This article has been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, November 2006 issue, @2006 by Steven J. Bruzonsky, Esq.
Federal Medicare+Choice Lien Claims
In my opinion, M+C healthplans do not have lien rights although they may have contract reimbursement rights enforceable under Arizona law. The Federal statutes do not mention giving M+C plans any lien or subrogation rights as opposed to coordination of benefits. There is no Federal or Arizona appellate caselaw support for the proposition that there is any Federal jurisdiction or Federal lien established or that Arizona or other state anti-subrogation caselaw is preempted or otherwise invalid. Contrast this to Medicare, where lien and subrogation rights are expressly given by Federal law. The potential contractual debt under Arizona law at issue does not constitute a "lien" against the client's personal injury settlement. However, the "debt" itself may be enforceable in Arizona courts or the M+C plan could attempt to reduce or cutoff payment of future health benefits due to nonpayment of the claimed lien.
42 U.S.C. §§ 1395w-21 through 1395w-28; and 42 U.S.C. § 1395mm establish Medicare+Choice (M+C) program by which healthcare organizations substitute for Medicare.
Note that when Federal statutes and regulations refer to "services for which Medicare is not the primary payer" for purposes of both Medicare and also M+C, they are referring to health care services "also covered under State or Federal workers' compensation, any no-fault insurance, or any liability insurance policy or plan, including a self-insured plan." 42 U.S.C § 1395mm(e)(4); 42 U.S.C. § 1395y(b)(2)(A)(ii); 42 USC 1395W-26(b)(3)42 C.F.R. § 417.528; and 42 C.F.R. § 422.108.
Federal law expressly authorizes the HMO/PPO to coordinate benefits by billing the primary payer (automobile or liability insurance policy or plan, a self-insured plan, medical payments, no-fault, and workmen's compensation), and then Medicare is the secondary or excess payer. 42 USC Section 1395mm(e)(4) provides that the HMO/PPO "may" bill the primary payers noted above. 42 USC 1395W-26(b)(3) provides that state law "cannot take away an M+C organization's right - - - to bill - - - for services for which Medicare is not the primary payer." However, these statutes do not expressly grant the HMO/PPO lien or subrogation rights. Contrast this to Medicare, where lien and subrogation rights are expressly given by Federal law. Congress chose and used different language for Medicare+Choice which doesn't provide for a lien or subrogation or any federal enforcement thereof.
42 C.F.R. § 417.452 and 42 C.F.R. § 417.454 implement the above statutes. 42 C.F.R. § 417.452 provides that the enrollee "is liable for payments made to the enrollee for all covered services for which Medicare is not the primary payer". 42 C.F.R. § 417.454 provides that the M+C plan " must agree to charge its Medicare enrollees - - - for the - - - Services for which Medicare is not the primary payor as provided in Sec. 417.528." The regulations have been in force for years and do not say mention any lien or subrogation as opposed to coordination of benefits and contractual rights.
There is no Federal (U.S. Supreme Court or Ninth or any other Circuit) or Arizona appellate caselaw support for the proposition that there is any Federal jurisdiction or Federal lien established or that Arizona or other state anti-subrogation caselaw is preempted or otherwise invalid.
Arizona anti-subrogation caselaw is briefly summarized as follows: The common law rule long followed in Arizona is that, absent a statute, an assignment of a cause of action for personal injuries against a third party tortfeasor is void and unenforceable. Harleysville Mutual Ins. Co. v. Lea, 2 Ariz. App. 538, 410 P.2d 495 (App. 1966) (auto medical payments); State Farm Fire and Casualty Co. v. Knapp, 107 Ariz. 184, 484 P.2d 180 (1971) (auto medical payments); Allstate Ins. Co. v. Druke, 118 Ariz. 301, 576 P.2d 49 (1978) (auto medical payments); Gallego v. Strickland, 121 Ariz. 160, 589 P.2d 34 (App. Div. 2 1978) (uninsured motorist) (prior to statutory amendment providing for uninsured motorist subrogation); Brockman v. Metropolitan Life Ins. Co., 125 Ariz. 246, 609 P. 2D 61 (1980) (group health insurance); Karp v. Speizer, 132 Ariz. 599, 647 P.2d 1197 (App. Div. 1 1982) (assignment to judgement creditor by judgement debtor of proceeds expected to be recovered from personal injury action) ; Piano v. Hunter, 173 Ariz. 172, 840 P.2d 1037 (App. 1992) (same rule applies to local school district health trust fund); and Lingel v. Olbin, 198 Ariz. 249, 8 P.3d 1163 (App.2000) (prohibition against assignment of personal injury claims is based on public policy). Note that ARS 20-1072 prohibits health insurance carriers from charging the healthplan's insured anything other than co-pays and deductibles.
The only Federal appellate court that has heard this issue, the 6th Circuit, held that there is no Federal lien/subrogation right and no Federal court jurisdiction, and that any lien claim would have to be brought in state court. The 6th Circuit mentioned that 42 USC 1395mm(e)(4) gives HMOs the option to seek reimbursement from their members under certain circumstances (third party liability/UM/UIM/Med Pay), but didn't state that any lien or subrogation rights were created by this provision. Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003).
Of interest but not of any precedent is a District Court of Pennsylvania case. The M+C plan claimed a lien against personal injury settlement proceeds, claiming that Federal law preempted a state anti-subrogation statute. The Court concluded that although the Medicare Act permits HMOs to contract with their insureds for subrogation, that it does not provide a mechanism for them to enforce their private contractual rights. Therefore, the action was not completely preempted and was remanded to state court for lack of subject matter jurisdiction
The Medicare administration added new provisions on Jan. 28, 2005 at 42 C.F.R § 422.108(f) and 42 C.F.R. § 422.402 as an attempt by Medicare to give M+C healthplans the same "Superlien" rights that Medicare exercises pursuant to express Federal law. 42 C.F.R § 422.108(f) was amended to add that "The MA organization will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter." (Under subparts B though D of 42 C.F.R. Part 411, at 42 C.F.R. § 411.24, Medicare administratively implements its "Superlien" enforceable against all parties, insurance carriers, and plaintiffs' attorneys, by virtue of 42 U.S.C. § 1395y(b)(2)(B)(iii) which expressly gives Medicare this "Superlien".) 42 C.F.R. § 422.402 was added to state that "The standards established under this part [Part 422 Medicare Advantage Plans] supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to the MA plans that are offered by MA organizations." However, these recent regulatory additions are clearly not enforceable because they are not authorized by existing Federal statutes. Only Congress can give M+C healthplans express lien rights.
Although the potential contractual debt under Arizona law at issue does not constitute a "lien" against the client's personal injury settlement, there remains concern that the "debt" itself may be enforceable in Arizona courts. The M+C plan could attempt to reduce or cutoff payment of future health benefits due to nonpayment of this "debt". If the plan inquires of the client with an accident questionairre or requests that the client sign a subrogation or lien agreement prior to paying benefits, then as a practical matter your client may want to consider having you negotiate and settle the "debt" from the settlement proceeds.