Medicaid as Secondary Insurance: Third Party Liability and Coordination of Benefits

Updated November 9, 2026, based on CMS, the eCFR, the U.S. Code, Ohio Medicaid, North Dakota Medicaid and California DHCS as of that date.

When a patient has Medicaid and any other coverage, Medicaid is the secondary insurance: you bill the other payer first and send Medicaid the balance with the primary payment or denial. Federal law makes Medicaid the payer of last resort, and states enforce it through third party liability (TPL) edits on claims.

If the state already has the other coverage on file, a claim sent to Medicaid first is rejected and returned to you (cost avoidance). For a short list of services, the state pays first and recovers from the other payer later (pay and chase).

Medicaid third party liability: why Medicaid pays last

Section 1902(a)(25) of the Social Security Act requires each state to "take all reasonable measures to ascertain the legal liability of third parties" to pay for care. Its list of third parties includes health insurers, self-insured and group health plans, managed care organizations, pharmacy benefit managers and any other party legally responsible for paying a claim.

CMS's coordination of benefits and TPL page says "all other available third party resources must meet their legal obligation to pay claims before the Medicaid program pays." People eligible for Medicaid assign their rights to third party payments to the state.

CMS's 2020 COB/TPL handbook lists Medicare and TRICARE among the third parties. It also lists programs that by statute pay after Medicaid, so Medicaid goes first for them, such as Indian Health Services, the Ryan White program and crime victims compensation funds.

Cost avoidance vs pay and chase

The default is cost avoidance. Under 42 CFR 433.139(b)(1), when the state has established that a third party is probably liable, it must reject the claim and return it to the provider. Once the other payer's liability is known, the state pays only to the extent its allowed amount exceeds what the third party paid.

The CMS handbook separates rejected claims from denied ones, and the follow-up differs. A rejected claim never enters the claims system, so it usually has no internal control number, and the fix is to correct it and resubmit. A denied claim was processed, so the fix is an appeal, not a resubmission.

Pay and chase is the exception. The statute and 433.139(b)(3) name two cases:

• Preventive pediatric care, including EPSDT screenings. The state pays at its usual rate and recovers later. A state may instead pay only if the other payer hasn't paid within 90 days of the provider's first claim to it, if the state finds that cost-effective and it won't hurt access to care.
• Care for a child whose child support is being enforced by the state's IV-D agency, where the other coverage comes from the absent parent. The state pays if the third party hasn't paid within 100 days of the provider's claim to it. A state that finds it cost-effective and necessary for access can pay after 30 days instead.

The 2020 CMS handbook says states must pay and chase preventive pediatric claims and doesn't mention the 90-day option, which the statute and current regulation allow. Ask your state which approach it uses.

Prenatal care, including labor and delivery and postpartum care, is no longer on the list. The CMS handbook says the Bipartisan Budget Act of 2018 narrowed these exceptions, so confirm how your state handles prenatal claims. Some states add their own cases where you can bill Medicaid directly. North Dakota Medicaid's TPL policy, for example, lists EPSDT, school services under an IEP or IFSP, certain 1915(c) waiver services, 1915(i) services and services it has verified another payer never covers. Check your state's provider manual for its list.

If the state finds out about other coverage after it paid a claim, 433.139(d) requires it to seek recovery within 60 days after the end of the month it learns of it. When the state can't bill the other payer directly, the handbook notes it may recoup from the provider and ask you to rebill correctly.

How other coverage shows up on the eligibility check

The state's file of other coverage drives the cost avoidance edit, so read it on every Medicaid eligibility check, not only at registration.

On an electronic 271 response, other coverage comes back as a benefit entry of its own. The codes are set by each state's companion guide. One state's example is Ohio Medicaid's 270/271 companion guide (version 1.11, September 2020):

• EB01 code `R` means "Other or Additional Payer."
• The 2120C loop names a related entity, with NM101 `PR` for a payer.
• The 2110C REF segment accepts `IG` (insurance policy number) and `6P` (group number).

Other states differ in what they send, so read your state's companion guide. The 271 isn't the only place to look. North Dakota, for example, tells providers to get TPL information from the member, its MMIS portal, its claims call center or the Medicaid remittance advice. Our guide to what a 271 eligibility response leaves out covers when to check the portal as well.

When the response shows other coverage, record the carrier, policy number and dates, compare them with what the patient tells you, and sort out any mismatch before the claim goes out.

Billing Medicaid as secondary insurance: order and the primary EOB

For a patient with Medicaid and other insurance, the steps usually run like this:

1. Bill the other payer first, following its rules for prior authorization, network and timely filing.
2. Wait for its payment or denial. The CMS handbook says the balance can go to Medicaid once the third party has paid or denied for a substantive, non-procedural reason.
3. Bill Medicaid with the primary payer's results on or with the claim. North Dakota requires the EOB information, including payment, contractual adjustments and patient responsibility, at the header level for inpatient claims and the line level for dental, outpatient and professional claims.
4. Expect Medicaid to pay no more than its own allowed amount. North Dakota pays the member responsibility up to the Medicaid allowed amount, and $0 if the primary paid more than that.
5. Write off the rest. Under 42 CFR 447.20, if the third party's liability equals or exceeds what Medicaid would pay, you can't collect anything from the patient. If it's less, you can collect only the lesser of the Medicaid cost sharing or the gap between the Medicaid amount and the third party's payment.

