Court bars collecting fees beyond Medicaid pay

The ruling says health care professionals in Louisiana can’t recoup from Medicaid patients any money from third-party settlements.

By — Posted Aug. 16, 2013

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A federal judge in Louisiana ruled that health care professionals cannot be permitted to recover any money for care of Medicaid patients beyond what the program pays them, even if those patients receive compensation for their injuries from third parties.

An internal state regulation had enabled hospitals or other Medicaid professionals to seek collection of any payments that exceeded what they had been paid by the program in the event a third-party liability recovery were involved.

The court case involved Joseph Taylor Jr., a Louisiana man who was issued a lien by the health care system that treated his injuries in an attempt to collect some of the money paid by a third-party source. But on July 30, U.S. District Court Judge Brian A. Jackson said in a final judgment that federal Medicaid statute preempted what was in the state’s regulation.

Under federal law, a physician or other professional that treats a Medicaid recipient “is supposed to only charge and collect the amount that Medicaid pays. So if a bill is $1,000 and Medicaid pays $200, then that’s all they get,” said J. Lee Hoffoss Jr., an attorney in Lake Charles, La., who represented Taylor.

Taylor had been struck by a vehicle while crossing the street and then treated at University Medical Center in Lafayette for his injuries. The state’s Medicaid program paid more than half of what amounted to a $2,579 hospital bill, leaving a balance of about $1,000. In the meantime, Taylor had reached a $10,000 settlement with the individual who hit him with his car.

But before Taylor had a chance to collect that sum, University Medical Center, which at the time had been part of the Louisiana State University system, “filed a lien not only against the third-party liability insurance company, but a lien on me, his attorney, saying that we couldn’t disperse any settlement funds” without first paying the hospital’s outstanding bill, Hoffoss said.

The hospital claimed that it wasn’t seeking these funds directly from the patient; it was trying to collect from third-party sources. Hoffoss’ argument was that the hospital was attempting to collect these funds while the money was en route to Taylor, which “violated clear and unambiguous federal law prohibiting such collection practices.”

Hundreds of liens affected

LSU eventually dismissed the lien against Taylor, and the cause of action went away, which left the state’s regulation as the only outstanding issue in this case. Weldon J. Hill II, the attorney that represented the Louisiana Dept. of Health and Hospitals, wrote in court documents that “federal regulations were never intended to protect third-party tortfeasors,” and that the state’s internal regulation had been implemented under the approval of the federal Centers for Medicare & Medicaid Services.

“What we sought in our lawsuit is to have that internal hospital regulation declared invalid because it conflicted with federal law. And that’s what the judge found,” Hoffoss said.

Medicaid serves as a means-tested program for low-income families and individuals, Jackson indicated in an earlier decision issued in March. “Congress did not intend for providers to receive Medicaid reimbursement for patient care and then intercept funds that the patient would otherwise receive. Once a health care provider has received Medicaid coverage for a patient, it is precluded from recovering more than the program’s reimbursement rates for care,” the judge wrote.

The outcome of this ruling likely “turns over and voids probably hundreds of liens in the state of Louisiana and requires the health care providers to actually follow the law,” Hoffoss observed. “Anybody who accepts Medicaid has to follow the Medicaid laws.”

In a statement, the Louisiana Dept. of Health and Hospitals said it was reviewing the judge’s ruling and looking at options for possible next steps. “We’ve not made a final decision on if we’ll appeal. The lawsuit will have no impact on the Medicaid program or our providers,” the department said.

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