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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 5845

January 21, 1981

MOTOR VEHICLE INSURANCE:

Subrogation to Medicaid benefits

DEPARTMENT OF SOCIAL SERVICES:

Right of subrogation for Medicaid benefits provided

The Department of Social Services has a legal right of subrogation against either the applicable insurer or the insurer designated by the assigned claims facility for Medicaid benefits provided a recipient by the Department at a time when the recipient's entitlement, if any, to insurance coverage could not be readily determined and, thus, was at issue, and such Medicaid benefits may not be deducted from no-fault benefits owing a claimant by the applicable insurer or the insurer designated by the assigned claims facility.

The Honorable Richard H. Austin

Secretary of State

Treasury Building

Lansing, Michigan

You have requested my opinion regarding two questions arising with respect to the no-fault automobile insurance act, 1956 PA 218, ch 31, Sec. 3101 et seq, as added by 1972 PA 294; MCLA 500.3101 et seq; MSA 24.13101 et seq, and the administration of the assigned claims facility established by such statute. Your questions deal with the interpretation of 1956 PA 218, ch 31, supra, Sec. 3109(1), in light of the decision of the Michigan Court of Appeals in O'Donnell v State Farm Mutual Automobile Insurance Co, 70 Mich App 487; 245 NW2d 801 (1976). 1956 PA 218, ch 31, Sec. 3109(1), supra, provides as follows:

'Benefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance benefits otherwise payable for the injury.'

Your questions are:

'Does the O'Donnell decision preclude deduction of Medicaid monies from no-fault benefits received by a claimant from the assigned claims facility?

'If O'Donnell is the governing decision, does the Department of Social Services as administrator of the Medicaid program have a legal right to subrogation against either the insured or the assigned claims plan when a Medicaid recipient has received no-fault insurance benefits from the assigned claims facility?'

Since your questions are related, they will be considered together.

It must first be noted that the Michigan Supreme Court has reviewed the decision of the Court of Appeals in O'Donnell v State Farm Mutual Automobile Insurance Co, 404 Mich 524; 273 NW2d 829, reh den, 406 Mich 1103 (1979), and concluded that the federal social security survivors' benefits must be subtracted from no-fault benefits under 1956 PA 218, ch 31, Sec. 3109(1), supra, but expressly reserved any opinion regarding the effect of such statute vis a vis other government benefits.

However, the Court concurrently issued a decision in a companion no-fault case which is directly on point as regards your questions. In Workman v Detroit Automobile Inter-Insurance Exchange, 404 Mich 477, 498; 274 NW2d 373 (1979), the Court addressed the issue of whether 1956 PA 218, ch 31, supra, Sec. 3109, applies to Medicaid benefits authorized by 1939 PA 280, Sec. 105 et seq; MCLA 400.105 et seq; MSA 16.490(15) et seq.

In Workman, supra, the parties had stipulated that an indeterminate amount of plaintiff's medical expenses had been paid by Medicaid and that the balance awaited final determination of the case. The Court held that Medicaid benefits were not provided or required to be provided under the laws of the state in that plaintiff was ineligible for Medicaid benefits under 1939 PA 280, Sec. 106(2)(b); MCLA 400.106(2)(b); MSA 16.490(16)(2)(b), and stated:

'We perceive plaintiff's Sec. 3107(a) no-fault personal protection insurance coverage with defendant-insurers to constitute ' [medical assistance] available through the legal obligation of a contractor, public or private, to pay or provide for the care without regard to the income or resources of the patient'. As such, plaintiff is expressly precluded from qualifying as a medically indigent individual eligible for medical assistance under the state Medicaid program. This finding requires us to conclude that Medicaid benefits are not in the nature of Sec. 3109(1) benefits 'required to be provided under the laws of any state or the federal government'; any attempted set-off of plaintiff's Medicaid benefits would, therefore, not only be unnecessary but absurd since no 'benefits' exist to be set off.' (Footnotes omitted.) Workman, supra, 501-502.

Further, the Court expressly noted the fact that 1939 PA 280, Sec. 106, supra, requires the provision of Medicaid benefits where the claimant's entitlement to insurance is at issue and it subrogates the Department of Social Services to the claimant's right of reimbursement from the insurer for medical benefits:

'. . . Both Secs. 106(2)(b) and 107 of the Social Welfare Act contemplate that under certain circumstances Medicaid benefits may potentially be made available to medically solvent individuals. (12) In such instances, however, those statutes further provide that the Department of Social Services shall be entitled to a right of either subrogation or reimbursement to the extent of those Medicaid benefits paid.

