REPORT TITLE:
Medical payments


DESCRIPTION:
Clarifies and standardizes provisions relating to the recovery of
medical assistance payments by DHS in third-party liability
situations.  (SB1058 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                H.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO RECOVERY OF MEDICAL PAYMENTS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that there is a need to
 
 2 clarify the law with respect to the amount to be reimbursed for
 
 3 the costs of medical assistance provided by the department of
 
 4 human services when damages are recovered from a third party who
 
 5 is legally responsible for causing the injuries, or who may be
 
 6 legally responsible for any payment obligation as a result of the
 
 7 injury.  The department of human services is required to seek
 
 8 reimbursement of the costs of medical assistance in third-party
 
 9 liability situations by congressional mandate as a condition for
 
10 eligibility for federal funding of the medical assistance
 
11 program.  The reimbursements have the potential to reduce the
 
12 State's expenditure for its medical assistance program.  In most
 
13 cases, state benefits are provided when a claimant suffers
 
14 physical injury.  It is the intent of the legislature that, in
 
15 third-party liability situations, the medical assistance program
 
16 of the department of human services must be fully reimbursed
 
17 before the claimant can receive any money from a settlement or
 
18 award.
 

 
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 1      Consequently, one of the purposes of this Act is to clarify
 
 2 that the full amount of the costs of medical assistance is to be
 
 3 reimbursed and that any third-party reimbursement to a claimant
 
 4 is required to be applied to the costs of medical assistance,
 
 5 which costs will otherwise have to be borne by the department of
 
 6 human services and the taxpaying public.
 
 7      A further intent of this Act is to clarify that the
 
 8 department of human services is given the discretion to settle or
 
 9 compromise its reimbursement rights for less than the full amount
 
10 due.
 
11      The legislature further finds that some claimants are
 
12 seeking to avoid or circumvent full reimbursement of the costs of
 
13 medical assistance by seeking relief in the courts rather than
 
14 requesting an administrative hearing to air the dispute.
 
15 Traditionally, the courts have required that such a claimant
 
16 exhaust the administrative remedies provided in section 346-
 
17 37(g), Hawaii Revised Statutes.  However, in a recent case, the
 
18 court determined that the courts have jurisdiction to determine
 
19 the amount to be reimbursed to the department of human services
 
20 for the costs of medical assistance.  Therefore, because any
 
21 recovery in a liability situation without reimbursement would
 
22 constitute a duplication of public assistance benefits, it is the
 

 
 
 
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 1 further purpose of this Act to require that a medical assistance
 
 2 recipient first pursue any reimbursement dispute through the
 
 3 administrative hearing process.
 
 4      Finally, this Act specifies that the department of human
 
 5 services may serve notices of lien by either certified or
 
 6 registered mail.
 
 7      SECTION 2.  Section 346-37, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "§346-37  Recovery of payments and costs of medical
 
10 assistance.  (a)  If a recipient under this chapter dies leaving
 
11 an estate and does not have a surviving spouse, child, father,
 
12 mother, grandfather, grandmother, grandchild, stepfather,
 
13 stepmother, or any designated heir, the department shall have a
 
14 valid claim against the estate for the amount of social services
 
15 overpayments, financial assistance overpayments, or burial
 
16 payments granted.  The department shall file a claim against the
 
17 estate of a deceased recipient of medical assistance for the
 
18 amount of medical assistance granted, only if the recipient was
 
19 age fifty-five or over when such medical assistance was received
 
20 and there is no surviving spouse, or surviving child who is under
 
21 twenty-one years of age, or blind, or disabled.  The department
 
22 shall file a claim against the estate of a recipient of medical
 
23 assistance who was an inpatient in a nursing facility,
 

 
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 1 intermediate care facility for the mentally retarded, or other
 
 2 medical institution only if there is no surviving spouse or
 
 3 surviving child who is under twenty-one years of age, or blind,
 
 4 or disabled.
 
 5      (b)  If any portion of any public assistance, including
 
 6 medical assistance, food stamps, or burial payment, was obtained
 
 7 by any fraudulent device, including but not limited to those
 
 8 under section 346-34, or if any public assistance, including
 
 9 medical assistance, food stamps, or burial payment, was furnished
 
10 or provided after receipt of income or resources which were not
 
11 reported to the department as required by this chapter or by the
 
12 department, the department may file a claim against the estate of
 
13 the deceased recipient notwithstanding subsection (a).
 
