STATEMENTS OF POLICY
Title 55--PUBLIC WELFARE
DEPARTMENT OF PUBLIC WELFARE
[ 55 PA. CODE CH. 259 ]
Implementation of Third-Party Liability Provisions of Act 2008-44
[38 Pa.B. 5970]
[Saturday, November 1, 2008]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 sections 1409 and 1409.1 of the Public Welfare Code (code) (62 P. S. §§ 1409 and 1409.1) to tort claims involving MA recipients.
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 requires the Department to operate a program to recover the costs of MA expenditures from liable third parties. Section 1409 of the code (42 U.S.C.A. § 1396a(a)(25)), implements these provisions by giving the Department the option of suing tortfeasors separately or asserting a claim against money 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.
In Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752 (2006) (Ahlborn), the United States 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 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 when proceeding under the assignment.
On July 4, 2008, Governor Rendell signed Act 2008-44 (Act 44) into law. Act 44 makes significant changes in MA third-party liability procedures. The new law enacts section 1409.1 of the code to implement the Ahlborn decision by statute and it amends section 1409 of the code to establish procedures under which MA recipients can exclude recovery of medical expenses paid by MA from their tort claims. The legislation also extends the statute of limitations for the recovery of medical expenses paid by MA on behalf of minors, thus allowing parents to recover the medical expenses after the statute of limitations on other parental claims has expired. This change effectively overrules the Superior Court's decision in Bowmaster v. Clair, 933 A.2d 86 (Pa. Super. 2007). Finally, the law extends the statute of limitations for the Department to pursue third parties and insurers, and gives the Department civil money penalty authority to enforce the law.
Discussion
This statement of policy explains how the Department will interpret and apply certain changes in the law made by Act 44. This statement of policy also explains the duty of MA beneficiaries to cooperate with the Department's efforts to obtain reimbursement from third parties. The term ''beneficiary'' includes both adult and minor recipients of MA.
Section 259.2 (relating to claims against moneys for which third parties are liable as a result of a tort claim allocation of tort proceeds in actions filed before September 2, 2008--statement of policy) will now apply only to lawsuits filed prior to September 2, 2008. As required by Federal law, the Department will continue to apply the Ahlborn decision to lawsuits filed prior to September 2, 2008, even though the statutory requirement implementing Ahlborn in section 1409.1 of the code does not apply to those cases. In addition, a technical change was made to § 259.2 to add subsection (d) to clarify that the Department's Bureau of Hearings and Appeals has jurisdiction to determine the amount of the Department's claim against settlements under the existing regulation in 55 Pa. Code § 275.1(a)(4)(ii)(F) (relating to policy) when a court does not adjudicate the claim.
Section 259.3 (relating to claims against moneys for which third parties are liable as a result of a tort claim--allocation of tort proceeds in actions filed on or after September 2, 2008--statement of policy) explains how the Department will apply the amendments made by Act 44. This section applies to lawsuits filed on or after September 2, 2008. In accordance with section 1409.1 of the code and Ahlborn, the Department will only recover from that portion of a tort recovery which represents payment for medical care by the third party. The beneficiary is in exclusive possession of information as to whether a tort recovery included all damages. Accordingly, the beneficiary has the burden of informing the Department that a claim must be limited under Ahlborn and showing that not all medical expenses paid by MA were recovered.
Act 44 establishes a procedure for MA recipients to exclude medical expenses paid by MA from the damages claimed in a court case. Section 259.3(b) explains the consequences of the decision. If a beneficiary decides not to pursue medical expenses paid by MA, then the Department will intervene in the case or sue separately if it is cost-effective to do so. Ahlborn does not limit the Department's recovery when it sues a third party directly using its independent statutory authority to recover MA under section 1409(b)(1) of the code. Beneficiaries who elect not to recover medical expenses paid by MA as part of their claim forfeit the right to have the Department's claim reduced on account of their attorneys' fees and costs, even if the Department benefits indirectly from their efforts. The beneficiary may not attempt to recover medical expenses paid by MA in the past, or those medical expenses that will be paid by MA in the future. Notice of settlement must still be provided to the Department under section 1409(b)(5)(iv) of the code notwithstanding the election. An election not to recover medical expenses paid by MA can be revoked by the beneficiary only with the express written consent of the Department since it is expected that the Department will incur costs to retain counsel and intervene following the election. The beneficiary cannot settle or release the Department's claims against third parties or insurers.
