December 7, 1982
Subject:
Social Services; Medical Assistance; State and County Rights by Subrogation or Assignment;
G.S. 108A-57 and G.S. 108A-59.
Requested By:
Honorable Anthony M. Brannon Resident Superior Court Judge 14th Judicial District
Question:
- Under G.S. 108A-57(a), to the extent of Medical Assistance (Medicaid) payments made to a Medicaid recipient, the State or county providing the payments is "usbrogated to all rights of recovery, contractual or otherwise, of the beneficiary of assistance." What is meant by the term "rights of recovery, contractual or otherwise"?
- Under G.S. 108A-59(a) a Medicaid recipient is deemed to have assigned to the State his "right to third party benefits, contractual or otherwise, to which he may be entitled." What is meant by the term "third party benefits, contractual or otherwise"?
- Who has standing to sue to enforce G.S. 108A-57 or G.S. 108A-59?
Conclusions:
- The term "rights of recovery, contractual or otherwise" means those common law, statutory or contractual causes of action whereby the sick or injured Medicaid recipient or another person legally responsible to pay the cost of his medical care can recover damages from another person for the cost of treating his sickness or injury. These "rights of recovery" include, but are not necessarily limited to, causes of action arising in tory or under workers compensation.
- The term "third party benefit, contractual or otherwise" means those benefits payable directly to or on behalf of a sick or injured Medicaid recipient on account of the sickness or injury and apart from damages or compensation established through a legal action. Such "third paty benefits" include, but are not necessarily limited to, health insurance benefits.
- Since G.S. 108A-57 is a subrogation statute, the State and county have exclusive standing to sue, provided they are subrogated to the Medicaid beneficary’s entire claim. If the State and county are only subrogated to part of the claim, the beneficiary of assistance has the standing to sue, but he must hold the recovery in trust to reimburse the State and county.
Since G.S. 108A-59 is an assignment statute, the State is entitled to receive payment of any "third party benefits" and has exclusive standing to sue to enforce this right.
Medical Assistance (Medicaid) is a program of public assistance funded jointly by the federal, State and county governments. It is created by Title XIX of the Social Security Act and has been authorized and adopted in North Carolina pursuant to G.S. 108A-25(b) and G.S. 108A-54. Its purpose is to pay the cost of medical care for those who otherwise could not afford to obtain it. Under authority of G.S. 108A-57 and G.S. 108A-59 the federal, State and county governments can recover part or all of the cost of Medicaid to a person when third parties ultimately prove liable to pay for the cost of care.
The first two questions set forth above ask us, in effect, to construe G.S. 108A-57 and G.S. 108A-59 in relation to each other. The former statute provides, in part, as follows:
"Notwithstanding any other provision of law, to the extent of (Medicaid) payments under this part, the State or the county providing Medical assistance benefits shall be subrogated to the rights of recovery, contractual or otherwise, of the beneficiary of such assistance . . . against any person. . . . The United States and the State of North Carolina shall be entitled to share in each net recovery under this section. . . ." G.S. 108A-57(a) (Emphasis added)
The latter statute says, in part, as follows:
"Notwithstanding any other provision of the law, by accepting medical assistance the recipient shall be deemed to have made an assignment to the State of the right to third party benefits, contractual or otherwise, to which he may be entitled." G.S. 108A-59(a). (Emphasis added)
We begin our examination of these statutes by noting that no reported North Carolina case construes either of them or defines their terms. (Issues concerning former G.S. 108.61.2, now
G.S. 108A-57, were raised in Malloy v. Durham County Department of Social Services, ___ N.C.App. ___ , 293 S.E.2d (1982), but the case was decided on other grounds. Lacking this guidance, we must give the statutory language its ordinary meaning, if it is possible to do so. State ex rel. Utilities Comm. v. Edmisten, Attorney General, 291 N.C. 451 at 465, 232 S.E.2d 184 (1977). We must also construe the two statutes in pari materia, because they have the same subject matter. This means each must be given separate effect if possible. Jackson v. Guilford County Board of Adjustment, 275 N.C. 155 at 167, 166 S.E.2d 78 (1969). The presumption is that statutory provisions are not repetitive. Id. This must be a particularly strong presumption when, as in the present case, both provisions are enacted as part of the same act of the General Assembly. See, State v. Benton, 276 N.C. 641 at 658, 174 S.E.2d 793 (1970) (presumed that legislature acted with care and knowledge).
It follows from what is said that the words "rights of recovery" and "third party benefits" describe different things. Otherwise there would be no need for different statutes, one creating rights in the State or county as a subrogee of the beneficiary of assistance and one creating rights in the State alone as an assignee of the recipient.
It also follows from the rules of statutory construction that the statutes in question are to given a broad reading so as to cover all possible means by which the public might obtain reimbursement for its Medicaid expenditures. Anything less would be contrary to the clear purpose of the General Assembly, which is to protect the public purse. The use of the clause "(n)otwithstanding any other provision of law", use of the words "contractual or otherwise", and the statement that the State or county shall be subrogated to rights of recovery against "any person" (Emphasis added) all indicate a broad legislative intent, and the intent of the legislature is the touchstone of statutory construction. State v. Hunt, 287 N.C. 76 at 80, 213 S.E.2d 291 (1975).
