439 Mass. 1 | Mass. | 2003
At issue in this case is whether the division of medical assistance (division), the Commonwealth’s administrator of its Medicaid program, has the authority to enforce its reimbursement regulation, 130 Code Mass. Regs. § 450.316(E) (1998) (reimbursement regulation), which requires that healthcare providers return payment to the division in the event that a liable third party is identified after the division has paid the provider for services.
1. Background. “Medical assistance is a cooperative Federal and State program which provides payment for medical services to eligible individuals and families.” Haley v. Commissioner of Pub. Welfare, 394 Mass. 466, 467 (1985). Federal funds are provided to participating States, conditioned on the State’s compliance with various statutory requirements. See 42 U.S.C. §§ 1396a et seq. (2000). One such set of requirements pertains to the recovery of funds from liable third parties. See 42 U.S.C. § 1396a(a)(25). The State or local agency must “take all reasonable measures to ascertain the legal liability of third parties (including health insurers . . .) to pay for care and services available under the plan.” See 42 U.S.C. § 1396a(a)(25)(A). Reasonable measures include “the collection of sufficient information ... to enable the State to pursue claims against such third parties,” 42 U.S.C. § 1396a(a)(25)(A)(i), and the development of a plan for pursuing such claims. See 42 U.S.C.
Massachusetts, as a Medicaid participant, has established a Medicaid program to conform with the Federal statutory scheme. See Haley v. Commissioner of Pub. Welfare, supra at 472 (“the Legislature intended the . . . benefits program to comply with the Federal statutory and regulatory scheme”). See also G. L. c. 118E, § 9 (establishing Medicaid program “pursuant to and in conformity with” Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq.). The division administers the program, see G. L. c. 118E, § 1, and is “authorized] to promulgate regulations which give effect to legislative mandates” (citations omitted). Thomas v. Commissioner of the Div. of Med. Assistance, 425 Mass. 738, 746 (1997). See G. L. c. 118E, §§ 7 and 12. Exercising this power, the division promulgated 130 Code Mass. Regs. § 450.316(E), its reimbursement regulation. See note 3, supra. This regulation applies where, although the provider has made the required “diligent effort” to identify liable third parties before billing the division, a third-party insurer is identified after the division has paid the provider. Compare 130 Code Mass. Regs. § 450.316, first par., with 130 Code Mass. Regs. § 450.316(E). In such a case, the regulation requires the healthcare provider to return to the division payments made to the provider under the Medicaid program.
In 1998, the division sought to enforce the reimbursement regulation with respect to the six plaintiff hospitals. The material facts prompting the division’s action are undisputed. In the three years prior to the division’s enforcement action, each
2. Discussion. Our review of an administrative action is “limited to a determination whether the State action is arbitrary, capricious, or contrary to law.” Tarin v. Commissioner of the Div. of Med. Assistance, 424 Mass. 743, 750 (1997), quoting Massachusetts Hosp. Ass’n v. Department of Pub. Welfare, 419 Mass. 644, 652 (1995). We will declare an agency regulation void if “its provisions cannot by any reasonable construction be interpreted in harmony with the legislative mandate.” Thomas v. Commissioner of the Div. of Med. Assistance, supra at 746,
We exercise de nova review over questions of statutory construction. Raytheon Co. v. Director of the Div. of Employment Sec., 364 Mass. 593, 595 (1974). Although we generally defer to an agency’s interpretation of a statute that it is charged with administering, an “incorrect interpretation of a statute . . . is not entitled to deference.” Massachusetts Hosp. Ass’n v. Department of Med. Sec., 412 Mass. 340, 345-346 (1992), quoting Kszepka’s Case, 408 Mass. 843, 847 (1990). In discerning a statute’s meaning, “[w]e interpret the words used in a statute with regard to both their literal meaning and the purpose and history of the statute within which they appear.” Massachusetts Hosp. Ass’n v. Department of Med. Sec., supra at 346. Applying this rule, we first consider the plain language of 42 U.S.C. § 1396a(a)(25)(B). See note 5, supra.
