1659 Implementation of United States Supreme Court decision in Arkansas Deparmtent of Health & Human Service v. Ahlborn

Title 55--PUBLIC WELFARE

DEPARTMENT OF PUBLIC WELFARE

[55 PA. CODE CH. 259]

Implementation of United States Supreme Court Decision in Arkansas Department of Health & Human Service v. Ahlborn

[37 Pa.B. 4881]
[Saturday, September 8, 2007]

Scope

   This statement of policy applies to claims by the Department of Public Welfare (Department) for reimbursement of Medical Assistance (MA) from moneys owed by third parties on tort claims brought by MA recipients.

Purpose

   The purpose of this statement of policy is to state how the Department will interpret and apply section 1409 of the Public Welfare Code (code) (62 P. S. § 1409) in seeking reimbursement of MA from tort recoveries, in light of the decision of the United States Supreme Court in Arkansas Department of Health & Human Services v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752 (2006) (Ahlborn).

Background

   The Commonwealth participates in the Federal Medicaid program established under Title XIX of the Social Security Act (42 U.S.C.A. §§ 1396--1396v). The Commonwealth's Medicaid program is called Medical Assistance (MA). Section 1902(a)(25) of the Social Security Act (42 U.S.C.A. § 1396a(a)(25)) requires the Department to operate a program to recover the costs of MA expenditures from liable third parties. Section 1409 of the code implements these provisions by giving the Department the option of suing tortfeasors separately or asserting a claim against moneys owed by third parties in tort claims brought by MA recipients. Section 1912 of the Social Security Act (42 U.S.C.A. § 1396k) requires MA recipients to assign to the state the right to payment for medical care from any third party. Section 1404(b) of the code (62 P. S. § 1404(b)) implements the assignment under State law.

   Prior to the Supreme Court's decision in Ahlborn, Federal Medicaid policy allowed states to recover from the entire amount of a tort recovery. However, in Ahlborn, the Supreme Court held that states could only assert claims on that portion of a tort recovery that represents the assigned right to payment for medical care from third parties. States are now prohibited from asserting Medicaid claims against that portion of a tort recovery that represents other types of damages such as lost wages, pain and suffering, and other nonmedical damages.

Discussion

   In this statement of policy, the Department explains how it will interpret and apply the requirements of section 1409(b) of the code consistent with the Ahlborn decision. Since existing Commonwealth law is facially consistent with Ahlborn, this statement of policy does not announce significant changes in Department policy or recovery procedures. The main purposes of this statement of policy are to: (1) announce the Department's interpretation of section 1409 of the code consistent with Ahlborn; and (2) establish procedures to determine the amount of the Department's recovery in unique factual situations when application of section 1409 of the code may be inconsistent with Ahlborn.

   Section 259.2(a) (relating to claims against moneys for which third parties are liable as a result of a tort claim allocation of tort proceeds--statement of policy) states the general rule established by Ahlborn. The Department will recover from only that portion of a tort recovery that represents payment of medical expenses by a third party. The Department will not recover from a portion of a tort recovery that represents payment for lost wages, pain and suffering, or other nonmedical damages.

   Section 259.2(b) explains how the Department will determine the portion of a tort recovery that represents payment of medical expenses. In § 259.2(b)(1), the Department interprets section 1409(b) of the code to provide that the MA beneficiary generally recovers the Department's expenses as part of his tort claim unless the Department chooses to intervene in an action or sue separately. This has been the practice in handling MA reimbursement claims for more than 20 years and reflects the clear intention of the Legislature expressed in section 1409(b)(7) of the code that gives the Department a reimbursement claim in actions prosecuted by the beneficiary alone.

   The Department explicitly states in § 259.2(b)(1) that minor beneficiaries must recover MA expenses as part of their cause of action. Although the general rule in this Commonwealth is that the parent sues for a child's medical expenses, In re Mikasinovich, 110 Pa. Super 252 168 A. 506 (1933), the provisions of section 1409(b) of the code do not distinguish between minor and adult beneficiaries and a minor's estate may be liable to repay MA under certain circumstances. Shearer v. Moore, 255 Pa. Super 246, 386 A.2d 600 (1978). The rule announced in Mikasinovich and similar cases predates modern health insurance and the Department does not see sound policy reason to interpret section 1409 of the code as extending that rule to the recovery of MA owed with respect to minors. Accordingly, the Department interprets section 1409(b) of the code as providing that minors and adults, as beneficiaries of MA, recover MA expenses in the same way in tort actions. If the minor beneficiary has a viable cause of action, the recovery of MA expenses is not barred by the statute of limitations applicable to the parent's cause of action.

   In § 259.2(b)(2), the Department interprets section 1409(b)(11) of the code to establish a statutory default rule of allocation for tort recoveries consistent with Ahlborn. Section 1409(b)(11) of the code limits the Department's reimbursement to 1/2 of a beneficiary's recovery after deducting attorney's fees, litigation costs and medical expenses regarding the injury paid by the beneficiary. The Department interprets section 1409(b)(11) of the code to mean that the Legislature has by law set aside a portion of a tort recovery for reimbursement of MA and a portion for other damages and expenses. Ahlborn does not affect state laws governing the allocation of tort proceeds.

