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Supreme Court Decision Update - Arkansas Department of Health and Human Services vs. Ahlborn

supreme2.jpgThe second of today’s three Supreme Court decisions is Arkansas Department of Health and Human Services vs. Ahlborn (PDF of the Opinion), which is about the state’s right to be fully reimbursed for Medicaid costs when an injured party settles a third-party case for an amount in excess of the costs of medical care but for less than the amount of the claim.

QuizLaw Analysis: Those folks over at Medicaid are hard-core; you know the system is in trouble when it’s trying to attach a lien to an injured party’s future earnings damages.

The facts to Arkansas Department of Health and Human Service (ADHS) vs. Ahlborn are pretty straightforward, but the issues are complicated. Ahlborn was involved in a vehicle accident with allegedly negligent third parties. After the accident, Medicaid and other state medical providers paid $215,645 on her behalf for medical costs. Ahlborn then filed a lawsuit against the negligent third parties, seeking damages for past medical costs, pain and suffering, loss of earnings and work time, and permanent impairment, a case that settled for $550,000. Though ADHS didn’t participate in settlement negotiations, it did attach a lien to the settlement, asking to be refunded for the full amount it paid on Ahlborn’s behalf. The settlement, however, only amounted to one-sixth of Ahlborn’s actual claim; therefore, she argued that ADHS was only due $35,581, the prorated reimbursement amount of medical payments made (one-sixth of $215,645). ADHS, however, argued that it was entitled to be reimbursed for the full $215,645.

The Supreme Court, in a unanimous decision written by Justice Stevens, sided with Ahlborn, holding that the Federal Medicaid law does not authorize ADHS to assert a lien on Ahlborn’s settlement in an amount exceeding $35,581.47, and the federal anti-lien provision affirmatively prohibits it from doing so.

Stevens reasoned that the Arkansas statute in question required that Medicaid recipients, as a condition of eligibility, “assign the State any rights…to payment for medical care from any third party.” ADHS did not, however, have a right to attach a lien to payments made for lost wages, pain and suffering, etc. As Stevens wrote, “because the tortfeasors accepted liability for only one-sixth of Ahlborn’s overall damages, and ADHS has stipulated that only $35,581.47 of that sum represents compensation for medical expenses, the relevant ‘liability’ extends no further than that amount.”

ADHS argued that this result would encourage manipulation of settlement agreements to, for instance, provide more settlement monies for lost wages, pain and suffering, etc. than for medical costs, thus depriving ADHS of its rightful reimbursement amount. The Supreme Court, however, rejected that argument because there was no evidence that Ahlborn engaged in manipulation tactics, and, besides “the risk that parties to a tort suit will allocate away the State’s interest can be avoided either by obtaining the State’s advance agreement to an allocation or, if necessary, by submitting the matter to a court for decision.”

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Comments

QuizLaw,
You got that right about the folks at Medicaid being hardcore. In NC, our Medicaid folks are not even really acknowledging the implications of Ahlborn. We are having to file Fed DJ actions to get some love from medicaid.

Here is a link from my Blog about the "practical way" for Plaintiff lawyers to use Ahlborn. There is also a link to the newspaper coverage dealing with the fed. DJ actions.

http://nctrialblog.typepad.com/north_carolina_trial_law_/2006/08/ahlborn_what_do.html