Medicaid as Secondary: Do You Ever Collect a Copay?

The Surprising Truth About Medicaid & Commercial Copays

It's a common scenario. A patient shows up for an appointment with two insurance cards: a commercial plan as primary and a Medicaid card as secondary. The commercial EOB (Explanation of Benefits) comes back, showing a $30 copay and a $150 remaining balance. The front desk staff prepares to collect the copay, but a nagging question pops up: “Wait, do we bill Medicaid first? Or do we collect from the patient?”

The answer isn't what most people think.

In this specific scenario, a patient with commercial primary and Medicaid secondary, you almost never collect the copay from the patient. This is a critical—and often misunderstood—rule of the road for any medical practice. Collecting that copay from the patient could put your practice at risk.

Here's why.

The simple, unbending rule of Medicaid is that it is the "payer of last resort." This is a bedrock principle established in federal law. What it means in practice is that Medicaid will only pay for a service after every other liable third party (like a commercial insurer) has paid their share. But the rule goes a step further: once a practice accepts Medicaid, it agrees to accept the Medicaid-approved amount as payment in full. This includes any remaining copays, deductibles, or coinsurance that the primary commercial plan didn't cover.

Think of it like this: your practice has a contractual agreement with both the commercial insurer and the state's Medicaid program. The commercial insurer pays what it's contractually obligated to pay. The remaining balance (the copay in this case) is then billed to Medicaid. Because of the "payer of last resort" rule, Medicaid will evaluate the total payment from the commercial plan. If that amount meets or exceeds Medicaid’s own approved fee for that service, Medicaid will pay nothing. Crucially, the remaining patient liability is then written off. You cannot "balance bill" the patient for a covered service.

This isn't just a best practice; it's a regulatory requirement. The Centers for Medicare & Medicaid Services (CMS) specifies that providers who accept Medicaid are prohibited from billing the patient for copays or other cost-sharing amounts for covered services [1, 2]. The one and only exception is if your state's Medicaid program specifically allows for a small copay, which is rare for standard covered services.

So, when that commercial EOB shows a $30 copay and a paid secondary claim, you need to understand what happened. The commercial insurer paid their portion. The claim then crossed over to Medicaid (either automatically or manually). Medicaid processed the claim, determined the primary payment met or exceeded its fee schedule, and zeroed out the remaining patient responsibility. The secondary claim "paid" by reducing the patient's liability to zero.

The Problem Explained Simply

Most billing departments see a copay on the EOB and automatically assume it's patient responsibility. This is a costly mistake. It leads to:

• Improper collections: You’re asking a patient to pay a bill they legally do not owe.

• Compliance risk: This practice could be viewed as balance billing, which is a violation of your Medicaid provider agreement. This can lead to audits, fines, and even exclusion from the Medicaid program.

• Erosion of trust: Patients who are dually insured with commercial and Medicaid often rely on Medicaid to cover these gaps. Billing them directly damages the patient-provider relationship.

  
  

The 3-Step Solution for Your Practice

Here is a simple, repeatable process to ensure you handle these claims correctly.

Step 1: Front Desk Verification & Patient Communication

• What: At the time of service, your front desk must verify all insurance. If a patient presents a commercial card and a Medicaid card, you should document both.

• Why: This proactive step prevents errors down the line. It's a critical part of your pre-appointment workflow. By identifying a patient as having dual coverage, you'll know exactly how to handle their claim and financial responsibility before they even walk into the exam room.

• How: Your staff should have a simple script: “I see you have a commercial plan as your primary and Medicaid as your secondary. We'll be billing your commercial plan first, and any remaining balance will be sent to Medicaid. You won't have a copay or balance for today’s visit.” This sets the right expectation and builds trust.

  
  

Step 2: Correct Claims Submission

• What: The claim must be submitted to the commercial primary insurer first. Once the primary EOB is received, the claim (along with the EOB data) must be submitted to Medicaid as the secondary payer.

• Why: Following the correct claims cascade is the only way to get a full and compliant picture of the patient's financial responsibility. The EOB from the primary plan provides the necessary information for the secondary plan to adjudicate the claim. Many states now have automatic "crossover" programs for Medicare and Medicaid, but this is less common with commercial and Medicaid claims [3].

  
  

• How: Your practice management system should be configured to handle this. After the primary payment is posted, the system should automatically generate a secondary claim, using the appropriate Claim Adjustment Reason Codes (CARCs) and Remittance Advice Remark Codes (RARCs) from the primary EOB. This prevents manual errors and ensures timely filing.
  

Step 3: Post-Payment Review & Write-Off

• What: When the Medicaid EOB comes back, review it carefully. The EOB will likely show a $0 payment and a denial or adjustment code. The key is the code that explains why the claim was denied.

• Why: This step confirms that Medicaid has processed the claim and determined there is no patient liability. It’s the final step in the payment process. If the EOB indicates the patient is not liable for the copay, you can then write off the amount.

• How: Your practice management system should have a protocol for this. You'll use an adjustment code to write off the remaining copay or patient balance. Do not transfer this balance to patient responsibility or send a statement.

Expected Outcomes

By implementing this process, you can expect to:

• Reduce improper collections: Your billing staff will stop chasing patients for money they don't owe, saving time and avoiding awkward conversations.

• Decrease compliance risk: You’ll be in full compliance with state and federal regulations for Medicaid, protecting your practice from potential audits and fines.

• Improve patient satisfaction: Patients will appreciate the clarity and transparency, strengthening their loyalty to your practice.

• Streamline your billing workflow: Automating the secondary claims process and having a clear policy for these claims reduces manual work and improves efficiency. In 2023, the average cost to a provider for rework on a single denied claim was $25.50 [4]. Eliminating these errors can significantly reduce administrative overhead.

Quick Checklist

1. Verify both commercial and Medicaid coverage at every visit.

2. Bill the commercial plan first, then send the claim to Medicaid with the commercial EOB data.

3. Do not collect the copay from the patient unless specifically authorized by state Medicaid rules.

Your Next Step

Navigating the complexities of dual-eligibility can be challenging. A single misstep can lead to compliance issues and lost revenue. If you're unsure about your practice's current policies or want to ensure you're maximizing revenue while staying compliant, let's talk.

Book a free 30-minute RCM checkup. We'll review your specific situation and give you a clear, actionable plan to handle dual-eligibility claims with confidence.

Sources: [1] Centers for Medicare & Medicaid Services. Medicaid State Plan Amendments. https://www.medicaid.gov/medicaid/state-plan-amendments/downloads/state-plan-amendments-guidance.pdf [2] Medicare Payment Advisory Commission (MedPAC). Third Party Liability. https://www.macpac.gov/subtopic/third-party-liability/ [3] Undivided. How to Use Medi-Cal as Secondary Insurance. https://undivided.io/resources/how-to-use-medi-cal-as-secondary-insurance-1235 [4] CAQH. CAQH Index 2023. https://www.caqh.org/about/news/releases/caqh-releases-new-report-administrative-automation-healthcare