Lead Opinion
Opinion
As а participant in the federal Medicaid program, the State of California has agreed to abide by certain requirements imposed by federal law in return for federal financial assistance in furnishing medical care to the needy. (See Harris v. McRae (1980)
Because no federal waivers were obtained, the 1985 version of section 14124.791 was never implemented. (See Assem. Ways & Means Com., Republican analysis of Sen. Bill. No. 1719 (1991-1992 Reg. Sess.) Aug. 31, 1992, p. 1.) In 1992, the Legislature sought to rectify this problem by revising section 14124.791. Under the 1992 version, a provider could recover on a lien “against any judgment, award, or settlement obtained by the [Medicaid] beneficiary” for the full cost of its services only after refunding the Medi-Cal payment. (§ 14124.791.) Thus, the 1992 version permitted substitute billing—where the provider substitutes recovery from a judgment or settlement obtained by the beneficiary for recovery from Medi-Cal—and not balance billing. Unlike in 1985, the Legislature did not condition implementation of the 1992 version on the receipt of appropriate federal waivers.
Today we consider the constitutionality of the 1992 version of the provider lien statute in the context of a lawsuit filed by a Medi-Cal beneficiary against her medical provider. In this case, the health care provider filed a lien pursuant to section 14124.791 against the Medi-Cal beneficiary. Challenging the legality of the provider’s practice of filing such liens, the beneficiary filed a class action lawsuit against the provider, alleging unfair competition and various tort claims. As the basis for her claims, the beneficiary contended federal law preempted section 14124.791 and rendered invalid any liens filed pursuant to that section. The trial court dismissed the action, holding that federal Medicaid law did not preempt section 14124.791. We now conclude that the trial court erred in part because federal law does preempt California’s provider lien statutes. Nonetheless, we
Facts
Because we review this case after the trial court sustained a general demurrer, we accept as true all material allegations of the complaint. (See Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001)
Cimarron Olszewski (plaintiff) is a minor and a Medi-Cal beneficiary who received emergency medical care from Scripps Health (defendant), a medical care provider that participates in the Medi-Cal program. Defendant received and accepted Medi-Cal payments for the medical care it provided to plaintiff. Defendant, either directly or through its collection agent, Medical Liabilities Recoveries, Inc. (MLR) (collectively defendants),
In response, plaintiff filed this class action, alleging that defendants had no legal right to assert and collect on such liens in light of federal Medicaid law governing provider reimbursement and third party liаbility. Plaintiff asserted causes of action for (1) violations of the unfair competition law (hereafter UCL; Bus. & Prof. Code, § 17200 et seq.), (2) trespass to chattels, (3) negligent misrepresentation, and (4) fraud. In addition to restitution and damages, plaintiff sought an order declaring that the liens asserted by defendants against her and the other class members were “unlawful, unenforceable, and uncollectible” because federal law preempted the California statutes authorizing these liens. Plaintiff also sought to enjoin defendants from asserting these liens in the future.
Defendants demurred, and the trial court sustained the demurrers without leave to amend. The court concluded that defendants had a statutory right to assert the liens under section 14124.791 and that federal law did not preempt this statutory right. The court also held that plaintiffs tort claims were
The Court of Appeal disagreed with the trial court on the preemption issue and concluded that federal Medicaid law preempted section 14124.791. The court, however, agreed that plaintiffs claims were barred because (1) section 14124.791 provided a safe harbor from plaintiffs UCL claim under Cel-Tech, supra,
Both plaintiff and defendants petitioned this court and we granted review.
Discussion
I
A
As an initial matter, we find that the Court of Appeal acted properly in modifying the judgment to include a declaration that defendants’ lien against plaintiff was invalid, but erred in adding a declaration that federal law preempted section 14124.791. In her complaint, plaintiff adequately pled a claim for declaratory relief under Code of Civil Procedure section 1060 even though she did not separately identify such a cause of action. (Bank of America etc. Assn. v. Gillett (1940)
The Court of Appeal, however, erred by modifying the judgment to include a declaration addressing the constitutionality of section 14124.791. In her complaint, plaintiff never sought a declaration that federal law preempted section 14124.791; she only sought a declaration that defendants’ liens were invalid. Thus, in modifying the judgment, the court should have only included a declaration that defendants’ lien against plaintiff was invalid, unenforceable, and uncollectible—and not that section 14124.791 was preempted.
