Legislature(1999 - 2000)

02/24/2000 03:06 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                              
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                                                              
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                                                              
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                                                              
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                                                              
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                                                                  
     Page 4, line 25, strike "and" after assistance, insert "that                                                               
     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                                                              
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 [7] "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.                                                                 

Document Name Date/Time Subjects