Medicaid Third Party Liability in NEMT: When Another Payer Must Pay First

What third party liability means

A third party is “any individual, entity or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a State plan” (42 CFR 433.136). Third party liability is the duty of those other payers to pay first. CMS’s handbook on the subject (2020) puts it plainly: Medicaid is generally the “payer of last resort,” meaning it pays for covered services only when no other liable payer covers the same service.

The rule comes from federal law. Section 1902(a)(25) of the Social Security Act requires every state to “take all reasonable measures to ascertain the legal liability of third parties,” including health insurers, group health plans, managed care organizations, and any party legally responsible by statute, contract, or agreement. Riders agree to this when they enroll. As a condition of eligibility, each rider assigns to Medicaid the right to payment from any third party (42 CFR 433.145).

State manuals repeat it for rides. North Dakota’s NEMT manual (updated January 2026) says Medicaid “is generally the payer of last resort” and that providers must pursue other payment sources. New York’s transportation billing guidelines (version 2026-02) say “Medicaid is always the payer of last resort.”

Cost avoidance and pay and chase

States handle other coverage in one of two ways, set by 42 CFR 433.139.

Method	When it applies	What happens to your claim
Cost avoidance	The state already knows about other coverage when your claim arrives	The claim is rejected or denied and returned to you to bill the other payer. Medicaid then pays only the amount by which its rate exceeds the other payer’s payment.
Pay and chase	The state cannot establish other coverage when the claim arrives, or the service is one the rule exempts	Medicaid pays the full fee schedule amount, then seeks the money from the liable payer. It must start within 60 days after the end of the month it learns of the other payer.

Cost avoidance is the default. The federal exceptions are narrow: preventive pediatric services, and services for a child whose support order the state is enforcing. Arizona’s own rule also lists labor, delivery, and postpartum care (Chapter 9, revised June 3, 2026). None of these is a NEMT exception, so a known other payer usually has to be billed first.

CMS allows one more shortcut in its 2020 handbook. A state may exempt a service that insurers never cover, if it holds clear and convincing proof, confirmed every year. It can then let providers put an override code on the claim so the system pays it. Providers who use the code must keep their own proof of non-coverage.

Which other payers can apply to a NEMT ride

Other coverage	Does it pay for NEMT?	What to do
Original Medicare	Only ambulance transport	Medicare & You 2027 lists rides to doctor visits among extras that some Medicare Advantage plans cover and Original Medicare does not. New York lets ambulette, taxi, day program, and livery claims show 0.00 from Medicare without billing it first. See does Medicare cover NEMT.
Medicare Advantage	Some plans cover rides to doctor visits as an extra benefit	CMS’s FAQs of January 14, 2025 say a state may require you to bill the plan first when it covers that extra service out of network. Indiana does not let Medicare Advantage members skip the plan for services Original Medicare never covers, because the plan may cover them.
Employer or individual health plan	Only if the plan covers rides	Bill it first if it covers the ride or you do not know. Keep its denial.
Auto insurance after a crash	Possibly, for accident-related care	Mark the accident boxes on the claim. Indiana does not cost avoid on liability or medical payments coverage: you may bill Medicaid or the liable party, and the state recovers from the settlement later.
Workers’ compensation	Possibly, for a work injury	The claim may come back with reason code 19, the workers’ compensation carrier’s liability
Indian Health Service, Ryan White, crime victims’ funds	These pay after Medicaid by law	Bill Medicaid first. CMS lists them as exceptions to the payer of last resort rule.

For riders with both Medicare and Medicaid, CMS adds one more point. Medicare is not a liable third party for a service from a provider not enrolled in Medicare, because Medicare does not pay those providers. CMS says a provider not enrolled in Medicare should not send Medicare a claim, so it will not have a Medicare denial to show. See dual eligible for how these riders’ benefits fit together.

