§ 10.4.3 STATE HEALTHCARE PLAN RECOVERY RIGHTS

• Jurisdiction: Arizona

§ 10.4.3 State Healthcare Plan Recovery Rights⁴

Many state employees participate in health plans offered by the State of Arizona or one of its political subdivisions (altogether, the "State"). Although these plans may be administered or offered through private health insurance companies, the State retains rights of recovery pursuant to the Medical Care Cost Recovery Act ("MCCRA"), codified at A.R.S. §§ 12-961, et seq. Arizona Dept. of Admin. v. Cox, 222 Ariz. 270, 273-74 ¶¶ 10-12, 213 P.3d 707, 710-11 (App. 2009).

a. The Scope of State Healthcare Plan Recovery Rights

The MCCRA gives the State powerful rights of recovery against a tortfeasor or injured person for the reasonable value of medical care provided to an injured person. Specifically, "under circumstances creating tort liability upon a [tortfeasor]," the State "may recover from the [tortfeasor] or the injured . . . person the reasonable value of the medical care and treatment." A.R.S. § 12-962(A) (emphasis added). This subsection then continues, in relevant part, "[t]o the extent of this right," the State or its political subdivisions "is subrogated to the injured . . . person's . . . estate . . . or survivors with reference to any right or claim they might have against the [tortfeasor]." A.R.S. § 12-962(A) (emphasis added).

The State, therefore, "stands in the shoes" of the injured party against a tortfeasor "to the extent" such injured party could make a claim for recovery of medical expenses from the tortfeasor. See, e.g., Nationwide Mut. Ins. Co. v. AHCCCS, 166 Ariz. 514, 517-18, 803 P.2d 925, 928-29 (App. 1990). A.R.S. § 12-962 creates this interest as a matter of law and no perfection is required, but it only applies to third-party liability claims. Cox, 222 Ariz. at 278 ¶ 35, 213 P.3d at 715 n.6.

The mechanisms for enforcing these recovery rights are found in A.R.S. § 12-962(B). A.R.S. §§ 12-962(B)(1) and (2) allows the State to intervene in any action "against the [tortfeasor] who is liable for the injury" or directly "institute and prosecute legal proceedings against the [tortfeasor] who is liable for the injury . . . for which the medical care and treatment were furnished." In addition, § 12-962(B)(3) provides the State may "[r]ecover the cost of care from the injured . . . person . . . to the extent that such person has received money . . . [from] the [tortfeasor]." A.R.S. § 12-962(B)(3).

b. Limitations on State Healthcare Plan Recovery Rights

Potential limitations on recovery rights under the MCCRA are (i) equitable compromise, (ii) the make whole doctrine, and (iii) reductions to account for procurement costs.

i. Equitable Compromise

The first area limiting a MCCRA claim is A.R.S. § 36-2915(H). This statute provides that "[a] public entity shall compromise a claim it has pursuant to . . . 12-962 . . . if, after considering the factors...