Legislature(1999 - 2000)
03/27/2000 01:20 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 325 - MEDICAL ASSISTANCE:LIENS & CLAIMS CHAIRMAN KOTT announced that the next order of business would be 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." [Before the committee was CSHB 325(HES).] Number 0350 JON SHERWOOD, Division of Medical Assistance, Department of Health & Social Services (DHSS), explained that HB 325 seeks to make two improvements to the medical assistance statutes. The first improvement deals with third-party recoveries. Someone who applies for medical assistance assigns his or her right to recovery against the medical expenses for which the state pays. The department is looking for some improvements in the statutes governing that area. Those provisions will be addressed in more detail by Lisa Kirsch, Department of Law, and Leonard Anderson, DHSS. MR. SHERWOOD informed the committee that the other change is with regard to the statute for timely filing of provider claims. Under current statutes, when services are provided to people on Medicaid or the Chronic and Acute Medical Assistance Program, the provider has six months to file a claim if there is no other insurance to bill first, or 12 months if there is other insurance to bill first. This legislation makes two changes to that provision: making the time frame a year for all claims, which really brings it into the industry practice; and eliminating the restriction on rewarding more than 50 percent of the allowable charges when the department's commissioner finds that the provider has a good cause for failing to meet the timely filing deadline, which is an equity issue. Mr. Sherwood offered to answer questions about timely filing but deferred questions regarding third-party recovery to Mr. Anderson. He mentioned that there is an amendment that department is requesting, which Mr. Anderson would address. REPRESENTATIVE GREEN referred to page 3 and noted that he is not very familiar with "subrogation." He posed a situation in which the recipient is awarded 80 percent and there is a subrogation, and the department reclaims 100 percent. He asked, then, if the other 20 percent would be returned to the recipient or would be retained by the state. MR. SHERWOOD deferred to Mr. Anderson. Number 0484 LISA KIRSCH, Assistant Attorney General, Human Services Section, Civil Division (Juneau), Department of Law, addressed the second part of HB 325, which she noted that she has split into two parts. The first part deals with strengthening existing rights to recover Medicaid payments from a third party that would be liable for that Medicaid recipient's cost. She identified a typical example of such a party as a driver who injures a Medicaid recipient and thus Medicaid pays the medical bills and then the Medicaid recipient brings a lawsuit against that other driver for liability for that accident; it would be a tort claim. She reviewed other typical examples, then said HB 325 would strengthen the existing subrogation right. Simply put, subrogation means that the state has the right to stand in the shoes of the recipient. MS. KIRSCH stated, "So, whatever the recipient would be able to recover for their medical expenses that the state would be able to step into that position by virtue of the fact that the state has paid their medical expenses." In order to strengthen that subrogation right, HB 325 would make it express in statute that the state's has a lien rather than a simple subrogation right. She said Mr. Anderson can specify why this is a problem for him. She further noted that the Department of Law does not enforce these third[-party] claims contracted out by the Division of Medical Assistance, which is a requirement of the Medicaid Act. MS. KIRSCH turned attention to the second area that strengthens the existing subrogation rights, which is the allowance of the state to initiate a claim. In a case where a recipient fails to go after the third party, [the bill] would allow the state to come in and initiate a plan. Ms. Kirsch addressed the second part of the subrogation portion of HB 325, which she felt to be very important. She commented that there have been stories in which there has been an unfair result. The bill includes a provision that would allow the state to waive this claim of subrogation against a third party if it would cause an undue hardship on the Medicaid recipient. MS. KIRSCH told members that another provision would require the state to reduce its claim by the amount of money prorated to the state's share that the recipient has spent on attorney's fees. Therefore, the recipient would not being paying out of pocket in order to recover money for the state. That provision is already in existing statute but has not worked well; Mr. Anderson could explain why. From [the Department of Law's] perspective, this is not a substantive change because the attempt is to clarify the existing use of the civil rules, Rule 79 for costs and Rule 82 for fees. There has been some difficulty in making that work, and thus Section 7 of HB 325 attempts to clarify the intent of the legislature. Ms. Kirsch offered to answer any questions specific to the bill but deferred other questions to Mr. Anderson. Number 0707 REPRESENTATIVE MURKOWSKI related her understanding that HB 325 would create a lien for assistance payments because there is only a subrogation right now. MS. KIRSCH agreed. REPRESENTATIVE MURKOWSKI asked who is being displaced now that the priority status