State News : New Jersey

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New Jersey



Ask any practitioner about the nature of Medicare and his or her response will usually be that it is a source of medical coverage for the very poor, such as those receiving SSI (Supplemental Security Income.) Alas, such an answer is no longer correct, nor is it safe. Why? Well, as in the case of ERISA liens, (Ah ha! Now you know where you’ve seen my name before!) we are again dealing with the dreaded “F” word. No, not that “F” word, the one which resulted in Ralphie enjoying the subtle flavor of Lifebuoy (remember, “A Christmas Story?”).  No, once again we have a federal Act, establishing both the benefit and the requirement of recovery of any claims paid for which a third-party source is legally liable. The (somewhat) good news is, however, that the recovery mechanisms (liens) are administered by the states. More on this later.

Medicaid was established by federal law, 42 U.S.C 1396 et. seq. (the Act.)  The intent of this Act was to provide medical coverage for people unable to afford their own coverage. Like other federally-established health coverage such as Medicare and Veterans Administration benefits, Medicaid (and as the title indicates, NJ Family Care – hereinafter NJFC) is intended to pay health care costs for illnesses, injuries, etc., where no other coverage is legally obligated to pay. In other words, they are “payors of last resort.” This is seen in N.J.A.C. 10:49-7.3(1)(b), “Medicaid and NJFC program benefits are last-payment benefits. All [third party liability medical benefits]…shall, if available, be used first and to the fullest extent in meeting the cost of the medical needs of the Medicaid or NJ Family Care beneficiary…”

While established by federal law, Medicaid & NJFC are state-funded and administered. Additionally, and most important to the purpose of this article, the Act contains a requirement that the states establish a mechanism to pursue the recovery of any payments made by Medicaid/NJFC for which a third-party source should be legally liable. These sources include, but are not limited to, workers’ compensation coverage and casualty insurance in tort recoveries. In New Jersey, recovery of improper payments is contracted to HMS.

In addition to recovery efforts by HMS, a provision in N.J.S.A. 30:4D-7.1(b) states “…every recipient or his legal representative shall promptly notify the division (Division of Medical Assistance and Health Services) of any recovery from a third party and shall immediately reimburse the division in full from the proceeds of any settlement, judgement, or other recovery in any action or claim initiated against any such third party…” Clearly, this places a duty to report such recoveries on the injured party’s attorney. However, respondents take note. The Statute on the Code speak of recovery from a third party. And, in Hedgebeth v. Medford, 74 N.J. 360, (1977) our State Supreme Court stated that New Jersey’s Medicaid law evidences an “…unmistakable intent to afford the State every opportunity to recoup its payments from third parties.” Thus, both petitioners and respondents have an interest in the outcome of petitions involving such liens. In the event that a petitioner fails to give notice where Medicaid/Family Care clearly provided treatment, a respondent could likely give notice or file a motion to compel petitioner to give notice.

OK, so with the legal background established, what should a claimant’s attorney do to protect his/her client, him/herself, and honor the law? Well, this process begins with the initial interview with a new client. No attorney should assume that a client has medical coverage through an employer; Medicaid is increasingly the coverage for many people, even those who work for employers which provide excellent coverage. Traditionally, Medicaid/NJFC covered people who were very poor, disabled or both. Now, however, more and more people are covered by Medicaid and NJFC. As a practitioner I have personally observed that more and more people no longer have coverage offered by their employers; in many such situations they can no longer afford the employee’s portion of the premium. And so, they are now covered by N.J. Family Care, a “payor of last resort.”

Accordingly, at this first meeting with a new client the workers’ compensation attorney must ask whether the client is covered by Medicaid/NJFC. If so, notice must be immediately given to HMS of the claim in question. This has always been done by mail; however, HMS now has a Web-Portal for submission of the necessary documents. The mailing address/portal information can be obtained on the HMS website for New Jersey Medicaid. (Sorry, this article is to raise awareness of these issues; I won’t do your work for you!) Once that is done, HMS will send the attorney a set of questions to be answered concerning the happening of the accident, is it workers’ compensation or tort, what body parts were involved, etc. These questions are designed to allow HMS to determine what payments, if any, have been made for which a third party is legally liable. HMS will then send the attorney an initial Statement of Aid Paid, if in fact payments were made. Later, after a settlement has been agreed to but PRIOR to seeking approval of the settlement by a Judge of Workers’ Compensation, the petitioner’s attorney MUST provide HMS a copy of the proposed Order Approving Settlement or Section 20 Order, inclusive of fees and costs. Thereafter, HMS will issue a Final Statement of Aid Paid.  In my experience, (fortunately, to date observing others,) delayed responses from HMS are frequently caused by incomplete/incorrect submission of documents.

OK, so now I’ve discussed the origin of these state-funded plans; what they pay for and, most importantly, what they DON’T pay for; law and mechanisms for recovering payments; and, how to provide proper documentation to HMS. Now, all of you are thinking, I will tell you what guidelines exist for negotiating these liens, the power of workers’ compensation judges to deal with them, etc., etc., all the things to make your lives easier, right? Well, time to cue the occasional chirping of crickets; no other sound to break the silence. Right, you guessed it, I’ve been unable to find any guidelines, code provisions, case law, etc. to smooth the process of closing workers’ compensation cases with HMS liens. Nothing. Nor have I spoken to anyone who has found such guidance. Of course, if the liens contain payments for treatment clearly unrelated to the work-related injury, write to HMS and ask them to please remove them. Still, I and many others believe there should be some guidance in this area.

So, what is the answer? Well, I have a definite idea as to what should be done. I may be told it’s unrealistic, that it is an area in which I have no business treading, I may even upset some people. But, as that increasingly popular little creature says, “Honey Badger don’t care.” (No, don’t ask. I won’t tell!)

Several years ago there were questions as to the proper method to close a workers’ compensation case where the Petitioner was in receipt of an Accidental Disability Pension. High ranking representatives of the Division of Workers’ Compensation met with similar representatives from the Division of Pensions to work out the issues, resulting in a Memo from former Director/Chief Judge Calderone outlining the accepted methods of closing such claims.

I believe similar actions need to be taken here. However, considering the fact we are dealing with benefits created under federal law, and considering the large sums of money which are the subject of HMS liens, I suggest that the Department of Labor and HMS should attempt to work this out. Obviously, the Division of Workers’ Compensation will provide more than significant input. May I also suggest (ok Al, now you are really going out on a limb) that the Commissioner’s Advisory Committee on Workers’ Compensation be reconstituted to provide valuable input here, and in other issues affecting the practice of Workers’ Compensation. Just a thought.

(Editor’s Note:  Many thanks for Attorney Al Vitarelli for educating us all on Medicaid liens.  This is an increasingly important part of the NJ workers’ comp practice.)



Editor:  John H. Geaney, Esq., is an Executive Committee Member and a Shareholder in Capehart Scatchard's Workers’ Compensation Group.  Mr. Geaney concentrates his practice in the representation of employers, self-insured companies, third-party administrators, and insurance carriers in workers’ compensation, the Americans with Disabilities Act and Family and Medical Leave Act. Should you have any questions or would like more information, please contact Mr. Geaney at 856.914.2063 or by e‑mail at