Nonetheless, the Court of Appeal did not exceed its jurisdiction by deciding the preemption issue. In a convoluted argument, defendant contends the court’s erroneous resolution of the “imbedded” declaratory relief claim somehow invalidated its finding of preemption because defendant had no opportunity to litigate the claim. Defendant is mistaken. In determining whether defendants’ lien was invalid, the Court of Appeal had to determine whether federal law preempted California’s provider lien statutes. Moreover, the trial court, in sustaining the demurrers, expressly held thаt federal law did not preempt section 14124.791. Thus, the Court of Appeal properly considered and decided the preemption issue in reviewing the trial court’s order sustaining the demurrers. In any event, defendant fully briefed the preemption issue before the Court of Appeal and the trial court. Under these circumstances, defendant can hardly claim that it lacked an adequate opportunity to litigate the preemption issue.
B
Similarly, defendant’s contention that the Court of Appeal erred by deciding the federal preemption issue without making the State of California a party to this action must be rejected. Code of Civil Procedure section 389, subdivision (a) states in relevant part that “[a] person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if. . .in his absence complete relief cannot be accorded among those already parties . . . .” Thus, “[a] person is an indispensable party [only] when the judgment to be rendered necessarily must affect his rights.”
II
We now consider defendant’s substantive challenge to the Court of Appeal’s declaration that defendants’ lien against plaintiff filed pursuant to section 14124.791 was invalid, unenforceable, and uncollectible. Plaintiff concedes that California law permits provider liens against “the personal injury claims, judgments or settlements” of Medicaid beneficiaries. She, however, contends these liens, such as the liens filed by defendants, are unenforceable because federal law preempts the statutes authorizing these liens. We agree.
A
We begin with a brief overview of Medicaid and Medi-Cal. In 1965, Congress established Medicaid by enacting title XIX of the Social Security Act (42 U.S.C. §§ 1396-1396v; see Schweiker v. Gray Panthers (1981)
Although the requirements of title XIX are described in detail in 42 United States Code section 1396a (see Pennsylvania Medical Society v.
Despite these requirements, “[t]he [Medicaid] program was designed to рrovide the states with a degree of flexibility in designing plans that meet their individual needs. [Citation.] As such, states are given considerable latitude in formulating the terms of their own medical assistance plans.” (Addis v. Whitburn (7th Cir. 1998)
With this backdrop in mind, we now turn to the Medicaid statutes and regulations governing provider reimbursement and third party liability. A state Medicaid plan must “establish a scheme for reimbursing health care providers for the medical services provided to needy individuals, and must require that payment for Medicaid services be made only to the provider of
Because “Medicaid is essentially a payer of last resort” (Rehabilitation Ass’n of Va. v. Kozlowski (4th Cir. 1994)
Thus, when a health care provider submits a Medicaid claim, the state Medicaid agency must first ascertain whether a third party may be liable. “If the agency has established the probable existence of third party liability at the time the claim is filed, the agency must reject the claim and return it to the provider for a determination of the amount of liability .... When the amount of liability is determined, the agency must then pay the claim to the extent that payment allowed under the agency’s payment schedule exceeds the amount of the third party’s payment.”
While federal law requires the state Medicaid agency to obtain full reimbursement of Medicaid payments whenever possible, it strictly limits the ability of providers to obtain reimbursement for their services. Even though Medicaid payments are typically lower than the amounts normally charged by providers for their services (see McAmis v. Wallace (W.D.Va. 1997)
Despite these limitations on provider reimbursement, section 14124.791, subdivision (a) provides: “Subject to the director’s prior right of recovery, a provider who has rendered services to a beneficiary because of an injury for which a third party is liable and who has received payment under the Medi-Cal program shall be entitled to file a lien for all fees for services provided to the beneficiary against any judgment, award, or settlement obtained by the beneficiary or the director against that third party. A provider may only recover upon the lien if the provider has made a full reimbursement of any fees paid by the department [the state agency that administers Medi-Cal] for those services.” “In the event of judgment or award in a suit or claim against a third party or carrier,” the provider may collect on the lien.
As acknowledged by plaintiff, sections 14124.791 and 14124.74 authorized the liens filed by defendant. Nonetheless, plaintiff contends the liens are unenforceable because federal Medicaid statutes and regulations limiting provider reimbursement—title 42 United States Code Service section 1396a(a)(25)(C) and 42 Code of Federal Regulations parts 447.15 and 447.20—preempt these California statutes.
