of requirements. (1) The agency may request initial and 
continuing waiver of the requirements to determine third party 
liability found in paragraphs (c), (d)(4), (d)(5), (e), (f), (g)(1), 
(g)(2), (g)(3), and (g)(4) of this section if the State determines the 
activity to be 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 HCFA 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 claims recovery data and a 
State analysis documenting a cost-effective alternative that 
accomplished the same task.
    (iii) The agency must agree, if a waiver is granted, to notify HCFA 
of any event that occurs that changes the conditions upon which the 
waiver was approved.
    (2) HCFA will review a State's request to have a requirement 
specified under paragraph (l)(1) of this section waived and will 
request additional information from the State, if necessary. HCFA will 
notify the State of its approval or disapproval determination within 30 
days of receipt of a properly documented request.
    (3) HCFA may rescind a waiver at any time that it determines that 
the agency 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.
    3. Section 433.139 is amended by revising paragraphs (b), (d)(1), 
(d)(2), and (e) to read as follows:


Sec. 433.139  Payment of claims.

* * * * *
    (b) Probable liability is established at the time claim is filed. 
Except as provided in paragraph (e) of this section, if: (1) 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 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.)
* * * * *
    (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.
* * * * *
    (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 HCFA 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 HCFA 
of any event that occurs that changes the conditions upon which the 
waiver was approved.
    (2) HCFA 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. HCFA will 
notify the State of its approval or disapproval determination within 30 
days of receipt of a properly documented request.
    (3) HCFA 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 60-day limit in paragraph (d)(1) or (d)(2) of this 
section must submit documentation of written agreement between the 
agency and third party, including Medicare fiscal intermediaries and 
carriers, that extension of the billing requirement is agreeable to all 
parties.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778- Medical 
Assistance Program)

    Dated: July 27, 1993
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: November 28, 1993.
Donna E. Shalala,
Secretary.
[FR Doc. 94-2116 Filed 2-1-94; 8:45 am]
BILLING CODE 4120-01-P