Roberts v. Total Health Care, Inc.

• Decision Date: 01 September 1996
• Docket Number: No. 76,76
• Citation: 709 A.2d 142,349 Md. 499
• Parties: Georgette ROBERTS et al. v. TOTAL HEALTH CARE, INC. ,
• Court: Maryland Court of Appeals

Page 499

349 Md. 499

709 A.2d 142

Georgette ROBERTS et al. v. TOTAL HEALTH CARE, INC.

No. 76, Sept. Term, 1996.

Court of Appeals of Maryland.

May 14, 1998.

Saul E. Kerpelman, Baltimore, for petitioner.

Monte Fried (Tracey D. King, Wright, Constable & Skeen, L.L.P., on brief), Baltimore, for respondent.

Argued before BELL, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI ^*, RAKER and WILNER, JJ.

ELDRIDGE, Judge.

This case arose out of the lead poisoning of two minor children in 1987. Specifically, the case involves a dispute regarding the payment of the children's medical expenses, which were paid by Total Health Care under contract with the State of Maryland through its Medicaid program. Total Health Care has asserted a statutory and equitable subrogation claim against a tort settlement received by the children in connection with the poisoning, to recoup the amount it paid to treat the children.

I.

The State of Maryland, through the Department of Health and Mental Hygiene, provides comprehensive medical health care assistance to low-income persons who meet certain eligibility requirements. See Maryland Code (1982, 1994 Repl.Vol., 1997 Supp.), §§ 15-101 through 15-124 of the Health-General Article. Most relevant to this case is the provision that, to be eligible for benefits under the program, recipients are deemed to have assigned to the State any rights to payment for medical care from legally liable third parties. Section 15-109(d) currently states as follows:

"(d) Automatic assignment of benefits.--As a condition of eligibility for medical assistance, a recipient is deemed to have assigned to the Secretary of Health and Mental Hygiene or the Secretary's designee any rights to payment for medical care services from any third party who has the legal liability to make payments for those services, to the extent of any payments made by the Department on behalf of the recipient."

Additionally, § 15-120 grants the State a right of subrogation to any cause of action which a program recipient has against a third party for payment of medical services. At all times relevant to the resolution of this case, § 15-120 stated as follows:

" § 15-120. Subrogation claims.

"(a) In general.--If a Program recipient has a cause of action against a person, the Department shall be subrogated to that cause of action to the extent of any payments made by the Department on behalf of the Program recipient that result from the occurrence that gave rise to the cause of action.

"(b) Holding money for Department.--(1) Any Program recipient or attorney, guardian, or personal representative of a Program recipient who receives money in settlement of or under a judgment or award in a cause of action in which the Department has a subrogation claim shall, after receiving written notice of the subrogation claim, hold that money, for the benefit of the Department, to the extent required for the subrogation claim, after deducting applicable attorney fees and litigation costs.

"(2) A person who, after written notice of a subrogation claim and possible liability under this paragraph, disposes of the money, without the written approval of the Department, is liable to the Department for any amount that, because of the disposition, is not recoverable by the Department. * * * "

Thus, § 15-120(a) grants the Department a right of subrogation to any claim that a program recipient may have against a third party, where the third party's actions resulted in medical care for which the Department paid. Section 15-120(b)(1) requires the program recipient or the recipient's attorney to hold funds sufficient to satisfy the Department's subrogation claim from any judgment or settlement proceeds received, upon receiving notice of the subrogation claim from the Department. Finally, § 15-120(b)(2) states that, if anyone required by § 15-120(b)(1) to hold the funds disposes of them, that person will become personally liable on the Department's claim if the Department is later unable to recover the money. Under this section, if after receiving notice of a subrogation claim under § 15-120(a), an attorney releases settlement funds to a client without holding back an amount sufficient to satisfy the subrogation claim, and the Department later is unable to recover the funds from the client, the attorney will be personally liable.