14      (c)  If the department has provided medical assistance or
 
15 burial payment to a person who was injured, suffered a disease,
 
16 or died under circumstances creating a tort or other liability or
 
17 payment obligation against a third person, the department shall
 
18 have a right to recover from the third person an amount not to
 
19 exceed the full amount of the costs of medical assistance or
 
20 burial payment furnished or to be furnished by the department.
 
21      (d)  The department [shall], as to this right of
 
22 reimbursement, shall also be subrogated to [any right or claim]
 

 
 
 
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 1 all rights or claims that a claimant[, defined in subsection
 
 2 (k),] has against the third person for [special] all damages [to]
 
 3 not to exceed the full extent of the costs of medical assistance
 
 4 or burial payment furnished or to be furnished by the department.
 
 5 The department's right to full reimbursement of the costs of
 
 6 medical assistance or burial payment as a subrogee of a claimant
 
 7 shall not be diminished by the recovery of any judgment,
 
 8 settlement, or award of an amount less than the value of the
 
 9 original or settled claim as perceived or calculated by the
 
10 claimant or any other person.
 
11      To enforce its rights, the department may intervene or join
 
12 in any action or proceeding brought by a claimant against the
 
13 third person [who is liable].  If the action or proceeding is not
 
14 commenced within six months after the first day on which medical
 
15 assistance or burial payment is furnished by the department in
 
16 connection with the injury, disease, or death involved, the
 
17 department may institute and prosecute legal proceedings against
 
18 the third person [who is liable] for the injury, disease, or
 
19 death, in a state court, either alone (in its own name or in the
 
20 name of a claimant) or in conjunction with the claimant.
 
21      [(d)  If a claim is made by the claimant under subsection
 
22 (c) against a third person, the claimant shall give timely notice
 
23 of the action to the department.]  
 

 
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 1      (e)  An attorney representing a claimant shall make
 
 2 reasonable inquiry as to whether the claimant has received or is
 
 3 receiving from the department medical assistance related to the
 
 4 incident involved in the action [from the department].  If the
 
 5 claimant, claimant's attorney, or claimant's heirs,
 
 6 representatives, or beneficiaries have received from the
 
 7 department actual notice of its right to reimbursement or if they
 
 8 have reason to know that the claimant has received or is
 
 9 receiving from the department medical assistance related to the
 
10 incident, then the claimant, claimant's attorney, or claimant's
 
11 heirs, representatives, or beneficiaries shall give to the
 
12 department timely written notice of any claim or action against a
 
13 third person.  At any time during the pendency of any claim or
 
14 action, the claimant, claimant's attorney if represented, or
 
15 claimant's heirs, representatives, or beneficiaries may contact
 
16 the department to ascertain the full amount of the costs of
 
17 medical assistance or burial payment made, which information
 
18 shall be provided in a reasonable time by the department.  Upon
 
19 obtaining a judgment or reaching a settlement through negotiation
 
20 or legal proceedings, but before the release of any award or
 
21 settlement proceeds to any person:
 
22      (1)  The claimant's attorney, if the attorney has received
 
23           actual notice from the department of a lien or if the
 
24           attorney has reason to know that a lien exists[,]; or
 

 
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 1      (2)  The claimant or the claimant's heirs, representatives,
 
 2           or beneficiaries, if not represented by an attorney who
 
 3           has received actual notice of the lien,
 
 4 shall notify the department immediately[.] to ascertain and pay
 
 5 the full amount of the costs of medical assistance or burial
 
 6 payment made.
 
 7      [(e)] (f)  If [third party] third-party liability is found
 
 8 to exist, or if the issue of [third party] third-party liability
 
 9 is settled or compromised without a finding of liability,
 
10 regardless of who institutes legal proceedings or seeks other
 
11 means of recovering, the department shall have a right to recover
 
12 the full amount of the costs of medical assistance or burial
 
13 payment made.  To aid in the recovery of the costs, the
 
14 department shall have a first lien in the full amount of the
 
15 costs of medical assistance or burial payment made against the
 
16 proceeds from [special] all damages awarded in a suit or
 
17 settlement.  The lien shall attach as provided by subsection
 
18 [(f).  If a notice of lien is properly served upon the attorney
 
19 representing the claimant as provided in subsection (f), that
 
20 attorney shall satisfy the lien prior to disbursing any of the
 
21 proceeds of the suit or settlement to the attorney's client.  If
 
22 a notice of lien is properly served upon the third person under
 
23 subsection (c), the third person's agent or attorney, or upon the
 

 
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 1 third person's insurance company, as provided in subsection (f),
 
 2 it shall be the responsibility of the third person to satisfy the
 
 3 lien prior to disbursing any of the proceeds to the claimant's
 
 4 attorney.  This section is not intended to restrict or diminish
 
 5 the right of the department to settle or compromise its
 
 6 subrogation or lien rights under this section.] (g).
 