Under the United States Constitution, the “Laws of the United States . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” (U.S. Const., art. VI, cl. 2.) “Since . . . McCulloch v. Maryland (1819)
A federal statute or regulation may preempt state law in three situations, commonly referred to as (1) express preemption, (2) field preemption, and (3) conflict preemption. “ ‘First, Congress can define explicitly the extent to which its enactments pre-empt state law.’ [Citations.] ‘Second, in the absence of explicit statutory language, state law is pre-empted where it regulates conduct in a field that Congress intended the Federal Government to occupy exclusively.’ [Citations.] ‘Finally, state law is pre-empted to the extent that it actually conflicts with federal law.’ [Citations.]” (Smiley, supra, 11 Cal.4th at pp. 147-148, fn. omitted, quoting English v. General Electric
A state law actually conflicts with federal law “where it is impossible for a рrivate party to comply with both state and federal requirements [citation], or where state law ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’ ” (English, supra,
Although federal law may preempt state law, “[c]ourts are reluctant to infer preemption, and it is the burden of the party claiming that Congress intended to preempt state law to prove it.” (Elsworth v. Beech Aircraft Corp. (1984)
In this case, the California statutes at issue address a subject traditionally regulated by the states—public health and the costs of medical care. (See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. (1995)
Indeed, the very nature of the Medicaid program triggers a presumption against preemption. The Medicaid program is “based on a scheme of cooperative federalism.” (King v. Smith (1968)
With these standards in mind, we now consider plaintiffs contention that federal Medicaid law actually conflicts with and therefore preempts California’s provider lien statutes..
When determining the preemptive effect of federal law, we are guided by the United States Supreme Court’s “oft-repeated comment . . . that ‘ [t]he purpose of Congress is the ultimate touchstone’ in every preemption case.” (Medtronic, supra,
We therefore begin by reviewing the history and language of the relevant federal statutes and regulations. (See Medtronic, supra,
At the time Congress first enacted Medicaid, health care providers often supplemented below-cost payments from the state with contributions from the needy patient or his or her relatives. (See Resident v. Moot (Minn. 1981)
In the nursing home context, however, “many states were unable to bear the entire cost of providing medical care to the needy, notwithstanding the states’ receipt of federal funds.” (Resident v. Noot, supra,
In the 1970’s and 1980’s, Congress amended the Medicaid statutes to permit some cost-sharing charges, such as copayments and deductibles. Under these amendments, state plans could charge Medicaid beneficiaries certain nominal cost-sharing amounts. (See Medicaid Program; Imposition of Cost Sharing Charges Under Medicaid, 50 Fed.Reg. 23009 (May 30, 1985).) “The basic intent of providing States with the option of imposing
Pursuant to section 1396a(a)(25)(C) of title 42 of the United States Code, the Secretary promulgated 42 Code of Federal Regulations part 447.20. “The intent of this provision [was] to protect the Medicaid [beneficiary] from being charged for a service in excess of the amounts allowed under the State plan after considering the third party’s liability.” (55 Fed.Reg. 1428 (Jan. 16, 1990).) Parts 447.15 and 447.20 of 42 Code of Federal Regulations therefore had complementary purposes. “Under § 447.15, the provider is limited to the amount paid by the agency plus any deductible, coinsurance or copayment required by the plan and is not entitled to collect additional payment from the State.” (55 Fed.Reg. 1428 (Jan. 16, 1990).) Meanwhile, part 447.20 “prohibits the provider from seeking to collect from the Medicaid [beneficiary] any amount that exceeds the amount, if any, allowed as [beneficiary] liability in the State plan (§ 447.20(a)).” (55 Fed.Reg. 1428 (Jan. 16, 1990).)
