Opinion ID: 2602444
Heading Depth: 2
Heading Rank: 3

Heading: utah medicaid provisions

Text: ¶ 28 Utah's Medicaid provisions address the federal requirements of assignment and reimbursement, but in an apparent effort to ensure the state a high degree of flexibility with regard to both the source and extent of reimbursement, are so broadly drafted as to permit acts that go beyond the limits set by federal law. The statute reads: The department's claim to recover medical assistance provided as a result of the injury... is a lien against any proceeds payable to or on behalf of the recipient by that third party. Utah Code Ann. § 26-19-5(1)(b) (1998) (emphasis added). The state lien provision on its face exceeds federal limits both as to the source and extent of permissible state recovery, since it allows a lien to attach to proceeds on which the recipient has a legal claim and also appears to allow the lien to attach to any proceeds, rather than only to those designated for medical expenses. ¶ 29 In Wallace and S.S. a majority of this court saved the state's lien provision from preemption by the federal anti-lien provision by holding that the settlement proceeds to which the state's lien attaches are the property of the third party, not the designated beneficiary of the settlement. While this reading operated to spare the statute from actual conflict with federal law, it comports awkwardly with well-established Utah law determining the effects of judgments on property rights. The court's interpretation of Utah's lien provision rested on the assumption that the subject matter of a judgment (the value determined to be owed to the judgment creditor) is not the property of the judgment creditor at the moment judgment is entered, but remains the property of the judgment debtor. This analysis is difficult to reconcile with other provisions of Utah law that give a judgment creditor a lien in some of the assets of the judgment debtor at the moment judgment is entered: [T]he entry of judgment by a district court creates a lien upon the real property of the judgment debtor .... located in the county in which the judgment is entered. Utah Code Ann. § 78-22-1(2) (Supp.2001)(current version at Utah Code Ann. § 78-22-1(7)(a) (Supp.2001)). [5] While under Utah law a judgment does not of its own force immediately transfer ownership of real property to the judgment creditor, by statute a judgment does, the moment it is entered, create a lien on certain types of property owned by the judgment debtor. When this lien is enforced through execution and sale, [6] the proceeds are the property of the judgment creditor. While that property could be made subject to other liens by other creditors, it remains indisputably the property of the judgment creditor; indeed, other liens may attach precisely because the property belongs to the judgment creditor. ¶ 30 While the judgment lien created upon entry of a judgment is not equivalent to ownership of the property to which the lien attaches, it is a form of security for payment that can be readily transformed into ownership. This court has had occasion to observe that a judgment lien has always been regarded as the highest form of security to a [creditor]. [7]  Belnap v. Blain 575 P.2d 696, 700 (Utah 1978) (citation omitted). Absent explicit statutory language to that effect, it seems unlikely the legislature intended to eliminate judgment liens or to postpone their attachment when the judgment creditor is a Medicaid recipient. [8] The conclusion in S.S and Wallace that the subject matter of a judgment remains the property of the third-party debtor until after Medicaid is reimbursed thus fits awkwardly with a legislative scheme that gives the judgment creditor, at the moment a judgment is entered, a legal interest in property that can be converted into ownership of proceeds through execution and sale. [9] The court's preliminary resolution of the potential conflict between state and federal lien provisions rests on the assumption that the recipient has no legal interest in the proceeds of a judgment; this position is not consistent with Utah statutory and common law concerning the effect of a judgment on the judgment creditor's interest in the subject matter of the judgment. ¶ 31 If Utah's Medicaid statute permits the state to obtain a lien on what is in fact the recipient's property, then Utah's lien provisions would be subject to preemption under the conflict aspect of the preemption model outlined above. A state law that explicitly permits what is clearly prohibited by federal law makes compliance with both laws impossible. ¶ 32 The notion in Wallace that the money realized from third-party settlements or judgments remains the property of the third party is not an argument informed by Utah's law of property or judgments, but an argument based on statutory construction. The opinion observed that sections of a statute should be harmonized wherever possible to avoid any conflict between them. Wallace, 972 P.2d at 448. The perceived conflict, however, was not a conflict between state and federal law, but rather one between different provisions of the federal Medicaid statute. Wallace treated the anti-lien provisions of 42 U.S.C. § 1396p(a)(1) as potentially conflicting with the mandate that states collect sufficient information to enable them to seek reimbursement from third parties. Id. (citing 42 U.S.C. § 1396a(a)(25)(A)). Congress, the