is being given. MS. KIRSCH explained that currently subrogation claims, at least in some case law, are considered an equitable right. Therefore, if the recipient does not receive full recovery, the department has a negotiating starting point of zero. She said, "If they're not made whole equitable subrogation rights, it is argued by the opposition ... that we have no right of recovery." The statutes of other states where Medicaid programs have had better luck recovering funds include a lien right. In such a case, the negotiation would begin with the amount of money that Medicaid had spent, reduced by costs and fees that the recipient had to spend to recover the Medicaid portion. Then negotiations could begin. At that point, it could be modified by things such as the undue hardship clause or other issues within the case. REPRESENTATIVE MURKOWSKI commented, then, that "we're" getting in line in front of hospitals, nurses or physicians. She asked, "This would give us a slight bump up over other claims to those monies; is that correct?" MS. KIRSCH answered that in general that would be correct. However, with regard to physicians and hospitals, she was not sure that this change would make much difference. She explained that hospitals and physicians have a statutory lien right and thus "we" had to place ourselves somewhere in terms of our statutory lien right. She pointed out that the hospital or physician who treated this Medicaid patient would receive payment. She commented that she was not sure how it would really happen, and she was not sure it would really make a difference in terms of a Medicaid provider. Ms. Kirsch said, "In terms of where this money would be coming from, the only difference would be you wouldn't have a Medicaid recipient able to hold on to as much of the money that came to them by virtue of a reimbursement of their medical bills." Again, she deferred to Mr. Anderson for more specifics. Number 0900 REPRESENTATIVE MURKOWSKI indicated she reads the recording statutes to mean that if [the Department of Law] perfects its lien as does a hospital, nurse or physician under the statutes, "you" would have a priority over them. MS. KIRSCH agreed that would be true if a hospital or physician had a reason to have a lien. However, she could only think of one context in which it would come up in one of these Medicaid cases. Such a case would be when an individual is Medicaid-eligible for a short time but also had a time when he/she was not Medicaid- eligible, and thus there were physicians that treated this individual when he/she was not Medicaid-eligible. However, if the person had been Medicaid-eligible the entire time, the physicians and the hospitals would not need to have a lien because "we" would have paid our Medicaid providers. Perhaps Mr. Anderson would know of other circumstances, Ms. Kirsch said. The only reason that statutory change was made was because a lien right was being created and had to be placed somewhere. REPRESENTATIVE KERTTULA asked what happens to the individual. She added, "The lien can come against what that person's recovered ... but it would have to wait to be paid until the person had fully covered." MS. KIRSCH deferred to Mr. Anderson. Number 1023 LEONARD ANDERSON, Division of Medical Assistance, Department of Health & Social Services, testified via teleconference from Anchorage. He explained that in a typical recovery case, information is gathered from a Medicaid recipient or through other sources. That information would let the division know whether or not a responsible and reliable third party is present, which is sometimes accomplished through contacts with the Medicaid recipient. He noted that sometimes a responsible third party is not found until the state's contractor receives a call during the middle of a settlement conference between a plaintiff's counsel and an opposing counsel with a judge. In some cases, [a third party] is found after the fact, after a settlement has occurred. At that point, some recipients or their attorneys will call the contractor and inquire as to what it would take to eliminate the subrogation lien or the Medicaid payments that were made on behalf of the client. Sometimes [a third party] is not found at all. MR. ANDERSON explained that part of the problem the state contractor has is the negotiation of the amount that the state should recover out of the Medicaid funds that have been for a recipient. One of the biggest problems is that the plaintiff's attorneys have argued with the state contractor that under the current statute, the subrogation is [not] equitable and the state should not receive any money [until] the plaintiff is made whole. He pointed out that the plaintiff's attorney will call the state contractor and request print outs of all the charges for which the state has paid for the medical assistance. Those charges are used in order to boost or substantiate a claim that is being settled. Mr. Anderson commented that the lack of strength of the current statute leaves some question. Number 1314 MR. ANDERSON mentioned that the proposed amendment would insert "or the recipient's attorney" on page 3, line 4, following "recipient of medical assistance". Currently, when a recipient signs up for Medicaid, the 1050 application is filed; that application says the applicant will cooperate and notify the state of any claim or case that he/she brings, and the applicant will include any amount of Medicaid paid in a case that he/she would bring against