Calvanese v. Calvanese

Decision Date06 April 1999
Docket NumberNos. 55,59,s. 55
Citation93 N.Y.2d 111,688 N.Y.S.2d 479,1999 WL 215967,710 N.E.2d 1079
Parties, 710 N.E.2d 1079, 1999 N.Y. Slip Op. 3023 Robin Krakower CALVANESE, Appellant, v. Anthony J. CALVANESE, et al., Defendants, County of Westchester, Nonparty Respondent. In the Matter of Frances Callahan. Suffolk County Department of Social Services, Respondent, Patricia Callahan, Appellant.
CourtNew York Court of Appeals Court of Appeals
OPINION OF THE COURT

KAYE, Chief J.

In Cricchio v. Pennisi, 90 N.Y.2d 296, 660 N.Y.S.2d 679, 683 N.E.2d 301, this Court held that the Department of Social Services is entitled to satisfy a Medicaid lien placed on the proceeds of a personal injury settlement pursuant to Social Services Law § 104-b before a plaintiff may transfer those funds to a supplemental needs trust. * The appeals now before us present a question left open in Cricchio: is the entire amount of a personal injury settlement available to satisfy a Medicaid lien, or only that portion of the settlement specifically allocated to past medical expenses?

The relevant facts of these cases may be stated briefly. Appellants received Medicaid benefits for injuries they suffered allegedly due to the negligence of third parties. They commenced personal injury actions against the third parties, which eventually settled. Even though a Medicaid lien was placed on both settlements, neither provided for any payment to satisfy the liens. Instead, the net settlement proceeds were allocated to appellants' pain and suffering, and Supreme Court approved the transfer of those funds to supplemental needs trusts for appellants' benefit.

In both cases, the Appellate Division reversed the Supreme Court orders establishing the supplemental needs trusts. Reasoning that "[n]one of the assignment, subrogation, and recoupment provisions *** limit the right of recovery by DSS to that portion of the settlement proceeds intended to compensate the plaintiff for past medical expenses," the Appellate Division held that all settlement proceeds are available to satisfy a Medicaid lien, and that appellants could transfer settlement funds to a supplemental needs trust only after the liens were paid (Calvanese v. Calvanese, 250 A.D.2d 564, 565, 672 N.Y.S.2d 410; see also, Matter of Callahan, 254 A.D.2d 415, 678 N.Y.S.2d 741). We agree, and accordingly affirm in both cases.

Medicaid is a jointly funded Federal and State program that pays for necessary medical care of qualifying indigent persons (see, 42 U.S.C. § 1396 et seq.; Social Services Law § 363 et seq.). In order to contain program costs and ensure that Medicaid remains the "payor of last resort" (S.Rep. No. 146, 99th Cong., 2d Sess. 1, 312, reprinted in 1986 U.S.Code Cong. & Admin.News 42, 279), States must "take all reasonable measures to ascertain the legal liability of third parties *** to pay for care and services available under the plan," and seek reimbursement from them (42 U.S.C. § 1396a[a][A], [B] ). Federal law also requires Medicaid recipients to "cooperate with the State in identifying, and providing information to assist the State in pursuing, any third party who may be liable to pay for care and services available under the plan," unless good cause exists for the refusal to cooperate (42 U.S.C. § 1396k[a][C]; see also, 42 CFR § 433.145[a] ).

Such cooperation requires Medicaid applicants to assign to the State the right to seek reimbursement from any third party up to the amount of medical assistance paid (42 U.S.C. § 1396k[a][A]; Social Services Law § 366[h]; 18 NYCRR 360-7.4[a] ). In New York, as a corollary to this assignment, the local social services district is subrogated, to the extent of its expenditures for medical care furnished, to any rights a Medicaid recipient may have to third party reimbursement (Social Services Law § 367-a [b]; 18 NYCRR 360-7.4[a] ). Pursuant to this assignment and subrogation scheme, the Department "obtains all of the rights that the recipient has as against the third party to recover for medical expenses, including the ability to immediately pursue those claims against the third party" (Cricchio v. Pennisi, supra, 90 N.Y.2d, at 307, 660 N.Y.S.2d 679, 683 N.E.2d 301).

