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Hospital May File Lien on Medicaid-Eligible Patient and Third-Party’s Insurer Settlement


A driver negligently ran a stop sign and crashed into a car containing the plaintiffs, a woman and her three sons. The negligent driver’s car was insured by the defendant insurance company for up to $250,000 for each injured individual, with a total cap of $500,000 for each accident. The plaintiffs received medical care at the defendant hospital valued at $182,799.61. The plaintiffs were eligible for Medicaid at the time of the accident. The defendant hospital did not bill Medicaid for the plaintiffs’ medical care. It filed liens against the proceeds of any future settlement reached between each of the individual plaintiffs and the defendant insurance company.

 

The plaintiffs sought a declaratory judgment that the liens were unenforceable arguing that Wisconsin’s hospital lien statute barred the liens because it prohibited hospitals from knowingly imposing direct charges upon a patient in lieu of obtaining payment from Medicaid. The defendant hospital sought a declaratory judgment that the liens were valid arguing that Wisconsin’s administrative code allowed the hospital to either file the liens or bill Medicaid. The trial court issued a declaratory judgment that the liens were valid and the plaintiffs appealed. The court of appeals reversed the trial court applying a prior case that held a lien upon a settlement between a tortfeasor and a patient is, in effect, a lien against the patient, and therefore requires a debt owed by the patient to the hospital. The appellate court reasoned that Medicaid bore the debt to the hospital, not the plaintiffs, and since a lien against the settlement was a lien against the plaintiffs, Wisconsin’s hospital lien statute barred the liens. The appellate court found that Wisconsin’s administrative code did not apply to seeking payment from third-party liability settlements.

 

The Wisconsin Supreme Court reversed the court of appeals and affirmed the trial court holding that a charitable hospital may pursue payment for medical care provided to a Medicaid-eligible patient by filing a lien against a settlement between the patient and an insurance company covering the liability of a tortfeasor responsible for the patient's injuries.

 

First, the liens did not violate the Wisconsin statute that prohibits hospitals from knowingly imposing upon a Medicaid-eligible patient charges in addition to payments received from Medicaid. The hospital's liens were an effort to collect from the plaintiffs. The Wisconsin statute states that a hospital cannot impose charges in addition to receiving payments from Medicaid. However, the defendant hospital did not receive any payments from Medicaid for the plaintiffs’ medical care. Therefore, the liens do not violate this statutory provision.

 

Second, the liens did not violate the Wisconsin statute that prohibits hospitals from knowingly imposing direct charges upon a patient in lieu of obtaining payment from Medicaid. The hospital's liens were not direct charges by a hospital levied upon a Medicaid-eligible patient. In the medical context, a hospital directly charges a patient when it sends a bill to the patient.

 

These two conclusions harmonize with the Wisconsin Administrative Code that permits hospitals to either bill Medicaid or join personal injury lawsuits when liability may be contested. The prior case that held a lien upon a settlement between a tortfeasor and a patient is, in effect, a lien against the patient, and therefore requires a debt owed by the patient to the hospital is legally and factually distinguishable because it involved patients protected by contractual and statutory immunity as the result of an HMO.

 

See: Gister v. American Family Mut. Ins. Co., 2012 WL 2814364 (Wis., July 11, 2012) (not designated for publication).

 

 

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