BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2007-2008 Regular Session
SB 93 S
Senator Corbett B
As Amended September 7, 2007
Hearing Date: September 11, 2007 9
Welfare & Institutions Code 3
GMO/KB
PURSUANT TO SENATE RULE 29.10
SUBJECT
Medi-Cal liens
DESCRIPTION
This bill would prohibit consideration of the amount paid
by Medi-Cal for medical services provided to a beneficiary
as evidence of past medical damages, or for the purpose of
reducing the third party's liability to the beneficiary in
any third-party action. In effect, for purposes of
measuring damages, an injured party who is a Medi-Cal
beneficiary would be treated the same as any other injured
party where a third party is found liable for the injuries.
BACKGROUND
Under current law, a person injured by a third party is
able to recover the cost of medical services for injuries
received, as well as other compensatory damages, such as
for wage losses and pain and suffering. The damages
recovered are generally measured by the reasonable value of
the services provided by a health care provider.
SB 93 is a response to the California Supreme Court's
invitation in Olszewski v. Scripps Health, (2003) 30
Cal.4th 798 to correct a deficiency in the state's health
care lien law relating to claims made by Medi-Cal
beneficiaries against third parties who caused their
injuries.
(more)
SB 93 (Corbett)
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In Olszewski, the Supreme Court found that a provider who
treats a Medi-Cal beneficiary may not recover an amount
exceeding the Medi-Cal payment by asserting a lien against
the beneficiary's entire recovery from a third party liable
for the injury. Because California's Medi-Cal statutes
permits a lien against the entire recovery (and not just
against the amount of the recovery attributable to past
medical services), the Olszewski court held that the
statutes were preempted by federal law and that the lien
claim against the beneficiary was invalid and
unenforceable.
The Court, however, urged legislative action "to remedy
this anomaly in a manner consistent with federal law" in
order to avoid giving a third party tortfeasor "a windfall
at the expense of the innocent health care provider."
Similarly, the United States Supreme Court in ADHS v.
Ahlborn, 126 S. Ct. 1752 (2006) struck down an Arkansas
statute similar to California's Medi-Cal lien statute
because it gave the state a lien right against the entire
recovery of the beneficiary, and did not limit it to the
portion of the settlement or award attributed to past
medical expenses.
The federal Center for Medicare and Medicaid Services (CMS)
has issued a memorandum to all states advising that Ahlborn
is the controlling authority and that states should seek
legislative changes to their lien statutes to allow for
continued lien recoveries in a way that meets the Ahlborn
constitutionality criteria.
In order to comply with these court decisions, the
Department of Health Care Services agreed in SB 83 (the
recently enacted health care services budget trailer bill)
to an allocation system that protects the beneficiary's
personal property. However, the compromise language in SB
83 does not ensure that the Department will be able to
collect on the Medi-Cal liens. Without the clarifying
language in SB 93, there is no certainty that adequate
funds would be available to reimburse the state and to
appropriately compensate the injured Medi-Cal beneficiary
and the "innocent health care provider" described in
Olszewski.
SB 93 (Corbett)
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SB 93 completes the package negotiated with the Department
of Health Care Services this year to ensure that the state
is adequately reimbursed when someone causes injury to a
person whose medical benefits are paid through the state's
Medi-Cal program.
CHANGES TO EXISTING LAW
Existing law authorizes the Director of Health Care
Services, as well as the Attorney General, and other
specified officials, to bring an action to recover the
reasonable value of benefits provided or that will be
provided to a Medi-Cal recipient against a third party,
including an insurance carrier, because of any injury for
which the third party is liable. (Welfare & Institutions
Code
14124.71.)
Existing law contains procedures governing these actions,
as well as provisions pertaining to the director's right to
claim reimbursement when the claim against a third party is
brought by another person, including the recipient.
(Welfare & Institutions Code 14124.70, et seq.)
Existing law permits a health care provider, subject to the
Director of Health Services' statutory right to recover the
Medi-Cal payment made to the health care provider, to file
a lien for all fees for services provided to the Medi-Cal
beneficiary against any judgment, award, or settlement
obtained by the beneficiary or the director against that
third party. (Welfare & Institutions Code 14124.791.)
Existing law defines the term "lien" as the director's
claim for recovery, from a beneficiary's tort action or
claim, of the reasonable value of benefits provided on
behalf of the beneficiary. (Welfare & Institutions Code
14124.70.)