As an alternative to suing the responsible third party directly, the Department may pursue reimbursement indirectly by placing a lien on personal injury suits brought by a Medicaid recipient against the responsible party (see, Social Services Law § 104-b). A Medicaid lien "shall attach to any verdict, decision, decree, judgment, award or final order in any suit, action or proceeding in any court or administrative tribunal of this state respecting such injuries, as well as the proceeds of any settlement thereof," and continues until discharged by the public welfare official (Social Services Law § 104-b, ). Because section 104-b "is purely procedural," it does not alter the agency's substantive right to recover the amount it has expended on behalf of a Medicaid recipient, and the agency's right to recover is the same whether it sues directly or uses a lien (Baker v. Sterling, 39 N.Y.2d 397, 405, 384 N.Y.S.2d 128, 348 N.E.2d 584).

Pitted against the Department's right to reimbursement in these appeals is appellants' desire to place all of their settlement proceeds into supplemental needs trusts. This Court addressed the relationship between supplemental needs trusts and Medicaid liens in Cricchio v. Pennisi, 90 N.Y.2d 296, 660 N.Y.S.2d 679, 683 N.E.2d 301, supra. The question before us was whether a Medicaid lien placed on the proceeds of a personal injury settlement must be satisfied before those funds could be transferred to a supplemental needs trust. After reviewing the Federal and State assignment and subrogation scheme, we answered in the affirmative. In so doing, the Court left open the issue of what portion of the settlement was available to satisfy the lien:

"Given that the parties did not present any arguments to this Court concerning whether the entire amount of the personal injury settlement or only that portion attributable to past medical expenses is available to satisfy the lien, we do not pass on the question, which must be addressed in the first instance by the court on remittal" (Cricchio v. Pennisi, supra, 90 N.Y.2d, at 309-310, 660 N.Y.S.2d 679, 683 N.E.2d 301).

That open question is now before us.

Appellants argue that only the settlement proceeds specifically allocated to past medical expenses should be available to satisfy the Medicaid lien. Nowhere in the elaborate statutory scheme governing this area of the law, however, is the agency's right of recovery restricted in this manner. A State that has furnished Medicaid acquires the rights of recipients "to payment by any other party for such health care items or services," and must "retain [ ]" from the recovery an amount "as is necessary to reimburse it for medical assistance payments made on behalf of an individual" (42 U.S.C. § 1396a[a] [H]; § 1396k[b] ).

New York's assignment, subrogation and lien provisions effectuate these Federal mandates by imbuing the Department with broad authority to pursue any amount of third party reimbursement to which appellants are entitled. As a condition of eligibility for Medicaid, all applicants and recipients must "assign to the appropriate social services official or the department *** any benefits which are available to him or her individually from any third party for care or other medical benefits available under this title" (Social Services Law § 366[h] [emphasis added]; see also, 18 NYCRR 360-7.4[a] ). Once the Department has furnished Medicaid assistance to an applicant or recipient, it is subrogated to the extent of the expenditures it has made "to any rights such person may have to *** third party reimbursement" (Social Services Law § 367-a[b] [emphasis added]; see also, 18 NYCRR 360-7.4[a] ).

The Department's ability to enforce its right to reimbursement with a lien is correspondingly broad. If any Medicaid recipient has a right of action "on account of any personal injuries suffered by such recipient," the Department has a lien "for such amount as may be fixed by the public welfare official" up to the amount it has expended (Social Services Law § 104-b ). Appellants' proposal that courts--or Medicaid recipients acting in conjunction with responsible third parties--be allowed to compromise Medicaid liens by allocating settlements to specific categories of damages is contrary to statutory mandate. Once a Medicaid lien is in effect, only the local public welfare official may release and discharge it, and "no release, payment, discharge or satisfaction of any *** claim, demand, right of action, suit or counterclaim shall be valid or effective against such lien" (Social Services Law § 104-b ).

In light of the Department's broad statutory obligation to seek reimbursement from responsible third parties, appellants present no justification for circumscribing the Department's recovery from settlement funds. The allocation of funds in the manner that appellants urge would divert available third-party resources...

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