DAN MORALES 

ATTORNEY GENERAL 

William R. Archer III, M.D. 

Commissioner of Health 

Texas Department of Health 

1100 West 49th Street 

Austin, Texas 78756-3199 

@ffice of tip Rlttornep Qkneral 

$Mate of QlTexaS 

May 29,1998 

Opinion No. DM-477 

Re: Whether the Texas Department of Health 

may allocate medicaid provider payments to 

satisfy a medicaid provider’s child-support 

obligation (RQ- 1046) 

Dear Commissioner Archer: 

Human Resources Code section 32.036 stipulates that a medical assistance (medicaid) 

provider payment may be paid only to the service provider unless the provider has assigned the 

payment consistently with 42 U.S.C. $ 1396a(a)(32). Under the federal law, a state may pay a 

medicaid provider’s assignee if the assignee is a governmental agency or if the assignment was 

established in accordance with a court order. You ask whether the Texas Department of Health 

(“TDH”) may “garnish” a service provider’s medicaid payment to satisfy the provider’s childsupport obligation. By “garnish,” we understand you to mean “allocate”~the payment in accordance 

with an assignment authorized by 42 USC. 5 1396a(a)(32). We conclude the Department of Health 

may withhold all or part of the payment if the provider has assigned medicaid payments to 

a governmental agency or if the assignment is established by or in accordance with a court order 

issued by a court of competent jurisdiction.’ We do not determine in any particular case whether 

payments have been assigned as Human Resources Code section 32.036(c) and 42 U.S.C. 

9 1396a(a)(32)(B) require. 

We understand the TDH is the operating agency for the State’s medical assistance program? 

As such, the TDH pays service providers for medical assistance services rendered to medicaid 

recipients.3 

We conclude, in answer to your question, that Human Resources Code section 32.036 

permits the TDH to withhold some or all of a medical assistance payment due a service provider 

‘Your question doesfiot implicate article XVI, section 28 of the Texas Constitution, which generally prohibits 

garnishing wages. Even assuming medicaid provider payments are “wages” for purposes of article XVI, section 28, 

that section excepts garnishment “for the enforcement of court-ordered child support payments.” 

*See generally Hum. Res. Code ch. 32 (creating program to provide medical assistance on behalf of needy 

individuals). The medical assistance program is commonly known as “Medicaid.” 

‘See id. 5 32.029. 
William R. Archer, M.D. - Page 2 (DM-477) 

to satisfy the provider’s child-support obligation if the assignment satisfies 42 U.S.C. 

$ 1396a(a)(32)(B). Human Resources Code section 32.036 generally prohibits the assignment or 

garnishment of payments to medicaid providers, unless the assignment is permitted under 42 U.S.C. 

§ 1396a(a)(32): 

(a) Neither medical assistance nor payments to providers of medical 

assistance under this chapter are transferable or assignable at law or in equity. 

(b) No money paid or payable under the provisions of this chapter is 

subject to garnishment. . . 

(c) This section does not apply to the extent that it conflicts with the 

Social Security Act (42 USC. Section 1396a(a)(32)). 

The United States Code requires a state plan for medical assistance to permit the assignment 

of medicaid provider payments if the assigmnent is to a governmental agency or if a court order 

establishes or orders the assignment (or in other specific circumstances not relevant here): 

A State plan for medical assistance must- 

(32) provide that no payment under the plan for any care or service 

provided to an individual shah be made to anyone other than such individual 

or the person or institution providing such care or service, under an 

assignment or power or attorney or otherwise; except that- 

(A) . . 

(B) nothing in this paragraph shall be construed (i) to prevent the 

making of such a payment in accordance with an assigmnent from the person 

or institution providing the care or service involved if such assignment is 

made to a governmental agency or entity or is established by or pursuant to 

the order of a court of competent jurisdiction, or (ii) . .4 

A state’s failure to permit assigmnents allowed by federal law may lead to the loss of federal 

funding.5 

. . 

‘42 USC. $ 1396a(a)(32). 

‘See 42 USC. 5 1396 (authorizing federal government to appropriate funds for state medical assistance plans 

that United States Secretary of Health and Human Services has approved); Connecticut Hosp. Ass’n Y. O’NeiN, 793 F. 

(continued...) 

p. 2700 
William R. Archer, M.D. - Page 3 (DM-477) 

The legislature added subsection(c) in 1997 to clear up an apparent conflict with 42 U.S.C. 

5 1396a(a)(32).6 Prior to the 1997 amendment, a court might apply section 32.036 and 42 U.S.C. 

8 1396a(a)(32) and reach conflicting results. In In re Missionary Baptist Foundation of America, 

Inc. v. First National Bank’ the United States Court of Appeals, Fifth Circuit, compared the pre-1997 

version of Human Resources Code section 32.036 with 42 U.S.C. 8 1396a(a)(32) and concluded that 

“cases decided under them could . . come out differently, depending upon which applied.“* 

According to the court, the state statute “is broader and more rigid in its prohibitions.‘* Arguably, 

before the 1997 amendment, Human Resources Code section 32.036 absolutely prohibited paying 

medicaid service provider payments to any assignee of the service provider. By contrast, 42 U.S.C. 

