Under current Medicare rules and regulations, before dual eligible bad debts can be reported on the cost report, providers are required to bill the state or managed care organization (i.e. the “must bill” policy) and obtain proof of the completed claim processing and adjudication (i.e. the “RA” policy).
The unpaid amount is reported as reimbursable bad debts on the Medicare cost report. In the FY 2022 IPPS Proposed Rule, CMS is proposing to require all state Medicaid programs to accept enrollment of all Medicare-enrolled providers who meet the Federal requirements so that these state programs will process/adjudicate Medicare cost sharing claims and issue an RA efficiently and timely. The current issue is that some states are not adhering to their obligations to process these cost-sharing claims and issue an RA, and therefore aren’t determining the appropriate cost sharing liability for dual eligible claims. States would be required to enroll all required providers and have systems in place to process/adjudicate claims and issue RAs for dates of service beginning January 1, 2023.
CMS’s rationale for this change is that it will reduce the number of appeals and ultimately the appeals and litigation costs for providers and the federal government. There will not be an impact to existing bad debt appeals. In our opinion, this proposed change by CMS is putting the states on the hook to process cost sharing claims in order to reduce Medicare’s share of the liability. As a result, this will ultimately reduce the amount of bad debts that may be reported on the Medicare cost report due to an increase in payments from state Medicaid programs.
For a copy of the slides used in Josh Weissenborn's presentation, go here: 
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