Issue #30      May 8, 2006
 

U.S. SUPREME COURT ISSUES OPINION RESTRICTING STATES’ ABILITY TO RECOVER MEDICAID LIENS IN LIABILITY SETTLEMENTS

 

By John J. Campbell, Esq., CELA, MSCC

 

          In previous issues of the Medicare Set-Aside Bulletin, we reported the decision of the U.S. Court of the Appeals for the Eighth Circuit in Ahlborn v. Arkansas Dep’t. of Human Services[1], limiting the state’s recovery of its Medicaid lien to that portion of a third party settlement representing reimbursement for past medical expenses.  (“Federal Court of Appeals Limits Medicaid Lien Recovery in Third Party Liability Settlement,” The Medicare Set-Aside Bulletin, Issue #6, March 14, 2005.)  On September 27, 2005, the U.S. Supreme Court granted certiorari to review the Ahlborn case.  See, Order List, No. 04-1581 (U.S. 09/27/2005).  On May 1, 2006, the Supreme Court issued its decision in Ahlborn, affirming the decision of the Eighth Circuit.  Arkansas Dept. of Health & Human Services v. Ahlborn, 547 U.S. ____, No. 04-1506 Slip Opinion (05/01/2006).

 

          The Ahlborn case involved a plaintiff who was seriously injured and permanently disabled in a motor vehicle accident in 1996.  She applied and qualified for Medicaid benefits in the State of Arkansas.  According to Arkansas law, she was required, as a condition of Medicaid eligibility, to assign “any settlement, judgment, or award which may be obtained against any third party” to the Arkansas Department of Human Services (ADHS), the state Medicaid agency, “to the full extent of any amount which may be paid by Medicaid” for her benefit.  Ark. Code Ann. §20-77-307(a).

 

          By the time Ms. Ahlborn settled her third party tort claim, Medicaid had made payments totaling $215,645.30 for her care.  The net amount of Ms. Ahlborn’s settlement was $550,000, of which $35,581.47 represented settlement of her claim for past medical expenses.  Based upon state law and the required assignment, ADHS attempted to assert its $215,645.30 Medicaid lien against the entire settlement.

 

          The U.S. Court of the Appeals for the Eighth Circuit held on appeal that 42 U.S.C. §1396p(a)(1), the federal “anti-lien statute,” clearly prohibited the placement of a lien on third party liability claims asserted by a Medicaid beneficiary, except to the extent that 42 U.S.C. §1396a(a)(25)(H) and 42 U.S.C. §1396k(a)(1) permitted the states to recover from third party payments for medical care.  Thus, the state’s ability to recover its Medicaid lien was limited to that portion of the settlement representing compensation for past medical expenses.

 

          The Ahlborn case was the first decision from any federal appellate court on this issue.  However, there had been a split among the states for several years.  Some state courts have held that the state may recover its Medicaid lien from any liability claim asserted against a third party by the Medicaid beneficiary, regardless of the nature of the claim or the nature of the damages.  E.g., Houghton v. Dep’t of Health, 57 P.3d 1067 (Utah 2002); and Wilson v. State, 10 P.3d 1061 (Wash. 2000); Calvanese v. Calvanese, 93 N.Y.2d 111, 710 N.E.2d 1079, 688 N.Y.S.2d 479 (N.Y. 04/06/1999).  However, the Supreme Court of Minnesota held that the state’s right of recovery is limited to a judgment or settlement for past medical expenses only.  Martin ex rel. Hoff v. City of Rochester, 642 N.W.2D 1 (Minn. 2002).

 

          The U.S. Supreme Court has now settled the dispute by upholding the decision of the Eighth Circuit.  States are now limited in their ability to reach settlement proceeds to satisfy state Medicaid liens.  However, the Court cautioned that states retain the right to challenge the reasonableness of the settlement allocation to past medical expenses, either by participating in the settlement negotiations or by seeking relief in state court to modify or approve the settlement allocations.

 

          This groundbreaking decision will be helpful to Medicaid beneficiaries who receive settlements in all states.  For large settlements where a state Medicaid agency may attempt to assert a lien significantly greater than the portion of the settlement reasonably allocated to past medical expenses, the Ahlborn case will be an effective tool to ensure that the greatest possible portion of settlement proceeds will remain available to the plaintiff.

                     


 

[1] 397 F.3d 620 (8th Cir., Feb. 9, 2005).

 

 

         John J. Campbell, the founder and principal attorney of the Law Offices of John J. Campbell, P.C., has practiced law for 19 years and has practiced in the area of Medicare Set-Asides since 1996.  Mr. Campbell is certified as an Elder Law Attorney by the National Elder Law Foundation;* and is a Medicare Set-Aside Consultant Certified (national certification through the Commission on Health Care Certification).*  Mr. Campbell is licensed to practice law in Colorado and is also licensed and on inactive status in Missouri.  He is a member of the Colorado Bar Association (Trust & Estate Section and Elder Law Section), the Arapahoe County Bar Association, the Missouri Bar Association, the National Academy of Elder Law Attorneys, The National Structured Settlements Trade Association and the National Alliance of Medicare Set-Aside Professionals.  His areas of concentration include elder law; estate, disability and long term care planning; probate; guardianship and conservatorship; Medicare, Medicaid, Medicare Set-Aside Arrangements, and the preservation of public benefits in catastrophic third party liability and worker’s compensation settlements.  Mr. Campbell has published numerous articles and has presented numerous seminars on issues relating to Medicare Set-Aside Arrangements across the country.

 

*The State of Colorado does not certify attorneys as experts in any field
.

 

 

 

 

 

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