MEDI-CAL
LIENS PREEMPTED BY FEDERAL LAW
OLSZEWSKI
V. SCRIPPSHEALTH
The California Court of
Appeal for the Fourth Appellate District has held that state law
permitting liens to recover the full amount paid by a provider from a Medi-Cal
patient is preempted by federal law.
In Olszewski v.
ScrippsHealth (2001) 01 CDOS 3683, a patient was injured in a car
accident and her medical bills were well in excess of $200,000.
Medi-Cal paid her health care provider approximately $200,000 as
payment in full and federal law prohibited the provider from collecting
the difference from the patient. However,
when the patient sued the tortfeasor to recover for her injuries,
including her medical expenses, state law allowed the provider to file a
lien on any recovery by the patient and obtain reimbursement for the
entire medical bill and not just on the amount paid by Medi-Cal.
The court held that
federal Medicaid law prohibiting the provider from balance-billing the
patient for amounts not paid by Medi-Cal preempted state law allowing the
provider to seek reimbursement from the patient for the entire amount of
the medical bill should she recover damages from the tortfeasor.
The court rejected the
argument that the lien should not be preempted if reimbursement from the
patient is limited only to those amounts recovered by the patient from the
tortfeasor in excess of the amount paid by Medi-Cal because under case
law, the patient’s recovery from the tortfeasor for medical expenses is
already limited to that paid by Medi-Cal.
Olszewski
is of significance to health plans and health maintenance organizations
because it clearly preempts third party reimbursement actions to recover
amounts in excess of that paid by Medi-Cal.
Olszewski is of significance to physicians and their
professional liability insurers because it appears to invalidate Medi-Cal
liens that can make settlements of malpractice actions problematic.
Case law has held that Medi-Cal liens are allowed in malpractice
actions, notwithstanding MICRA.
However, it is unclear
whether liens and related third party reimbursement actions would still be
preempted if the amount sought to be recovered by the provider was exactly
the amount paid by Medi-Cal.
The
court also held that the patient could not sue the provider for unfair
competition under Business and Professions Code section 17200 because the
provider’s actions were permitted under state law, or sue under common
law torts for the provider’s lien because of the litigation privilege.