Existing case law invalidates the health care provider lien
law as it applies to services rendered to Medi-Cal
beneficiaries because the statute does not limit provider
recovery to that portion of recovery from a third party
that is specifically allocated for the beneficiary's past
medical expenses. (Olszewski v. Scripps Health, (2003) 30
Cal.4th 798.)
SB 93 (Corbett)
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This bill would prohibit the amount paid by Medi-Cal from
being considered as evidence of past medical damages, or
for the purpose of reducing the third party's liability to
the beneficiary in any third-party action.
COMMENT
1. Stated need for the bill
The author states:
SB 93 accomplishes the goal of reforming California's
Medi-Cal statute by making sure that a Medi-Cal patient's
measure of damages is determined in the same manner as
any other injured person, instead of limiting the amount
to what Medi-Cal paid. If the recovery is limited to the
amount actually paid by Medi-Cal, a settlement or
judgment will rarely be adequate to both protect the
Medi-Cal patient and pay the state full reimbursement.
SB 93 would create identifiable funds that would allow
California's Department of Health Care Services to assert
the lien and recover the much needed reimbursement of
monies paid on behalf of the beneficiary, without running
afoul of Ahlborn and Olszewski.
2.This bill would correct deficiency in the Medi-Cal lien
statute identified in Olszewski
Due to their inability to collect on Medi-Cal liens since
the California Supreme Court's decision in Olszewski, the
Department of Health Care Services estimates that the
State currently loses more than $22 million a year.
The recent budget bill (SB 83) attempted to correct the
deficiency in California's Medi-Cal lien statute to
comply with the mandates of Olszewski and Ahlborn.
However, supporters state that the provisions actually
included in the Budget Act trailer bill are meaningless
because adequate funds to reimburse the state will not be
available from an award or settlement received by an
injured Medi-Cal recipient unless SB 93 is enacted.
SB 93 (Corbett)
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SB 93 would correct the legal deficiency in the
California Medi-Cal lien statutes by providing that the
amount paid by Medi-Cal may not be considered as evidence
of medical damages for the purposes of reducing the third
party's liability to the beneficiary in any third-party
action. Instead, a court could consider the value of
medical services provided by a health care provider.
This will ensure that the portion of a settlement or
damages award attributed to medical expenses will be
sufficient to both compensate the victim and the health
care provider, and reimburse the state for its Medi-Cal
payments. Thus, it will cure the "windfall" to third
party tortfeasors (and their insurance carriers)
highlighted in the Olszewski case.
3. Opposition
Opponents of SB 93, such as State Farm Insurance and the
California State Automobile Association (AAA) contend
that the bill will result in higher settlements and
judgments and thus create a bigger pot of money from
which trial attorneys would take contingency fees. They
also contend that SB 93 will result in higher litigation
expenses for insurance carriers, which translates into
higher insurance premiums for all consumers. Finally,
opponents argue that SB 93 overturns Hanif v. Housing
Authority, (1988) 200 Cal.App.3d 635, which held that a
plaintiff's "special damages" recovery is limited to the
amount Medi-Cal actually paid and not the "reasonable
value" of the medical services rendered.
Supporters such as the California Medical Association
however contend that Medi-Cal payments are generally much
lower than the provider's billed costs for the services
provided, and thus an award calculated on such payments
would not be adequate to cover the cost of medical
services provided. Thus, as noted in Olszewski, the
current Medi-Cal lien statute results in a windfall to
the liable third-party and/or the third party's insurance
carrier in cases involving Medi-Cal beneficiaries who are
injured by third parties. SB 93 would correct this
inequity and place a Medi-Cal recipient in the same
position as a non-Medi-Cal recipient who has been injured
by a third party, for the purpose of recovering damages
SB 93 (Corbett)
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for the injuries suffered.
Support: California Medical Association
Opposition: California State Automobile Association
(AAA); Allstate Insurance Company; State Farm
Insurance Company; Department of Health Care
Services
HISTORY
Source: Consumer Attorneys of California
Related Pending Legislation: AB 1456 (Laird) would
prohibit the amount paid by Medi-Cal
from being considered as evidence of
past medical damages or for the
purpose of reducing the third party's
liability to the beneficiary in any
third-party action. This bill is on
the Senate Floor.
Prior Legislation: SB 399 (Escutia, 2005) would have
restored a health care provider's lien rights
against a Medi-Cal beneficiary's recovery for
injuries caused by a liable third party, but
limit the lien to allocations for past medical
expenses.
SB 494 (Escutia, 2003) would have authorized
all health care providers who treat Medi-Cal
patients injured by a third party to claim
reasonable and necessary charges from a liable
third party.
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