Ask the legal expert ... about Medicaid reimbursements

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John Durso, Esq.  Nixon Peabody LLP
John Durso, Esq. Nixon Peabody LLP

Our state is continually late with Medicaid reimbursements, for whatever reason.  Can we sue to get some satisfaction? What can we do to help ourselves?

Because states cannot avail themselves of the federal bankruptcy laws, they must eventually pay their bills.  States have sovereign immunity, however, which means that one cannot sue a state, except for particular actions the state allows one to file against it.  

Most states have statutes that require the state to pay claims for goods or services (including Medicaid services) that one provides the state, within a defined timeframe after it receives a “clean claim,” and impose penalties on the state for failing to do so. 

Generally, a “clean claim” contains all of the information the state needs to determine whether to pay or deny the claim. Under these “prompt pay” statutes, the most common penalty for late payment is interest on the amount of the claim that remains unpaid, after the imposed timeframe. These statutes generally provide that a person or entity that does not receive timely payment may sue the state for both payment and interest on the late payments.  

In Illinois, for instance, the State Prompt Payment Act requires the state to pay for goods or services within 60 days of its receipt of a “proper bill or invoice.” If the state does not pay within this 60-day period, the statute imposes an interest penalty on the amount of the unpaid claim (of 1% or 2% per month, depending on the type of claim), until the state pays it.  

Given the hundreds of millions of dollars of Medicaid reimbursements, this interest penalty is often substantial. Under the State Prompt Payment Act, we have successfully recovered millions of dollars in interest for our skilled nursing facility clients.