With these matters in mind, it is clear that G.S. 108A-57, the subrogation statute, applies to claims or causes of action to recover damages for what was lost. Two points establish this conclusion. First, the word "recovery" means, in general speech, "restoration" or the "act of regaining" something which was lost. Webster’s International Dictionary (2d Ed.) In law, it means to obtain anything by judgment or trial. Hoover v. Clark, 7 N.C. 169 at 171 (1819); Black’s Law Dictionary. Thus, use of the word "recovery" and especially use of the phrase "rights of recovery" denote an action in the courts or quasi-judicial agencies for damages to make a person whole.
Second, the definition is bolstered by the fact that the State or county is subrogated to the rights of recovery of the "beneficiary of assistance." The beneficiary of assistance apparently can be someone in addition to the recipient. Compare, G.S. 108A-24(5). For example, in tort law the parent of the child is responsible for the child’s medical bills, Flippin v. Jarrell, 301 N.C. 108 at 121, 270 S.E.2d 482 (1980), and, therefore, the parent obtains the "benefits" from any Medicaid which its child receives. Such a child would be the "recipient" of public assistance, G.S. 108A24(5), but its parent would be a "beneficiary" of the assistance. Therefore, its parent would have standing to sue for the cost of care, and the State and county would be subrogated to this right of recovery. In short, it appears that the General Assembly’s use of the words "beneficiary of assistance" was a well-advised decision to draft G.S. 108A-57 broadly enough to cover all possible causes of action for the cost of medical care.
Finally, use of the words "contractual or otherwise" does not alter the meaning of the words "right of recovery".
Turning to G.S. 108A-59, we find that the State alone stands as the assignee of a Medicaid recipient’s "right to third party benefits, contractual or otherwise." In construing this phrase we begin by repeating our conclusion that it means something different than the phrase "right to recovery" appearing in G.S. 108A-57. One key to the meaning of the phrase is the meaning of "third party". In the context of G.S. 108A-59, the "recipient" of public assistance and the State are specifically identified. They are, respectively, the first and second parties. The "third party" is anyone else who is obligated to confer a "benefit" on the recipient, i.e., the first part. Since rights of recovery are not recovered by the word "benefits" what remains is, at least, any insurance payment to the recipient or on his behalf.
The third question concerns standing to sue. Since G.S. 108A-57 is a subrogation statute, the law of subrogation controls. Under the law of subrogation, the subrogee is the real party in interest with exclusive standing to sue, provided the subrogee has been subrogated to the subrogor’s entire right of action. G.S. 1-57: Insurance Co. v. Storage Co., 267 N.C. 679 at 686, 149 S.E.2d 27 (1966); Milwaukee Ins. Co. v. McLean Trucking Co., 256 N.C. 721 at 726 & 27, 125 S.E.2d 25 (1962). If the subrogee holds the entire action, the subrogor cannot sue. University Motors, Inc. v. Durham Bottling Co., 266 N.C. 251 at 256, 145 S.E.2d 102 (1966); Smith v. Pate, 246 N.C. 63 at 68, 97 S.E.2d 467 (1957). However, if the subrogee has not compensated the subrogor for his entire claim, then the subrogor may bring the action against the person who caused the loss, Hardware Dealers Mutual Fire Ins. v. Sheek, 272 N.C. 484 at 487, 158 S.E.2d 635 (1968); Insurance Co. v. Supply Co., 19 N.C.App. 302 at 304, 198 S.E.2d 482 (1973). If the subrogor recovers, he must hold his recovery in trust for the subrogee to the extent the subrogee has already compensated him for his loss. Id.; Burgess v. Trevathan, 236 N.C. 157 at 160, 72 S.E.2d 231 (1952). As alternatives, the subrogee may intervene in the subrogor’s action, see, White v. Sutherland, 92 N.M. 187, 585 P.2d 331 at 333 (N.M. App., 1978). cert den. 1292 (197:); cf. Malloy v. County Department of Social Services, supra. Or, if the subrogor refuses to sue, the subrogee may bring the action and join the subrogor as defendants. Hardware Dealers Mutual Fire Ins. Co. v. Sheek, supra.
In light of the foregoing cases, under G.S. 108A-57, the State or county have exclusive standing to sue whenever Medicaid has paid all of a recipient’s damages attached to his right of recovery against another person. This will not always be the case. First, in the typical tort case the subrogor’s claims will include, in addition to the medical expenses which Medicaid has paid, elements of pain and suffering, lost earnings, and other such things. And, second, Medicaid may not cover the cost of all medical services. Therefore, in a given case there may be certain medical expenses to the recovery of which the State or county is not subrogated. In either case, the State or county, would hold only part of the claim. Therefore, either would be a proper party to the recipient’s action, but not the only real party in interest. Of course, any monies which the recipient recovered would be held in trust for the State or county, to the extent of Medicaid payments.
Turning again to G.S. 108A-59, we must consider the law of assignments. After an assignment is completed, only the assignee is the real party in interest, and only he can sue to enforce or obtain the assigned benefit. G.S. 1-57; Morton v. Thornton, 257 N.C. 259 at 262, 125 S.E.2d 464 (1962); Gillespie v. DeWitt, 53 N.C.App. 252 at 262, 280 S.E.2d 736 (1981), pet. disc. rev. den, 304 N.C. 390, 285 S.E.2d 832 (1981). Therefore, the State is the real party in interest with standing to sue to collect or enforce "third party benefits" otherwise payable to the Medicaid recipient.
Rufus L. Edmisten Attorney General
Steven Mansfield Shaber Assistant Attorney General