a potentially liable third party. Furthermore, there is a notification requirement if there is any recovery made. In practice, however, it seems that some of the Medicaid recipients are ignoring that and thus not informing the state that a recovery has been made. Mr. Anderson commented that this [proposed] change would place some burden on the attorney to talk to his/her client and place this on the checklist. MR. ANDERSON turned to the problem under the current law with regard to subrogation claims. [The current law] is forcing the state to estimate what the damages are in a case. As mentioned by Ms. Kirsch, the current statute forces the state to negotiate from a zero (indisc.) recovery to whatever the state can get the other side to agree to without going to court. He indicated his clients have informed him that for the small cases Medicaid recovery is fairly good. However, the larger cases rarely result in the state receiving one-third of what the state has expended. He said that when the state has to estimate what the damages are in a case, this places the state at a severe disadvantage in bargaining. The new statute eliminates the "made whole" argument and provides the state a right to recover, which seems fair. MR. ANDERSON continued. The Medicaid recipient uses all the medical information he/she receives from the state to get his/her recovery or to substantiate his/her recovery. As it currently stands with the negotiation process, the Medicaid recipients are receiving some sort of windfall on medical expenses paid. He reiterated that the new statute will provide stronger notice requirements and hopefully, inclusion in the law will provide more weight and the recipient and the attorney will have to address it. Mr. Anderson said that he believes the new bill will also foster communication between the state and the recipients and the Medicaid counsel. Furthermore, this would eliminate the state's second- guessing of the value of a recipient's tort case and would allow the state to negotiate down from the amount that it had paid. He also mentioned the undue hardship provisions. Hopefully, this will result in a fair and equitable recovery to the state for funds that are recovered for medical assistance paid by the state. Number 1713 REPRESENTATIVE GREEN asked if the aforementioned amendment would invoke a legal obligation to the attorney for the recipient or if the opportunity to point to each other still remains. What will the amendment provide that tightens this up? MR. ANDERSON answered that he believes the amendment will give the attorney a legal obligation to notify the state. The amendment will require the attorney to ask the client whether Medicaid benefits were expended on his/her behalf. He emphasized that some of the attorneys he has spoken with claim that they do not even have to ask that because there is no lien. The amendment places a burden upon the attorney to notify the department of a claim. Mr. Anderson specified that he would prefer a [requirement of] notification before a disbursement of a settlement fund. If the attorney is required to ask his/her client about a Medicaid payment and then provide notice to the state before disbursement of the settlement fund, it provides the state with the opportunity to discuss its claim and resolve it. REPRESENTATIVE GREEN asked if "or" would still provide the attorney with some ability to say that he/she did not know. However, he understood Mr. Anderson to say that this would require that the attorney ask certain questions of the client. MR. ANDERSON said that he believes it would require that attorney to place this on the checklist. REPRESENTATIVE KERTTULA referred to Section 9. She asked if the recipient will be made whole before the department starts to take money. MR. ANDERSON clarified that the legal issue of whether a recipient is made whole is whether the plaintiff or Medicaid recipient fully compensated for all of his/her injuries, economic and noneconomic. He pointed out that tort cases include noneconomic damages such as pain, suffering and emotional distress; however, there is considerable dispute as to what may be suffered there. With regard to making [a plaintiff] whole on those issues before the state recovers, Mr. Anderson said that the amendment may not do that. With regard to making whole for what was paid for medical expenses, that will depend upon each individual case. The statute will allow the state to come in and discuss the issues. The issue of a legitimate hardship is addressed on page 3, Section 8. REPRESENTATIVE KERTTULA commented that the it does more than that. She understood that the bill could place [the department] in a spot where it could recover. She asked if it is based on the medical expenses alone, without looking at the overall case. She specified that she is interested in "where we wind up in terms of the recipient versus the department after this." MR. ANDERSON said that he believes the state is recovering funds received in a settlement by Medicaid recipients. Although the right for the state to step in [for the Medicaid recipient] is currently present, many attorneys argue otherwise. The amendment, by using the lien language, would specify that this right exists. Mr. Anderson said that he hopes it would preclude a Medicaid patient from double recovery on medical payments because he believes that the state is entitled to recover any medical payments that a Medicaid recipient recovers in a settlement. This is what