Original Notice.

     Preproposal statement of inquiry was filed as WSR 07-04-020.

     Title of Rule and Other Identifying Information: Amending WAC 388-501-0100 Subrogation.

     Hearing Location(s): Blake Office Park East, Rose Room, 4500 10th Avenue S.E., Lacey, WA 98503, (one block north of the intersection of Pacific Avenue S.E. and Alhadeff Lane. A map or directions are available at http://www1.dshs.wa.gov/msa/rpau/docket.html or by calling (360) 664-6094), on July 25, 2007, at 10:00 a.m.

     Date of Intended Adoption: Not sooner than July 26, 2007.

     Submit Written Comments to: DSHS Rules Coordinator, P.O. Box 45850, Olympia, WA 98504, delivery 4500 10th Avenue S.E., Lacey, WA 98503, e-mail schilse@dshs.wa.gov, fax (360) 664-6185, by 5:00 p.m. on July 25, 2007.

     Assistance for Persons with Disabilities: Contact Jennisha Johnson, DSHS Rules Consultant, by July 18, 2007, TTY (360) 664-6178 or (360) 664-6094 or by e-mail at johnsjl4@dshs.wa.gov.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The department is amending this rule to codify the department's reimbursement policy for medical services paid on behalf of an injured client by the department when the injured client receives settlement or judgment from a liable third party's insurer, or the injured client's own insurance.

     Reasons Supporting Proposal: The department is entitled to recover from the portion of a settlement or judgment that represents medical damages. This proposed rule establishes a fair and equitable process for determining the amount of medical damages of any settlement or judgment to be obtained by a medical assistance client.

     Statutory Authority for Adoption: RCW 74.08.090 and 74.09.185.

     Statute Being Implemented: RCW 74.09.185.

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: Department of social and health services, governmental.

     Name of Agency Personnel Responsible for Drafting: Wendy Boedigheimer, P.O. Box 45504, Olympia, WA 98504-5504, (360) 725-1306; Implementation and Enforcement: Gerald L. Pike, Legal Advisor, P.O. Box 45561, Olympia, WA 98504-5561, (360) 725-1225.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. The department has analyzed the proposed rule and concluded that no new costs will be imposed on businesses affected by them. The preparation of a comprehensive small business economic impact statement is not required.

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Gerald L. Pike, COB Tort Recovery Legal Advisor, P.O. Box 45561, Health and Recovery Service Administration, Olympia, WA 98504-5561, phone (360) 725-1225, fax (360) 586-9727, e-mail pikejl@dshs.wa.gov.

June 19, 2007

Stephanie E. Schiller

Rules Coordinator

     (a) ((The tort-feasor)) A person who commits or is guilty of a private or civil wrong doing or the insurer of ((the tort-feasor)) that person, or both; and

     (b) Any ((person who is liable to provide coverage)) individual, entity or program that is or may be liable to pay for all or part of the expenditures for ((the illness or injuries for which the)) medical assistance ((administration (MAA) is providing assistance or residential care)) furnished under the State plan. That liability must be based on any contract or insurance purchased by the client or any other person on behalf of the client.

     (2) As a condition of medical care eligibility, a client must assign to the state any right the client may have to receive payment from any ((other)) liable third party for medical expenses and/or assistance or residential care. ((An eligible client who receives health care items or services from the state under medical care programs under chapter 74.09 RCW and who has a right to payment from any other third party for those items or services, subrogates that right of payment to the state. This applies except as provided in subsection (3) of this section.))

     (3) To the extent authorized by a contract executed under RCW 74.09.522, a managed health care plan has the rights and remedies of the department as provided in RCW 43.20B.060 and 70.09.180.

     (4) ((MAA)) The department is not responsible to pay for medical care for a client whose personal injuries are caused by the negligence or wrongdoing of another. However, ((MAA)) the department may provide the medical care required as a result of an injury or illness to the client if both of the following apply:

     (a) The client is otherwise eligible for medical care; and

     (b) No other liable third party has been identified at the time the claim is filed.