The natural reading of the text of § 1396a(a)(25)(B) is that the State or local agency must seek reimbursement from a liable third party, provided it is cost effective to do so. See, e.g., Wesley Health Care Ctr., Inc. v. DeBuono, 244 F.3d 280, 281 (2d Cir. 2001) (§ 1396a[a][25][B] requires that, “[i]f third party liability is discovered after medical care has been provided, the [Sjtate agency must seek reimbursement from the third party” [emphasis added]). The statute clearly designates the “State or local agency” as the entity responsible for collecting the reimbursement. Furthermore, the several references in the statute to “third parties” and the absence of a single reference to health
While the statutory language tends to support the hospitals’
Our interpretation of § 1396a(a)(25)(B) is also informed by the corresponding Federal regulations. See 42 C.F.R. § 433.139. Subparagraphs (d)(1) and (d)(2) identify the two scenarios under which recovery of reimbursement must be sought: (1) where the agency “has an approved waiver under paragraph (e) of this section to pay a claim in which the probable existence of third party liability has been established and then seek reimbursement . . . from the third party”; and (2) where the agency “learns of the existence of a liable third party after a claim is paid, or benefits become available from a third party after a claim is paid.” Subparagraph (d)(3) states that “[Reimbursement must be sought unless the agency determines that recovery would not be cost effective in accordance with paragraph (f) of this
Our interpretation of § 1396a(a)(25)(B) is also consistent with the policy set forth in the Health Care Financing Administration’s (HCFA’s) State Medicaid manual.
“Recovery. [States must s]eek reimbursement from third parties whenever [States] have paid claims for which there are third parties that are liable for payment of the claims. This is referred to as the ‘pay and chase’ method. Reimbursement must be sought unless it is determined that recovery of reimbursement would not be cost effective in accordance with threshold amounts that have been established. ... If the probable existence of [third-party liability] cannot be established or third party benefits are not available to pay the recipient’s medical expenses at the time the claim is filed, [States must] pay the full amount allowed under [the] payment schedule. If [States] learn of the existence of a third party after [they] have paid the claims, or benefits become available from the third party*10 after the claim is paid, [States must] seek recovery of reimbursement from the third party to the limit of legal liability within [sixty] days from the end of the month in which [they] learn of the existence of a third party or benefits become available, whichever is later” (emphasis added).
HCFA State Medicaid Manual § 3904.3 (1990). The division contends that, while the “pay and chase” method accurately represents an agency’s responsibilities where the agency recovers for prenatal or preventive pediatric care or for child support, see 42 U.S.C. § 1396a(a)(25)(E) and (F), where the agency recovers against estates or tort feasors, see, e.g., Cohen v. Commissioner of the Div. of Med. Assistance, 423 Mass. 399 (1996), or where the agency has a waiver pursuant to 42 C.F.R. § 433.139(d)(1), the method does not apply where the agency seeks recovery pursuant to § 1396a(a)(25)(B). We see no reason so to limit the language in this section of the manual.
The division argues that the Superior Court judge “misconstrued the statute’s structure” by incorrectly reading into subparagraph (B) the third-party limitation specified in subparagraphs (E) and (F). Compare 42 U.S.C. § 1396a (a)(25)(B) with 42 U.S.C. § 1396a(a)(25)(E) and (F). Subparagraphs (E) and (F) direct the State or local agency to pay a provider for certain types of services regardless whether there is a known third-party liability and then to “seek reimbursement from such third party in accordance with subparagraph (B).” The division argues that the phrase “from such third party” was inserted to alter the meaning of subparagraph (B), which contains no such limitation. We disagree. The term “in accordance with” conveys the idea that the procedure for seeking reimbursement from third parties is described in subparagraph (B). Moreover, it is clear that when subparagraphs (E) and (F) were added, Congress did not intend to qualify subparagraph (B), but rather to limit the scope of subparagraph (A), and the division acknowledges as much. See H.R. Conf. Rep. No. 99-453 at 544 (explaining intent of subparagraphs [E] and [F] with
Our construction of § 1396a(a)(25)(B) would be entirely unremarkable were it not for the division’s view, agreed to by the hospitals, that it cannot recover costs from the liable third party when that party is Medicare.
Although the parties’ arguments regarding Medicaid’s alleged inability to recover from Medicare are largely conclusory, their views appear to be grounded in the notion that the division does not have standing to pursue a claim against Medicare. However, to the extent that the parties have identified relevant regulations, none seems to apply to a situation in which Medicare has acknowledged a mistake in denying liability for a claim or has agreed to pay a claim retroactively. See, e.g., 42 C.F.R. § 433.146 (2000) (individual’s assignment to State of rights to benefits “may not include assignment of rights to Medicare benefits”); 42 C.F.R. § 424.51 (2001) (basic rule that “Medicare pays the provider for services by a provider”). Moreover, at least two courts have resoundingly rejected the rationale underlying the division’s position.
