Untitled Texas Attorney General Opinion

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DAN MORALES May 29,1998
ATTORNEY
GENERAL

William R. Archer III, M.D. Opinion No. DM-477
Commissioner of Health
Texas Department of Health Re: Whether the Texas Department of Health
1100 West 49th Street may allocate medicaid provider payments to
Austin, Texas 78756-3199 satisfy a medicaid provider’s child-support
obligation (RQ- 1046)

Dear Commissioner Archer:

Human Resources Code section 32.036 stipulates that a medical assistance (medicaid)
provider payment may be paid only to the service provider unless the provider has assigned the
payment consistently with 42 U.S.C. $ 1396a(a)(32). Under the federal law, a state may pay a
medicaid provider’s assignee if the assignee is a governmental agency or if the assignment was
established in accordance with a court order. You ask whether the Texas Department of Health
(“TDH”) may “garnish” a service provider’s medicaid payment to satisfy the provider’s child-
support obligation. By “garnish,” we understand you to mean “allocate”~the payment in accordance
with an assignment authorized by 42 USC. 5 1396a(a)(32). We conclude the Department of Health
may withhold all or part of the payment if the provider has assigned medicaid payments to
a governmental agency or if the assignment is established by or in accordance with a court order
issued by a court of competent jurisdiction.’ We do not determine in any particular case whether
payments have been assigned as Human Resources Code section 32.036(c) and 42 U.S.C.
9 1396a(a)(32)(B) require.

We understand the TDH is the operating agency for the State’s medical assistance program?
As such, the TDH pays service providers for medical assistance services rendered to medicaid
recipients.3

We conclude, in answer to your question, that Human Resources Code section 32.036
permits the TDH to withhold some or all of a medical assistance payment due a service provider

‘Your question doesfiot implicate article XVI, section 28 of the Texas Constitution, which generally prohibits
garnishing wages. Even assuming medicaid provider payments are “wages” for purposes of article XVI, section 28,
that section excepts garnishment “for the enforcement of court-ordered child support payments.”

*See generally Hum. Res. Code ch. 32 (creating program to provide medical assistance on behalf of needy
individuals). The medical assistance program is commonly known as “Medicaid.”

‘See id. 5 32.029.
William R. Archer, M.D. - Page 2 (DM-477)

to satisfy the provider’s child-support obligation if the assignment satisfies 42 U.S.C.
$ 1396a(a)(32)(B). Human Resources Code section 32.036 generally prohibits the assignment or
garnishment of payments to medicaid providers, unless the assignment is permitted under 42 U.S.C.
§ 1396a(a)(32):

(a) Neither medical assistance nor payments to providers of medical
assistance under this chapter are transferable or assignable at law or in equity.

(b) No money paid or payable under the provisions of this chapter is
subject to garnishment. . .

(c) This section does not apply to the extent that it conflicts with the
Social Security Act (42 USC. Section 1396a(a)(32)).

The United States Code requires a state plan for medical assistance to permit the assignment
of medicaid provider payments if the assigmnent is to a governmental agency or if a court order
establishes or orders the assignment (or in other specific circumstances not relevant here):

A State plan for medical assistance must-

(32) provide that no payment under the plan for any care or service
provided to an individual shah be made to anyone other than such individual
or the person or institution providing such care or service, under an
assignment or power or attorney or otherwise; except that-

(A) ..

(B) nothing in this paragraph shall be construed (i) to prevent the
making of such a payment in accordance with an assigmnent from the person
or institution providing the care or service involved if such assignment is
made to a governmental agency or entity or is established by or pursuant to
the order of a court of competent jurisdiction, or (ii) . .4

A state’s failure to permit assigmnents allowed by federal law may lead to the loss of federal
funding.5
..

‘42 USC. $ 1396a(a)(32).

‘See 42 USC. 5 1396 (authorizing federal government to appropriate funds for state medical assistance plans
that United States Secretary of Health and Human Services has approved); Connecticut Hosp. Ass’n Y. O’NeiN, 793 F.
(continued...)

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William R. Archer, M.D. - Page 3 (DM-477)

The legislature added subsection(c) in 1997 to clear up an apparent conflict with 42 U.S.C.
5 1396a(a)(32).6 Prior to the 1997 amendment, a court might apply section 32.036 and 42 U.S.C.
8 1396a(a)(32) and reach conflicting results. In In re Missionary Baptist Foundation of America,
Inc. v. First National Bank’the United States Court of Appeals, Fifth Circuit, compared the pre-1997
version of Human Resources Code section 32.036 with 42 U.S.C. 8 1396a(a)(32) and concluded that
“cases decided under them could . . come out differently, depending upon which applied.“*
According to the court, the state statute “is broader and more rigid in its prohibitions.‘* Arguably,
before the 1997 amendment, Human Resources Code section 32.036 absolutely prohibited paying
medicaid service provider payments to any assignee of the service provider. By contrast, 42 U.S.C.
5 1396a(a)(32) permits payments to certain assignees. Since the 1997 amendment became effective,
however, the state law comports with 42 USC. 5 1396a(a)(32).

