Costello v. Geiser, 85 N.Y.2d 103 (1995)
A municipality’s subrogation reimbursement rights for Medicaid payments are limited to the actual costs of medical services provided and do not extend to statutory Medicaid subsidies like bad debt and charity surcharges.
Summary
This case addresses whether a county Department of Social Services can recover the full Medicaid payment, including statutory surcharges for bad debt and charity care, from a responsible third party (the father of a child born to a Medicaid recipient). The Court of Appeals held that the Department’s subrogation rights are limited to the actual cost of medical services provided and do not include the additional statutory surcharges. This decision emphasizes that Medicaid is intended to be the payer of last resort, and subrogation is an equitable doctrine that should not be used to unduly burden private citizens with public charges unrelated to the specific medical care they are responsible for.
Facts
Stark, an unemployed woman with no income or insurance, gave birth to a daughter. She received Medicaid benefits to cover the confinement and delivery expenses. The Washington County Department of Social Services paid $4,244.08 for the medical services. Geiser, the child’s father, obtained employment after the birth. The Department sought reimbursement from Geiser for the full Medicaid payment. Geiser challenged the reasonableness of the bill, discovering the actual hospital charges were only $802.07.
Procedural History
The Washington County Department of Social Services initiated proceedings in Family Court to recover medical expenses from Geiser. The Family Court ordered Geiser to reimburse the full amount paid by the Department. The Appellate Division affirmed. The New York Court of Appeals granted leave to appeal.
Issue(s)
Whether, under Social Services Law § 367-a (2)(b), a responsible third party must reimburse the Department of Social Services the full amount paid to medical providers under Medicaid, including statutory subsidies for bad debt and charity care, or only the actual cost of the medical services provided.
Holding
No, because the municipality’s subrogation reimbursement rights do not entitle it to recover costs unrelated to the actual medical services provided. The Department is only entitled to reimbursement for the actual costs of the medical services furnished.
Court’s Reasoning
The Court reasoned that Social Services Law § 367-a (2)(b) subrogates the Department to the rights of the Medicaid recipient. Subrogation is an equitable doctrine that allows the subrogee (the Department) to stand in the shoes of the subrogor (the Medicaid recipient) and recover only to the extent the subrogor could have recovered. “[S]ubrogation is wholly dependent on the subrogor’s claim against the third party and they stand in one another’s juridical shoes.” Since the Medicaid recipient would only be liable for the reasonable expenses of her confinement and recovery, the Department’s recovery is similarly limited. The Court emphasized that the statutory surcharges for bad debt and charity care are public charges unrelated to the specific medical services provided to the individual. The Court also noted that Federal Medicaid laws do not require dollar-for-dollar reimbursement based on complex formulas. Rather, 42 U.S.C. § 1396a(a)(25)(A) only requires the state to “take all reasonable measures to ascertain the legal liability of third parties…to pay for care and services available under the plan”. 42 CFR 433.136 states the third party “may be liable to pay all or part of the expenditures for medical assistance furnished under a State plan”. Allowing the Department to recover the full Medicaid payment, including the surcharges, would result in the third party subsidizing the municipality’s entire payment, which is not the intent of the statute. “Equity should not countenance Social Services Law § 367-a (2) (b) being used in such instances to recoup for the public purse from a private citizen the additional public charge component of a medical assistance payment.”