   In § 259.2(b)(3), the Department recognizes that there may be specific factual situations when application of section 1409 of the code might violate Ahlborn. Accordingly, the Department establishes a procedure for notifying the Department that the beneficiary intends to make an assertion and seek a court order limiting the availability of tort proceeds to reimburse the MA program. However, it should be noted that Commonwealth law provides that a complete settlement of a tort claim conclusively establishes the settlement as full compensation for damages and a plaintiff will not be heard to complain that he settled for less than the full value of his claim. Goldberg v. Workmen's Compensation Appeal Board, 620 A.2d 550 (Pa.Cmwlth. 1993); Allstate Insurance Company v. Clarke, 527 A.2d 1021 (Pa. Super. 1987); Price v. Pennsylvania Property and Casualty Insurance Company, 795 A.2d 407 (Pa. Super, 2002). Accord: Strickler v. Desai, 813 A.2d 650 (Pa. 2002) (Opinion announcing judgment of the court). Accordingly, motions or petitions seeking an allocation of tort proceeds after a complete settlement will be opposed by the Department. Likewise, a verdict by the court or jury after trial is normally presumed to constitute a judicial determination of all damages that have been proved. See Paves v. Corson, 801 A.2d 546 (Pa. 2002) (The law presumes a jury follows the court's instructions in awarding damages.).

   If a prejudicial court order is entered without fair notice to the Department, the Department may contend that the order is not binding upon it or that the order should be vacated. In addition, § 259.2(b)(4) provides that the Department may consider the failure to give fair notice a violation of section 1408(a)(1) of the code (62 P. S. § 1408(a)(1)), making the person responsible for giving the notice liable for a civil money penalty or other sanctions.

   Section 1409(b)(11) of the code states that the ''entire amount of any settlement'' is subject to the Department's claim for reimbursement. Section 259.2(b)(5) interprets section 1409(b)(11) of the code to mean that private parties cannot allocate a settlement to put part of it beyond the reach of the Department. Section 1409(b)(11) of the code also allows the Department to recover from moneys owed to the Department that were incorrectly paid to the beneficiary or others. This provision does not authorize the Department to assert a claim against nonmedical portions of a tort recovery.

   Section 259.2(b)(6) states a beneficiary may not release the Department's claim without the Department's express consent. If a tort defendant wishes to be certain that it will not be sued by the Department, it should insist that an express release of claims be obtained from the Department. Beneficiaries should be aware that section 1912(a) of the Social Security Act requires that they cooperate with the Department in pursuing liable third parties. If a beneficiary does not obtain a release of the Department's claims, but instead indemnifies the liable third parties from those claims, the beneficiary's eligibility for MA may be jeopardized.

   The Department is entitled to fair notice before action is taken to limit the portion of tort proceeds available to the Department. The Department specifies what it considers fair notice in § 259.2(c). If a beneficiary seeks to exclude MA expenses from its claim, the Department must be notified at the time of filing of the lawsuit so it can intervene in the case or sue separately. If a beneficiary seeks an allocation of the tort proceeds by the court or a trier of fact, the Department must be given reasonable advance notice so it can participate in the allocation. If the parties seek to settle a case, and the beneficiary wishes to obtain a court order allocating the proceeds so that the Department receives less than 1/2 of the net proceeds of any settlement, the beneficiary must provide the Department with reasonable advance notice of the settlement so the Department can take action to protect its interest before the settlement becomes binding. Finally, if a party files a motion to eliminate the medical expenses paid by MA from the case, the moving party must give the Department reasonable advance notice and an opportunity to intervene in the case. Thirty days advance notice will be deemed reasonable.

Effective Date

   This statement of policy takes effect upon publication in the Pennsylvania Bulletin and applies to unresolved and open claims.

Contact

   Comments and questions regarding this statement of policy should be directed to the Division of Third Party Liability, Department of Public Welfare, P. O. Box 8486, Harrisburg, PA 17105-8486, [phone].

   (Editor's Note: Title 55 of the Pennsylvania Code is amended by adding a statement of policy in § 259.2 to read as set forth in Annex A.)