Whether a particular transfer is an assignment that satisfies 42 U.S.C. $ 1396a(a)(32)(B) is,
of course, a fact question that cannot be resolved in the opinion process.“’ The transfer first must
be a valid assigmnent. ” If it is , the assigmnent must be either made to a governmental agency or
entity or established by or in accordance with the order of a court of competent jurisdiction. In the
case of child-support payments, for instance, the assignment may be to a governmental entity (the

Supp. 47,49 (D. CQM. 1992) (stating that state my choose whether to participate in Medicaid program under Social
Security Act, 42 U.S.C. $5 1396-1396v. but if state chooses to participate, it must comply with all federal statutory and
regulatory requirements); see also Team Dep’t ofHuman Servs. v. Christian Care Cm., Inc., 826 S.W.2d 715,711 (Tex.
App.--Austin 1992, writ denied) (stating that Medicaid program requires state and federal governments to cooperate
to ensure that Texas qualifies for federal matching funds).

%See Act of May 7, 1997,7Sth Leg., R.S., ch. 216,s 1, 1997 Tcx. Gen. Laws 1086, 1086; see also Senate
Comm. on Health & Human Servs., Bill Analysis, S.B. 614,75th Leg., R.S. (1997); House Comm. cm Public Health,
Bill Analysis, H.B. 1634,75th Leg., R.S. (1997) (companion bill to S.B. 614).

‘796 F.2d 752 (5th Cir. 1986).

*Id. at 758; see also Senate Comm. on Health&Human Servs., Bill Analysis, S.B. 614,75th Leg., R.S. (1997)
(noting Fifth Circuit decision that conflict between state law and federal law could result in different outcomes); House
Comm. on Public Health, Bill Analysis, H.B. 1634,75th Leg., R.S. (1997) (companion bill to S.B. 614) (same).

‘In re Missionary Baptist Found. ofAmerica, 796 F.2d at 758.
.I

?%e, e.g., Attorney General Opinions DM-98 (1992) at 3, H-56 (1973) at 3, M-18; (1968) at 3.0-2911 (1940)
at 2.

“An assignment is a contract between two parties to transfer a property, right, 01 interest from one party, the
assignor, to the other party, the assignee. See University of Tex. Med. Branch Y. Allan, 777 S.W.2d 450.452-53 (Tex.
App.--Houston [14th Dist.] 1989, no writ). See generoNy 7 TEX. JUR. 30 Assignments $5 23-31 (1997) (discussing
requisites and validity of assignments).

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William R. Archer, M.D. - Page 4 (DM-477)

state’s Title IV-D agency or the “local registry”)‘2 or it may be established by or in accordance with
an order of the court with jurisdiction over the child-support matter.”

This result is entirely consistent with the purpose of the federal law. The United States
Congress adopted what is now subdivision (32)(A) of 42 U.S.C. 8 1396a(a) in 197214and adopted
the substance of what is now subdivision (32)(B) five years later.” The House Interstate and Foreign
Commerce Committee explained that the purpose of both the 1972 and 1977 amendments to the
Social Security Act was to stop the assignment of medicaid receivables to “factoring” agencies,
which purchased medicaid accounts receivable at a discount and allegedly sent the government
inflated bills:

In 1972, the Congress took action to stop a practice under which some
physicians and other persons providing services under medicare and medicaid
reassigned their medicare and medicaid receivables to other organizations or
groups. Under the conditions of these reassignments, the organizations or
groups purchased the receivables for a percentage of their face value,
submitted claims and received payments in their name. By 1972, it had
become apparent that such reassignments were a significant source of
incorrect and inflated claims for services paid by medicsre and medicaid. In
addition, cases of fraudulent billings by collection agencies and substantial
overpayments to these so-called “factoring” agencies were also found.

Congress concluded that such arrangements were not in the best interest
of the government or the beneficiaries served by the medicare and medicaid
programs. The Social Security Amendments of 1972, . . therefore, included
a prohibition against the payment for covered services to anyone other than
the patient, his physician, or other person who provided the service, unless
the physician or other person is required as a condition of his employment to
turn his fees over to his employer, or unless the physician or other person has
an arrangement with a facility under which the facility bills for such services.