As evidenced by this legislative history, the Secretary clearly intended to bar a health care provider from recovering from a Medicaid beneficiary any amount exceeding the cost-sharing charges allowed under the state plan. The Secretary found it necessary to impose this limitation on provider recovery in order to effectuate Congress’s intent and to ensure medical care for the needy. (See Yanez v. Jones, supra,
Our review of the language of these federal statutes and regulations limiting provider reimbursement in the context of the surrounding regulatory framework confirms this intent. Where, as here, probable liability of a third party cannot be established at the time the claim is filed, the state agency must pay the full amount due under its payment schedule. (See 42 C.F.R. § 433.139(c).) Under 42 Code of Federal Regulations part 447.15, the provider must “accept” this payment plus any cost-sharing charges allowed under the plan as “payment in full.” Meanwhile, 42 United States Code
Read together, these statutes and regulations are unambiguous and limit provider collections from a Medicaid beneficiary to, at most, the cost-sharing charges allowed under the state plan, even when a third party tortfeasor is later found liable for the injuries suffered by that beneficiary. (See Mallo v. Public Health Trust of Dade County (S.D.Fla. 2000)
By contrast, under sections 14124.791 and 14124.74, a provider, after refunding the Medi-Cal payment, may recover the full customary charge for its services through a lien on the beneficiary’s property—i.e., his or her recovery for lost wages or pain and suffering. Because this customary charge is usually, if not always, greater than the amount payable under Medicaid (see McAmis v. Wallace, supra,
While federal statutes and regulations do not bar a provider from recovering from liable third parties, we reject defendant’s contention that there is no collection from the beneficiary for purposes of federal law when a provider collects on a lien pursuant to sections 14124.791 and 14124.74. “A
Even assuming federal law is ambiguous on this point, the June 9, 1997, policy clarification letter sent by the Acting Director of the Medicaid Bureau of the HCFA to all state Medicaid directors confirms that sections 14124.791 and 14124.74 conflict with federal law. Where a federal regulation is ambiguous, “an agency’s interpretation of its own regulation is entitled to deference.” (Christensen v. Harris County (2000)
Although sections 14124.791 and 14124.74 meet the first condition, they do not meet the second. Under these statutes, the entire award obtained by the Medicaid beneficiary is subject to a lien filed under section 14124.791; the statutes do not limit provider recovery to the portion of the award specifically allocated to medical expenses. As the policy clarification observed, portions of the award unrelated to medical expenses constitute the “general assets of the” beneficiary for purposes of federal law. Even if the beneficiary may request an allocation of the award, as suggested by defendant, nothing in the statutes ensures that the provider’s recovery will be limited to the portion of the award allocated to medical expenses.
Cases holding that a lien asserted by a state Medicaid agency against the entire judgment, compromise or settlement of а Medicaid beneficiary “does not violate the statutory prohibition against imposing a lien against a beneficiary’s property” are inapposite. (Cricchio v. Pennisi (1997) 90 N.Y.2d
Medicaid beneficiaries do not, however, have to assign to providers their right to recover from third parties. Thus, a provider does not have a direct cause of action against a third party tortfeasor and may not independently recover any amount from that tortfeasor. Consequently, a lien filed under section 14124.791 does not attach until after the judgment, compromise, or settlement becomes the property of the Medicaid beneficiary. Recovery of any amount not allocated to medical expenses therefоre constitutes a collection from the beneficiary’s personal property. Because the lien allows the provider to recover from the beneficiary an amount exceeding the nominal cost-sharing charges allowed by federal Medicaid law, the lien cannot coexist with federal law and stands as an obstacle to the accomplishment of the objectives of Medicaid.
While no California courts have addressed the preemption question (but see Palumbo v. Myers (1983)
Using similar reasoning, the Seventh Circuit Court of Appeals barred a provider from suing a Medicaid beneficiary for the full cost of its services even though the provider was willing to refund the Medicaid payment. (Evanston Hospital v. Hauck (7th Cir. 1993)
A Florida federal district court also used this reasoning to hold that a Medicaid beneficiary may sue a provider under title 42 United States Code section 1983. (See Mallo, supra,
These cases establish that a provider that treats a Medicaid beneficiary may not recover from that beneficiary an amount exceeding the Medicaid payment by asserting a lien against the beneficiary’s entire recovery from a third party tortfeasor. Defendant does not cite, and we could not find, any case law to the contrary. In fact, virtually every case addressing the federal Medicaid statutes and regulations governing provider reimbursement holds that “[u]nder federal law, medical service providers must accept the state-approved Medicaid payment as payment-in-full, and may not require that
