Considering Medicaid: Legal Issues

In the fourth part of the six-part Medicaid series, we examine the matter of staying compliant with state rules.

“Look before you leap” is good advice when it comes to expanding your practice to include Medicaid clients, says Kevin J. Ryan, JD, a member of the health care and life sciences practice at Chicago’s Epstein Becker & Green, PC. 

Psychologists are important providers of health care to Medicaid beneficiaries, and there are many benefits to participating in the program, as described in the first part of this series. But the rules vary from state to state, so you should take time to understand how the program works in your jurisdiction. Just as you would with any contract with a third-party payer, you should understand your obligations before agreeing to participate, says Ryan, noting that rules governing this federal/state partnership are complicated and often-changing. 

There are many things you can do to stay compliant with the rules in these sometimes complex arrangements. Ryan suggests keeping these tips in mind:

  • Make sure you accurately record your time when you bill for services. “You definitely want to make sure you’re submitting claims that accurately reflect services provided,” says Ryan. If you are using a code that requires at least 38 minutes of face-to-face time with the patient, for example, don’t round up if you only spent 30 minutes. Another potential pitfall is billing separately for services if there’s a single code covering them. For example, if you provide both psychotherapy and health and behavioral services in the same session, you would just bill for the predominant service provided instead of billing a therapy code and a health and behavior code. As with commercial insurance plans, expectations for services and billing should be explained in your agreement.
  • Beware of giveaways. Federal and state anti-kickback laws forbid Medicaid providers from offering payment or other inducements to clients and potential referral sources. “Providers frequently think, ‘Oh, I’ll offer a free service or gift card,’” says Ryan. “Those types of things can get you into trouble.” Because giveaway dollar amounts are strictly regulated, “lunch and learn” educational sessions for physician practices or other potential referral sources or even promotional T-shirts for potential clients could be problematic. And while it’s okay to waive copays and deductibles occasionally in cases of financial need, says Ryan, routine waivers count as kickbacks.
  • Avoid referrals to entities where you or family members have a financial interest. While the federal “Stark” law doesn’t cover referrals by psychologists, your state law may. Additionally, if your practice includes a psychiatrist, his or her referrals are definitely covered under the law.
  • Check exclusion lists on a monthly basis. Medicaid can prohibit providers with past infractions from participating in the program. If you hire providers to work in your practice, check — or hire a company to check — Medicaid’s exclusion list every month, Ryan suggests.
  • When in doubt, seek legal advice. Don’t just take a fellow practitioner’s word that something is acceptable, says Ryan. “It may be OK for that practice, but only because of that practice’s unique circumstances,” he says. 

In many cases, members of the APA Practice Organization can get a free initial read of these issues from Legal and Regulatory Affairs staff or from their professional liability insurer. If you need legal advice, don’t turn to the lawyer who handled your practice’s real estate closing or other general legal affairs. “You definitely want someone who deals with this on a regular basis,” says Ryan. “Seek out counsel from a health-care attorney who’s knowledgeable and can provide guidance on some of the key issues.” APA Practice Organization staff may be able to provide you with a referral.

You can get a head start by familiarizing yourself with Medicaid’s legal issues using online and other resources, says Ryan. The Centers for Medicare and Medicaid Services, which administers the program at the federal level, offers Medicaid program integrity education, among other resources. Because rules differ state by state, you should also check out your state Medicaid agency’s website for state-specific educational resources.


Please note: Legal issues are complex and highly fact specific and require legal expertise that cannot be provided by any single article. In addition, laws change over time and vary by jurisdiction. The information in this article does not constitute legal advice and should not be used as a substitute for obtaining personal legal advice and consultation prior to making decisions regarding individual circumstances.