Palumbo v. Myers

EVANS, J.—I dissent.

I perceive the majority opinion to be the result of periphrasis reasoning.

I view the question presented as simple, whether plaintiff, a doctor who has been partially reimbursed by Medi-Cal for services rendered a patient, may collect the balance of his bill from a personal injury settlement concluded between the patient and the tortfeasor who caused the patient’s injuries, when that settlement includes funds for payment of the full bill and the patient directs payment be made.

For purposes of this dissent I restate the essential facts. Mary Kimble, eligible for coverage under the Medi-Cal program, was injured in an automobile accident. Plaintiff treated her and presented his bill for $3,739 both to Medi-Cal and to Kimble. Medi-Cal paid plaintiff $2,172, the amount authorized by its fee schedule. Kimble commenced a personal injury action against the other driver and gave plaintiff’s bill for medical treatment to her attorney. When her suit settled, the damage recovery included $3,739 allocated for plaintiff’s services. From this sum, Kimble’s attorney gave plaintiff a check for $1,567, the balance of his billing not paid by MediCal. The $2,172 paid plaintiff by Medi-Cal was subject to a lien asserted against Kimble’s recovery, and was paid to Medi-Cal to the extent allowed by law.1

Plaintiff has not cashed the $1,567 check following a Medi-Cal warning that to do so would possibly expose him to suspension from the program and criminal liability. (See § 14123; 42 U.S.C. § 1396h (d).)

*1036I

Under the factual and legal circumstances as I view them, plaintiff’s recovery of the balance of his fee for medical treatment from the third party payer was not prohibited. Plaintiff initially collected only a portion of his medical bill from Medi-Cal. His patient later negotiated a personal injury settlement which specifically included an amount to pay his entire bill. Plaintiff received a check from the patient’s attorney for the balance owing from this settlement, leaving the remainder of the special damage settlement available for Medi-Cal to recoup its payments to the extent allowed by law.

Defendant concedes plaintiff could properly collect his entire bill if the case involved not a personal injury settlement, but what is referred to as “other coverage” (health care coverage such as health insurance, a prepaid health plan membership, or Medicare). The statutory provision allowing collection in such a case is provided for in section 14019.4, subdivision (a). That section provides: “Any provider of health care services who obtains a label or copy from the Medi-Cal card or other proof of eligibility pursuant to this chapter shall not seek reimbursement nor attempt to obtain payment for the cost of such covered health care services from the eligible applicant or recipient, or any person other than the department or third party payer who provides a contractual or legal entitlement to health care services. ” (Italics added.)2

Defendant construes the provisions in section 14019.4, subdivision (a), that a “third party payer who provides a contractual or legal entitlement to health care services” to mean only a supplier of “other coverage;” defendant asserts it does not include a third party tortfeasor. A number of reasons are advanced in an attempt to justify this peculiar distinction. Generally, the construction given a statute by the officials who administer it is ordinarily entitled to great weight. (Morris v. Williams (1967) 67 Cal.2d 733, 748 [63 Cal.Rptr. 689, 433 P.2d 697].) However, in this instance, I view the distinction as indefensible. I would conclude that from the proceeds of a settlement with a third party tortfeasor, plaintiff may be compensated for the *1037balance of his bill under the “third party payer” provisions of section 14019.4.

Defendant argues the distinction is required by federal law. I perceive the contrary to be true.

The Medi-Cal program provides funds for health care and related services to indigent persons. (§ 14000.) It receives funding from the federal government under the Medicaid program, which requires that Medi-Cal follow Medicaid requirements or suffer the loss of the federal funds. (42 U.S.C. §§ 1396, 1396a; see generally Morris v. Williams, supra, 67 Cal.2d 733; Comment, Third Party Liability and the Medi-Cal Program: Administratively Inconsistent, Judicially Inequitable (1982) 13 Pacific L.J. 1067, 1069-1070.) Defendant contends the federal prohibition lies in 42 Code of Federal Regulation section 447.15, which states: “A State plan must provide that the Medicaid agency must limit participation in the Medicaid program to providers who accept, as payment in full, the amounts paid by the agency.” (Italics added; see also 42 U.S.C. § 1396h (d); § 14019.3; Cal. Admin. Code, tit. 22, § 51002, subd. (a).)