ESTELLE B. RICHMAN,   
Secretary

   Fiscal Note: 14-BUL-074. (1) General Fund;

		MA--Inpatient	MA--Outpatient	MA--Long-Term Care	Cash Grants
(2)	Implementing Year 2007-08 is	$1,654,000	$1,094,000	$332,000	$405,000
(3)	1st Succeeding Year 2008-09 is	$1,985,000	$1,317,000	$400,000	$486,000
	2nd Succeeding Year 2009-10 is	$1,985,000	$1,317,000	$400,000	$486,000
	3rd Succeeding Year 2010-11 is	$1,985,000	$1,317,000	$400,000	$486,000
	4th Succeeding Year 2011-12 is	$1,985,000	$1,317,000	$400,000	$486,000
	5th Succeeding Year 2012-13 is	$1,985,000	$1,317,000	$400,000	$486,000
(4)	2006-07 Program--	$513,020,000	$671,472,000	$753,146,000	$478,338,000
	2005-06 Program--	$478,693,000	$945,950,000	$817,890,000	$434,931,000
	2004-05 Program--	$531,785,000	$842,991,000	$476,116,000	$384,182,000
(7)	MA--Inpatient, MA--Outpatient, MA--Long-Term Care, Cash Grants; (8) recommends adoption. Funds have been included in the Department's budget to cover this increase.

Annex A

TITLE 55. PUBLIC WELFARE

PART II. PUBLIC ASSISTANCE MANUAL

Subpart G. RESTITUTION AND REIMBURSEMENT

CHAPTER 259. THIRD-PARTY LIABILITY

§ 259.2. Claims against moneys for which third parties are liable as a result of a tort claim allocation of tort proceeds--statement of policy.

   (a)  With respect to claims asserted by the MA Program against moneys owed by third parties as a result of tort claims asserted by a beneficiary of MA benefits, the Department will only recover from that portion of a tort recovery which represents payment for medical care by the third party. The term ''beneficiary'' includes both present and former recipients of MA benefits, and includes individuals receiving benefits through an MA managed care organization.

   (b)  In determining the portion of a tort recovery that represents payment for medical care by a third party, the Department will apply the following interpretations:

   (1)  Unless the Department intervenes in a lawsuit or sues separately, beneficiaries, including beneficiaries who are minors, are vested with the right to recover injury related medical expenses paid by the MA Program as part of their cause of action for other damages, and absent an express court order to the contrary are deemed to recover medical expenses as part of any tort recovery.

   (2)  In the absence of a court order allocating tort proceeds among categories of damages, 1/2 of the net proceeds are allocated by law to be available to repay injury-related MA expenses. The amount of the net proceeds is computed by deducting from the gross proceeds the attorney's fees, litigation costs and medical expenses relating to the injury that were paid for by the beneficiary prior to the settlement of the injured beneficiary's action or claim.

   (3)  If the beneficiary or other party seeks to obtain a court order limiting the portion of the tort recovery from which MA reimbursement may be paid to an amount less than 1/2 of the net proceeds, or excluding amounts paid by the MA program from the recovery, the Department shall be given fair notice and an opportunity to protect its interest.

   (4)  Failure to provide the Department with fair notice and an opportunity to protect its interest, prior to obtaining a court order limiting the portion of a tort recovery from which MA reimbursement may be paid, constitutes a violation of section 1408(a)(1) of the Public Welfare Code (62 P. S. § 1408(a)(1)).

   (5)  The Department is not bound by a private agreement between the parties to a tort claim regarding allocation of the proceeds.

   (6)  The Department's claims against third parties for reimbursement of MA cannot be released by a beneficiary without the Department's express consent in writing.

   (c)  The following procedures provide the Department with fair notice and an opportunity to protect its interest prior to entry of an order subject to subsection (b)(3):

   (1)  In a case when the beneficiary seeks to exclude injury-related medical expenses paid by the MA Program from the recovery, the beneficiary shall comply with the notice of suit requirements in section 1409(b)(5) of the Public Welfare Code (62 P. S. § 1409(b)(5)) and include a statement that the beneficiary will seek to exclude moneys paid by the MA Program from any recovery.

   (2)  In a case when the beneficiary seeks an allocation of tort proceeds by the court or a trier of fact, the beneficiary shall provide the Department with reasonable advance notice and an opportunity to intervene in the case prior to the determination.

   (3)  In a case when the beneficiary seeks a court order limiting the portion of the tort settlement from which MA reimbursement may be paid to an amount less than 1/2 of the net proceeds of any settlement, the beneficiary shall provide the Department with reasonable advance notice of the settlement before it becomes binding.

   (4)  In a case when a motion is to eliminate medical expenses paid by MA from the case, the moving party shall provide the Department with reasonable advance notice and an opportunity to intervene in the case prior to adjudication of the motion.

   (5)  Thirty days advance notice is considered reasonable advance notice under this subsection.

   (6)  Notices must be in writing and sent by certified or registered mail to the Division of Third Party Liability, Department of Public Welfare, P. O. Box 8486, Harrisburg, PA 17105 and include the following information:

   (i)  The name of the beneficiary.

   (ii)  The beneficiary's MA identification number, if known.

   (iii)  The beneficiary's date of birth.

   (iv)  The name of the beneficiary's attorney, if applicable.

   (v)  The insurance carriers, if applicable.

   (vi)  The date and specific injuries giving rise to the claim.

   (vii)  The court and docket number in which the claim is pending, if applicable.

[Pa.B. Doc. No. 07-1659. Filed for public inspection September 7, 2007, 9:00 a.m.]