Act 44 places new obligations upon insurers and third parties. These obligations are similar to those imposed by Congress upon insurers and third parties with respect to the Medicare program in the Medicare, Medicaid and SCHIP Extension Act of 2007, Pub. L. No.110-173. Liability insurance companies must now establish a direct relationship with the Department's Division of Third- Party Liability and provide the Department with both notice of suit and notice of settlement in any case when they have information indicating that the claimant received MA. This information will often come from plaintiff's counsel and may also be present in medical and provider records that are reviewed as part of the insurer's claim adjudication process. Section 1409(c) of the code authorizes the Department to impose civil money penalties upon insurers that do not comply with these requirements or who make distributions to beneficiaries in cases when the Department has an interest without insuring payment of the Department's claim. The Department has established a safe harbor provision in § 259.3(e) and has specified those actions that can be taken by third parties and insurers to shield themselves from potential liability to the Department.
Section 259.3(f) and (g) specify what identifying information must be included in notices that are provided to the Department. Subsection (f) is similar to existing requirements in § 259.2(c)(6).
Act 44 requires that a notice of election to not recover MA be given so that the Department has sufficient time to intervene and prosecute the claim itself. Section 259.3(h) specifies when notice of an election to not recover MA will be considered unreasonable. Notice is not reasonable if it is given after the close of discovery. Notice of a settlement that occurs prior to the close of discovery is not reasonable if the Department is not given 30 days to intervene in the case before the settlement agreement is executed.
Section 259.3(h) provides that the Bureau of Hearings and Appeals has jurisdiction to determine the amount of the Department's claim against a settlement under the existing regulation in § 275.1(a)(4)(ii)(F),when a court does not adjudicate the claim.
Act 44 does not expressly provide procedures for cases that are settled without litigation. Section 259.4 (relating to settlements without litigation--statement of policy) explains how the Department will apply Ahlborn to settlements that occur without litigation. The Department will assume that a settlement includes medical expenses paid by MA unless certain circumstances apply. In a case involving a minor or incapacitated individual, the court order approving the settlement may adjudicate the Department's claim. If agreement cannot be reached with the Department regarding the amount of its claim against a settlement, then the beneficiary can obtain an Ahlborn allocation determination by filing an appeal to the Bureau of Hearings and Appeals.
Section 259.4(b) specifies the circumstances when the Department will not assert a claim against a settlement that is settled without litigation. The Department will not assert a claim in a settlement involving a minor or incapacitated person, when the court order approving the settlement expressly adjudicates the Department's claim after reasonable notice and an opportunity to be heard. The Department will not assert a claim when the beneficiary is legally incapable of recovering the medical expenses paid by MA. Finally, the Department will not assert a claim against a settlement when both the Department and the settling party have been provided advance notice that the beneficiary's claim does not include medical expenses paid by MA. The Department will consider a failure to provide it with reasonable notice that a claim does not include medical expenses paid by MA to be a violation of section 1408(a)(1) of the code, and may impose a civil money penalty or establish an overpayment of MA. Notice is not reasonable if it is given less than 30 days prior to execution of a settlement agreement. Section 259.4 applies to all pending claims.
Beneficiaries are required to cooperate with the Department's efforts to secure reimbursement as a condition of eligibility for MA. 42 U.S.C.A. § 1396k(a)(1)(B)(ii). The Department's interpretation of the cooperation requirement is explained at § 259.5 (relating to cooperation in obtaining payment from third-party--statement of policy). Cooperation includes identifying liable third parties, providing information to the Department, disclosing that a claim has been filed against an insurer or third party, not opposing the Department's efforts to intervene in the case, consenting to reasonable extensions of time requested by the Department's counsel, supplying litigation documents, and providing testimony in support of the Department's claim. The cooperation requirement also requires beneficiaries to disclose to tort defendants that they are not recovering medical expenses that have been paid by MA or will be paid by MA in the future. The cooperation requirement precludes beneficiaries from interfering with the Department's collection efforts by, for example, signing an indemnification agreement under which the beneficiary will pay the tort defendant if the Department pursues its claim. Finally, the Department may request that a beneficiary include medical expenses paid by MA in his claim under the cooperation requirement. If a beneficiary violates the cooperation requirement, the Department may terminate or deny MA benefits, and may establish an overpayment against the client for MA benefits received after the date of noncooperation. Section 259.5 applies to all pending claims.
Section 259.6 (relating to civil money penalties--statement of policy) describes the civil money penalties that the Department may impose for violations of section 1409 of the code and failing to disclose information regarding third-party liability to the Department as required under section 1408(a)(1) of the code. Section 259.6(c) identifies those persons who are required to disclose information to the Department and § 259.6(d) defines what constitutes a willful violation of the law. The Bureau of Hearings and Appeals has jurisdiction to hear appeals relating to civil money penalties. Section 259.6 applies to pending cases.