 7      [(f)] (g)  The lien of the department for reimbursement of
 
 8 costs of medical assistance or burial payments under subsection
 
 9 [(e),] (f), shall [not] attach [unless a] by a written notice of
 
10 lien [is] served upon the claimant's attorney or upon the third
 
11 person, the third person's agent, attorney, or insurance company.
 
12 The method of service shall be by certified or registered mail,
 
13 return receipt requested, or by delivery of the notice of lien
 
14 personally to the individuals referred to.  Service by certified
 
15 or registered mail is complete upon receipt.  The notice of lien
 
16 shall state the name of the injured, diseased, or deceased
 
17 person, the amount of the lien, and the date of the accident or
 
18 incident which caused the injuries, disease, or death which
 
19 necessitated the department's medical assistance or burial
 
20 payments.  If the notice of lien is served upon the claimant's
 
21 attorney, the notice of lien shall state that the claimant's
 
22 attorney shall pay the full amount of the lien from the proceeds
 
23 of any judgment, settlement, or compromise based on the incident
 

 
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 1 or accident.  If the notice of lien is served upon the third
 
 2 person [under subsection (c)], the third person's agent,
 
 3 attorney, or insurance company, the notice of lien shall state
 
 4 that the third person shall [satisfy] pay the full amount of the
 
 5 lien prior to disbursing any of the proceeds to the claimant or
 
 6 to the claimant's attorney.  A notice of lien may be amended from
 
 7 time to time until extinguished, each amendment taking effect
 
 8 upon proper service.
 
 9      (h)  The lien shall attach as provided by subsection (g).
 
10 If a notice of lien is properly served upon the attorney
 
11 representing the claimant as provided in subsection (g), that
 
12 attorney shall pay the full amount of the lien, prior to
 
13 disbursing any of the proceeds of the suit or settlement to the
 
14 attorney's client.  If a notice of lien is properly served upon
 
15 the third person, the third person's agent or attorney, or the
 
16 third person's insurance company, as provided in subsection (g),
 
17 it shall be the responsibility of the person receiving the
 
18 notices to pay the full amount of the lien prior to disbursing
 
19 any of the proceeds to the claimant's attorney.
 
20      If, after having received timely written notice of any claim
 
21 or action under subsection (e), the department did not intervene
 
22 or join in the action or prosecute its own claims or actively
 
23 participate with the claimant or claimant's attorney in the
 

 
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 1 prosecution of claims, or a distribution agreement was not
 
 2 entered into between the parties, then the department shall
 
 3 determine its fair contribution toward attorney fees and costs
 
 4 incurred in the action that shall be a reasonable amount based
 
 5 solely upon legitimate costs and services rendered by the
 
 6 claimant or claimant's attorney in recovering the lien amount.
 
 7 Any dispute regarding the department's determination of its
 
 8 contribution to fees and costs may be submitted to administrative
 
 9 hearing under subsection (i) or a court of competent
 
10 jurisdiction.  The value of services contributed by the claimant
 
11 and department may be considered in fairly allocating fees and
 
12 costs between the claimant and department where both contribute
 
13 to recovering the lien amount.
 
14      [(g)  If] (i)  Notwithstanding any other law to the
 
15 contrary, if there is a dispute between the claimant, the
 
16 claimant's agent[,] or the claimant's attorney, and the
 
17 department concerning the existence of the lien or the amount of
 
18 the lien, or the amount to be reimbursed, the claimant, the
 
19 claimant's agent, or the claimant's attorney [may] shall request
 
20 in writing a hearing on the dispute.  After receipt by the
 
21 department of a written request, the department shall conduct an
 
22 administrative hearing within a reasonable period of time.
 
