The Pennsylvania Legislature has significantly changed its rules relating to the reimbursement of Department of Public Welfare (DPW) liens for Medical Assistance (MA) payments from recoveries by or on behalf of MA recipients. The changes place new obligations on defendants and their insurers arising from actions filed after September 1, 2008 and authorize significant civil fines for violations.

The changes create a direct relationship between the defendant/insurer and DPW's Division of Third Party Liability. The rules now require that the defendant and insurer notify DPW both that suit has been filed and in regards to settlement. These reporting obligations arise in any claim where the defendant and/or insurer knew or should have known that the claimant received MA benefits. Notice must be in writing, per new guidelines; however, the DPW has indicated that it will release information much more freely now, even via telephone inquiry.

Act 44 does include a safe harbor provision allowing the defendants or insurers to insulate themselves from potential liability to DPW. Under the safe harbor provisions, the defendant or insurer can avoid liability if they either pay the DPW lien directly, make the DPW a payee on the settlement draft so that DPW's endorsement is required to negotiate the draft, or obtain a statement from DPW that no lien exists.

As a result, if your defendant or insurer is reasonably on notice (from the documents you/they have or from other sources) that plaintiff received MA benefits, the above reporting requirements attach. Again, these new obligations apply only to tort actions commenced on or after September 2, 2008.