Issue #22     October 10, 2005
 

STATE MUST PAY ITS SHARE OF ATTORNEY’S FEES WHEN RECOVERING MEDICAID LIEN FROM LIABILITY SETTLEMENT

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

 

          The Utah Supreme Court has held that the state must shoulder its fair share of attorney’s fees incurred by a Medicaid beneficiary in procuring a third party liability settlement from which the state recovers its Medicaid lien.  Houghton v. Department of Health, Case No. 20030931, 2005 UT 63 (Utah 9/27/2005).

 

          The plaintiffs were each injured in separate accidents; and each received benefits from Utah’s Medicaid program to pay for medical services resulting from their injuries.  When the plaintiffs sought recovery of damages from the liable third parties, the state filed liens against their settlements to recover for the Medicaid benefits that had been provided.

 

          In an earlier decision in the same case, the Utah Supreme Court held that the state could recover its lien from the entire proceeds of the settlement, even those proceeds that did not represent compensation for past medical expenses.  Houghton v. Department of Health, 57 P.3d 1067, 2002 UT 101 (Utah 10/18/2002).  However, the Court did not uphold the trial court’s decision to deny the plaintiffs’ request for attorney’s fees incurred in obtaining the settlements.  Instead, the Court remanded that issue to the trial court for further determination.  On remand, the trial court again denied the plaintiffs’ request for attorney’s fees. 

 

          Under Utah state law, a Medicaid recipient is required to seek the state’s permission to pursue his or her claim on behalf of the state against a liable third party.  The state is required to share proportionately in a plaintiff’s attorney’s fees if it consents to the plaintiff’s action against a liable third party and there is a recovery from which the state recovers its Medicaid lien.  The trial court held that, where the state denied permission to the plaintiffs to proceed with their third party claim on behalf of the state, the state was only required to absorb a portion of the plaintiffs’ attorneys fees if the state chose to seek recovery of its lien directly against plaintiffs who had “expressly excluded the state’s claim from any attempt to recover from a third party.” 

 

          The Utah Supreme Court reversed the trial court’s ruling, holding that any time the state recovers its lien from a third party judgment or settlement that was procured through the efforts of private counsel after the state's permission to proceed is requested, the law requires the state to pay its fair share of the plaintiffs’ attorney’s fees.  The Court held that this is true, whether or not the state consented, and whether or not the state recovered from the third party or directly from the Medicaid recipient.  Otherwise, the state could refuse permission to proceed with the claim and then seek to recover its lien from the third party defendant instead of from the Medicaid beneficiary, thereby benefiting from the efforts of private counsel while evading the obligation to pay attorney’s fees.

 

          The Court was quite critical of this tactic, indicating that it would have a chilling effect on the ability of plaintiffs to pursue their claims through private attorneys.  The Court warned:

 

 . . .in those cases where a settlement or judgment is obtained through the efforts of a private attorney, any claim by the State that it recovered its lien through its own efforts will be subject to scrutiny.  The State will not be able to establish that it recovered its lien through its own efforts simply by showing that it sent notification of its lien to potentially liable third parties with the expectation that they will pay the State directly from the settlement proceeds generated through the effort’s of a recipient’s private attorney.  To avoid paying its fair share of attorney’s fees after it has refused to grant consent, the State must demonstrate that its lien was paid wholly independent of the settlement or judgment procured by the recipient’s private attorney.

 

                 

         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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