Defendant’s contention that federal law prohibits only balance billing— and not the substitute billing authorized by sections 14124.791 and 14124.74—is not persuasive. We acknowledge that liens filed pursuant to section 14124.791 are not strictly a form of balance billing because the lien holder must refund the Medi-Cal payment before recovering on them. But nothing in the language or history of the federal statutes and regulations restricting provider recovery from Medicaid beneficiaries limits their restrictions to balance billing. The mere fact that “[tjhese restrictions are commonly known as the prohibition against ‘balance billing’ ” does not mean that these restrictions only prohibit balance billing. (Palumbo v. Myers, supra,
The Secretary’s approval of California’s Medicaid plan does not dictate a contrary conclusion. Even assuming this approval “is entitled to great weight and deference” (RCJ Medical Services, Inc. v. Bonta' (2001)
We also do not find the April 19, 1995, HCFA letter persuasive. In the letter, Sharon Yee, Chief of the Program Operations Branch, Division of Medicaid, HCFA, answered several questions posed by an attorney. Her letter opined that “[n]o federal waiver [was] required for the implementation of [Welfare and Institutions Code sections] 14124.791 and 14019.3” and that these sections do not conflict with 42 Code of Federal Regulations part 447.15. Her conclusions, however, are not persuasive because Yee did not consider all the relevant federal statutes and regulations, including 42 United States Code section 1396a(a)(25)(C) and part 447.20 of 42 Code of Federal Regulations. (See Christensen, supra,
But we do so reluctantly. By invalidating liens filed pursuant to section 14124.791, we give the third party tortfeasor a windfall at the expense of the
Ill
Despite finding that federal law preempts the lien provisions, we must still determine whether the trial court properly sustained defendant’s demurrer and dismissed plaintiffs entire action on other grounds. We conclude it did.
A
We begin with plaintiffs unfair competition claim. In affirming the dismissal of this claim, the Court of Appeal held that plaintiffs “UCL claim is . . . barred by Cel-Tech’s safe harbor protection.” Plaintiff contends there is no safe harbor for defendant’s practice of filing liens under section 14124.791 if the lien provisions are preempted by federal law. We disagree.
As relevant here, “[t]he UCL defines unfair competition as any unlawful, unfair or fraudulent business practice . . . .” (Lazar v. Hertz Corp. (1999)
In Cel-Tech, we considered a UCL claim for unfair—but not unlawful— business practices and recognized a safe harbor from such claims for acts
Although plaintiff concedes sections 14124.791 and 14124.74 expressly permitted the liens filed by defendant, she contends these statutes do not provide a safe harbor for defendant’s conduct because they conflict with federal law. This contention is meritless.
We initially reject plaintiffs contention that these statutes do not insulate ■ defendant’s conduct from a UCL claim because defendant violated federal Medicaid law by filing the liens. According to plaintiff, the Cel-Tech safe harbor cannot protect defendant from UCL claims for unlawful business practices. We, however, need not determine whether the safe harbor applies to unlawful business practices, because plaintiff cannot establish that defendant violated federal law.
None of the cases cited by plaintiff hold to the contrary. In Hauck, the Seventh Circuit Court of Appeals declared that the provider would violate Illinois statutes—which were consistent with the requirements imposed by
We also reject plaintiffs contention that sections 14124.791 and 14124.74 do not provide a safe harbor from her UCL claim because our finding of preemption should apply retroactively. By enacting these statutes, the Legislature declared that provider liens were lawful so long as the statutes remained in effect. (See Cel-Tech, supra, 20 Cal.4th at pp. 183-184.) Morеover, “retroactive application of a decision disapproving prior authority on which a person may reasonably rely in determining what conduct will subject the person to penalties, denies due process.” (Moss v. Superior Court (1998)
Using similar reasoning, we find that plaintiff cannot state an unfair competition claim premised on defendant’s alleged breach of its Medi-Cal provider agreement. Assuming that the provider agreements in the record accurately reflect defendant’s current agreement, they establish that “Part 3, Division 9 of the Welfare and Institutions Code”—which includes sections
B
We now turn to plaintiffs tort claims. In affirming the dismissal of these claims, the Court of Appeal held that the litigation privilege shielded defendant from plaintiffs tort claims. We agree.
The litigation privilege, as codified in Civil Code section 47, subdivision (b), shields, among other things, any “publication or broadcast” made “[i]n any . . . judicial proceeding.” The privilege is “absolute in nature” (Silberg v. Anderson (1990)
“The usual formulation is that the privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” (Silberg v. Anderson, supra,
Plaintiff concedes sections 14124.791 and 14124.74 permitted the liens filed by defendant. Plaintiff does not dispute that defendant filed the liens to achieve the objects of the litigation or that the liens are connected to litigation filed by plaintiff and other class members. Thus, the litigation privilege shields defendant’s assertion of liens pursuant to sections 14124.791 and 14124.74 from plaintiff’s claims.
