Issue #22      October 10, 2005
 

 

U.S. SUPREME COURT TO ADDRESS LIMITS ON STATE MEDICAID LIEN RECOVERY

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

 

          In a previous issue 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).

 

          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 has 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).

 

          By granting certiorari, the U.S. Supreme Court has now entered the fray and, presumably, will have the last word.  The Eighth Circuit’s Ahlborn decision was a well-reasoned and well-written one; as was the Minnesota Supreme Court’s decision in Martin, upon which the Eighth Circuit relied heavily.  However, in a political and economic climate in which significant changes and cuts in Medicaid are being considered, it is not possible to predict with certainty how the Court will rule.