More factually similar to the instant case is Michigan Dep’t of Social Servs. v. Shalala, 859 F. Supp. 1113 (W.D. Mich. 1994). There, the Michigan Department of Social Services (MDSS) sought reimbursement from HHS for payments that MDSS had made to healthcare providers. Relying on New York State Dep’t of Social Servs. v. Bowen, supra, and a Michigan subrogation statute, the Federal District Court held that the MDSS had standing as the patients’ assignee or subrogee to pursue reimbursement from HHS.
In essence, the division seeks a statutory construction that is not provided in the language of the statute, and one that is inconsistent with the unequivocal legislative history and the cognate Federal regulations, for a reason that may be hypothetical or anomalous and grounded in a legal theory that one Federal court has described as “in defiance of common sense.” New York State Dep’t of Social Servs. v. Bowen, supra at 134. We conclude that the better course is to refrain from such a construction of § 1396a(a)(25)(B).
We recognize that it is not impossible for providers to seek recovery from third parties. The division contends that the judge’s interpretation of § 1396a(a)(25)(B) is inconsistent with established commercial practice and that, in seeking to avoid the reimbursement regulation, the hospitals aim to treat Medicaid differently from the way they treat private insurers.
In sum, we conclude that the interpretation of § 1396a (a)(25)(B) proposed by the division is inconsistent with the tenor of the statutory language, with the unambiguous legislative history and with the clear meaning of the corresponding regulations, and we reject the division’s suggestion that we interpret the statute to avoid what it views as problems connected with recovery from Medicare. The division has “no inherent authority to issue regulations ... or ‘promulgate rules that conflict with the statutes or exceed the authority conferred by the statutes by which the agency was created.’ ” Massachusetts Hosp. Ass’n v. Department of Med. Sec., 412 Mass. 340, 342 (1992), quoting Massachusetts Mun. Wholesale Elec. Co. v. Energy Facilities Siting Counsel, 411 Mass. 183, 194 (1991). “Where there is a conflict between State and Federal regulations, the Legislature intended that the [division] comply with the Federal rule.” Cruz v. Commissioner of Pub. Welfare, 395 Mass. 107, 112 (1985). Accordingly, the Superior Court judge correctly concluded that the hospitals had satisfied the elements required to obtain a declaratory judgment, see, e.g., Villages Dev. Co. v. Secretary of the Executive Office of Envtl. Affairs, 410 Mass. 100, 106 (1991), and properly entered a declaration that the division lacks the authority to implement 130 Code Mass. Regs. § 450.316(E) to the extent that the regulation, by requiring the hospitals to return payments to the
Judgment affirmed.
Title 130 Code Mass. Regs. § 450.316(E) provides, in pertinent part, that “[i]f a third-party resource is identified after the provider has already billed and received payment from the [division, the provider must return any payment it received from the [division. The provider must bill all third-party resources before resubmitting a claim to the [division.”
Title 130 Code Mass. Regs. § 450.316, first par. (1998), provides, in pertinent part, that “all providers must make diligent efforts to obtain payment first from other resources .... The [division will not pay a provider and will recover any payments to a provider if it determines that the provider has not made such diligent efforts.”
The hospitals, each represented by the same legal counsel, consolidated their three separate appeals into a single complaint before the Superior Court.
Title 42 U.S.C. § 1396a(a)(25)(B) (2000) provides, in pertinent part, that, “in any case where [third-party] legal liability is found to exist after medical assistance has been made available on behalf of the individual and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery, the State or local agency will seek reimbursement for such assistance to the extent of such legal liability.”
Where the provider has not made the required “diligent efforts” to identify a liable third-party insurer prior to billing the division, the division may decline payment or, if payment has already been made, recover that payment pursuant to its due diligence regulation. See 130 Code Mass. Regs. § 450.316, first par. See also G. L. c. 118E, § 23, fourth par. (“The division is the payor of last resort, and accordingly a provider shall request payment for medical care or services it provides from a health insurer which is or may be liable for the medical care or services so provided, before payment is requested from the division”).
