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Reimbursement of Medical Assistance from Pennsylvania Personal Injury Claims

by Lisa A. Cauley, Esquire

Effective September 2, 2008, changes were made to Pennsylvania law governing reimbursement of Medical Assistance from personal injury claims. The Pennsylvania Department of Public Welfare may fine insurance companies up to $5,000.00 for each violation of the new law. Essentially, whereas the burden and penalty used to be upon the recipient/claimant for failure to reimburse the DPW, insurers now share in that responsibility, with financial consequences for failure to do so. The new law applies to suits filed or claims made on or after September 2, 2008.

62 Pa. C.S. §1409 is entitled “Third Party Liability” and addresses payment or reimbursement of health care furnished by a publicly funded health care program, i.e. “medical assistance.” Section 1409(b)(1) provides:

When benefits are provided or will be provided to a beneficiary under this section because of an injury for which another person is liable, or for which an insurer is liable in accordance with the provisions of any policy of insurance issued pursuant to Pennsylvania insurance laws and related statutes the department shall have the right to recover from such person or insurer the reasonable value of benefits so provided . ...

Section 1409 has been the subject of three recent changes, first, the requirement that an insurer affirmatively notify DPW when an action or claim is filed involving someone who has received Medical Assistance, second, the requirement that DPW be affirmatively notified prior to settlement of a case involving a recipient of Medical Assistance, and third, the “negative election” provisions whereby a claimant can notify DPW that he is not recovering medical expenses covered by MA. These three provisions are set forth and discussed below.

62 Pa. C.S. 1409(b)(5) provides in pertinent part:

Any third party or insurer that has received information indicating that the beneficiary received benefits under the medical assistance program shall give written notice to the department by personal service or by certified or registered mail of the action of claim. Proof of the notices shall be filed in the action or claim.

As such, this provision requires insurers to notify DPW, by certified or registered mail, when it has received information that the claimant or plaintiff has received Medical Assistance, and requires that proof of notices “shall be filed in the action or claim.” This would be akin to a certificate of service filed in a pending court case; it is unclear how proof of notice could be filed in the case of claim not in suit.

Section 1409(b)(5)(i), (ii) and (iii) addresses a beneficiary’s “negative election” procedure” whereby the claimant can notify DPW that he is not recovering medical expenses paid by MA. When a negative election is made, the insurer should then contact DPW’s Third Party Liability section directly to resolve the MA reimbursement claim directly.

Finally, section 1409(b)(5)(iv) requires that DPW be notified of any settlement with a beneficiary within thirty days thereof. Again, while the burden of this notification previously fell upon the claimant/recipient, the insurer is now also required to provide such notice.

The new provisions do not appear to place the onus on the insurer to affirmatively “search out” whether a claimant has received medical assistance, but if it appears from records provided to the insurer that the claimant is a MA recipient, the notification requirement is triggered. Payment of a claim or suit nearly always requires itemization of special damages such as medical expenses, including a determination of what bills have been paid and by what source, and to what extent, and as such, determining whether MA has been a source of payment is not likely to be a departure from routine claim adjustment.

As stated above, section 1409 applies only “when benefits are provided or will be provided to a beneficiary under this section because of an injury for which another person is liable . . .” As such, payment of medical assistance for unrelated illnesses or injuries arguably does not trigger the requirements of section 1409. However, if a claimant is already receiving Medical Assistance, there is a chance that all or a portion of medical bills from the incident that led to his claim or suit will also be paid or payable by MA. The notice provisions set forth above should therefore be followed whenever there is an indication that the claimant is a MA recipient.

Section (c) provides that: “Following notice and hearing, the department may administratively impose a penalty of up to five thousand ($5,000) per violation upon any person who willfully fails to comply with the obligations imposed under this section.” (Emphasis added). As such, the imposition of fines with regard to failure to notify the DPW of a claim or settlement is certainly not automatic, and the requirement that willful intent be shown would seem to excuse mere negligence, although this issue has not been addressed in any court case.

From a practical standpoint, adjustors and claims personnel must notify the DPW in any claim or case in which the claimant appears to have received Medical Assistance, particularly where settlement is being discussed. The statute requires that the notice be sent by certified or registered mail to the Secretary of the Department of Public Welfare. The notice should contain the claimant’s name, MA number, if known, date of birth, date of injury, name of claimant’s attorney, insurance carrier(s), and claim numbers if applicable, and court term and docket number where the case is pending.