Effective Date
This statement of policy is effective immediately upon publication in the Pennsylvania Bulletin.
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, (717) 772-6604.
ESTELLE B. RICHMAN,
Secretary(Editor's Note: Title 55 of the Pa. Code is amended by amending a statement of policy in § 259.2 and adding statements of policy in §§ 259.3--259.6 to read as set forth in Annex A.)
Fiscal Note: 14-BUL-078. No fiscal impact; (8) recommends adoption.
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 in actions filed before September 2, 2008--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 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 beneficary'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 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 compy 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 opportunity to intervene in the case prior to the determination.
(3) In a case when the beneficary seeks a court order limiting the portion of the tort settlement from which MA reimbursement may be paid to an amount less that 1/2 of the net proceeds of any settlement, the beneficiary shall provide the Department with reasonable advance notice of 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.
(d) If a court does not adjudicate the amount of the Department's claim against a settlement, the Bureau of Hearings and Appeals has jurisdiction to hear and determine an appeal by a beneficiary contesting the amount of the Department's claim.
§ 259.3. Claims against moneys for which third-parties are liable as a result of a tort claim--allocation of tort proceeds in actions filed on or after September 2, 2008--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 beneficiary has the burden of informing the Department that its claim must be limited under this subsection and showing not all medical expenses paid by MA were recovered. For purposes of this section, the term ''beneficiary'' includes both present and former adult and minor recipients of MA benefits, and includes individuals receiving benefits through an MA managed care organization.
(b) If a beneficiary elects not to recover expenses for which medical assistance is provided under section 1409(b)(5) of the Public Welfare Code (62 P. S. § 1409(b)(5)) then:
(1) The Department will pursue its claim directly against the liable third-party or insurer if it is cost-effective to do so.
(2) The Department will not reduce its claim on account of attorney fees or costs incurred by the beneficiary regardless of any indirect benefit that the Department receives from the beneficiary's prosecution of his claim.
(3) The beneficiary is prohibited from attempting to recover past or future medical expenses that will be paid by MA.
(4) Notice of settlement under section 1409(b)(5)(iv) of the Public Welfare Code shall be provided to the Department.
(5) The election not to recover expenses paid by MA may be revoked by the beneficiary only with the consent of the Department in writing.
(6) The beneficiary shall disclose to the liable third- party or insurer that the beneficiary has elected not to recover expenses paid by MA and that the third-party or insurer will remain liable to the Department on the claim.
(7) The beneficiary shall cooperate with the Department's efforts to obtain payment of medical care from any liable third-party or insurer as a condition of eligibility for MA in accordance with § 259.5 (relating to cooperation in obtaining payment from third-parties--statement of policy)
(c) A beneficiary may not settle or release the Department's claims against third parties or insurers without the Department's consent.
(d) The Department may impose a $5,000 civil money penalty for a violation of the notice requirements of section 1409(b)(5) of the Public Welfare Code or the distribution requirements of section 1409(b)(9) of the Public Welfare Code. A separate penalty may be imposed for each violation of the law. In determining whether to assess a civil money penalty against a third party or insurer for violating the statutory requirements, the Department will deem a third party or insurer to have information indicating that a beneficiary received medical assistance if the beneficiary's MA status is shown in records received by the third party or insurer.
(e) The Department will not impose or pursue liability under section 1409(b)(9) of the Public Welfare Code against a third-party or insurer for the distribution of settlement proceeds on a claim by a beneficiary if an insurer or third-party has complied with one or more of the following requirements:
(1) The insurer resolves the Department's claim with the Department and makes direct payment to the Department.
(2) The insurer or third-party requires the beneficiary to satisfy the Department's claim and makes the Department a payee on the settlement draft so that the Department's endorsement is required to negotiate the draft.
(3) The insurer obtains a statement from the Division of Third-Party Liability that the Department has no claim against the settlement.
(f) Notices to the Department under sections 1409 and 1409.1 of the Public Welfare Code (62 P. S. §§ 1409 and 1409.1) 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:
(1) The name of the beneficiary.
(2) The beneficiary's MA identification number, if known.
(3) The beneficiary's date of birth.
(4) The name of the beneficiary's attorney, if applicable.
(5) The insurance carriers and claim numbers, if applicable.
(6) The date and specific injuries giving rise to the claim.
(7) The court and docket number in which the claim is pending.
(8) The filing date of the lawsuit or claim.
(9) The close of discovery date.
(g) A notice of election to exclude medical expenses paid by MA from a claim that is made within 30 days of filing the complaint must contain a copy of the complaint. A notice of election to exclude medical expenses paid by MA from a claim that is made more than 30 days after the filing of the complaint must contain a copy of the complaint and the docket entries in the case.
