REPORT TITLE:
Subrogation


DESCRIPTION:
Allows the Department of Human Services to subrogate against a
third-party recovery for medical assistance payments.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1058
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
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 special damages are recovered from a third
 
 5 party who is legally responsible for causing the injuries, or who
 
 6 may be legally responsible for any payment obligation as a result
 
 7 of the injury.  The department of human services is required to
 
 8 seek reimbursement of the costs of medical assistance in
 
 9 third-party liability situations by congressional mandate as a
 
10 condition for eligibility for federal funding of the medical
 
11 assistance program.  These reimbursements have the potential of
 
12 reducing the State's expenditure for its medical assistance
 
13 program.  In most cases, state benefits are provided when a
 
14 claimant suffers physical injury.  
 
15      It is the intent of the legislature that, in third-party
 
16 liability situations, the medical assistance program of the
 
17 department of human services must be fully reimbursed before the
 
18 claimant can receive any money from a settlement or award.
 
19      The legislature further finds that some claimants are
 

 
Page 2                                                     1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

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

 
Page 3                                                     1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 amended to read as follows:
 
 2      "346-37  Recovery of payments and costs of medical
 
 3 assistance.  (a)  If a recipient under this chapter dies leaving
 
 4 an estate and does not have a surviving spouse, child, father,
 
 5 mother, grandfather, grandmother, grandchild, stepfather,
 
 6 stepmother, or any designated heir, the department shall have a
 
 7 valid claim against the estate for the amount of social services
 
 8 overpayments, financial assistance overpayments, or burial
 
 9 payments granted.  The department shall file a claim against the
 
10 estate of a deceased recipient of medical assistance for the
 
11 amount of medical assistance granted, only if the recipient was
 
12 age fifty-five or over when such medical assistance was received
 
13 and there is no surviving spouse, or surviving child who is under
 
14 twenty-one years of age, or blind, or disabled.  The department
 
15 shall file a claim against the estate of a recipient of medical
 
16 assistance who was an inpatient in a nursing facility,
 
17 intermediate care facility for the mentally retarded, or other
 
18 medical institution only if there is no surviving spouse or
 
19 surviving child who is under twenty-one years of age, or blind,
 
20 or disabled.
 
21      (b)  If any portion of any public assistance, including
 
22 medical assistance, food stamps, or burial payment, was obtained
 
23 by any fraudulent device, including but not limited to those
 

 
Page 4                                                     1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 under section 346-34, or if any public assistance, including
 
 2 medical assistance, food stamps, or burial payment, was furnished
 
 3 or provided after receipt of income or resources which were not
 
 4 reported to the department as required by this chapter or by the
 
 5 department, the department may file a claim against the estate of
 
 6 the deceased recipient notwithstanding subsection (a).
 
 7      (c)  If the department has provided medical assistance or
 
 8 burial payment to a person who was injured, suffered a disease,
 
 9 or died under circumstances creating a tort or other liability or
 
10 payment obligation against a third person, the department shall
 
11 have a right to recover from the third person an amount not to
 
12 exceed the full amount of the costs of medical assistance or
 
13 burial payment furnished or to be furnished by the department.
 
14      (d)  The department shall as to this right of reimbursement
 
15 also be subrogated to [any right or claim] all rights or claims
 
16 that a claimant [defined in subsection (k),] has against the
 
17 third person for all special damages to the full extent of the
 
18 costs of medical assistance or burial payment furnished or to be
 
19 furnished by the department.  The department's right to full
 
20 reimbursement of the costs of medical assistance or burial
 
21 payment as a subrogee of a claimant shall not be diminished by
 
22 the recovery of any judgment, settlement, or award of an amount
 
23 less than the value of the original or settled claim as perceived
 

 
Page 5                                                     1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 or calculated by the claimant or any other person.
 