reasoning went, could not have intended that the anti-lien provision would interfere with collection efforts against liable third parties: Congress could not have intended to prohibit or inhibit third-party recoveries which it directed in the same Social Security Act .... [The anti-lien provision] has coexisted for many years with 42 U.S.C. § 1396a(a)(25)(A), a sister section in the Act, which mandates states to seek reimbursement from third parties who are legally liable for the medical payments. Wallace, 972 P.2d at 448. If the third-party liability recognized in a judgment or settlement remains the property of the third party, then it can be the subject of the state's recovery efforts without violation of the anti-lien provisions. ¶ 33 Wallace's resolution of the potential conflict between obligations to collect reimbursement and to protect some of the recipient's assets did accomplish the goal of harmonizing federal provisions with each other, but it did not address the more important issue of federal goals and state law, required by preemption analysis. As explained above, the federal provisions can more properly be harmonized by looking to their plain meaning, and without reference to state law. Federal assignment provisions require a recipient to assign claims for medical care to the state as a condition of eligibility for Medicaid. Once these claims are assigned, they are no longer the property of the recipient, but of the agency to whom they are assigned. In pursuing the liability of third parties for medical expenses, or in enforcing a lien on proceeds payable by a third party for medical expenses, the state is enforcing its own property rights and not those of the recipient, who has already assigned them to the state. ¶ 34 The Minnesota Supreme Court has recently adopted this interpretation of the federal law and its preemptive implications relative to state law in Martin v. Rochester, 642 N.W.2d 1 (Minn.2002). The Minnesota court likens a tort victim's claims against a liable third party to a bundle of sticks; federal law requires that certain sticks in the bundlecertain causes of action arising out of the incident that created the need for medical assistancebe assigned to the state, but allows any other causes of action to remain the property of the recipient. Id. at 30. ¶ 35 The analogy to the bundle of sticks, familiar to students of property law, operates to harmonize federal collection provisions with the protections federal law creates for the assets of Medicaid recipients. Federal assignment requirements do not, under this approach, conflict with the anti-lien provision because the event that gives rise to a need for medical care also creates multiple rights. While federal law requires that a Medicaid recipient assign the state all rights to recover for medical expenses from any liable third party, the recipient retains all rights to recover for any other damages: [T]he state becomes the sole owner of the claim against any third parties for medical expenses. But the recipient retains ownership of the remaining sticks in the bundlethat is to say, the claims for pain and suffering, emotional distress, disability, disfigurement, loss of earnings, and loss of earning capacity. Martin, 642 N.W.2d at 30-31. State laws providing for liens on that portion of a settlement or judgment designated for medical expenses do not conflict with federal anti-lien provisions because the rights to these proceeds have been completely assigned to the state and are thus no longer a recipient's property. [10] State liens on proceeds designated for damages other than medical expenses violate the federal prohibition on liens since those proceeds have not been assigned and thus remain the recipient's property. ¶ 36 The property created by a third party's liability is not a single, undifferentiated mass, nor is a recipient's claim on any element of that property necessarily identical to her claim on any other element. The Martin court rejects the analysis in cases such as S.S. and Wallace because of their unwillingness to recognize that a personal injury tort action against potentially liable third parties comprises more than a right to recover for medical expenses. The tort action includes claims for pain and suffering, emotional distress, loss of earnings, and other familiar tort claims. The part of any settlement attributable to these unassigned claims is the property of the medical assistance recipient during his life, and the state has no right to these claims under the assignment. So while the . . . [Utah court is] correct in ... [its] conclusion ... that a recovery for medical expenses is not the property of a medical assistance recipient... [it] ignore[s] the part of the recovery or settlement for claims other than medical expenses. Martin, 642 N.W.2d at 23-24. The Martin court links the federal assignment and collection provisions: it is only claims for medical expenses that have been assigned and it is only proceeds of claims for medical expenses that the state can collect. The state obtains the right to precisely what has been assigned; the federal anti-lien provision prevents the state from acquiring a broad and undifferentiated right to collect its reimbursement from any other proceeds payable by the third party to the recipient. ¶ 37 A sweeping and indiscriminate right to third-party payments, rejected by the Martin court, is