'12 Similar provision is made in the 1976 amendatory language to Sec. 106(2)(b) of the Social Welfare Act:

"A payment may be withheld under this act for medical assistance for an injury or disability for which the patient is entitled to medical care or reimbursement for the cost of medical care under sections 3101 to 3179 of Act No. 218 of the Public Acts of 1956, as amended, being sections 500.3101 to 500.3179 of the Michigan Compiled Laws, or under any other policy of insurance providing medical or hospital benefits, or both, for the patient unless the patient's entitlement to that medical care or reimbursement is at issue.' MCL 400.106(2)(b); MSA 16.490(16)(2)(b), as amended by 1976 PA 284, Sec. 1 imd eff October 20.

'This provision is qualified by the Department of Social Services statutory right of recovery to the extent of Medicaid benefits paid at such time as the claimant's 'entitlement to [no-fault] medical care' is no longer determined to be at issue.' (Footnotes 10 and 11 omitted.) Workman, supra, 502-503.

It may be difficult for a health care provider to determine, when rendering emergency medical treatment, whether an individual who is otherwise indigent or who is holding the monthly Medicaid eligibility card issued to many recipients, has no-fault insurance coverage available and, therefore, the Medicaid program should not be billed. The Department of Social Services has advised that there are often circumstances involving Medicaid recipients, such as confusion as to whether there are related individuals in the same household who have insured vehicles or whether a Medicaid recipient's own insurance is current, which lead to difficulty in ascertaining whether there is insurance available even where circumstances might allow verification time. Similarly, disputes also often occur between insurers as to respective liability which would make entitlement to insurance at issue.

Moreover, the Department of Social Services daily processes approximately 90,000 claims submitted by medical providers. If the Department of Social Services were to reject all payment on all Medicaid claims for automobile-related injuries until the recipient's entitlement to insurance were finally ascertained, the Medicaid recipient would suffer irreparable harm in the interim. The Legislature, in 1939 PA 280, Sec. 106(2)(b), supra, has wisely permitted such medical care to be provided while entitlement under 1956 PA 218, ch 31, Sec. 3109(1), is in issue and to allow the Department of Social Services to recover from the applicable insurer or the insurer designated by the assigned claims facility to the extent of Medicaid benefits paid.

Therefore, it must be concluded that 1956 PA 218, ch 31, Sec. 3109, supra, as construed in the Workman case, supra, does preclude the deduction of Medicaid benefits from no-fault benefits owed to a claimant by the applicable insurer or insurer designated by the assigned claims facility because such Medicaid benefits are extended to the recipient under circumstances in which his entitlement to insurance coverage may not be readily determined and is at issue at the time Medicaid coverage is extended. Thus, the Department of Social Services has a legal right of subrogation against either the insurer or the assigned claims facility, as authorized by 1939 PA 280, Sec. 106, supra. Workman, supra.

As the Michigan Court of Appeals noted in Tel-Twelve Shopping Center v Sterling Garrett Construction Co, 34 Mich App 434, 441; 191 NW2d 484 (1971):

'. . . [A] person entitled to subrogation stands in the shoes of the creditor, is entitled to the benefits of all the remedies of the creditor, and may use the means which a creditor could employ to enforce payment [although] he can enforce and employ only such rights as a creditor could enforce or use and, therefore, must exercise such rights under the same conditions and limitations as were binding on the creditor. See Michigan Hospital Service v Sharpe (1954), 339 Mich 357.'

Thus, the Department of Social Services, in respect to Medicaid benefits paid, is the 'insured' with respect to recovery of no-fault benefits from the assigned claims facility and may apply for, and is entitled to directly receive, payment of no-fault benefits where its claim is made to the facility. The Department of Social Services also has a right of recovery against a Medicaid recipient who, because the Department had not filed a timely claim with the assigned claims facility, might directly receive no-fault benefits for medical expenses paid for by Medicaid, since the claimant would then be holding monies he had assigned to the Department of Social Services under 1939 PA 280, Sec. 106, supra.

It is my opinion, therefore, that Medicaid benefits provided a recipient by the Department of Social Services when the recipient's entitlement to insurance coverage cannot be readily determined and, thus, is at issue at the time Medicaid coverage is extended, may not be deducted from no-fault benefits owing a claimant by the applicable insurer or the insurer designated by the assigned claims facility. It is further my opinion that the Department of Social Services has a legal right of subrogation against either the applicable insurer or the insurer designated by the assigned claims facility for such Medicaid benefits as it has provided. Where the Department makes its claim for recovery after the applicable insurer or the insurer designated by the assigned claims facility has reimbursed the recipient for Medical expenses, the Department of Social Services has a right of recovery against the Medicaid recipient.

Frank J. Kelley

Attorney General


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