According to third-party liability (TPL), third parties are legally required to pay for all or part of a Medicaid-eligible citizen’s medical expenses before Medicaid pays for any medical expenses. For example, a person’s private health insurance must pay their legally obligated minimum towards a person’s medical expenses before Medicaid contributes.
Third parties may include private health insurance, workers’ compensation, employer-sponsored health insurance, automobile insurance, medical malpractice insurance and Medicare.
Medicaid is legally considered "the payer of last resort." TPL is designed to help Medicaid limit expenses.
States are responsible for identifying and billing responsible third parties before billing expenses to Medicaid. If states identify third parties after billing Medicaid, they must recover the expenses from the third party.