Legislature(1999 - 2000)
02/24/2000 03:06 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 325 - MEDICAL ASSISTANCE:LIENS & CLAIMS Number 0838 CHAIRMAN DYSON announced the next order of business as House Bill No. 325, "An Act relating to priorities, claims, and liens for payment for certain medical services provided to medical assistance recipients; and providing for an effective date." Number 0847 JON SHERWOOD, Program Officer, Division of Medical Assistance, Department of Health & Social Services, came forward to present HB 325. He explained that HB 325 proposes to make improvements to the Medical Assistance program in the third-party recovery and a timely filing of medical claims by the provider to the department. When a person applies for medical assistance in Alaska, he/she assigns his/her right to third-party recovery to the state. Under Medicaid, this is a federal requirement as well. Over the years, the contractor, who does much of the third-party recovery, has identified weaknesses in the present law that limit the department's ability to recover against the third-party claims. There is usually litigation involved, either against an insurance company or an individual, in these type of claims. MR. SHERWOOD offered an example: Someone is hit by a drunk driver, and the medical care is paid by Medicaid; the person makes a claim against the drunk driver or the drunk driver's insurance company. This bill would improve the department's ability to recover money in these situations. It would require recipients to notify the department of recovery actions; it creates the authority for the state to place a lien upon such recoveries that are made and establishes a precedent; and gives the department the ability to take its own action against the third party if the individual doesn't pursue it themselves. MR. SHERWOOD explained that additionally, HB 325 is intended to bring medical assistance statutes "in sync" with current practice of other health care payers. Right now the department gives providers six months to make claims for payment for medical assistance; twelve months if the recipient has private insurance that must be billed first. The industry standard generally gives people 12 months to file claims. The twelve-month period will give providers an opportunity to identify those claims and make claims against the department within the timely filing limits. The bill would also amend the law to allow the department to pay for 100 percent of a claim when it finds that a provider missed the timely filing deadline with good cause. Currently under statute, if the department makes that finding, it can only pay 50 percent of the claim. Number 1075 REPRESENTATIVE BRICE commented that he had dealt with constituents on a similar drunk driving case in which the victim received close to a $300,000 court award against someone. The department came in and took every penny of it, and the victim had to go back on medical assistance. He asked Mr. Sherwood how HB 325 fixes that situation. MR. SHERWOOD answered that HB 325 is intended to give the state a clear position in making a claim. When someone is reimbursed for medical claims that the department has paid for, the department wants to be reimbursed for those claims. There is a provision under law that allows for attorneys' fees to be paid under the court rules. In the situation he is familiar with in Fairbanks, the department's eventual recovery was not 100 percent; it was substantially less than 100 percent. He doesn't believe HB 325 would fix the problem in the sense that if the department has paid for expenses and someone recovers on those expenses, the department intends to be reimbursed for those expenses. The money doesn't go to the recipient, even though the recipient may have other valid uses for the money. Number 1188 REPRESENTATIVE BRICE said he would feel better limiting what the department can go after. If there were compensatory damages as well as punitive damages, then the department could only go after the compensatory damages. MR. SHERWOOD indicated the department does not "go after the victim." The department goes after the award that was made as part of the settlement or the court case. In theory, it is before any money goes to the victim. The department has a right to collect reimbursement for the services it paid for. If an award is paid, then the department is trying to collect those funds for the services it paid for. He doesn't believe HB 325 will give the department any entitlement to a greater pool of money; it simply improves and clarifies the ability to get the money the department is already entitled to by law. REPRESENTATIVE BRICE commented that basically this is turning Medicaid and medical assistance programs into a low-interest loan program. MR. SHERWOOD said HB 325 would not create a low-interest loan program. This bill does not create any special requirement that a recipient pay back Medicaid; if there is a recovery against the