 2      To enforce its rights, the department may intervene or join
 
 3 in any action or proceeding brought by a claimant against the
 
 4 third person [who is liable].  If the action or proceeding is not
 
 5 commenced within six months after the first day on which medical
 
 6 assistance or burial payment is furnished by the department in
 
 7 connection with the injury, disease, or death involved, the
 
 8 department may institute and prosecute legal proceedings against
 
 9 the third person [who is liable] for the injury, disease, or
 
10 death, in a state court, either alone (in its own name or in the
 
11 name of a claimant) or in conjunction with the claimant.
 
12      [(d)  If a claim is made by the claimant under subsection
 
13 (c) against a third person, the claimant shall give timely notice
 
14 of the action to the department.]  (e)  An attorney representing
 
15 a claimant shall make reasonable inquiry as to whether the
 
16 claimant has received or is receiving from the department medical
 
17 assistance related to the incident involved in the action [from
 
18 the department].  If the claimant, claimant's attorney, or
 
19 claimant's heirs, representatives, or beneficiaries have received
 
20 from the department actual notice of its right to reimbursement
 
21 or if they have reason to know that the claimant has received or
 
22 is receiving from the department medical assistance related to
 
23 the incident, then the claimant, claimant's attorney, or
 

 
Page 6                                                     1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 claimant's heirs, representatives, or beneficiaries shall give to
 
 2 the department timely written notice of any claim or action
 
 3 against a third person.  At any time during the pendency of any
 
 4 claim or action, the claimant, claimant's attorney if
 
 5 represented, or claimant's heirs, representatives, or
 
 6 beneficiaries may contact the department to ascertain the full
 
 7 amount of the costs of medical assistance or burial payment made,
 
 8 which information shall be provided in a reasonable time by the
 
 9 department.  Upon obtaining a judgment or reaching a settlement
 
10 through negotiation or legal proceedings, but before the release
 
11 of any award or settlement proceeds to any person:
 
12      (1)  The claimant's attorney, if the attorney has received
 
13           actual notice from the department of a lien or if the
 
14           attorney has reason to know that a lien exists, or
 
15      (2)  The claimant or the claimant's heirs, representatives,
 
16           or beneficiaries, if not represented by an attorney who
 
17           has received actual notice of the lien,
 
18 shall notify the department immediately[.] in order to ascertain
 
19 and pay the full amount of the costs of medical assistance or
 
20 burial payment made.
 
21      [(e)] (f)  If third-party liability is found to exist, or if
 
22 the issue of third-party liability is settled or compromised
 
23 without a finding of liability, regardless of who institutes
 

 
Page 7                                                     1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 legal proceedings or seeks other means of recovering, the
 
 2 department shall have a right to recover the full amount of the
 
 3 costs of medical assistance or burial payment made.  To aid in
 
 4 the recovery of the costs the department shall have a lien in the
 
 5 full amount of the costs of medical assistance or burial payment
 
 6 made against the proceeds from all special damages awarded in a
 
 7 suit or settlement.  The lien shall attach as provided by
 
 8 subsection [(f).  If a notice of lien is properly served upon the
 
 9 attorney representing the claimant as provided in subsection (f),
 
10 that attorney shall satisfy the lien prior to disbursing any of
 
11 the proceeds of the suit or settlement to the attorney's client.
 
12 If a notice of lien is properly served upon the third person
 
13 under subsection (c), the third person's agent or attorney, or
 
14 upon the third person's insurance company, as provided in
 
15 subsection (f), it shall be the responsibility of the third
 
16 person to satisfy the lien prior to disbursing any of the
 
17 proceeds to the claimant's attorney.  This section is not
 
18 intended to restrict or diminish the right of the department to
 
19 settle or compromise its subrogation or lien rights under this
 
20 section.] (g).
 
21      [(f)] (g)  The lien of the department for reimbursement of
 
22 costs of medical assistance or burial payments under subsection
 
23 [(e),] (f), shall [not] attach [unless a] by a written notice of
 

 
Page 8                                                     1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 lien [is] served upon the claimant's attorney or upon the third
 
 2 person, the third person's agent, attorney, or insurance company.
 