the subrogation statute is about. Furthermore, this is required by the federal government. Again, the problem is that the current statute is somewhat weak in that area. Number 2215 REPRESENTATIVE KERTTULA expressed her preference to have the recipient "come back to the place where he/she started." She did not want to see a "wholesale jumping of those rights by the state," she added, noting that the language seems to be a dramatic change. MR. ANDERSON stated that currently the recipient is coming out ahead on medical reimbursement, and the state is coming out behind. REPRESENTATIVE KERTTULA acknowledged that if recipients are double- recovering and receiving more than they are entitled to, that problem needs to be resolved. However, what if the recipient is not coming out ahead? For instance, what would happen under the new statute if the recipient recovered up to 80 percent of what he/she had spent. MR. ANDERSON answered that he believes that would go to the hardship waiver portion of HB 325. REPRESENTATIVE KERTTULA commented that [the new statute] would place the department in line ahead; the department would have the ability to utilize the waiver. That is troublesome. MR. ANDERSON interpreted Representative Kerttula's question to be how that can be avoided. He stated that the intent of the bill is not to have that happen. The intent of the bill is to give the state the ability to recover amounts that the Medicaid recipient recovers for Medicaid assistance. The intent is not to recover amounts that the Medicaid recipient had recovered for something else. However, most of the plaintiffs' attorneys utilize the client data report, which lists all Medicaid amounts expended for a recipient. The attorney uses that information in the case in order to get as much ... [Due to tape change, the testimony was interrupted midspeech.] TAPE 00-40, SIDE A MR. ANDERSON said that due to the current statute, the state is getting reimbursed amounts that have been collected, and therefore the Medicaid recipient is getting a double recovery. REPRESENTATIVE MURKOWSKI referred to the portion of the bill that changes the timely filing of the claim from six months to twelve months. She asked if this extension could possibly cause providers to slow down. Number 0130 MR. SHERWOOD stated that the extension of the timely filing deadline is a separate issue. In general, it is in the providers' best interests to file their claims quickly because they have already provided a service for which they are out their expenses. He pointed out that delays can be caused when clients provide insufficient information about their Medicaid eligibility for the provider to submit an accurate claim. He acknowledged that often there is a good reason for that insufficient information. Another situation that can cause a delay is a change in billing personnel or accounting software. Mr. Sherwood commented that, in his experience, such things would all be resolved well before arriving at the settlement points in most cases. REPRESENTATIVE MURKOWSKI said she understood, then, that in addition to the six months' extension, a person would not be limited to the 50 percent reimbursement if he/she had a good reason for failure to timely file a claim. MR. SHERWOOD agreed. In further response to Representative Murkowski, he agreed that it is correct that most states have a lien statute, and it seems to be a common way of doing business. Number 0369 REPRESENTATIVE KERTTULA asked: If [the department] has filed a lien and the parties know about it, wouldn't that result in raising the recovery? MR. ANDERSON replied yes, potentially. He identified part of the problem as being that settlements are being negotiated without any knowledge of the state. Therefore, by there being a lien that is recorded and sent to an attorney, there is a notice provision and he believes the attorneys will seek to recover a higher amount. REPRESENTATIVE GREEN asked if Representative Kerttula meant there would be a higher cost due to the attorney's fees and court costs. He pointed out that page 4, line 3, says, "The lien is the amount of the medical assistance paid ...." Number 0520 REPRESENTATIVE KERTTULA pointed out that they wouldn't necessarily know what the amounts were, which is the problem. She explained that sometimes the plaintiff's attorneys will come and request lists of services, but the department has no way to know what is actually being claimed or [recovered]. Therefore, the [department's] desire is to submit a lien for their costs which will force the plaintiff's attorney to return and specify the costs and the ways in which his/her client has been hurt. Thus the [department] would recover what the plaintiff is out as well as what the state is out. She asked if that is correct. CHAIRMAN KOTT asked whether there were additional questions or persons who wished to testify. There being none, the public testimony was closed. Number 0665 REPRESENTATIVE CROFT made a motion that the committee adopt Amendment 1: Page 3, line 4: Following "recipient of medical assistance" Insert "or the recipient's attorney" There being no objection, Amendment 1 was adopted. Number 0699 REPRESENTATIVE CROFT made a motion to move HB 325 [CSHB 325(HES)], as amended, out of committee with individual recommendations and the accompanying fiscal note. There being no objection, it was so ordered and CSHB 325(JUD) was moved from the House Judiciary Standing Committee.
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