However, defendant concedes section 14019.4 does not run afoul of that federal regulation in circumstances when a “third party payer” makes payment available for the patient. An “exclusion” from the federal regulation is established since the Medi-Cal program does not actually come into play. Medi-Cal benefits are not payable to a patient with any other “contractual or legal entitlement” (§ 14000, subd. (b)); since the program is not involved, the medical provider may seek payment of the full fee. As defendant points out, this “exclusion” applies even if the provider has billed both Medi-Cal and the patient, and initially collected from the former.3 This is made possible by section 14024 which authorizes Medi-Cal to recoup all it paid for services, placing Medi-Cal in the position of noninvolvement.4 *1039recovery, provides in part: “ ‘Third party’ means any individual, entity or program that is or may be liable to pay all or part of the medical cost of injury, disease, or disability of an applicant or recipient.” As it is noted in volume 3 of the Medicare and Medicaid Guide (Commerce Clearing House, Inc. 1982), the federal government considers all third parties alike for purposes of reimbursement, (f 14,749, pp. 6429-6430.)

*1038Defendant’s attempt to exclude a tort recovery from the concept of “other coverage” is asserted on the basis of the statutory scheme governing Medical’s reimbursement from third party tortfeasors (which defendant refers to as “casualty” collections).

Those provisions (§ 14124.70 et seq.) authorize Medi-Cal to independently institute and prosecute legal proceedings against the tortfeasor, and attempt to recover all it paid on behalf of the beneficiary (less, of course, its costs of recovery). (§ 14124.71.) Or, Medi-Cal may file a lien on the beneficiary’s claim against the tortfeasor, in which case its reimbursement must be reduced by 25 percent of the lien (this represents Medi-Cal’s reasonable share of attorney fees paid by the beneficiary) and by a pro rata share of the beneficiary’s litigation expenses (§§ 14124.72, subd. (d); 14124.74). The statutes preclude the reimbursement under the lien from exceeding one-half the beneficiary’s recovery after deducting attorney fees, litigation costs, and medical expenses paid by the beneficiary (§ 14124.78). Medi-Cal may waive reimbursement in whole or in part if collection would result in undue hardship on the beneficiary (§ 14124.71, subd. (b)(2)).

Defendant argues that because Medi-Cal typically resorts to the lien procedure—and as a result rarely receives full reimbursement—there is no basis for an “exclusion” since under the lien procedure at least some of the MediCal funds expended are not recouped, and the program is implicated. The argument totally ignores the fact that Medi-Cal is expressly authorized to pursue full reimbursement in a tort situation. (§ 14124.71.) Since there is a potential for full reimbursement, an “exclusion” does exist just as much in the tort context as in the “other coverage” context. Under the circumstances, 42 Code of Federal Regulations section 447.15 is not impinged.5

In fact, far from compelling a distinction between tortfeasors and suppliers of “other coverage,” federal regulations militate against it. Section 433.136(3) of 42 Code of Federal Regulations, dealing with third party

*1039II

Next, defendant contends a “third party payer” cannot include a third party tortfeasor under section 14019.4, asserting such an interpretation is contrary to the provisions of the section and to the statutory scheme.

Defendant first argues the phrase itself—“third party payer who provides a contractual or legal entitlement to health care services”—does not describe a third party tortfeasor, but rather contemplates a right to “health care services” (see § 14053), not to money damages. The argument goes on that the entitlement must exist “at the time the service is provided” (§ 14024, see also § 14023, subd. (c)) before resorting to Medi-Cal if the patient’s obligation to use the entitlement is to have any meaning.