Sections 15-109 and 15-120 represent the State of Maryland's effort to comply with the federal law on medical assistance, which requires states to seek reimbursement for medical assistance payments made where a third party is legally liable for that medical care. See 42 U.S.C. § 1396a(a)(25)(B) (1994) (State plan for medical assistance must provide that "in any case where [third party] legal liability is found to exist after medical assistance has been made available on behalf of [a program recipient] and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery, the State or local agency will seek reimbursement for such assistance to the extent of such legal liability"); 42 U.S.C. § 1396a(a)(25)(I) (1994) (State plan for medical assistance must provide that "the State has in effect laws under which, to the extent that payment has been made under the State plan for medical assistance for health care items or services furnished to an individual, the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or services"); 42 U.S.C. §§ 1396a(45) and 1396k(a)(1)(A) (1994) (State plan must require a program recipient "to assign the State any rights ... to support (specified as support for the purpose of medical care by a court or administrative order) and to payment for medical care from any third party"); 42 C.F.R. §§ 433.135 through 433.154 (1997). ¹

As part of its medical assistance program, the Department contracts with Health Maintenance Organizations (HMOs) to provide medical services to medical assistance recipients, in exchange for monthly per capita payments to the HMO. See Code (1982, 1994 Repl.Vol., 1997 Supp.) §§ 15-103(b)(2)(i), 15-103(b)(18)(i) of the Health-General Article. The Department entered into such a contract with Total Health Care. ² The contract between the Department and Total Health Care contained the following provision:

"9. Third-party Liability

"a. If an enrollee [program recipient] under the terms of this contract has a cause of action against a person, the HMO-MA shall be subrogated to that cause of action to the extent of any payments made, or costs incurred, by the HMO-MA on behalf of the enrollee that result from the occurrence that gave rise to the cause of action. Costs incurred by the HMO-MA may be considered as including the HMO-MA's reasonable and customary charges for services furnished by the HMO-MA's own staff or that of subcontractors.

"b. The Department intends hereby to assign to the HMO-MA its right of subrogation under section 15-120, Health-General Article, Annotated Code of Maryland, but only to the extent to which these rights are assignable under the laws of Maryland. The Department accepts no liability for the failure or inability of the HMO-MA to recover sums potentially available to it under the terms of this section."

Thus, the Department intended that Total Health Care would carry out the State's duty to provide medical care to low-income persons, while also possessing the State's right of subrogation granted by § 15-120. The amount of the capitation payment that the State would pay Total Health Care for each program recipient was determined on the assumption that Total Health Care would have the right to recover any amounts it paid for medical treatment from responsible third parties. See 8:4 Md. Register 355 (February 20, 1981).

II.

With this general background in mind, we turn to the facts of this case. Georgette Roberts and her two minor children, Shaneira and Corina Deloatch, were enrolled with Total Health Care under the State's Medicaid program from 1987 through 1991. In 1987 Shaneira and Corina suffered lead poisoning and required significant medical care which Total Health Care could not provide at its facilities. Therefore, Total Health Care arranged for the two girls to receive treatment at the Kennedy Institute for Handicapped Children, for which Total Health Care paid $59,880.

In 1988, Shaneira and Corina sued their landlord for the injuries they suffered as a result of the lead poisoning. Upon learning of the suit in June 1991, Total Health Care sent a "lien letter" to the children's attorney asserting its "statutory subrogation lien and rights provided in § 15-120" as assigned to it by the State. This letter requested that the children's attorney forward a check for $59,880 out of any settlement or judgment received by the children, and stated that "any settlement entered into concerning the matter may be overturned if THC is not consulted or paid." Total Health Care sent a second letter asserting its "statutory lien under § 15-120" in July 1992. The children's civil suit was settled for $330,000 in October 1993, at which time Total Health Care made both an oral and a written demand for payment of $59,880 from the settlement proceeds. When payment was not forthcoming, Total Health Care brought this action in the Circuit Court for Baltimore City, naming both Georgette Roberts and her attorney, Saul E. Kerpelman, as defendants. ³

In its complaint, Total Health Care claimed a right to payment of the $59,880 which it had expended for Shaneira and Corina's medical care based on a statutory subrogation claim under § 15-120 (as assigned to it by the Department), and, alternatively, based on principles of non-statutory equitable subrogation. Total Health Care filed a motion for summary judgment. In opposing the motion, Roberts and Kerpelman argued that § 15-120 violated their due process rights, that the State's rights under § 15-120 were...