23 Chapter 91, including any provisions for judicial review or
 

 
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 1 appeal, shall apply to the hearing.  Funds sufficient to
 
 2 [extinguish the lien] fully satisfy the reimbursement rights of
 
 3 the department shall be either retained by the person [or entity]
 
 4 served with the notice of lien, [or] shall be paid to the
 
 5 department, or otherwise reserved subject to agreement with the
 
 6 department pending its decision[.] and any subsequent judicial
 
 7 review or appeal.
 
 8      [(h)] (j)  Upon the recovery of any claim as provided in
 
 9 this section, the amount recovered shall be paid into the
 
10 treasury of the State, and if the amount for which claim was paid
 
11 was in part from federal funds, the proper portion thereof shall
 
12 be paid by the director of finance into the treasury of the
 
13 United States, and the director of finance shall report the
 
14 payment to the department.
 
15      [(i)] (k)  Any person [failing to satisfy the lien as
 
16 required by subsections (e) and (f),] who is subject to the lien
 
17 who fails to pay the full amount due to the department for
 
18 reimbursement of the costs of medical assistance, although able
 
19 to do so from the proceeds of the suit or settlement, shall be
 
20 personally liable to the department for any damage proximately
 
21 caused to the department by such failure.
 
22      [(j)] (l)  No action taken by the department in connection
 
23 with the rights under this section shall deny to the claimant the
 

 
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 1 recovery for that portion of the claimant's [damage] damages not
 
 2 covered under this section.
 
 3      [(k)] (m)  For purposes of this section[, the term
 
 4 "claimant" shall include]:
 
 5      "Claimant" includes an injured or diseased person, the
 
 6 person's guardian, or the personal representative, estate,
 
 7 dependents, or survivors, of the deceased person.
 
 8      "Costs of medical assistance" as furnished by or to be
 
 9 furnished by the department includes:
 
10      (1)  The value or cost of medical care services provided
 
11           directly by the department;
 
12      (2)  The amount paid by the department to a provider for
 
13           medical care services rendered or to be rendered; and
 
14      (3)  The value or cost of medical care services rendered or
 
15           to be rendered by a provider that has received the
 
16           equivalent of an insurance benefit, capitation rate,
 
17           and other fee or like charge paid by the department or
 
18           by a medical care insurer to provide for medical care
 
19           services.
 
20      "Third person" includes any person, business, corporation,
 
21 partnership, or entity of any kind or nature, including employers
 
22 and insurance carriers, that is potentially liable to the
 
23 claimant for any tort, liability, payment, reimbursement, or
 

 
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 1 benefit of any kind or nature by reason of any injury, disease,
 
 2 or death.
 
 3      [(l)] (n)  The department may agree with a provider or
 
 4 medical care insurer for the provision of medical care services
 
 5 or medical assistance to any claimant, and the agreement may
 
 6 provide for the department to be the exclusive entity authorized
 
 7 to recover all costs of medical assistance rendered to a
 
 8 claimant.  The department may recover all costs through the use
 
 9 of the lien procedures established by this section.
 
10      [(m)  For purposes of this section, the term "costs of
 
11 medical assistance" furnished or to be furnished by the
 
12 department shall include:
 
13      (1)  The value or cost of medical care services provided
 
14           directly by the department;
 
15      (2)  The amount paid by the department to a provider for
 
16           medical care services rendered or to be rendered;
 
17      (3)  The value or cost of medical care services rendered or
 
18           to be rendered by a provider that has received the
 
19           equivalent of an insurance benefit, capitation rate,
 
20           and other fee or like charge paid by the department or
 
21           by a medical care insurer to provide for medical care
 
22           services.]
 

 
 
 
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 1      (o)  In third-party liability situations, the medical
 
 2 assistance program of the department shall be fully reimbursed
 
 3 before the claimant receives any money from the settlement or
 
 4 award.
 
 5      (p)  This section is not intended to restrict or diminish
 
 6 the right of the department to settle or compromise its
 
 7 reimbursement rights under this section for less than the full
 
 8 amount due or enter into any agreement with the claimant,
 
 9 claimant's attorney or representative, or other party for the
 
10 distribution of proceeds from a suit or settlement."
 
11      SECTION 3.  Statutory material to be repealed is bracketed.
 
12 New statutory material is underscored.
 
13      SECTION 4.  This Act shall take effect upon its approval.