Third-party liability (TPL)
Third-party liability (TPL) means another payer — commercial insurance, Medicare, auto, or workers' compensation — is responsible for a claim before Medicaid pays, because Medicaid is payer of last resort.
Updated
Third-party liability (TPL), in the Medicaid context, refers to any other source of coverage that must pay a claim before Medicaid will. Because Medicaid is the payer of last resort by federal law, any other liable party — a commercial health plan, Medicare, automobile or liability insurance, or workers' compensation — must be billed first, and Medicaid pays only what remains after that source has adjudicated.
Identifying and billing third-party liability is a condition of Medicaid payment. A claim submitted to Medicaid without first pursuing an identified third party can be denied, and Medicaid programs require providers and states to seek that other coverage.
In practice
For a practice serving Medicaid patients, TPL means eligibility verification must look for other coverage, not only for Medicaid itself. A claim that ignores an identified third party can pend or deny, and the order of billing — third party first, Medicaid second — is what makes the Medicaid balance payable at all.
Commonly confused with
- Coordination of benefits: Coordination of benefits orders two health plans; third-party liability is the broader Medicaid principle that any other responsible source (health, auto, workers' comp) pays before Medicaid.
- Medicaid as payer of last resort: Payer-of-last-resort is the legal rule; TPL is its operational expression — the process of identifying and billing the other source that must pay first.