Medicaid is called the payer of last resort because federal regulations require that all available resources be used before Medicaid considers payment. This means that if a client is able to provide for his/her care, the client should pay for medical benefits first. Also, if there is a responsible third party who should be paying for the client's health benefits, like a health insurance provider, that responsible third party should be paying first. Coordination of Benefits makes sure that the correct party pays first by (1) cost-avoiding claims where a known other party should be paying or (2) cost recovering from a claim Medicaid paid that should have been paid by someone else.

1st Party = Client (Benefits Coordination)

2nd Party = Provider (Program Integrity)

3rd Party = Others, such as insurers & tortfeasors (Benefits Coordination)