In 2006, the case Arkansas Dept. of Health & Human Services v. Ahlborn established that a state’s Medicaid department would be limited to reimbursement from only the portion of one’s judgment or settlement that represents payment for medical expenses. The United States Supreme Court decided that states would be prohibited from seeking reimbursement for Medicaid costs from settlement proceeds that were intended to cover items other than medical expenses – such as pain and suffering, and wage loss.
Essentially, states could not demand reimbursement from portions of the settlement allocated or allocable to non-medical damages; instead, states were given only a priority disbursement from the medical expenses portion alone.
This ruling was beneficial to plaintiffs because it prevented states from receiving an entire settlement to cover Medicaid costs, which could leave the plaintiff with nothing in many scenarios.
Things were well and good until 2013, when a new budget act instructed states to increase their share of recovery to include any part of a settlement, judgment, or other payment (not just the part associated with past medical expenses). This meant Medicaid agencies could assert medical liens against a Medicaid beneficiary’s entire recovery. They could take parts of the settlement that were intended to cover other damages meant to help a plaintiff recover from their catastrophic injury.
However, earlier this month Congress passed the Bipartisan Budget Act of 2018. Part of this new law has again narrowed the scope of state Medicaid, essentially reinstating the 2006 Ahlborn decision. By repealing the scope of state Medicaid lien expansion, this most recent act effectively limits Medicaid recovery to the part of a settlement that represents only past medical expenses paid by state Medicaid agencies.
This could be considered a win for plaintiffs. For example, under the previous ruling, it would be allowable, yet rather unfair, for a state to recover $80,000 out of a $90,000 settlement even where that state paid $80,000 in medical bills for the Medicaid beneficiary. Instead, in that same example and with the newer ruling, if only $9,000 is identified as allocable for past medicals, that is the part against which state Medicaid agencies and their contractors could recover.
Reinstating the Ahlborn ruling puts individuals over states. It is critical that both plaintiffs and attorneys stay on top of these changes and familiarize themselves with state Medicaid lien laws to best protect individuals’ health insurance coverage and settlement results. If you have any questions about how the new budget act could affect a plaintiff, feel free to reach out to our team.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).