Opinion ID: 1224505
Heading Depth: 2
Heading Rank: 2

Heading: perfection of lien

Text: Conservators further complained in the trial court that the State had not perfected its lien on the insurance proceeds because it had not submitted evidence of compliance with Utah Code Ann. § 26-19-5. Under that section, the State's claim to recover medical assistance is a lien against proceeds payable to the recipient by liable third parties. Subject to certain conditions, the State may maintain an action on its lien directly against the third party. That section provides that The department shall mail or deliver written notice of its lien to the third party at its principal place of business or last known address. The notice shall include the recipient's name, the approximate date of injury, a general description of the type of injury and, if applicable, the general location where the injury is alleged to have occurred. Utah Code Ann. § 26-19-5(2). This section further provides: (3) The department may commence an action on its lien in its own name[;] however, that lien is not enforceable as to a third party unless: (a) the third party receives written notice of the department's lien before it settles with the recipient; or (b) the department has evidence that the third party had knowledge that the department provided or was obligated to provide medical assistance. Id. § 26-19-5(3). The obvious purpose of this section is to protect a third party who is unaware of the State's lien and settles with the recipient. That, of course, did not happen here because the State has not brought an action against any third party but has, instead, challenged the disposition of insurance funds that are subject to court approval, making notice to any third party irrelevant. Additionally, section 26-19-7(1)(a) provides that a recipient may not file a claim, commence an action, or settle, compromise, release, or waive a claim against a third party for recovery of medical costs for an injury, disease, or disability for which the department has provided ... medical assistance without the department's written consent. This provision protects both the liable third party and the State from ill-informed or devious action by the recipient. In the instant case, the conservators assigned certain insurance benefits to DMBA and also sought to settle with several other insurers without the permission of the State. In such an instance, the department is not bound by any decision, judgment, agreement, or compromise rendered or made on the claim or in the action. The department may recover in full from the recipient all medical assistance which it has provided and retains its right to commence an independent action against the third party. Utah Code Ann. § 26-19-7(2) (emphasis added). Furthermore, the department has an unconditional right to intervene in an action commenced by a recipient for recovery of medical costs connected with the same injury, disease, or disability, for which it has provided or has become obligated to provide medical assistance. Id. § 26-19-7(1)(b). Therefore, regardless of whether the State has a valid lien, the recipient's preemptive action does not cost the State its right to third-party payments which are in settlement or are already in the hands of the beneficiary. The court of appeals recognized this in Estate of Higley, 810 P.2d 436 (Utah Ct.App. 1991), and Camp v. Office of Recovery Services, 779 P.2d 242 (Utah Ct.App.1989), both holding that where the recipient had settled insurance claims without the State's consent, the State could recover full reimbursement from the recipient of its outlay for medical expenses. The conservators further contended in the trial court, and the court agreed, that any lien the State might have is illegal under 42 U.S.C. § 1396p(a), which provides that [n]o lien may be imposed against the property of an individual prior to his death on account of medical assistance paid or to be paid on his behalf under the state plan. The New York Court of Appeals recently addressed this issue in the consolidated appeals of Cricchio v. Pennisi and Link v. Town of Smithtown, 90 N.Y.2d 296, 683 N.E.2d 301, 660 N.Y.S.2d 679 (1997). There, the court stated that as a consequence of the mandatory assignment the settlement proceeds are resources of the third party tortfeasor that are owed to [the state recovery office]. Accordingly, the lien on the settlement proceeds attaches to the property of the third party, and thus does not violate the statutory prohibition against imposing a lien against a beneficiary's property until after his or her death. The flaw in plaintiff's theory that the lien cannot be satisfied until the recipient's death is that it fails to appreciate this critical distinction between the assets of a responsible third party and assets belonging to the Medicaid recipient. 660 N.Y.S.2d 679, 683 N.E.2d at 305 (citations omitted). We agree. Payments made by a third party do not legally become the property of the recipient until after a valid settlement, which necessarily must include reimbursement to Medicaid. Therefore, we hold that the State has a valid assignment and an enforceable right against third-party recoveries for S.S.'s injury up to the amount of Medicaid assistance paid as of the time of the settlement approval.