The term “[t]hird party” is defined in the Federal regulations as “any individual, entity or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a State plan.” 42 C.F.R. § 433.136 (2000). The parties do not dispute that both Medicare and private insurers are considered “third parties” within the meaning of the statute.
Specifically, the division suggests that the term “reimbursement,” which means “repayment” or “indemnification,” Black’s Law Dictionary 1290 (7th ed. 1999), directs the State or local agency to seek reimbursement from the original payee (i.e., the provider) or that, at a minimum, the statute leaves to the State or administering agency the discretion to determine whether to pursue reimbursement from providers or from liable third parties.
We are also persuaded by the hospitals’ argument that the division’s interpretation of the statute would render largely meaningless the Federal regulation requiring States or local agencies to obtain an assignment of benefits from recipients. See 42 C.F.R. § 433.146(b)(1). The apparent purpose of this assignment regulation is to ensure that the State or local agency has standing to pursue reimbursement directly from liable third parties. See id. Under the division’s proposed interpretations, there would be little purpose in such an assignment.
The judge also concluded that the language “to the extent of such legal liability” effectively excluded the hospitals from the group of potential recovery sources because the hospitals did not have a “legal liability.” The division disputes this conclusion, referring to the provider agreements, the Medicaid statute, and corresponding regulations. The division suggests that this language effectively prevents the division from recovering more from the provider than
At the time, subparagraph (B) was designated as subparagraph (C). The language was identical to that now found in subparagraph (B), except for the phrase “and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery,” which was added in 1981. See Pub. L. No. 97-35, Title XXI, § 2182, 95 Stat. at 814-816, 97th Cong., 1st Sess. (1981). In 1986, Congress recodified former subparagraph (C) as subparagraph (B). See Pub. L. No. 99-272, Title IX, § 9503(a)(1), 100 Stat. at 202, 99th Cong., 2d Sess. (1986).
We disagree with the division’s contention that the Superior Court judge improperly relied on the Health Care Financing Administration (HCFA) manual. The judge merely acknowledged that the manual was consistent with his interpretation. Compare Thomas v. Commissioner of the Div. of Med. Assistance, 425 Mass. 738, 748 (1997) (proper to discuss HCFA bulletin where opinion expressed therein was “consistent” with statutory interpretation adopted), with Haley v. Commissioner of Pub. Welfare, 394 Mass. 466, 474 (1985) (improper to rely on HCFA action transmittal because it was “unpersuasive, especially where the interpretation resulted] in a change from prior practice”).
Nor does Wesley Health Care Ctr., Inc. v. DeBuono, 244 F.3d 280, 282 (2d Cir. 2001), change our analysis. In that case, the court recognized that, under the New York regulatory scheme, a nursing home provider was obligated in some circumstances to repay funds to the Medicaid program in the event that the provider received payment from a third party after receiving Medicaid payments. Similar to the division’s due diligence regulation, the regulation at issue in that case appears to have applied in circumstances where the provider knew that a liable third party might exist when it billed Medicaid. In contrast, the parties here did not know (and in some cases could not have known) that a liable third party existed when the provider billed Medicaid.
At oral argument, however, both parties conceded that it might be possible for the division to recover from Medicare.
The Michigan subrogation statute, Michigan Comp. Laws Ann. § 400.106(l)(b)(ii) (West 1997), is substantially similar to G. L. c. 118E, § 23, first par.
As a general matter, we see no reason why the division, through enforcement of its due diligence regulation, should not be able to ensure that Medicare pays where liable. Furthermore, the providers have every incentive to assist the division in this endeavor; not only are they subject to the division’s due diligence regulation, they also receive greater monetary compensation from Medicare (and other private insurers) than they do from Medicaid.
Testimony at the administrative hearings established that when a private insurer pays a hospital and subsequently discovers that a different insurer should have been held primarily liable for the claim, the insurer that paid improperly recoups its payment. There was also testimony, however, that this practice only applies where the hospital incorrectly billed the insurer.
The commercial practice may be more akin to the division’s practice of seeking repayment under the due diligence regulation. At oral argument, counsel for the hospitals explained that commercial insurers tend to submit claims for recoupment to the provider at the time of claim resolution, and not years later. At the administrative hearing, testimony established that it is significantly more expensive for the hospital to repay a claim after a patient’s information has been archived.