The argument merely isolates a distinction without a difference. It is not important that a tortfeasor pays money damages rather than furnishing health care services. This is borne out by evidence that Medi-Cal treats an uninsured motorist insurance policy as a “contractual or legal entitlement to health care services,” even though such a policy provides an indemnity indistinguishable from a tortfeasor’s liability insurance. (See California State Auto. Assn. Inter-Ins. Bureau v. Jackson (1973) 9 Cal.3d 859, 866-868 [109 Cal.Rptr. 297, 512 P.2d 1201].) Medi-Cal treats health insurance in the same manner, even though a health insurer does not provide services, but pays indemnity.

It is equally unnecessary that the “entitlement” referred to in section 14019.4 exist at the time the services are rendered.

Defendant claims a preexisting entitlement is necessary to effectuate section 14023, subdivision (c).6 I believe that section is unnecessary and extraneous to a proper consideration of the question presented, as it is penal in nature, obviously designed to prevent abuse of the Medi-Cal system by *1040those who have available a coexisting present entitlement. By its terms, it does not preclude one from access to Medi-Cal assistance who may later be entitled to recoup cost of medical care from a third party responsible for the injury to the beneficiary. Moreover, the argument is contradictory; in fact that contradiction is made self-evident by defendant’s concession concerning its ability to proceed against such a recovery to recoup its expenditures pursuant to section 14024.

Defendant also argues that the two distinct procedures the Welfare and Institutions Code establishes for Medi-Cal to follow in seeking reimbursement-section 14024 for “other coverage” collection and section 14124.70 et seq. for “casualty” collection—will be rendered confusing or meaningless if section 14019.4 is interpreted to include a third party tortfeasor. The argument is that if a tort recovery equates with a “contractual or legal entitlement,” then the procedures in section 14124.70 et seq. become mere surplusage; that Medi-Cal will always seek reimbursement under section 14024, to avoid the limitations on its recovery imposed under section 14124.70 et seq.

This is an obvious attempt to bootstrap the result desired by defendant and achieved by the majority. In my view the argument becomes self-defeating upon examination of sections 14124.70, 14124.71, 14124.72, 14124.73, 14124.74, 14124.75, 14124.76, 14124.77, 14124.78, and 14124.79. Those sections provide authority for the director to seek reimbursement of medical expenditures made on behalf of a beneficiary from a third party tortfeasor and detail in unambiguous language the various recovery options which may be pursued by the director. The self-serving nature of the assertion is made quite evident by the provisions of section 14124.71 and those following. Those provisions, among others, provide that “When benefits are provided ... to a beneficiary under this chapter because of an injury for which another person is liable, or for which a carrier is liable in accordance with the provisions of any policy of insurance . . . the director shall have a right to recover from such person or carrier the reasonable value of benefits so provided.” (§ 14124.71.) Present entitlement to a personal injury recovery is not a prerequisite or required as a prerequisite to entitle a beneficiary to Medi-Cal aid. As I see the argument, it flies in the face of clear statutory authority. To interpret the various sections, as defendant and the majority opinion has, establishes an untenable distinction of less than doubtful legitimacy.

Ill

In the factual context of the case which involves a settlement concluded with a tortfeasor providing for reimbursement of medical expense and a *1041desire by a patient that her physician be paid, I have examined and would reject all the arguments suggested in support of a distinction between such a personal injury settlement and “other coverage.” I would conclude that the distinction sought does not exist. I do not find it to be compelled by federal regulation; indeed under the federal regulations, there is no distinction. It is not compelled by the state statutory scheme; on the contrary, the statutes properly interpreted provide a sound result and avoid the fundamental unfairness of the interpretation defendant and the majority opinion seem to justify. Whether the source of a patient’s “entitlement” is a tort recovery or health care coverage, the fact is the funds for the provider’s full recovery were recovered and payment does not tax or burden the beneficiary.

Defendant voices a worry that not in every case will satisfaction of the provider’s bill be so painless, and conjures up visions of providers plundering the tort recoveries much needed by the indigent tort victims. I would conclude that when a tort recovery provides—like a source of health care coverage—funds specifically to pay for medical services, the provider may collect the balance due for services from the funds recovered as a damage award from the third party causing the injury.

I would reverse the judgment.