precisely what the majority today creates. If the rights assigned and retained by a recipient are not differentiated, then a state may obtain reimbursement even from payments designated for causes of action and damages other than those for medical expenses. The court today reaches the conclusion that because our precedent allows liens on settlement proceeds, a priority lien on a recipient's third-party settlement proceeds does not encumber the recipient's property, even if those proceeds include compensation for nonmedical claims. (emphasis added). The measure of the state's recovery thus becomes the state's expenditures, not the amount of the third party's liability. This result is not compelled by our precedents; even if third-party payments remain the property of the third party until after Medicaid is reimbursed, it does not necessarily follow that all third-party payments, however designated, may be used to reimburse the state. ¶ 38 Two years ago this court addressed the extent to which the state can recover its expenditures against settlement proceeds. See Office of Recovery Servs. v. McCoy, 2000 UT 39, 999 P.2d 572. While the majority's language might appear to give the state the right to satisfy its lien against the entire proceeds payable to the recipient, the holding should be restricted to its facts, and its language should not be over-read. In McCoy the court read the state lien provision as giving the state a lien against the entire settlement proceeds, including both the amount designated as medical payment and the amount designated as bodily injury payment. Id. at ¶ 12. What is comprehended in a settlement for bodily injury is difficult to define, and may be virtually indistinguishable from payment for medical expenses. Because a payment for bodily injury may include, and, indeed, may be limited to, payments for medical expenses, McCoy need not be read to compel the holding that claims for damages not assigned to the stateand not required to be assigned to the stateand clearly designated as payments for damages other than medical expenditures, can be the subject of a state lien to recover Medicaid expenditures. ¶ 39 Not only do our precedents not require the conclusion that all third-party settlements are available in their entirety to satisfy state claims for Medicaid reimbursement, there is in fact support in our case law for the proposition that the recipient retains some claimsand some rights to payment despite state assignment provisions. The majority opinion in Wallace holds that harmony between the federal assignment and anti-lien provisions may be achieved if that part of the insurance proceeds assigned ... [by the recipient] to the state are considered to not be ... [the recipient's] property.... Wallace, 972 P.2d at 448 (emphasis added). Our precedent recognizes that only some of the proceeds, only some of the rights to payment, are assigned to the state, and that those rights that are not assigned are retained by the recipient. If only a part of the insurance proceeds is assigned to the state, the state cannot collect against payments flowing from those rights retained by the recipient. ¶ 40 Even if our precedent to the effect that state liens on third-party payments do not violate federal anti-lien provisions is correct, the conclusion that the state's lien must be satisfied to its full extent before the recipient may have any interest in the payments does not necessarily follow. The state has an interest in property in the hands of a third party because of the relationship between that third party and the recipient; the relationship that creates the state's interest may be construed as limiting the extent of the state's interest. An analogy to the rules governing garnishment illustrates the point: having a right to property in the hands of a third party does not necessarily create an entitlement to the entire obligation owed by the third party. Utah Rule of Civil Procedure 64D governs garnishment, the process by which debts and other obligations owed by a third party to a debtor may be reached by the debtor's creditors. The fact that garnishment provides a means by which third-party obligations may be reached, however, does not mean that the circumstances of the relationship between debtor and garnishee may be ignored. The right of setoff embodied in Utah Rule of Civil Procedure 64D(m) demonstrates the continuing importance of the relationship between debtor and garnishee in determining the extent of the garnishor's right to be satisfied from the third party's property. Possession of a lien includes no guarantee of its full satisfaction. ¶ 41 The state Medicaid provisions on which we relied in McCoy are not completely without ambiguity. Utah law provides that the department may recover in full from the recipient or any party to which the proceeds [11] were made payable 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)(b) (1998). Whether or not this provision guarantees full reimbursement depends on the construction placed on the word may. May can either suggest that it is possible that the state will recover its expenditures in full or that the state is invariably allowed to recover in full. While nothing in the statute compels the interpretation that a full recovery is only a permissible, not an inevitable, outcome, it is equally true that the statute does not require the result the court reaches today.