Arizona’s Medicaid agency (AHCCCS) pays for the medical treatment of low-income patients. Under federal law, hospitals that contract with a Medicaid agency to treat patients must generally accept the amounts paid by the agency as payment in full, even if the hospital customarily charges a higher rate for the treatment. 42 U.S.C. § 1396(a)(25)(C); 42 C.F.R. § 447.15.
Under Arizona law, however, a hospital that treats a patient’s injury may, to ensure payment, impose a lien on any tort recovery that the patient receives for the injury. A.R.S. §§ 33-931(A), 36-2903.01(G)(4). Relying on these statutes, some hospitals recorded liens on the tort recoveries of patients for whom the Medicaid agency had already paid, in an attempt to recover the balance between what the agency paid and what the hospital customarily charged for the treatment.
A group of patients sought declaratory and injunctive relief against this practice, arguing that the federal law requiring hospitals to accept Medicaid agency payments as payment in full preempts any state-law right of hospitals to seize a patient’s tort recovery beyond what the agency already paid. The trial court agreed and issued an injunction. The Court of Appeals affirmed.
The Arizona Supreme Court affirmed the injunction. First, the Court held that the patients had a private right of action to pursue equitable relief. The applicable federal statute, 42 U.S.C. § 1396(a)(25)(C), guarantees Medicaid patients an enforceable right: that payment from a Medicaid agency will constitute full payment of hospital bills, precluding further recovery by hospitals. Like other federal rights, this right may be enforced by a suit in equity, and Congress has not foreclosed such suits.
Second, the Court held that the federal law requiring hospitals to accept Medicaid agency payments as payment in full preempts state law to the contrary. Thus, although state law generally authorizes hospitals to impose liens on patients’ tort recoveries, hospitals cannot impose liens on amounts owed to Medicaid patients by third parties beyond the amount the Medicaid agency pays.
Justice Bolick authored the opinion, in which Chief Justice Brutinel, Vice Chief Justice Timmer, and Justices Gould, Lopez, Montgomery, and Pelander (Ret.) joined.
Posted by: Josh Whitaker