5 1396a(a)(32) permits payments to certain assignees. Since the 1997 amendment became effective, 

however, the state law comports with 42 USC. 5 1396a(a)(32). 

Whether a particular transfer is an assignment that satisfies 42 U.S.C. $ 1396a(a)(32)(B) is, 

of course, a fact question that cannot be resolved in the opinion process.“’ The transfer first must 

be a valid assigmnent. ” If it is , the assigmnent must be either made to a governmental agency or 

entity or established by or in accordance with the order of a court of competent jurisdiction. In the 

case of child-support payments, for instance, the assignment may be to a governmental entity (the 

Supp. 47,49 (D. CQM. 1992) (stating that state my choose whether to participate in Medicaid program under Social 

Security Act, 42 U.S.C. $5 1396-1396v. but if state chooses to participate, it must comply with all federal statutory and 

regulatory requirements); see also Team Dep’t ofHuman Servs. v. Christian Care Cm., Inc., 826 S.W.2d 715,711 (Tex. 

App.--Austin 1992, writ denied) (stating that Medicaid program requires state and federal governments to cooperate 

to ensure that Texas qualifies for federal matching funds). 

%See Act of May 7, 1997,7Sth Leg., R.S., ch. 216,s 1, 1997 Tcx. Gen. Laws 1086, 1086; see also Senate 

Comm. on Health & Human Servs., Bill Analysis, S.B. 614,75th Leg., R.S. (1997); House Comm. cm Public Health, 

Bill Analysis, H.B. 1634,75th Leg., R.S. (1997) (companion bill to S.B. 614). 

‘796 F.2d 752 (5th Cir. 1986). 

*Id. at 758; see also Senate Comm. on Health&Human Servs., Bill Analysis, S.B. 614,75th Leg., R.S. (1997) 

(noting Fifth Circuit decision that conflict between state law and federal law could result in different outcomes); House 

Comm. on Public Health, Bill Analysis, H.B. 1634,75th Leg., R.S. (1997) (companion bill to S.B. 614) (same). 

‘In re Missionary Baptist Found. ofAmerica, 796 F.2d at 758. 

.I 

?%e, e.g., Attorney General Opinions DM-98 (1992) at 3, H-56 (1973) at 3, M-18; (1968) at 3.0-2911 (1940) 

at 2. 

“An assignment is a contract between two parties to transfer a property, right, 01 interest from one party, the 

assignor, to the other party, the assignee. See University of Tex. Med. Branch Y. Allan, 777 S.W.2d 450.452-53 (Tex. 

App.--Houston [14th Dist.] 1989, no writ). See generoNy 7 TEX. JUR. 30 Assignments $5 23-31 (1997) (discussing 

requisites and validity of assignments). 

p. 2701 
William R. Archer, M.D. - Page 4 (DM-477) 

state’s Title IV-D agency or the “local registry”)‘2 or it may be established by or in accordance with 

an order of the court with jurisdiction over the child-support matter.” 

This result is entirely consistent with the purpose of the federal law. The United States 

Congress adopted what is now subdivision (32)(A) of 42 U.S.C. 8 1396a(a) in 197214 and adopted 

the substance of what is now subdivision (32)(B) five years later.” The House Interstate and Foreign 

Commerce Committee explained that the purpose of both the 1972 and 1977 amendments to the 

Social Security Act was to stop the assignment of medicaid receivables to “factoring” agencies, 

which purchased medicaid accounts receivable at a discount and allegedly sent the government 

inflated bills: 

In 1972, the Congress took action to stop a practice under which some 

physicians and other persons providing services under medicare and medicaid 

reassigned their medicare and medicaid receivables to other organizations or 

groups. Under the conditions of these reassignments, the organizations or 

groups purchased the receivables for a percentage of their face value, 

submitted claims and received payments in their name. By 1972, it had 

become apparent that such reassignments were a significant source of 

incorrect and inflated claims for services paid by medicsre and medicaid. In 

addition, cases of fraudulent billings by collection agencies and substantial 

overpayments to these so-called “factoring” agencies were also found. 

Congress concluded that such arrangements were not in the best interest 

of the government or the beneficiaries served by the medicare and medicaid 

programs. The Social Security Amendments of 1972, . . therefore, included 

a prohibition against the payment for covered services to anyone other than 

the patient, his physician, or other person who provided the service, unless 

the physician or other person is required as a condition of his employment to 

turn his fees over to his employer, or unless the physician or other person has 

an arrangement with a facility under which the facility bills for such services. 

Despite these efforts to stop factoring of medicare and medicaid bills, 

some practitioners and other persons have circumvented the intent of the law 

by use of a power of attorney. The use of a power of attorney allows the 

factoring company to receive the medicare or medicaid payment in the name 

‘%ze Fan. Code $§.158.103(7), .203(a). 

