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Blankenship v. Estate of Bain11/29/1999
Court of Appeals Reversed; Trial Court Judgment Reinstated.
We granted this appeal to decide whether a person who receives health care benefits under Tennessee's medical assistance program ("TennCare") must be "made whole" for his or her loss before the State is entitled to subrogation for any medical expenses it paid on the person's behalf.
The trial court concluded that TennCare, through its administrator, Blue Cross and Blue Shield of Tennessee ("Blue Cross/Blue Shield"), was not entitled to subrogation because the insureds had not been made whole for their loss under a settlement agreement. The Court of Appeals reversed, however, and held that Tenn. Code Ann. § 71-5-117(a) (1995 & Supp. 1999) entitles the State to subrogation without regard to whether a TennCare recipient has been made whole.
After reviewing the arguments and the applicable authority, we conclude that TennCare may not receive subrogation for medical payments made on behalf of a TennCare recipient unless and until the recipient has been made whole for his or her loss. We therefore reverse the judgment of the Court of Appeals and reinstate the judgment of the trial court.
BACKGROUND
Benny and Sheila Blankenship were enrolled in the Tennessee medical assistance program commonly referred to as "TennCare," which is administered by Blue Cross/Blue Shield of Tennessee. They paid monthly premiums for health care coverage under the program.
In July of 1995, Benny Blankenship was injured in a car accident caused by the negligence of Joshua Bain, who was killed in the accident. The Blankenships filed a complaint against Bain's estate. Bain had liability insurance coverage in the amount of $125,000, but his estate was otherwise insolvent. Although the suit was settled for the limit of Bain's policy, the trial court found that the Blankenships would have been entitled to recover damages well in excess of $125,000.
Blue Cross/Blue Shield paid $20,713.83 of the Blankenships' medical expenses and then filed a motion to intervene in the Blankenships' suit against Bain in an effort to enforce what it perceived to be its right to subrogation. It relied upon Tenn. Code Ann. § 71-5-117, which states in part:
(a) To the extent of payments of medical assistance, the state shall be subrogated to all rights of recovery, for the cost of care or treatment for the injury or illness for which medical assistance is provided, contractual or otherwise, of the recipients against any person. . . .
(b) Upon accepting medical assistance, the recipient shall be deemed to have made an assignment to the state of the right of third party insurance benefits to which the recipient may be entitled.
Tenn. Code Ann. § 71-5-117(a), (b). The Blankenships responded with a petition to determine the validity of the subrogation claim, which the trial court treated as an action for declaratory relief. After conducting a hearing, the trial court ruled that Blue Cross/Blue Shield was not entitled to subrogation because the Blankenships had not been made whole, i.e. fully compensated, for their loss. The trial court explained that
Tenn. Code Ann. § 71-5-117 contains no statutory exception to the made whole doctrine. The statutory interest of BlueCross BlueShield of Tennessee is subject to the plaintiffs' being first made whole. This is true regardless of whether the interest of BlueCross BlueShield of Tennessee is considered to be a subrogation or an assignment interest.
On appeal, the Court of Appeals concluded that Tenn. Code Ann. § 71-5-117(a) mandated subrogation in favor of Blue Cross/Blue Shield because the statute
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