A petition for a rehearing was denied January 10, 1984. Evans, J., was of the opinion that the petition should be granted. Appellant’s petition for a hearing by the Supreme Court was denied February 29, 1984. Mosk, J., was of the opinion that the petition should be granted.

Medi-Cal paid a total of $20,206 for services rendered Kimble, but filed a lien for only $18,424. The balance of $1,782 had been paid under several other (apparently unauthorized) Medi-Cal numbers, and was therefore overlooked when the lien was filed. However, none of the $1,782 which went unclaimed related to services performed by plaintiff.

Medi-Cal recovered $13,101 of its $18,424 lien; the remaining $5,323 Kimble was allowed to retain by statute. (Welf. & Inst. Code, § 14124.72, subd. (d).) If this 71 percent recovery under the lien is applied to the amount paid by Medi-Cal for plaintiff’s services, it appears Medi-Cal recouped from Kimble $1,542 of the $2,172 it paid plaintiff.

Unless otherwise noted, all code references will be to the Welfare and Institutions Code.

The statute is echoed in California Administrative Code, title 22, section 51002, which provides in part: “(a) A provider of service under the Medi-Cal program shall not submit claims to or demand or otherwise collect reimbursement from a Medi-Cal beneficiary, or from other persons on behalf of the beneficiary, for any service included in the Medi-Cal program’s scope of benefits in addition to a claim submitted to the Medi-Cal program for that service, except to: [D] (1) Collect payments due under a contractual or legal entitlement pursuant to Section 14000(b) of the Welfare and Institutions Code. ...” (Italics added; see also Cal. Admin. Code, tit. 22, § 51471.)

Section 14000, subdivision (b), provides: “The benefits available under this chapter shall not duplicate those provided under other federal or state laws or under other contractual or legal entitlements of the person or persons receiving them.”

Although Medi-Cal is supposed to be the provider’s last resort for payment, defendant’s brief states, “The Medi-Cal program has recognized that it is not always administratively feasible to require other coverage to be utilized first, particularly where beneficiaries are unsure of any coverage they may have. ...” Thus, “the providers rendering services to the beneficiary will generally bill the Medi-Cal program because it ensures fast and reliable payment at a time when other sources are as yet indefinite.” *1038provider to the extent the provider’s bill exceeded what Medi-Cal paid him: “(c) When the Department has paid for services and other coverage benefits are available as enumerated in subsection (a), the Department may recover payment for those services from the liable party.

Section 14024 provides in part: “When health care services are provided to a person under this chapter who at the time the service is provided has any other contractual or legal entitlement to such services, the director shall have the right to recover from the person, corporation, or partnership who owes such entitlement, the amount which would have been paid to the person entitled thereto, or to a third party in his behalf, or the value of the service actually provided, if the person entitled thereto was entitled to services. ...”

California Administrative Code, title 22, section 51005, subdivision (c), repeats this authorization; subdivision (d) goes on to provide that when Medi-Cal recoups an amount in excess of both its payments made and its cost of collection, the excess shall go to the

*1038[H] (d) Whenever the Department receives payment for a health care service provided to a beneficiary which is in excess of both the amount which the Department has expended on behalf of the beneficiary for said service, and the administrative costs incurred in the collection of such payment, the excess shall be paid to the provider(s) of that service to the extent that the billing for said service exceeds the amount paid by the Medi-Cal Program. Any funds remaining shall be paid to the legally entitled person or entity.”

The “exclusion” in the tort context does not depend on Medi-Cal’s actually seeking full reimbursement. The “exclusion” in the “other coverage” context obtains even though Medi-Cal may forego full reimbursement under section 14024—for example, when the anticipated cost of recovery exceeds the recovery itself. (See 42 U.S.C. § 1396a (a)(25).) I think the same is true in the tort context.

That subdivision states: “Any public assistance recipient or person eligible under this chapter who has any other contractual or legal entitlement to any health care service defined in Section 14053, and who knowing that he must use such entitlement first, obtains any such service under Medi-Cal without first having utilized and exhausted his other contractual or legal entitlement thereto or therefor, is guilty of a misdemeanor.”