third party, on behalf of that recipient, Medicaid is entitled to that part of the recovery for which the expenses have already been paid. Number 1354 CHAIRMAN DYSON asked Mr. Sherwood when the administration started working on HB 325. MR. SHERWOOD indicated it has been discussed over the past several years. The bill was put forward this year, about in November. CHAIRMAN DYSON noted that it is almost word for word what came out of the privatization commission. Number 1392 COMMISSIONER PERDUE restated that the department has done third- party recovery for about 15 to 20 years. This is not new; the department simply wants to refine the way it is done. CHAIRMAN DYSON asked Mr. Sherwood if the attorneys in the third- party cases get paid before or after the state. MR. SHERWOOD indicated there is a provision in the court rules for the determination of attorneys' fees, and the fees come out before the state makes its recovery. That determination is not the attorney-client contingency fee; that's based on the court rule formula for determining the allowable attorney fees. Number 1461 REPRESENTATIVE COGHILL said according to section 2, the department would be the first right of payer and the hospital would stand in line. He asked how the percentages of the total costs that the hospital would get affects the accounting. MR. SHERWOOD clarified that when the department pays a bill under Medicaid, the provider accepts this payment in full for the service with the exception of some small co-payments and deductibles. If the provider has accepted payment from Medicaid for the service, even though the department might not reimburse for the full charge, the provider has no claim for the additional percentage of what the department didn't pay for. It is a condition of participation; the provider has to accept the department's payment as payment in full. REPRESENTATIVE COGHILL asked about the rates. MR. SHERWOOD agreed that there are slightly different reimbursement rates for different kinds of providers. REPRESENTATIVE COGHILL asked what the process of payout would be. MR. SHERWOOD said he believes the department's lien would come first; if there were funds left over, the next lien would be paid. CHAIRMAN DYSON offered some amendments to discuss. On page 3, line 7, strike the period after liable and add "for cause." Number 1641 LISA KIRSCH, Assistant Attorney General, Human Services Section, Civil Division (Juneau), Department of Law, came forward to answer questions. She responded to the amendment. She said it doesn't appear to be problematic; she is not sure it changes things much. She wondered what he was trying to correct or achieve. CHAIRMAN DYSON said he will go through all the amendments and then Ms. Kirsch can decide if there are any problems. Number 1664 CHAIRMAN DYSON offered the following amendments: Page 3, lines 5 and 9, strike the word "payor" and insert "tort-feasor"; Page 4, line 25, strike "and" after assistance, insert "that are"; Page 4, line 28, insert "that are" after "services"; Page 4, lines 28-29, delete "for which the medical services were provided"; Page 4, line 9, delete "has not been" and insert "is not". CHAIRMAN DYSON referred to page 4, line 6. He asked for an explanation of what is the effect of an action that has been filed but is not in effect. MS. KIRSCH explained that is the notice provision which is designed to assure that everyone who is involved in the lawsuit, if there is a lawsuit, is aware that the lien exists. The second sentence modifies the first. If the notice provision is not met, then the lien is not enforceable. Number 1864 CHAIRMAN DYSON asked what "perfected" means. MS. KIRSCH said it doesn't imply any particular action other than that the lien is not legally enforceable until it is perfected. She indicated that the chronological order is probably reversed from the way it appears in this paragraph. That provision is in there so everyone involved is aware of the lien, so people aren't going into settlement negotiations, and the plaintiff compromises their claim based on a belief that they are going to receive all of the funds. If they know about the lien, that will affect how they posture in a settlement proceeding because it has the potential of reducing the ultimate recovery. Number 1919 LEONARD ANDERSON, Attorney, Davis & Davis, PC, testified via teleconference from Anchorage. He explained that he has been the state's contractor for about 2.5 years and supports HB 325. Over those years, he has had many conversations and correspondences with plaintiffs related to the State of Alaska's subrogation rights under the current statute. A problem was encountered in recovering an amount that Medicaid recipients promised to pay back if the Medicaid recipients have a claim, if they bring a claim against a liable third party, is that the Medicaid recipients will reimburse the State of Alaska. The problem has been under the current statute, it gives a subrogation claim to the State