Despite these efforts to stop factoring of medicare and medicaid bills,
some practitioners and other persons have circumvented the intent of the law
by use of a power of attorney. The use of a power of attorney allows the
factoring company to receive the medicare or medicaid payment in the name

‘%ze Fan. Code $§.158.103(7), .203(a).

“Seeid. $5 158.001, .011, ,105.

“See Social Security Amendments of 1972, Pub. L. No. 92-603, $236(b), 86 Stat. 1329,1415 (1972).

“See Medicare-Medicaid Antifraud and Abuse Amendments, Pub. L. No. 95-142, 5 2(a)(3), 91 Stat. 1176
(1977).

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William R. Archer, M.D. - Page 5 (DM-477)

of the physician thus allowing the continuation of program abuses which
factoring activities were shown to produce in the past.

The bill would modify existing law to preclude the use of a power of
attorney as a device for reassignments of benefits under medicare and
medicaid, other than an assignment to a governmental entity or
establishment, or an assigmnent established by or pursuant to the order of a
court of competent jurisdiction. .I6

Assigning all or part of a medical assistance payment to pay a child-support obligation or arrearage
is, in our opinion, vastly different from the factoring arrangements the federal law is designed to
preclude.

Although you ask only about the TDH’s authority to withhold some or all of the medical
assistance payment under Human Resources Code section 32.036, we believe your question raises
a second issue. Assuming that a court of competent jurisdiction has issued an order under Family
Code section 154.007 or 158.001 directing an “employer” to withhold a percentage of a child-
support payor’s disposable “earnings, ” is the TDH subject to it when paying medical assistance
payments to service providers? We conclude that it is.

First, we conclude that TDH is an employer in the context of Family Code chapter 158.
Family Code sections 154.007 and 158.001 require a court, in any proceeding ordering, modifying,
or enforcing child-support payments, to direct a child-support obligor’s employer to withhold up to
fifty percent of the obligor’s disposable earnings to pay child-support obligations and any
arrearage.17 Family Code section 101.012 defines employer for chapter 158, and the definition
encompasses relationships other than a typical “employment” relationship: “‘Employer’ means a
person, corporation, partnership, workers’ compensation insurance carrier, governmental entity, the
United States, or any other entity that pays or owes earnings to an individual. . . .” Assuming for the
moment that medicaid payments to a service provider are earnings, the TDH is a governmental entity
that pays earnings to an individual.

Second, we conclude that medicaid payments to service providers are earnings in the context
of Family Code chapter 158. The term earnings is defined, for purposes of chapter 158, in Family

16HR REP. NO. 393(11), 95th Gong., 1st Sess. 48-49 (1977), reprinted in 1977 U.S.C. 3039, 3051-52; see also
id. at 1, reprinled in 1977 U.k. 3039, 3040; In re Missionary Baptist Found. ofAmerica u First Nat? Bank, 796 F.2d
752,757 1x.6 (5th Cir. 1986).

“See ako Fam. Code 5 158.009 (establishing maximum amount that may be withheld from earnings). Family
Code sections 154.007 and 158.001 authorize the state’s “Title N-D agency,” which is the Offkx of the Attorney
General, see id. $ 231.001; see also id. 5 231.0011, to issue orders directing an employer to withhold a percentage of
a child-support obliger’s earnings. We do not consider in this opinion whether an order of the state’s Title N-D agency
is a court order for purposes of 42 USC. 5 1396a(a)(32)(B).

p. 2703
William R. Archer, M.D. - Page 6 (DM-477)

Code section 101.011. Like the applicable definition of employer, the definition of earnings is
broad, encompassing more than hourly wages or annual salary:

“Earnings” means a payment to or due an individual, regardless of source
and how denominated. The term includes a periodic or lump-sum payment
for:

(1) wages, salary, compensation received as an independent contractor,
overtime pay, severance pay, commission, bonus, and interest income;

(2) payments made under a pension, an annuity, workers’ compensation,
and a disability or retirement program; and

(3) unemployment benefits.

Certainly, a payment to a medical assistance provider for professional services he or she rendered
to a medicaid recipient is “a payment to or due” the provider.

p. 2704
William R. Archer, M.D. - Page 7 (DM-477)

SUMMARY

Consistent with Human Resources Code section 32.036, the Texas
Department of Health may allocate all or part of a service provider’s medical
assistance payments to satisfy the provider’s child-support obligation if the
service provider has assigned the payment to a government ~agency or if the
assigmnent was established by or in compliance with a court order issued by
a court of competent jurisdiction.

The Department of Health is an “employer” subject to a court order
issued under Family Code section 154.007 or 158.001 when it pays medical
assistance payments to a service provider. Additionally, medicaid payments
are “earnings” subject to such a court order.

DAN MORALES
Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by Kymberly K. Oltrogge
Assistant Attorney General

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