The California Supreme Court rules that a state law allowing providers who treat Medi-Cal (Medicaid) beneficiaries to assert a lien against the beneficiary's entire recovery from a third-party tortfeasor violates the federal Medicaid statute's ban on balance billing. Olszewski v. Scripps Health (Cal., No. S098409, June 2, 2003).
Cimarron Olszewski, a minor Medi-Cal (Medicaid) beneficiary, received emergency care from Scripps Health, a medical care provider that participates in the Medi-Cal program. After accepting Medi-Cal reimbursement for its care, Scripps Health asserted a lien against Cimarron's personal injury proceeds for the "customary charges" for the medical services it provided. A California "balance billing" law allows providers who receive Medi-Cal reimbursement to assert such liens as long as they first refund the Medi-Cal payment to the state.
Cimarron filed a class action, arguing that the California law under which Scripps Health sought recovery violated federal law, and she sought restitution and damages.
The trial court ruled that federal law did not preempt Scripps Health's statutory right to assert the lien and that safe harbor protections barred her tort claims. The Court of Appeal disagreed with the trial court on the preemption issue and concluded that federal Medicaid law preempted the California law.
The Supreme Court of California agrees with the appellate court that federal Medicaid law preempts the "balance billing" law and that Scripps Health's lien against Cimarron's personal injury proceeds is unenforceable. The court finds that the relevant federal 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."
However, in a June 9, 1997, letter by the Acting Director of the Medicaid Bureau of the Health Care Financing Administration, the court finds a means by which such a state statute could comport with federal law. The letter states that federal law would not preclude the practice of providers pursuing payment in excess of Medicaid reimbursement as long as a state satisfies two conditions: the state must assure that Medicaid is made whole before the provider recovers any money, and the state must protect the assets of Medicaid beneficiaries by limiting provider recovery to the portion of the award specifically allocated for the beneficiary's medical expenses. The court notes that it issues its ruling "reluctantly" because in doing so "we give the third party tortfeasor a windfall at the expense of the innocent health care provider." The court urges a legislative remedy. The court also finds that the trial court properly dismissed the tort claims.
For the full text of this decision, go to: https://scocal.stanford.edu/opinion/olszewski-v-scripps-health-33306
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