H.B. 284

1

MEDICAL BENEFITS RECOVERY ACT AMENDMENTS
2 1997 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Greg J. Curtis
5 AN ACT RELATING TO HEALTH; AMENDING PROVISIONS REGARDING RECOVERY
6 BY THE STATE OF MEDICAL ASSISTANCE PROVIDED TO RECIPIENTS, INCLUDING
7 PROCEDURES AND LIMITS ON THE USE OF LIENS.
8 This act affects sections of Utah Code Annotated 1953 as follows:
9 AMENDS:
10 26-19-2, as last amended by Chapter 79, Laws of Utah 1996
11 26-19-4.5, as enacted by Chapter 145, Laws of Utah 1993
12 26-19-5, as last amended by Chapter 102, Laws of Utah 1995
13 26-19-8, as last amended by Chapter 145, Laws of Utah 1993
14 62A-5-110, as last amended by Chapter 179, Laws of Utah 1996
15 ENACTS:
16 26-19-13.5, Utah Code Annotated 1953
17 26-19-13.7, Utah Code Annotated 1953
18 26-19-19, Utah Code Annotated 1953
19 REPEALS:
20 26-19-13, as last amended by Chapter 102, Laws of Utah 1995
21 Be it enacted by the Legislature of the state of Utah:
22 Section 1. Section 26-19-2 is amended to read:
23 26-19-2. Definitions.
24 As used in this chapter:
25 (1) "Employee welfare benefit plan" means a medical insurance plan developed by an
26 employer under 29 U.S.C. Section 1001, et seq., the Employee Retirement Income Security Act
27 of 1974 as amended.

1 (2) "Estate" means, regarding a deceased recipient, all real and personal property or other
2 assets included within a decedent's estate as defined in Section 75-1-201 and a decedent's
3 augmented estate as defined in Section 75-2-202.
4 (3) "Insurer" includes:
5 (a) a group health plan as defined in Subsection 607(1) of the federal Employee
6 Retirement Income Security Act of 1974;
7 (b) a health maintenance organization; and
8 (c) any entity offering a health service benefit plan.
9 (4) "Medical assistance" means [any]:
10 (a) all funds expended [by the state] for the benefit of a recipient under Title 26, Chapter
11 18, Medical Assistance Act, [and] or under Titles XVIII and XIX, federal Social Security Act[.];
12 and
13 (b) any other services provided for the benefit of a recipient by a prepaid health care
14 delivery system under contract with the department.
15 (5) "Provider" means a person or entity who provides services to a recipient.
16 (6) "Recipient" means:
17 (a) a person who has applied for or received medical assistance from the state;
18 (b) the guardian, conservator, or other personal representative of a person under Subsection
19 (6)(a) if the person is a minor or an incapacitated person; or
20 (c) the estate and survivors of a person under Subsection (6)(a) if the person is deceased.
21 (7) "State plan" means the state Medicaid program as enacted in accordance with Title
22 XIX, federal Social Security Act.
23 (8) "Third party" includes:
24 (a) an individual, institution, corporation, public or private agency, trust, estate, insurance
25 carrier, employee welfare benefit plan, health maintenance organization, health service
26 organization, preferred provider organization, governmental program such as Medicare,
27 CHAMPUS, and workers' compensation, which may be liable to pay all or part of the medical
28 costs of injury, disease, or disability of a recipient, unless any of these are excluded by department
29 rule; and
30 (b) a spouse or a parent who:
31 (i) may be liable to pay all or part of the medical costs of a recipient under law or by court