(h) A notice of election to exclude medical expenses paid by MA is not reasonable if it is given after the close of discovery in a case, or in the event of a settlement prior to the close of discovery, it is given less than 30 days prior to the date the settlement agreement is fully executed.
(i) If a court does not adjudicate the amount of the Department's claim against a settlement, the Bureau of Hearings and Appeals has jurisdiction to hear and determine an appeal by a beneficiary contesting the amount of the Department's claim.
§ 259.4. Settlements without litigation--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 settlement which represents payment for medical care by the third party. The beneficiary has the burden of informing the Department that its claim must be limited under this subsection and showing not all medical expenses paid by MA were recovered. For purposes of this section, the term ''beneficiary'' includes both present and former adult and minor recipients of MA benefits, and includes individuals receiving benefits through an MA managed care organization.
(b) If a beneficiary settles a tort claim without litigation, the settlement includes medical expenses paid by MA unless one of the following applies:
(1) The case involves a minor or incapacitated individual and a court enters an order expressly adjudicating the Department's claim after the Department has been given notice and an opportunity to be heard.
(2) The beneficiary is legally incapable of recovering the medical expenses paid by MA.
(3) The beneficiary notifies both the Department and the third party or insurer that the beneficiary's claim does not include medical expenses paid by MA prior to settling the claim.
(c) A beneficiary may not settle or release the Department's claims against third parties or insurers without the Department's written consent.
(d) The failure to provide reasonable notice to the Department that a claim does not include recovery of medical expenses paid by MA constitutes a violation of section 1408(a)(1) of the Public Welfare Code (62 P. S. § 1408(a)(1)). Notice is not reasonable if it is given less than 30 days prior to the date a settlement agreement is fully executed.
(e) The Bureau of Hearings and Appeals has jurisdiction to hear and determine an appeal by a beneficiary contesting the amount of the Department's claim against a settlement.
§ 259.5. Cooperation in obtaining payment from third parties--statement of policy.
(a) A beneficiary has a duty to cooperate with the Department in obtaining payment from third parties and insurers as a condition of eligibility for MA.
(b) If a beneficiary does not cooperate with the Department's efforts to obtain payment of medical care from any third party or insurer, then the Department will determine the beneficiary to be ineligible for MA and pursue an overpayment of MA received after the date of noncooperation. The Department is not limited to recovering from the medical portion of a tort recovery when an overpayment is established.
(c) Cooperation with the Department's efforts to obtain payment of medical care from any third party or insurer includes the following:
(1) Disclosing to the Department that a claim was filed against an insurer or third party.
(2) Identifying and providing information to assist the Department in pursuing a third party who may be liable to pay for medical care and services.
(3) Consenting to the Department's intervention into the beneficiary's pending lawsuit.
(4) Consenting to a reasonable extension of time requested by Department counsel in the case.
(5) Providing Department counsel copies of discovery documents and legal papers filed in the lawsuit upon request.
(6) Disclosing to the liable third party or insurer that the beneficiary has elected not to pursue recovery of expenses paid by MA and the third party or insurer will remain liable to the Department on the claim.
(7) Not agreeing to indemnify or release the liable third party or insurer from the Department's claims.
(8) Providing testimony and evidence in support of the Department's claim.
(9) Providing notices required under section 1409(b)(5) of the Public Welfare Code (62 P. S. § 1409(b)(5) in compliance with this section.
(10) Including medical expenses paid by MA in a claim or lawsuit if requested to do so by the Department.
(11) Taking any other action requested by the Department that is necessary to pursue a claim against a third party.
§ 259.6. Civil money penalties--statement of policy.
(a) The Department may impose a civil money penalty of up to $5,000 per violation upon a person who willfully fails to comply with the obligations imposed under section 1409 of the Public Welfare Code (62 P. S. § 1409).
(b) The Department may impose a civil money penalty of up to $1,000 per violation upon a person who willfully fails to disclose a material fact regarding third party liability for a beneficiary's injuries.
(c) Persons who are required to disclose information regarding third-party liability to the Department include the beneficiary, any representative of the beneficiary, and any liable third-party or insurer in possession of that information.
(d) ''Willfully'' means that the person acted intentionally in the sense that the person intended to do the act and was aware of what the person was doing. Proof of evil motive or intent or knowledge that the person's conduct violated the law is not required.
(e) The Bureau of Hearings and Appeals has jurisdiction to hear appeals from the assessment of civil money penalties by the Department.
[Pa.B. Doc. No. 08-1970. Filed for public inspection October 31, 2008, 9:00 a.m.]
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