Generally, State Medicaid agencies are required to use the cost avoidance method when probable TPL exists. For services that are not included in a student’s IEP or IFSP under IDEA, schools and school-based providers must meet federal and state Medicaid requirements by billing the third-party health insurance before billing Medicaid to determine the extent of the insurer’s liability. However, when the claim is for medical child support services or preventive pediatric services covered in the Medicaid State Plan, SMAs use the “pay and chase” method instead.
As stated on page 106 of the Comprehensive Guide,
“Using the ‘pay and chase’ method, the State Medicaid agency pays the claims submitted by providers and then seeks reimbursement from the liable third parties. Reimbursement must be sought unless it is determined that recovery of reimbursement would not be cost-effective in accordance with threshold amounts that have been established by the State Medicaid agency.”
If the SMA determines that recovery of third-party reimbursement will not be cost-effective, it can choose to terminate recovery efforts. More information about the termination of recovery efforts can be found at 42 CFR 433.139(f). This regulation specifies that the Medicaid State Plan must include the threshold amount.
“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.”