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1 or administrative order; or
2 (ii) has been ordered to maintain health, dental, or disability insurance to cover medical
3 expenses of a spouse or dependent child by court or administrative order.
4 Section 2. Section 26-19-4.5 is amended to read:
5 26-19-4.5. Assignment of rights to benefits.
6 (1) (a) To the extent that medical assistance is actually provided to a recipient, all benefits
7 for medical services or payments from a third party otherwise payable to or on behalf of a recipient
8 are [deemed to be] assigned by operation of law to the department if the department provides, or
9 becomes obligated to provide, medical assistance, regardless of who made application for the
10 benefits on behalf of the recipient. [That]
11 (b) The assignment:
12 (i) authorizes the department to submit its claim to the third party and authorizes payment
13 of benefits directly to the department[. The assignment]; and
14 (ii) is effective for [services that are paid or to be paid by the department under the state
15 plan, Section 26-18-10, and Title XIX of the federal Social Security Act] all medical assistance.
16 (2) The department may recover the assigned benefits or payments in accordance with
17 Section 26-19-5 and as otherwise provided by law.
18 (3) The assignment of benefits includes medical support and third party payments ordered,
19 decreed, or adjudged by any court of this state or any other state or territory of the United States.
20 That assignment is not in lieu of, and does not supersede or alter any other court order, decree, or
21 judgment.
22 (4) When an assignment takes effect, the recipient is entitled to receive medical assistance,
23 and the benefits paid to the department are a reimbursement to the department.
24 Section 3. Section 26-19-5 is amended to read:
25 26-19-5. Recovery of medical assistance from third party liable for payment -- Lien
26 -- Notice -- Action -- Compromise or waiver -- Recipient's right to action protected.
27 (1) (a) When the department provides or becomes obligated to provide medical assistance
28 to a recipient because of an injury, disease, or disability for which a third party is liable, the
29 department may recover the medical assistance directly from that third party.
30 (b) The department's claim to recover medical assistance provided as a result of the injury,
31 disease, or disability is a lien against any proceeds payable to or on behalf of the recipient by that

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1 third party. This lien has priority over all other claims to the proceeds, except claims for attorney's
2 fees and costs authorized under Subsection 26-19-7(4).
3 (2) The department shall mail or deliver written notice of its lien to the third party at its
4 principal place of business or last known address. The notice shall include the recipient's name,
5 the approximate date of injury, a general description of the type of injury and, if applicable, the
6 general location where the injury is alleged to have occurred.
7 (3) The department may commence an action on its lien in its own name, but that lien is
8 not enforceable as to a third party unless:
9 (a) the third party receives written notice of the department's lien before it settles with the
10 recipient; or
11 (b) the department h [has evidence ] DEMONSTRATES h that the third party had
11a knowledge that the department
12 provided or was obligated to provide medical assistance.
13 (4) The department may waive a claim against a third party in whole or in part, or may
14 compromise, settle, or release a claim or lien.
15 (5) An action commenced under this section does not bar an action by a recipient or a
16 dependent of a recipient for loss or damage not included in the department's action.
17 (6) A lien established by the department under this section follows and attaches to any
18 proceeds that may enter into a trust in violation of this section.
19 Section 4. Section 26-19-8 is amended to read:
20 26-19-8. Statute of limitations -- Survival of right of action -- Insurance policy not
21 to limit time allowed for recovery.
22 (1) (a) An action commenced by the department under this chapter against a health
23 insurance carrier or employee welfare benefit plan must be commenced within two years after the
24 date of the injury or onset of the illness or within six months after the date of the last payment for
25 medical assistance [payment], whichever is later.
26 (b) An action against any other third party must be commenced within four years after the
27 date of the injury or onset of the illness, or within six months after the date of the last payment for
28 medical assistance [payment], whichever is later.
29 (2) The death of the recipient does not abate any right of action established by this chapter.
30 (3) No insurance policy issued or renewed after June 1, 1981, may contain any provision
31 that limits the time in which the department may submit its claim to recover medical assistance

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1 benefits to a period of less than 24 months from the date the provider furnishes services or goods
2 to the recipient.
3 Section 5. Section 26-19-13.5 is enacted to read:
4 26-19-13.5. Estate recovery.
5 (1) For medical assistance correctly provided for the benefit of a recipient who was 55
6 years or older at the time the assistance was provided, the department may recover the medical
7 assistance from the recipient's estate h [ and from any trust when the recipient is the grantor and a
8 beneficiary ] h .
9 (2) (a) The amount of medial assistance correctly provided for the benefit of a recipient
10 and recoverable under this section is a lien against the estate of the deceased recipient or any trust
11 when the recipient is the grantor and a beneficiary.
12 (b) The lien holds the same priority as reasonable and necessary medical expenses of the
13 last illness as provided in Title 75, Utah Uniform Probate Code.
14 (3) (a) The department shall perfect the lien by filing a notice in the court of appropriate
15 jurisdiction for the amount of the lien prior to final distribution in the same manner as a creditor's
16 claim is filed.
17 (b) The department may file an amended lien prior to the entry of the final order closing
18 the estate.
19 h [(4) Any trust provision that denies recovery for medical assistance is void on and after the
20 time of its making.
21 (5) ] (4) h Except as provided in Section 26-19-5, a lien or encumbrance may not be imposed
22 against the property of a recipient before his death because of medical assistance correctly
23 provided or to be provided on behalf of the recipient before he is 55 years of age.
24 h [(6)] (5) h The department may not exercise its right of recovery under this section until:
25 (a) after the death of the surviving spouse; and
26 (b) the recipient has no surviving child:
27 (i) younger than 21 years of age; or
28 (ii) who is blind or permanently and totally disabled.
29 Section 6. Section 26-19-13.7 is enacted to read:
30 26-19-13.7. Recovery from recipient of incorrectly provided medical assistance.
31 The department may:

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lilac-February 25, 1997

1 (1) recover medical assistance incorrectly provided, whether due to administrative or
2 factual error or fraud, from the recipient or his estate; and
3 (2) pursuant to a judgment, impose a lien against real property of the recipient.
4 Section 7. Section 26-19-19 is enacted to read:
5 26-19-19. Direct payment to the department by third party.
6 (1) Any third party required to make payment to the department pursuant to this chapter
7 shall make the payment directly to the department.
8 (2) The payment or payment instrument may not require the recipient or any other party
9 to co-sign or otherwise require participation from the recipient or any other party in order for the
10 department to negotiate the instrument.
11 Section 8. Section 62A-5-110 is amended to read:
12 62A-5-110. Discretionary trusts for persons with disabilities -- Impact on state
13 services.
14 (1) For purposes of this section:
15 (a) "Discretionary trust for a person with disabilities" means a trust:
16 (i) that is established for the benefit of an individual who, at the time the trust is created,
17 is under age 65 and has a disability as defined in 42 U.S.C. Sec. 1382c;
18 (ii) under which the trustee has discretionary power to determine distributions;
19 (iii) under which the beneficiary may not control or demand payments unless an abuse of
20 the trustee's duties or discretion is shown;
21 (iv) that contains the assets of the beneficiary and is established for the benefit of the
22 beneficiary by a parent, grandparent, legal guardian, or court;
23 (v) that is irrevocable, except that the trust document may provide that the trust be
24 terminated if the beneficiary no longer has a disability as defined in 42 U.S.C. Sec 1382c; [and]
25 (vi) is not funded by property that is subject to lien by the state; and
26 [(vi)] (vii) providing that, upon the death of the beneficiary, the state will receive all
27 amounts remaining in the trust, up to an amount equal to the total medical assistance paid on
28 behalf of the beneficiary.
29 (b) "Medical assistance" means the same as that term is defined in Section 26-18-2.
30 (2) A state agency providing services or support to a person with disabilities may:
31 (a) waive application of Subsection (1)(a)(v) with respect to that individual if it determines

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1 that application of the criteria would place an undue hardship upon that individual; and
2 (b) define, by rule, what constitutes "undue hardship" for purposes of this section.
3 (3) A discretionary trust for a person with disabilities is not liable for reimbursement or
4 payment to the state or any state agency, for financial aid or services provided to that individual
5 except:
6 (a) to the extent that the trust property has been distributed directly to or is otherwise under
7 the control of the disabled beneficiary; or
8 (b) as provided in Subsection (1)(a)(vi).
9 (4) Property, goods, and services that are purchased or owned by a discretionary trust for
10 a person with disabilities and that are used or consumed by a disabled beneficiary shall not be
11 considered trust property that is distributed to or under the control of the beneficiary.
12 (5) The benefits that a person with disabilities is otherwise legally entitled to may not be
13 reduced, impaired, or diminished in any way because of contribution to a discretionary trust for
14 that person.
15 (6) All state agencies shall disregard a discretionary trust for a person with disabilities, as
16 defined in Subsection (1), as a resource when determining eligibility for services or support except
17 as, and only to the extent that it is otherwise prohibited by federal law.
18 (7) This section applies to all discretionary trusts that meet the requirements contained in
19 Subsection (1) created before, on, or after July 1, 1994.
20 Section 9. Repealer.
21 This act repeals:
22 Section 26-19-13, Recovery of medical assistance payments from recipient -- Lien
23 against estate -- Recovery of incorrectly paid amounts.




Legislative Review Note
as of 1-27-97 5:50 PM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

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