In reaching this conclusion, we reject plaintiff’s contention that defendant’s practice of using these statutorily authorized liens “to seize funds” in violation of federal law is noncommunicative conduct falling outside the litigation privilege. The only tortious acts alleged by plaintiff were defendant’s assertion of liens pursuant to section 14124.791. Plaintiff did not allege that defendant committed any acts not authorized by sections 14124.791 and 14124.74. Thus, LiMandri is inapposite. (See LiMandri v. Judkins, supra,
We. also find that defendant filed the liens as a “participant authorized by law” notwithstanding plaintiffs assertions to the contrary. (See Silberg v. Anderson, supra,
Finally, we believe plaintiff distorts the impact of our application of the litigation privilege in this case. Our holding is quite limited. We merely hold that the assertion of liens as authorized by validly enacted California statutes is shielded by the litigation privilege. This limited holding does not “pervertí] the judicial process and place[] the court in the unfortunate position of shielding, rather than addressing, wrongful conduct.” The cases cited by plaintiff are inapposite. Neither Barquis v. Merchants Collection Assn. (1972)
Disposition
We reverse the portion of the judgment of the Court of Appeal adding a declaration that federal law preempts section 14124.791, but affirm the judgment in all other respects.
George, C. J., Kennard, J., Baxter, J., Chin, J., and Moreno, J., concurred.
Notes
All further statutory references are to the Welfare and Institutions Code unless otherwise indicated.
As explained by the Court of Appeal, balance billing is “the practice of billing patients for the balance remaining on a medical bill after deducting the amount paid by Medi-Cal.”
Because we stayed the action as to MLR after it filed for bankruptcy, the opinion refers to Scripps Health as defendant and Scripps Health and MLR collectively as defendants.
Plaintiff also sought restitution, damages, injunctive relief, and attorney fees and costs.
“The Secretary has delegated his rulemaking power to the Health Care Financing Administration (HCFA) [citation], now called the Centers for Medicare and Medicaid Services [citation].” (Wisconsin Dept. of Health and Family Servs. v. Blumer (2002)
Hereafter, all further citations to the Code of Federal Regulations are to the 2002 edition unless otherwise indicated.
There are some exceptions not applicable here. (See 42 C.F.R. § 433.139(b)(2)-(3).)
Title 42 Code of Federal Regulations part 447.15 states: “A State plan must provide that the Medicaid agency must limit participation in the Medicaid program to providers who accept, as payment in full, the amounts paid by the agency plus any deductible, coinsurance or copayment required by the plan to be paid by the individual. However, the provider may not deny services to any eligible individual on account of the individual’s inability to pay the cost sharing amount imposed by the рlan in accordance with § 431.55(g) or § 447.53. The previous sentence does not apply to an individual who is able to pay. An individual’s inability to pay does not eliminate his or her liability for the cost sharing charge.”
Title 42 United States Code Service section 1396a(a) states in part: “A State plan for medical assistance must— [H ■ ■ • [10 (25) provide— [K] ... [10 (C) that in the case of an individual who is entitled to medical assistance under the State plan with respect to a service for which a third party is liable for payment, the person furnishing the service may not seek to collect from the individual (or any financially responsible relative or representative of that individual) payment of an amount for that service (i) if the total of. the amount of the liabilities of third parties for that service is at least equal to the amount payable for that service under the plan (disregarding section 1916 [42 USCS § 1396o]), or (ii) in an amount which exceeds the lesser of (I) the amount which may be collected under section 1916 [42 USCS § 1396o] or (II) the amount by which the amount payable for that service under the plan (disregarding section 1916 [42 USCS § 1396o]) exceeds the total of the amount of the liabilities of third parties for that service.”