 3 The method of service shall be by certified or registered mail,
 
 4 return receipt requested, or by delivery of the notice of lien
 
 5 personally to the individuals referred to.  Service by certified
 
 6 or registered mail is complete upon receipt.  The notice of lien
 
 7 shall state the name of the injured, diseased, or deceased
 
 8 person, the amount of the lien, and the date of the accident or
 
 9 incident which caused the injuries, disease, or death which
 
10 necessitated the department's medical assistance or burial
 
11 payments.  If the notice of lien is served upon the claimant's
 
12 attorney, the notice of lien shall state that the claimant's
 
13 attorney shall pay the full amount of the lien from the proceeds
 
14 of any judgment, settlement, or compromise based on the incident
 
15 or accident.  If the notice of lien is served upon the third
 
16 person [under subsection (c)], the third person's agent,
 
17 attorney, or insurance company, the notice of lien shall state
 
18 that the third person shall [satisfy] pay the full amount of the
 
19 lien prior to disbursing any of the proceeds to the claimant or
 
20 to the claimant's attorney.  A notice of lien may be amended from
 
21 time to time until extinguished, each amendment taking effect
 
22 upon proper service.
 
23      (h)  If a notice of lien is properly served upon the
 

 
Page 9                                                     1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 attorney representing the claimant under subsection (g), the
 
 2 attorney shall pay the full amount of the lien prior to
 
 3 disbursing any of the proceeds of the suit or settlement to the
 
 4 attorney's client.  If a notice of lien is properly served under
 
 5 subsection (g) upon the third person, the third person's agent or
 
 6 attorney, or the third person's insurance company, it shall be
 
 7 the responsibility of the third person to pay the full amount of
 
 8 the lien prior to disbursing any of the proceeds to the
 
 9 claimant's attorney.
 
10      The State shall only be responsible for its share of
 
11 attorney's fees and expenses and claimants shall be responsible
 
12 for their share of attorneys' fees and expenses attributable to
 
13 each party's share of any recovery.
 
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
 

 
Page 10                                                    1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 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
 

 
Page 11                                                    1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 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      "Third person" includes, but is not limited to, any person,
 
 9 business, corporation, partnership, limited liability company, or
 
10 entity of any kind or nature, including employers and insurance
 
11 carriers, that are potentially liable to the claimant for any
 
12 tort, liability, payment, reimbursement, or benefit of any kind
 
13 or nature by reason of any injury, disease, or death.
 
14      "Costs of medical assistance" as furnished by or to be
 
15 furnished by the department includes:
 
16      (1)  The value or cost of medical care services provided
 
17           directly by the department;
 
18      (2)  The amount paid by the department to a provider for
 
19           medical care services rendered or to be rendered; and
 
20      (3)  The value or cost of medical care services rendered or
 
21           to be rendered by a provider that has received the
 
22           equivalent of an insurance benefit, capitation rate,
 
23           and other fee or like charge paid by the department or
 

 
Page 12                                                    1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1           by a medical care insurer to provide for medical care
 
 2           services.
 
 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 which 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.]
 
23      (o)  In third-party liability situations, the medical
 

 
Page 13                                                    1058
                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 assistance program of the department shall be fully reimbursed
 
 2 before the claimant receives any money from the settlement or
 
 3 award.
 
 4      (p)  This section shall not be construed to restrict or
 
 5 diminish the right of the department to settle or compromise its
 
 6 reimbursement rights under this section for less than the full
 
 7 amount due.
 
 8      (q)  The State shall only be responsible for its share of
 
 9 attorney's fees and expenses and claimants shall be responsible
 
10 for their share of attorneys' fees and expenses attributable to
 
11 each party's share of any recovery."
 
12      SECTION 3.  Statutory material to be repealed is bracketed.
 
13 New statutory material is underscored.
 
14      SECTION 4.  This Act shall take effect upon its approval.