REPORT TITLE:



DESCRIPTION:


 
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THE SENATE                              S.B. NO.           
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 third-
 
 9 party liability situations by congressional mandate as a
 
10 condition for eligibility for federal funding of the medical
 
11 assistance program.  Such 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.  It is the intent of the
 
15 legislature that, in third-party liability situations, the
 
16 medical assistance program of the department of human services
 
17 must be fully reimbursed before the claimant can receive any
 
18 money from a settlement or award.
 
19 Consequently, one of the purposes of this bill is to clarify that
 

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

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

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

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

 
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 1 from the department actual notice of its right to reimbursement
 
 2 or if they have reason to know that the claimant has received or
 
 3 is receiving from the department medical assistance related to
 
 4 the incident, then the claimant, claimant's attorney, or
 
 5 claimant's heirs, representatives, or beneficiaries shall give to
 
 6 the department timely written notice of any claim or action
 
 7 against a third person.  At any time during the pendency of any
 
 8 claim or action, claimant, claimant's attorney if represented, or
 
 9 claimant's heirs, representatives, or beneficiaries may contact
 
10 the department to ascertain the full amount of the costs of
 
11 medical assistance or burial payment made, which information
 
12 shall be provided in a reasonable time by the department.  Upon
 
13 obtaining a judgment or reaching a settlement through negotiation
 
14 or legal proceedings, but before the release of any award or
 
15 settlement proceeds to any person:
 
16      (1)  The claimant's attorney, if the attorney has received
 
17           actual notice from the department of a lien or if the
 
18           attorney has reason to know that a lien exists, or
 
19      (2)  The claimant or the claimant's heirs, representatives,
 
20           or beneficiaries, if not represented by an attorney who
 
21           has received actual notice of the lien,
 
22 shall notify the department immediately[.] in order to ascertain
 
23 and pay the full amount of the costs of medical assistance or
 

 
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 1 burial payment made.
 
 2      [(e)] (f)  If third-party liability is found to exist, or if
 
 3 the issue of third-party liability is settled or compromised
 
 4 without a finding of liability, regardless of who institutes
 
 5 legal proceedings or seeks other means of recovering, the
 
 6 department shall have a right to recover the full amount of the
 
 7 costs of medical assistance or burial payment made.  To aid in
 
 8 the recovery of the costs the department shall have a lien in the
 
 9 full amount of the costs of medical assistance or burial payment
 
10 made against the proceeds from all special damages awarded in a
 
11 suit or settlement.  The lien shall attach as provided by
 
12 subsection [(f).  If a notice of lien is properly served upon the
 
13 attorney representing the claimant as provided in subsection (f),
 
14 that attorney shall satisfy the lien prior to disbursing any of
 
15 the proceeds of the suit or settlement to the attorney's client.
 
16 If a notice of lien is properly served upon the third person
 
17 under subsection (c), the third person's agent or attorney, or
 
18 upon the third person's insurance company, as provided in
 
19 subsection (f), it shall be the responsibility of the third
 
20 person to satisfy the lien prior to disbursing any of the
 
21 proceeds to the claimant's attorney.  This section is not
 
22 intended to restrict or diminish the right of the department to
 
23 settle or compromise its subrogation or lien rights under this
 

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

 
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 1 to the claimant's attorney.  A notice of lien may be amended from
 
 2 time to time until extinguished, each amendment taking effect
 
 3 upon proper service.
 
 4      (h)  The lien shall attach as provided by subsection (g). If
 
 5 a notice of lien is properly served upon the attorney
 
 6 representing the claimant as provided in subsection (g), that
 
 7 attorney shall pay the full amount of the lien prior to
 
 8 disbursing any of the proceeds of the suit or settlement to the
 
 9 attorney's client.  If a notice of lien is properly served upon
 
10 the third person, the third person's agent or attorney, or the
 
11 third person's insurance company, as provided in subsection (f),
 
12 it shall be the responsibility of the third person to pay the
 
13 full amount of the lien prior to disbursing any of the proceeds
 
14 to the claimant's attorney.
 
15      [(g)  If] (i)  Notwithstanding any other law to the
 
16 contrary, if there is a dispute between the claimant, the
 
17 claimant's agent, or the claimant's attorney[,] and the
 
18 department concerning the existence of the lien or the amount of
 
19 the lien, or the amount to be reimbursed, the claimant, the
 
20 claimant's agent, or the claimant's attorney [may] shall request
 
21 in writing a hearing on the dispute.  After receipt by the
 
22 department of a written request, the department shall conduct an
 
23 administrative hearing within a reasonable period of time.
 

 
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 1 Chapter 91, including any provisions for judicial review or
 
 2 appeal, shall apply to the hearing.  Funds sufficient to
 
 3 [extinguish the lien] fully satisfy the reimbursement rights of
 
 4 the department shall be either retained by the person [or entity]
 
 5 served with the notice of lien, [or] shall be paid to the
 
 6 department, or otherwise reserved subject to agreement with the
 
 7 department pending its decision[.] and any subsequent judicial
 
 8 review or appeal.
 
 9      [(h)] (j)  Upon the recovery of any claim as provided in
 
10 this section, the amount recovered shall be paid into the
 
11 treasury of the State, and if the amount for which claim was paid
 
12 was in part from federal funds, the proper portion thereof shall
 
13 be paid by the director of finance into the treasury of the
 
14 United States, and the director of finance shall report the
 
15 payment to the department.
 
16      [(i)] (k)  Any person [failing to satisfy the lien as
 
17 required by subsections (e) and (f),] who is subject to the lien
 
18 who fails to pay the full amount due to the department for
 
19 reimbursement of the costs of medical assistance, although able
 
20 to do so from the proceeds of the suit or settlement, shall be
 
21 personally liable to the department for any damage proximately
 
22 caused to the department by such failure.
 
23      [(j)] (l)  No action taken by the department in connection
 

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

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

 
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 1      (o)  In third-party liability situations, the medical
 
 2 assistance program of the department must be fully reimbursed
 
 3 before the claimant receives any money from the settlement or
 
 4 award.  This section is not intended to restrict or diminish the
 
 5 right of the department to settle or compromise its reimbursement
 
 6 rights under this section for less than the full amount due."
 
 7      SECTION 3.  Statutory material to be repealed is bracketed.
 
 8 New statutory material is underscored.
 
 9      SECTION 4.  This Act shall take effect upon its approval.
 
10 
 
11                           INTRODUCED BY:  _______________________
 

 
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