     (5) The department may pursue its right to recover the value of medical care provided to an eligible client from any liable third party or third party settlement or judgement as a subrogee, assignee, or by enforcement of its public assistance lien as provided under RCW 43.20B.040 through 43.20B.070 and RCW 74.09.180 and 74.09.185.

     (6) When a client obtains a settlement or judgement from a liable third party that includes compensation for medical or residential care, the department must be reimbursed for the payments made for the benefit of the client as a result of the injury or illness suffered by the client.

     (a) In the absence of evidence to the contrary as discussed below in subsection (6)(c), the department will presume that the entire settlement or judgement, up to the amount of the medical damages suffered by the client, is intended to compensate the client for past medical expenses and will enforce its claim accordingly. The department is entitled to be reimbursed up to the full amount of medical assistance paid on behalf of the client for the medical damages related to the injury or illness suffered by the client less the department's proportionate share of attorney's fees and costs incurred in obtaining the settlement or judgement, as required by law.

     (b) The department determines its net recovery by deducting its proportionate share of attorney's fees and costs from the gross medical damages amount according to the following formula, in the absence of a court-approved allocation of the medical damages or an agreement with the department establishing the allocation of medical damages:

(i) Gross settlement/judgement amount	$_____
(ii) Total amount of medical assistance paid	$_____
(iii) Department's percentage of attorney's fees and costs ((ii) divided by (i))	_____%
(iv) Attorney's fees $___+ Legal costs $___=	Total $_____
(v) Medicaid's pro rata share of fees and costs ((iv) multiplied by (iii))	$_____
(vi) Medicaid's reimbursement ((ii) minus (v))	$_____

     (c) If the client disagrees with the allocation as set forth in subsections (a) and (b) of this section:

     (i) Prior to accepting or disbursing the settlement or judgement funds, the client or the client's legal representative must provide the department with documentation that a different allocation of medical damages was negotiated, proven at trial, or is being considered with the third party and/or their insurer or the client's insurance carrier in obtaining the settlement or judgement; and

     (ii) If the client and the department are not able to come to an agreement as to the proper payment to be made to the department to satisfy the department's claim for reimbursement of the medical assistance paid on behalf of the client, the matter should be set before a court for an allocation hearing prior to the distribution of the settlement or judgement.

     (d) If the injured client does not have legal representation in the personal injury action and does not incur attorney's fees or costs in obtaining the settlement or judgement, the department ensures that the client will receive not less than one third of the total settlement or judgement amount, or the balance of the settlement or judgement after the full amount of medical assistance is paid, whichever is greater, as satisfaction of all other damages suffered by the client;

     (e) When the settlement or judgement obtained by the client exceeds the amount of the assistance paid, the department is entitled to recover up to the full amount of the medical assistance paid less the department's proportionate share of any attorney's fees and costs incurred in obtaining the settlement or judgement;

     (f) When the amount of a settlement or judgement is less than or equal to the amount of the department's medical assistance payments:

     (i) The department and the client and/or the client's legal representative must determine the appropriate allocation for medical damages; or

     (ii) If the department and the client and/or the client's legal representative are unable to agree upon an allocation for medical damages, then a court must decide the amount the client must reimburse the department for medical assistance payments made on his or her behalf.

     (g) Under no circumstances will the total amount that the department receives be less than one-third of the gross amount of the settlement or judgement, unless the department agrees in writing to a lesser amount.

     (7) Recovery ((pursuant)) according to the subrogation rights, assignment, or enforcement of the lien granted to the department is not reduced, prorated, or applied to only a portion of a judgment, award, or settlement. The secretary of the department or the secretary's designee must consent in writing to any discharge or compromise of any settlement or judgment of a lien created under RCW 42.20B.060. The department considers the compromise or discharge of a medical care lien only as authorized by federal regulation at 42 CFR 433.139.

     (((7))) (8) The doctrine of equitable subrogation does not apply to defeat, reduce, or prorate any recovery made by the department that is based on its assignment, lien, or subrogation rights.

[Statutory Authority: RCW 74.04.050 and 74.08.090. 00-01-088, § 388-501-0100, filed 12/14/99, effective 1/14/00.]

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