Medicaid Liens on Personal Injury Settlements and Awards

Anyone who practices in personal injury for very long faces issues with Medicaid liens.  As a basic framework, Medicaid is a state health insurance program that receives federal funding and is subject to federal law. In Nevada, Medicaid is administered through the Nevada Department of Health and Human Services.  The DHHS allows third party HMOs to manage the healthcare for some Medicaid recipients.  These third-party organizations are known as Medicaid Managed-Care Organizations (MCOs).  Nevada currently contracts with two national for-profit MCOs: Amerigroup Community Care and Health Plan of Nevada, owned by UnitedHealthcare.

Medicaid, and by extensions, MCOs, have a statutory lien on personal injury settlements.  Pursuant to NRS 422.293, Medicaid has a lien against “the right of the recipient [injured victim] to the extent of all such medical costs [paid by Medicaid].”  Under NRS 422.293(4), Medicaid may reduce its lien in consideration of an attorney’s services.  This is a statutory acknowledgment of the Common Fund Doctrine, though it couches the doctrine with the term “may”.  As a practical matter, attorneys would not collect funds if subrogating third parties would routinely ignore the Common Fund Doctrine’s principles.

On its face, NRS 422.293 seems to be a lien against the entirety of the settlement, up to the amount paid by Medicaid.  However, in 2006 and again in 2013, the United States Supreme Court held that a state’s Medicaid lien must be limited in proportion to the ratio of medical bills to the total value of the claim if unlimited funds were available.

 

Ahlborn and Medicaid Liens

In 2006, the United States Supreme Court decided the case of Arkansas Dep’t of Health & Human Servs. v. Ahlborn1)547 U.S. 268, 126 S. Ct. 1752, 164 L. Ed. 2d 459 [2006].  Ahlborn had been in a car accident and sustained injuries for which Medicaid paid providers $215,645.30.  Ahlborn sued in state court and later settled all claims for $550,000.00, presumably, for all insurance limits available.  The settlement did not apportion the settlement between categories of damages, such as past medical payments, future medical payments, pain and suffering, lost income, and so forth.  Medicaid did not participate in the litigation. Medicaid attempted to exert a lien against $215,645.30 of the settlement, but acknowledged that the pro-rata value of the medical expenses to the unreduced value of the claim would have been 1/6th, or $35,581.47.  Medicaid and Ahlborn fought over whether Medicaid’s lien should be for the full amount paid or for medical specials proportion of the settlement

The Supreme Court held that, pursuant to Medicaid’s anti-lien provision of 42 U.S.C. § 1396p(a)(1), Medicaid’s lien is limited to the portion of the settlement designated for medical payments.  Thus, if the parties designate that the value of the medical expenses are 1/6th of the settlement, then Medicaid’s lien is limited to 1/6th of the settlement.

The Supreme Court recognized that there was some danger of manipulation of settlement apportionment, but did not view it as an overriding concern.  Naturally, parties should not abuse apportionment.

 

Wos and Medicaid Liens

In 2013, the United States Supreme Court reaffirmed Ahlborn in Wos v. E.M.A. ex rel. Johnson2)133 S. Ct. 1391, 1393, 185 L. Ed. 2d 471 [2013].  In Wos, the Court addressed what happens when the parties to a settlement do not apportion the settlement.  Presumably in response to Ahlborn, North Carolina had implemented a presumption that, unless otherwise specified, a settlement consisted of 1/3rd medical expenses and 2/3rd other categories of injuries.  Thus, Medicaid would exert its lien against 1/3rd of the settlement.  The Wos court held that such a presumption was not definitive, and that a Medicaid recipient must have an ability to challenge the presumption.

 

Application of Ahlborn and Wos in Nevada to Medicaid Liens

Under Ahlborn and Wos, it is clear that a Medicaid lien is limited to the medical portion of the settlement.  Interestingly, there have been no reported cases in the Nevada Supreme Court, the Federal District Court of Nevada or the Ninth Circuit Court addressing either Ahlborn or Wos.  Naturally, the courts would have to accept controlling law, but it is unclear whether any of these courts would interpret these cases in an unexpected way.

The next question is how Ahlborn and Wos interplay with the collateral source doctrine3)the collateral source doctrine, as defined by Black”s Law Dictionary, is known as the principle in which “compensation paid by some source to an injured plaintiff cannot be deducted from the damages a defendant has to pay. The source, such as an insurance firm, cannot be a party to the litigation”. Is a Medicaid lien exerted against the entire medical specials portion of the settlement/judgment, or is the lien limited to the ratio of the actual Medicaid payments to the unreduced value of the case?  At least one federal district court has held that the lien is limited.

 

The Fairness of Ahlborn and Wos

Ahlborn and Wos make sense from a basic fairness principle.  Case valuations involve many different factors, and always involve pain and suffering.  In significant cases, pain and suffering is the largest part of a settlement.  Why should Medicaid, which has an obligation to pay for medical expenses anyway, be able to collect against an injury victim’s settlement for lost income, for property damage, or for pain and suffering?  Ahlborn and Wos provide an equitable result.

 

The Bipartisan Budget Act of 2013 and Protecting Access to Medicare Act of 2014

In 2013, President Obama signed into law an amendment to the Medicaid anti-lien provision that would allow Medicaid to exert a lien against the entire settlement through the Bipartisan Budget Act of 2013.  Needless to say, this amendment is grossly unfair.  As stated above, why should Medicaid be reimbursed out of an injury victim’s recovery of lost income?  It makes no equitable sense.  Nevertheless, the amendment passed and the law changed.  The amendment was originally slated to go into effect October 1, 2014.  In April 2014, Congress passed the Protecting Access to Medicare Act of 2014, which postponed the implementation of the new Medicaid super lien until October 1, 2016.  I have not yet done an analysis on whether the new super lien will apply retroactively to injuries that occurred prior to October 1, 2016.  I sincerely hope that Congress reevaluates the Medicaid super lien and returns to the more equitable and fair application of Ahlborn and Woz.  In the meantime, Ahlborn and Wos apply until October 1, 2016.

Footnotes   [ + ]

1. 547 U.S. 268, 126 S. Ct. 1752, 164 L. Ed. 2d 459 [2006]
2. 133 S. Ct. 1391, 1393, 185 L. Ed. 2d 471 [2013]
3. the collateral source doctrine, as defined by Black”s Law Dictionary, is known as the principle in which “compensation paid by some source to an injured plaintiff cannot be deducted from the damages a defendant has to pay. The source, such as an insurance firm, cannot be a party to the litigation”
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