The Biggest Swear Word in Personal Injury Law
What the Heck is Subrogation?
One of Lawyer Mark Jones’ favorite legal subjects to study is the doctrine of subrogation. In the personal injury context, subrogation is anytime your health insurance company seeks reimbursement for amounts the insurance company has paid out for medical treatment concerning your automobile wreck or slip and fall claim.
Subrogation works like this:
- You are injured in a wreck;
- You go to the hospital or other medical provider;
- Your health insurance plan pays out money for your medical care;
- Your health insurance plan learns you were in a wreck, typically from diagnostic codes on the medical bills; and
- Your health insurance plan then sends you a letter claiming a “lien” or “reimbursement” or “subrogation” on any settlement you reach in your automobile accident, slip and fall, trip and fall, or other negligence case
Subrogation claims arise from all types of different health insurance entities:
- Medicare Advantage Organizations
- Medicare Prescription Drug Plans
- ERISA plans
- Federal Employee Health Benefit plans (FEHBA) and many more.
Issue: Subrogation and Federal Pre-emption
To Lawyer Mark Jones, subrogation should be a simple matter of state’s rights. Does the state in which the Plaintiff resides or where the accident happened permit subrogation? If it does, then that should settle the issue. Alabama, for example, permits subrogation. However, Georgia, does not permit subrogation. Simple.
An issue arises when you are dealing with federal entities created under Federal law. Sometimes the Federal government has a nasty habit of claiming their law “preempts” or supersedes state law to the contrary. Thus, sometimes federal agencies claim federal subrogation law applies and supersedes state law that suggests no subrogation is permitted as a matter of state law. (This preemption issue described here is really quite similar to the a current event in the news surrounding medical marijuana. The conflict between federal law outlawing medical marijuana and state laws permitting it is a pre-emption issue).
Some Medicare Advantage Organizations had claimed unsuccessfully that they had subrogation rights equal to that of Medicare itself, even though Medicare Advantage Organizations are actually private insurance agencies who have bid for and won the ability to offer Medicare Part C to seniors. Basically Medicare Part C is a replacement plan created by Congress back when President Bush was in office as a way to “privatize” Medicare — nevermind that these plans receive billions of taxpayer funds to subsidize them.
Until recently, MAOs had consistently lost in federal court regarding their right to receive reimbursement from a client’s injury settlement. However, the tide is turning.
Medicare Advantage Organizations (MAOs) Win Big in Arizona on Subrogation
Lawyer Mark Jones was particularly disturbed to read a recent opinion by the Arizona Court of Appeals. In the Estate of Ethridge v. Recovery Managements Systems, Inc., 2014 Ariz. App. LEXIS 23 (No. 1 CA-CV 12-0740, Feb. 13, 2014), the Arizona Court of Appeals held that the Federal Code of Regulations preempted Arizona’s common law that expressly barred subrogation by health insurers under the “made whole doctrine.” This is particularly concerning because the Court acknowledged in its opinion that there is no federal, private cause of action for MAOs to sue in federal court as a statutory matter. In that regard, see Parra v. Pacificare, 715 F.3d 1146 (9th Cir. 2013). Nevertheless, the Court went on to permit preemption of state law pursuant to the regulations promulgated by an administrative agency — i.e., a federal bureaucrat! — the Secretary of the Department of Health and Human Services. Allowing a single administrative agency in Washington, D.C. to promulgate and modify state law that has been on the books for over 40 years in a state, see State Farm Fire & Casualty Co.v. Knapp, 107 Ariz. 184, 185, 484 P.2d 180 (1971), is quite concerning for any conservative.
Lawyer Mark Jones had argued previously that since there was no federal right of action for Medicare Advantage Organizations in federal court, then state law would control any such claim for subrogation by a Medicare Advantage Organization. State courts do not appear to be adopting this approach, as evidenced by the recent opinion by the Arizona Court of Appeals. Hopefully, this decision will not stay on the books for long! It is not favorable for injured claimants or for state’s rights. The opinion is set out below.[gview file=”http://www.lawyermarkjones.com/wp-content/uploads/2014/02/Estate-of-Ethridge-v.-Recovery-M.pdf”]
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