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December 21, 2008

Questions And Answers About PA’s New Medical Assistance Third-Party Liability Law

1. When is the new law effective? ANSWER: Act 2008-44 applies to lawsuits filed on or after September 2, 2008.

2. What changes are contained in the new law? ANSWER: There are two major changes. First the new law extends the statute of limitations and repose applicable for the recovery of medical expenses incurred on behalf of minors and paid by medical assistance (“MA”) so that parents can recover those medical expenses for the Department of Public Welfare (“DPW”) until the minor turns age 18. Secondly, the legislation provides a mandatory procedure for informing DPW when a MA client’s lawsuit does not seek recovery of medical expenses paid by MA. DPW refers to this as a “negative election.” Finally, fines up to $5,000 may be imposed if certain required notices are not given to DPW by MA clients and by third parties or their insurers.

3. Does the legislation override the Superior Court’s decision in Bowmaster v. Clair, 933 A.2d 86 (Pa. Super. 2007). ANSWER: Yes. The statute of limitations and repose applicable to recovery of medical expenses paid by MA is now tolled during the minority of a child who received MA.

4. What is a negative election and what are its consequences? ANSWER: A negative election occurs when a MA client informs DPW that a lawsuit is not seeking recovery of medical expense paid by MA. The new law regulates the procedure for making this negative election and allows DPW to impose fines of up to $5,000 per violation if the MA client does not comply with the statutory procedure for making the election. If a negative election is exercised, then DPW will work directly with the insurance company to make sure its claim is paid and will intervene into the lawsuit if it is cost effective to do so.

5. Will DPW continue to reduce its claims against a tort recovery if a negative election is exercised? ANSWER: No. By making a negative election, the MA client forfeits the right to have DPW assume a pro-rata share of attorney’s fees and costs.

6. Must the MA client cooperate with DPW after a negative election? ANSWER: Federal Regulations Act 42 C.F.R.§433.147 require MA clients to cooperate with DPW in pursuing third-party resources even if a negative election is exercised. Cooperation includes consenting to DPW’s intervention into the lawsuit, providing testimony on behalf of DPW, providing DPW with copies of discovery documents and other legal papers, and not indemnifying the tort defendant from the legal expenses associated with resisting DPW’s claim.

7. What happens if the MA client does not cooperate with DPW after making a negative election? ANSWER: DPW may terminate MA to the client and make the client establish an overpayment. If an overpayment is established, the client is personally liable to repay DPW.

8. Can a MA client sign an indemnification agreement with a third-party or insurer to settle the tort claim? ANSWER: If a MA client agrees to pay the legal expenses of a tort defendant or insurer in the event DPW makes a claim, then this will be considered non-cooperation. The client may be determined ineligible for MA and an overpayment will be established. DPW’s claim must be resolved before a MA client may sign such an indemnification agreement.

9. What notices must MA clients and insurers give to DPW, and what information must they contain? ANSWER: The law requires that notice of suit, notice of settlement, and notice of any election be given to DPW by the MA client and the insurer. In addition to the information set forth in 62 P.S.§1409(b)(5), the notice should contain the name of the client, the client’s MA identification number if known, the client’s date of birth, the date of injury, the name of the client’s attorney, the insurance carrier’s name and claim number (if applicable), and the court’s term and docket number in which the claim is pending. Failure to give any required notice may result in a $5,000 fine.

10. Were notices required under prior law? ANSWER: Yes, but the notice requirement only applied to MA clients and the requirement was often ignored. Now, both MA clients and insurers must give the notices and the failure to give any notice may result in a $5,000 fine. 

What It Means to You

Act 2008-44 made two major changes to the law: on the statute of limitations/repose applicable to the recovery of medical expenses incurred on behalf of minors and the creation of a mandatory procedure for informing DPW about the recovery of medical expenses paid by medical assistance. Our attorneys are available to discuss this change in the law as it may apply to your particular case.
 

Sources

Act 2008-44; 62 P.S. §1409(b)(5)