CS FOR HOUSE BILL NO. 325(JUD) "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." JOHN SHERWOOD, Division of Medical Assistance, Department of Health and Social Services, commented that the proposed legislation has two main purposes. · To improve the third party recovery effort for medical assistance; and · Changes to the claim filing provisions. Mr. Sherwood mentioned that HB 325 was a companion bill to SB 233. Mr. Sherwood proceeded to explain the second provision of the bill. He noted that currently, the Department allows health care providers six months to make payments on claims for medical assistance from the date of service or twelve months, as the provider must bill the private insurance company first. The legislation would extend the filing deadline to twelve months for all claims, elevating the Department to the industry standard. Additionally, the bill would allow the Department to pay 100% of a late claim if the Commissioner finds that the provider has "good cause" for missing a timely filing deadline. LISA KIRSCH, Assistant Attorney General, Department of Law, explained the third party recovery provision. She noted that the second part of the bill addresses strengthening the existing rights in which Medicaid must recover payments of those that have been made. Currently, there is a subrogation right, which has been difficult to enforce as it is not explicitly in statute. Co-Chair Torgerson inquired if that was Section 8 of the bill. Ms. Kirsch stated the provision in Section 8 would allow the State to waive the right if there were a case where work would cause a hardship against the Medicaid recipient. The primary section that changes authority to provide a lien right would be to Section 9, Pages 3 & 4. The changes requested would allow the Department flexibility to adjust the claims. Ms. Kirsch advised that as it stands, there are references made to the civil rule, which is intended to clarify existing law. Senator Phillips referenced Section 1. He asked to what extent would the involvement be contained in that process. He was trying to determine if he had a conflict of interest. Ms. Kirsch stated that Section 1 deals with the priority of the lien. A lien right was created for the Department and the Division of Medical Assistance had to be placed in the list of existing liens. She suspected that the concern would not come up often. She interjected that Medicaid does pay the hospital. Senator Phillips asked for consent that he be allowed to refrain from voting because of a conflict of interest. Co-Chair Parnell admitted that he could have a conflict of interest also. He voiced concern that the Department would be receiving priority over the hospital, nurses and physicians. He warned that there is much Medicaid money that needs to be recovered. Co-Chair Parnell asked when the priority would come into play. Ms. Kirsch replied that the placement in the list would depend on the type of placement coming up. She noted that a number one placement would be to the list of medical services. In most cases, if the person was Medicaid eligible, they would be covered and the provider would be paid. Co-Chair Parnell questioned why that language was necessary in the legislation. Ms. Kirsch replied that the State has to place themselves somewhere, a vacuum can not be left. She understood the problem to be that when the State has a subrogation right, the argument is that you have no right at all once the plaintiff recovers 100%. Co-Chair Parnell believed that requesting a right lien priority was the most extreme way to address the concern. LEONARD ANDERSON, (Testified via Teleconference), Representing the State of Alaska, Third Party Recovery Agent in Medicaid Matters, Anchorage, testified that there are general problems with the present statute. The first concern is the notice problem. Currently, when a Medicaid recipient requests Medicaid, they have already signed up and contractually agreed to include any Medicaid amount that they received as part of the claim against a third party. Part of the problem is getting the notice and then action when the notice is received. Typically, it is well into a tort case before the State of Alaska ever finds out that there is potentially a liable third party out there. It is not uncommon that the notice of that fact is received after the settlement has taken place. He stated that the new bill would address that issue. The legislation places into statute a requirement that the Medicaid recipient or his attorney notify the Department of any claim that is being made against a potentially liable third party. Mr. Anderson added, a second portion of the proposed legislation would address the subrogation issue. The real issue is that attorneys privately argue that equitable principles of subrogation apply. That means that if an injured third party is not made whole, then the State of Alaska can not get anything until the party is made whole. The lien will require dialogue between the injured party, their attorney and the State of Alaska. There is a "hardship" waiver provision in the bill which will provide some flexibility to it. Co-Chair Parnell questioned the position of the insurance companies. He used the example of a child hit on a bike. He reiterated why should the State have a higher right than any other party trying to recover their fees. Mr. Anderson did not agree that the State was on a "level playing field". Various courts have found that there are different policy reasons for where the insurance company sets. The courts that have addressed the issue have found that based upon that insurance company's base "risk" into the rates charged, they are different than the State that does not use the risk factor. He hesitated to compare the State and the insurance company. Tape: SFC - 00 #94, Side B 10:17 am Co-Chair Torgerson understood that there would only be a couple cases a year that this clause would apply to. Mr. Anderson argued that was inaccurate. He noted that weekly, he is involved in subrogation issues. He interjected, the Plaintiff's Bar is not happy with Alaska in the recovery of funds. Based on current statute weakness, they are waiting for the right case to bring it to the Supreme Court. If that were to happen, the outcome would not be good. Mr. Anderson believed that was part of the reason that State had made it a priority to settle claims. Co-Chair Torgerson suggested that the most important part of the bill was from Sections 3 on. He proposed removing Sections 1 & 2. Representative Murkowski stated that there needs to be some standing in the list, otherwise, the lien right would cause a great deal of confusion. Senator Green declared a conflict of interest. She asked if the legislation would address mainly the person covered by Medicaid and/or private insurance. Representative Murkowski stated that was a possibility. It could also be a circumstance where a Medicaid recipient was not covered by any other insurance but instead a third party who was responsible for their injury. Senator Green asked if the person had no coverage or no secondary coverage would Medicaid then be designed to repay. Representative Murkowski stressed that this was "third party" recovery. Senator Green inquired if the State could require a payment from a Medicaid recipient. Representative Murkowski mentioned that a couple of years ago, there had been a legislative change made to allow people who are disabled to go back to work, and by virtue of going back to work, they loose their coverage. The legislation would allow the disabled to enter into a contract. Mr. Sherwood stated that the Department is allowed and that they do charge nominal co-payments. Under federal law those payments are restricted to 5% of the persons total income. Senator Green argued that it is difficult to compare Medicaid to private insurance. Representative Murkowski stressed that Medicaid is not an insurer. That relationship is contractual and it is not meant to offset insurance. Co-Chair Parnell clarified that creating a lien would have other ramifications. Giving the State a lien priority impacts the collectability of the other claims by other private parties and also puts the State in priority of bankruptcy setting over unsecured creditors. Representative Murkowski stated that the lien created would be to a third party and responsible for medical expenses. That would be in the context of a third party recovery in a tort action if medical expenses were to be considered. Co-Chair Torgerson advised that the bill would be held in Committee for further consideration. He recommended that Sections 1 & 2 be reworked. Co-Chair Torgerson questioned Section 5 and asked why it had not been reflected in the fiscal note. Mr. Sherwood explained that provision related to timely filings. In that situation, the statute would limit pay of 50% of the claim, which would allow the entire claim to be paid. He advised that this was an equity issue for timely filing. Mr. Sherwood noted that the fiscal costs were not considered "material". HB 325 was HELD in Committee for further consideration.