of Alaska. The result has been that the state has compromised for probably the past 12-14 years or longer amounts that it recovered under the current statute. MR. ANDERSON indicated that the bill before the committee will allow the state to have a lien right that it does not currently have under AS 47.05.070. By giving the state that lien right, it forces attorneys representing Medicaid recipients in personal injury cases to add it to the checklist to ask their clients if they've received Medicaid; unfortunately, his client has found over the years that the attorneys don't always ask that question. MR. ANDERSON reported that he has had counsel ask him if the state actually has a lien right, and he had to answer, "Read the statute, but I don't see it." The problem is if the state doesn't have a lien right, the attorney doesn't have to add that to his checklist to ask the client, and sometimes doesn't. His client doesn't get notice that there's a possible pot of money to recover amounts that Medicaid has paid for the treatment of the recipient's injuries. Or, at the last minute, the contractor is informed of a potential settlement that's happening right away, and asked if the state will settle for "x" amount of dollars, which is pennies on the dollar. The state has not had a mechanism by which it has had any strong enforceable rights to go out and disagree with the settlement amount. The state has always opted to settle cases due to the weakness of the current statute. Number 2078 MR. ANDERSON commented on the proposed amendments. The reason for the proposed change on page 3, lines 5 and 9, inserting "tort-feasor" is the state won't have privity or the state won't have a contract with a third party payor, possibly an insurance company. Since the state isn't insured under the policy, it doesn't have the contractual right to go back after that company. The claim has to be actually brought against the liable third party. Tort-feasor is a fancy name for the liable third party. He noted that language is present also on page 4, line 3. If the amendment is accepted, it ought to be changed there as well. MR. ANDERSON referred to Representative Brice's comment about making a loan provision. On page 3, line 26, section 8, there is a hardship provision required by federal law that the current state statute doesn't have. Under federal law, the state is required to have a hardship provision so that the department can waive any subrogation rights it has underneath this bill or any new statute that's adopted. CHAIRMAN DYSON asked Mr. Anderson to explain the proposed change on page 4, line 9. Number 2206 MR. ANDERSON indicated it is a grammatical change to use an active voice instead of a passive voice. It is easier to read and understand. CHAIRMAN DYSON asked Mr. Anderson to explain the proposed changes on page 4, line 25 and lines 28-29. MR. ANDERSON said that didn't make any major change. That proposed change is for clarity. CHAIRMAN DYSON asked Mr. Anderson about the proposed change on page 3, line 3. MR. ANDERSON said he wasn't involved in that change. He believes it read fine as it was. Number 2287 MS. KIRSCH stated her only difficulty with the proposed amendments were on page 3, lines 5 and 9. If it is changed to tort-feasor, the ability to claim against a third-party insurer is eliminated when there is no tort. For example, a person had a claim against Medicaid at one time, but then there was some insurer who was ultimately liable, maybe for cause or maybe not, those amendments changing "payor" to "tort-feasor" and the amendment, page 3, line  "for cause" might limit the ability to recover in certain circumstances. She would resist those, but the other proposed amendments for grammatical and clarity issues are not a problem. CHAIRMAN DYSON asked Mr. Anderson to respond to the comments on substituting "tort-feasor" for "payor." MR. ANDERSON said the point may be well taken for both "tort- feasor" and "for cause"; however, he does see a potential problem in trying to bring it against possibly just an insurer as opposed to a liable third party. If there is an insurer out there from whom a pot of money is being collected, he would have to believe there is a liable third party being insured. TAPE 00-22, SIDE B Number 2341 REPRESENTATIVE GREEN made a motion to adopt the conceptual amendments for clarity, which read: Page 4, line 25, strike "and", insert "that are"; Page 4, line 28, insert "that are" after "services"; Page 4, lines 28-29, delete "for which the medical services were provided"; Page 4, line 9, delete "has not been" and insert "is not". CHAIRMAN DYSON asked if there was any objection. There being no objection, the conceptual amendments were adopted. Number 2327 REPRESENTATIVE BRICE made a motion to move HB 325, as amended, from the committee with individual recommendations and fiscal notes. There being no objection, CSHB 325(HES) moved from the House Health, Education and Social Services Standing Committee.