You also can't turn a Medicaid patient away because another payer might be liable. Both the statute and 447.20(b) say so.

Medicare is primary to Medicaid too, and the CMS handbook notes that Medicare fee-for-service claims generally cross over to the state automatically. Dual eligibles have their own rules on cost sharing and plan types, covered in our guide to dual-eligible billing, D-SNPs and crossover claims.

When the TPL data is wrong, get the record updated

States find other coverage through applications and renewals and through data matches with insurers, the Department of Defense for TRICARE, workers' compensation and motor vehicle accident files, according to CMS. Those records go stale: a patient drops employer coverage, and the state keeps rejecting claims for a policy that has ended.

The update route varies by state:

• In California, any provider can submit the DHCS OHC Removal or Addition Form with the member's consent, given in person or by phone. A Medi-Cal Rx bulletin (January 2022, updated March 2024) says DHCS processes these within 36 to 72 hours. Members can submit the form themselves, and members or providers can call the Medi-Cal Telephone Service Center.
• North Dakota's TPL policy lists a Third Party Liability Unit with a phone number and email for questions.

In practice, it helps to work it in order: get proof from the old carrier, such as a termination letter or a denial showing no coverage on the date of service. Send the update through the state's channel. Hold the claim until the next eligibility check shows the record corrected, then resubmit. If the other policy is still active but never covers the service, ask whether your state has an override code for documented non-coverage. The CMS handbook describes that option, and states that use it require you to keep the documentation.

If the other insurer pushes back, the statute requires states to bar insurers from taking a person's Medicaid eligibility into account when enrolling them or paying benefits, so "the patient has Medicaid" is not a reason for a commercial plan to deny.

Medicaid managed care plans and coordination of benefits

COB rules apply to Medicaid managed care plans the same way they apply to fee-for-service. The CMS handbook describes four setups a state can choose:

• Exclude people with known other coverage from managed care.
• Enroll them and keep TPL work at the state.
• Enroll them and contract the TPL work out to the plans.
• Exclude people with commercial managed care coverage, and enroll people with other kinds of coverage.

The state's contract with the plan lists the plan's TPL duties. Plans pay and chase in the same cases the state does.

If a managed care member's other coverage is commercial and you're outside that commercial network, the handbook says the state's contract must stop the Medicaid plan from paying when the commercial plan denied only for being out of network, unless a statute or regulation requires the plan to cover out-of-network care. Medicaid won't pay the balance either, so check your state's rule before seeing a patient whose commercial plan you're out of network with.

For a managed care patient, it's worth checking twice: the state response for the TPL record and plan assignment, and the plan's own portal for the plan's COB data. Our guide to Medicaid managed care and IPA assignment covers confirming which entity to bill.

Frequently asked questions

Is Medicaid ever the primary payer?

Yes, in a few cases. Programs whose statutes say they pay after Medicaid, such as Indian Health Services and the Ryan White program, come second. Medicaid also pays first and recovers later for preventive pediatric care and certain child support cases.

Can I bill the patient for what the primary insurance didn't pay?

Usually not. Under 42 CFR 447.20, if the primary paid at least what Medicaid would pay, you can't collect anything. Otherwise you can collect only the lesser of the Medicaid cost sharing or the gap between the two amounts.

What if the primary insurance denies the claim?

Send the denial to Medicaid with the claim. Medicaid can pay after a substantive, non-procedural denial; one caused by your own missed deadline or missing authorization may not qualify, so check your state's rules.

Medicare and Medicaid: which is primary?

Medicare pays first. What Medicaid covers after that depends on the patient's type of dual eligibility. See our dual-eligible guide for crossover and D-SNP details.

How long does it take to remove old insurance from a Medicaid record?

It depends on the state. California DHCS says requests sent on its OHC forms are processed within 36 to 72 hours. Elsewhere, confirm the timing with the state's TPL unit and recheck eligibility before you resubmit.

Checking Medicaid and other coverage across portals?

Champ automates portal work like eligibility checks across payer portals, including Medicaid plan portals. We set it up and run it, so your staff sees only the finished results. If TPL rejections are slowing your Medicaid claims, learn more here.

This post is general information, not legal, compliance or billing advice. Rules vary by state Medicaid program and managed care plan and change often, so confirm with your state Medicaid agency, its TPL unit or the patient's plan before acting. Champ is not affiliated with or endorsed by CMS, the Ohio Department of Medicaid, North Dakota Health and Human Services, California DHCS or any payer named.