Title 42 Code of Federal Regulations part 447.20(a) states: “A State plan must provide for the following: [U] (a) In the case of an individual who is eligible for medical assistance under the plan for service(s) for which a third party or parties is liable for payment, if the total
“If the action or claim is prosecuted by the beneficiary alone,. . . [a]fter payment of. . . expenses and attorney’s fees the court or agency shall, on the application of the director, allow as a first lien against the amount of the settlement, judgment, or award the reasonable value of additional benefits provided to the beneficiary under the Medi-Cal program, as provided in subdivision (d) of Section 14124.72, and as a second lien, the amount of any claims, pursuant to Section 14019.3, owed to a provider, as providеd in Section 14124.791.” (§ 14124.74, subd. (a).) “If the action or claim is prosecuted both by the beneficiary and the director, . . . [a]fter payment of. . . expenses and attorney’s fees, the court or agency shall first apply out of the balance of the judgment or award an amount sufficient to reimburse the director the fall amount of the reasonable value of benefits provided on behalf of the
Defendant notes that some courts have “questioned whether the Supremacy Clause even applies to spending power legislation like Medicaid.” (See, e.g., Westside Mothers v. Haveman (E.D.Mich. 2002)
The regulation was originally published at 45 Code of Federal Regulations part 249.31 (1969). (See Sargeant v. Commr. of Public Welfare (1981)
As originally enacted, 45 Code of Federal Regulations part 249.31 (1969) stated: “A State plan for medical assistance under title XIX of the Social Security Act must provide that participation in the program will be limited to providers of servicе who accept, as payment in full, the amounts paid in accordance with the fee structure, except that, with respect to payment for care furnished in skilled nursing homes, existing supplementation programs will be permitted until January 1, 1971, where the State has determined and advised the Secretary of Health, Education, and Welfare that its payments for skilled nursing home services furnished under the plan are less than the reasonable cost of such services permitted under Federal regulations, and the State has, prior to 1971, provided the Secretary with a plan for phasing out such supplementation within a reasonable period after January 1, 1971.” (33 Fed.Reg. 14894 (Oct. 4, 1968).)
The Secretary has amended 42 Code of Federal Regulations part 447.15 to permit the imposition of these cost-sharing charges.
Section 14124.791, subdivision (c) does limit “[t]he provider’s claim for reimbursement for fees ... to the amount of the fees less 25 percent, which represents the provider’s reasonable share of attorneys’ fees for prosecution of the action and of the cost of litigation expense.”
In contrast, the letter in Citizens Action League v. Kizer (9th Cir. 1989)
Contrary to defendant’s assertion, the limitation on provider recovery found in section 14019.3, subdivision (d) does not apply here. This section limits provider recovery to the “fees . . . that any other contractual entitlement... is obligated to pay the charges for the care provided the beneficiary.” (§ 14019.3, subd. (d), italics added.) Because a third party tortfeasor is not a “contractual entitlement,” section 14019.3, subdivision (d) is inapplicable.
Mercy Hospital & Medical Center v. Farmers Ins. Group of Companies (1997)
(See also Calvanese v. Calvanese (1999)
(See, e.g., Rehabilitation Ass’n of Va. v. Kozlowski, supra,
Plaintiff does not contend defendant’s filing of liens pursuant to sections 14124.791 and 14124.74 violated any California laws.
The two provider agreements submitted by plaintiff predate the 1992 enactment of section 14124.791.
Plaintiff did not assert a malicious prosecution claim. (See Kimmel v. Goland, supra,
Concurrence Opinion
I agree with the majority that California statutes purporting to authorize care providers’ liens against Medi-Cal patients’ monetary recoveries from third parties (Welf. & Inst. Code,
I do not agree, however, with the majority’s creation of a broad due process “safe harbor” for actions taken in reliance on preempted—and therefore invalid—state laws. (Maj. opn., ante, at pp. 829-830.) In Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999)
Were this an action seeking to punish defendant for conduct approved by facially valid state law, I might well agree that fundamental fairness, and hence the constitutional guarantees of due process, would bar the action. (See Moss v. Superior Court (1998)
For these reasons, I concur in the result, but not all the reasoning, of the majority opinion.
Concurrence Opinion
I have signed the majority opinion, but I have done so on the understanding that the opinion does not create the overbroad “safe harbor” to which Justice Werdegar’s concurring opinion properly objects. I agree with Justice Werdegar that a business whose ongoing practices are found unlawful or unfair could not complain, on fairness grounds, “of being enjoined from further such violations” in the future, even if the business’s past conduct was based on what seemed to be an enforceable state law. (Cone. opn. of Werdegar, J., post, at p. 833.) And I also agree that a grant of monetary relief “is not necessarily unfair merely because the defendant business believed in good faith that its practice was lawful.” (Ibid.) In my view, the majority opinion need not, and should not, be read as inconsistent with these propositions.