“Seeid. $5 158.001, .011, ,105. 

“See Social Security Amendments of 1972, Pub. L. No. 92-603, $236(b), 86 Stat. 1329,1415 (1972). 

“See Medicare-Medicaid Antifraud and Abuse Amendments, Pub. L. No. 95-142, 5 2(a)(3), 91 Stat. 1176 

(1977). 

p. 2702 
William R. Archer, M.D. - Page 5 (DM-477) 

of the physician thus allowing the continuation of program abuses which 

factoring activities were shown to produce in the past. 

The bill would modify existing law to preclude the use of a power of 

attorney as a device for reassignments of benefits under medicare and 

medicaid, other than an assignment to a governmental entity or 

establishment, or an assigmnent established by or pursuant to the order of a 

court of competent jurisdiction. .I6 

Assigning all or part of a medical assistance payment to pay a child-support obligation or arrearage 

is, in our opinion, vastly different from the factoring arrangements the federal law is designed to 

preclude. 

Although you ask only about the TDH’s authority to withhold some or all of the medical 

assistance payment under Human Resources Code section 32.036, we believe your question raises 

a second issue. Assuming that a court of competent jurisdiction has issued an order under Family 

Code section 154.007 or 158.001 directing an “employer” to withhold a percentage of a childsupport payor’s disposable “earnings, ” is the TDH subject to it when paying medical assistance 

payments to service providers? We conclude that it is. 

First, we conclude that TDH is an employer in the context of Family Code chapter 158. 

Family Code sections 154.007 and 158.001 require a court, in any proceeding ordering, modifying, 

or enforcing child-support payments, to direct a child-support obligor’s employer to withhold up to 

fifty percent of the obligor’s disposable earnings to pay child-support obligations and any 

arrearage.17 Family Code section 101.012 defines employer for chapter 158, and the definition 

encompasses relationships other than a typical “employment” relationship: “‘Employer’ means a 

person, corporation, partnership, workers’ compensation insurance carrier, governmental entity, the 

United States, or any other entity that pays or owes earnings to an individual. . . .” Assuming for the 

moment that medicaid payments to a service provider are earnings, the TDH is a governmental entity 

that pays earnings to an individual. 

Second, we conclude that medicaid payments to service providers are earnings in the context 

of Family Code chapter 158. The term earnings is defined, for purposes of chapter 158, in Family 

16H R REP. NO. 393(11), 95th Gong., 1st Sess. 48-49 (1977), reprinted in 1977 U.S.C. 3039, 3051-52; see also 

id. at 1, reprinled in 1977 U.k. 3039, 3040; In re Missionary Baptist Found. ofAmerica u First Nat? Bank, 796 F.2d 

752,757 1x.6 (5th Cir. 1986). 

“See ako Fam. Code 5 158.009 (establishing maximum amount that may be withheld from earnings). Family 

Code sections 154.007 and 158.001 authorize the state’s “Title N-D agency,” which is the Offkx of the Attorney 

General, see id. $ 231.001; see also id. 5 231.0011, to issue orders directing an employer to withhold a percentage of 

a child-support obliger’s earnings. We do not consider in this opinion whether an order of the state’s Title N-D agency 

is a court order for purposes of 42 USC. 5 1396a(a)(32)(B). 

p. 2703 
William R. Archer, M.D. - Page 6 (DM-477) 

Code section 101.011. Like the applicable definition of employer, the definition of earnings is 

broad, encompassing more than hourly wages or annual salary: 

“Earnings” means a payment to or due an individual, regardless of source 

and how denominated. The term includes a periodic or lump-sum payment 

for: 

(1) wages, salary, compensation received as an independent contractor, 

overtime pay, severance pay, commission, bonus, and interest income; 

(2) payments made under a pension, an annuity, workers’ compensation, 

and a disability or retirement program; and 

(3) unemployment benefits. 

Certainly, a payment to a medical assistance provider for professional services he or she rendered 

to a medicaid recipient is “a payment to or due” the provider. 

p. 2704 
William R. Archer, M.D. - Page 7 (DM-477) 

SUMMARY 

Consistent with Human Resources Code section 32.036, the Texas 

Department of Health may allocate all or part of a service provider’s medical 

assistance payments to satisfy the provider’s child-support obligation if the 

service provider has assigned the payment to a government ~agency or if the 

assigmnent was established by or in compliance with a court order issued by 

a court of competent jurisdiction. 

The Department of Health is an “employer” subject to a court order 

issued under Family Code section 154.007 or 158.001 when it pays medical 

assistance payments to a service provider. Additionally, medicaid payments 

are “earnings” subject to such a court order. 

DAN MORALES 

Attorney General of Texas 

JORGE VEGA 

First Assistant Attorney General 

SARAH J. SHIRLEY 

Chair, Opinion Committee 

Prepared by Kymberly K. Oltrogge 

Assistant Attorney General 

p. 2705