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Clearing Claims: SCOTUS Limits State Medicaid Liens

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By Gabriella Khorasanee, JD on September 04, 2013 7:01 AM

States are required to be reimbursed for their Medicaid outlays, for the treatment of plaintiffs, from tortfeasors. When plaintiffs receive their judgment or settlement, many questions arise regarding the calculation of a state Medicaid program's share.

Two Supreme Court cases help clarify the situation.

Arkansas Dept. of Health and Human Services v. Ahlborn

In Ahlborn, the plaintiff suffered permanent brain damage as a result of a car accident. The reasonable value of her entire claim was just over $3 million, but she settled for $550,000 because of her contributory negligence. Of the settlement amount, $35,581.47 was designated as reimbursement for medical expenses, even though Medicaid had paid $215,645.30.

The Supreme Court held that where plaintiff's recovery was reduced, as here for contributory negligence, then the state Medicaid program's lien should also be proportionally reduced. The Court stated: "[T]he statute[the federal anti-lien provision] does not sanction an assignment of rights to payment for anything other than medical expenses -- not lost wages, not pain and suffering." Because the parties had stipulated to the amount of medical expense, the issue of how to determine the portion of Medicaid recovery was not addressed.

Wos v. E.M.A.

In Wos, the Supreme Court addressed the issue left open in Ahlborn. E.M.A. was a minor, born with serious injuries that would leave her unable to care for herself for the rest of her life. Her parents sued the delivery doctor and hospital for medical malpractice. Her damages were valued at $42 million, but because of insurance limits, her parents settled for $2.8 million. North Carolina's Medicaid program covered some of the costs of her medical care.

Under North Carolina law, the state was entitled to one-third of a settlement or judgment that was attributable to medical expenses. The Supreme Court found that North Carolina law was preempted by the federal anti-lien provision and stated: "An irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act's clear mandate that a State may not demand any portion of a beneficiary's tort recovery except the share that is attributable to medical expenses."

Dealing with State Medicaid Offices

As with all settlements it's advisable to agree on an amount before finalizing the settlement. But, it is very difficult to get in contact with a Medicaid representative, and often Medicaid will just send a letter stating the amount they are owed. It's advisable to try to get in contact with someone at the office, and have a paper trail to prove it. As the Supreme Court suggested in its opinions, to determine what portions of recovery are attributable to medical expenses, plaintiffs may have to resort to a hearing.

For a more in-depth overview of the Supreme Court decisions limiting state Medicaid liens, please read our practice guide. This brings our series on liens to a close. If you missed some of our previous posts, please visit the links below.

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