Broker trips work differently. You bill the broker, not the rider’s other insurers, and your agreement sets the rules. MTM Health’s standard agreement, in the January 1, 2023 version Pennsylvania posts, says the provider “will look solely to MTM for payment.” Ask your broker how it wants a rider with other coverage handled.

How third party liability shows up on a claim

Other coverage usually appears first on the eligibility check. Indiana tells providers to find a member’s other insurance in its eligibility verification system, and federal rules require states to collect health insurance details at every application and renewal (42 CFR 433.138). Run eligibility verification before the ride and again before you bill.

If you miss it, the remittance tells you. These are the national codes, in X12’s wording:

Code	Type	X12 wording
22	Reason	This care may be covered by another payer per coordination of benefits.
19	Reason	This is a work-related injury/illness and thus the liability of the Worker’s Compensation Carrier.
20	Reason	This injury/illness is covered by the liability carrier.
21	Reason	This injury/illness is the liability of the no-fault carrier.
23	Reason	The impact of prior payer(s) adjudication including payments and/or adjustments. (Use only with Group Code OA)
MA04	Remark	Secondary payment cannot be considered without the identity of or payment information from the primary payer. The information was either not reported or was illegible.
MA92	Remark	Missing plan information for other insurance.
N4	Remark	Missing/Incomplete/Invalid prior Insurance Carrier(s) EOB.
N598	Remark	Health care policy coverage is primary.

State codes can sit next to them. Indiana denies a claim when it has other coverage on file and the claim shows no amount in the other payer field, and prints EOB 2505: “This member covered by private insurance, which must be billed prior to Medicaid.” EOB 2500 and 2502 say the same for Medicare Part A and Part B or D. For how to read these codes, see claim adjustment reason codes and NEMT claim denials.

How to bill a ride when another payer is involved

1. Find the other coverage. Check eligibility and ask the rider or caregiver about other insurance at intake. Note any trip tied to a car crash or a work injury.
2. Bill the other payer first when it may cover the ride. New York’s rule is a good default: if the service is covered, or you do not know, bill the other insurer first.
3. Wait for its answer, but watch the clock. Arizona requires the first Medicaid claim within 6 months of the ride even if the other payer has not paid, then gives you until 12 months to resubmit with its remittance. Indiana lets you bill Medicaid 90 days after an unanswered claim, with proof you billed.
4. Report what the other payer did. On the CMS-1500, mark item 11d and fill in items 9, 9a, and 9d for the other plan. Mark items 10a to 10c for a work or accident case. Put the amount the other payers paid in item 29. New York uses field 32, with 0.00 when the other insurer denied.
5. Attach the proof. Arizona wants a copy of the other payer’s remittance with each claim, one per claim, plus the pages that define its reason and remark codes. A claim without them is denied as incomplete.
6. Expect the difference, not the full rate. Medicaid pays only the amount by which its fee schedule amount exceeds the other payer’s payment. For example, if the Medicaid rate for a trip is $50 and the other plan paid $30, Medicaid pays up to $20.
7. Do not bill the rider. Under 42 CFR 447.20, when the other payer’s liability equals or exceeds the Medicaid amount, you collect nothing from the rider. When it is less, you may collect only the lesser of the allowed cost sharing or the gap to the Medicaid amount. You also may not refuse a ride because another payer might be liable.

When Medicaid pays first and recovers later

Sometimes Medicaid pays your claim in full and settles with the other payer later. Indiana pays accident-related claims when the provider bills it, then looks for liable parties using injury diagnosis codes and files a lien against the rider’s settlement. Its manual says providers are usually not involved and may not know a recovery happened.

Recovery can reach you, though. CMS’s January 2025 FAQs say that when a state later finds a third party was liable for a claim paid with an override code, it must recover the payment from the provider. Keep other payers’ remittances, denials, and any proof of non-coverage with the trip record, as long as you keep the claim itself. See Medicaid recoupment for what happens when money is taken back.