North Carolina Trial Law Blog

Liens and Workers' Compensation

I had the pleasure of speaking this  morning at the North Carolina Academy of Trial Lawyer's Workers' Compensation Roundtable Seminar.  I was pinch hitting for a number of State and federal Employees who were supposed to talk about:  Medicaid, Medicare, State Employee Health Plan, and TriCare.

Instead, they got me.

I am posting a link to my PowerPoint presentation for  those in attendance who wantde the "paper" copy of my talk.  Here is the link:  Ahlborn PowerPoint Slide show

Thanks for all the great questions!

Chris Nichols

www.NicholsTrialLaw.com

Lien manual published by Chris Nichols

Well, it finally happened- I'm officially a published author now (and editor!)

The NC Lien Manual is now on the shelves, the one I edited and wrote chapters for and that was published by the North Carolina Academy of Trial Lawyers and Lexis.  Before you think that I'm pitching my own product, you should know that 100% of proceeds go to NCATL to further the fight for people's rights, not to me!

Here is the link to check it out: NC LIEN MANUAL

Here is what Lexis says:

Description

New Publication! The Personal Injury Liens Manual is a brand new publication that is intended to help simplify the complexity that characterizes personal injury liens, and to provide information you need to secure maximum net recovery for your clients. Edited by Christopher R. Nichols, a leading personal injury attorney and Academy member, the first edition is authoritative, comprehensive, and user-friendly. The 380+ page manual contains 6 chapters and provides fingertip access to more than 35 sample forms, letters, and complaints, and includes dozens of practice tips and pointers from the experienced authors. It also contains the text of relevant state and federal statutes, regulations, and case law.

Medicaid v. State Employees v. Medical Provider Liens: An Epic Battle

I recently received a great question from an attorney regarding the interplay of Medicaid, State Employee Helath Plan, and Medical Provider Liens.  With the recent developments in Medicaid subrogation law (The SCOTUS decision in Ahlborn and North Carolina Supreme Court ruling in Ezell) and the "new" amended statute for the State employee Health Lien, lawyers are left scratching their heads on hoow to address the competing liens of these entities.

The Question:

We recently settled a case on behalf of a minor.  There is a Medicaid, a SEHP and a hospital lien.  Medicaid lien is much greater than the other two, but payment in full of all three would be less than 1/3 of the total net proceeds to the minor. 

By way of example (not actual numbers): Assume a $100,000 settlement and attorney fees and costs of $30,000.  Liens total $30,000.  $15,000 Medicaid, $10,000 SEHP and $5,000 Medical providers.  Here's the catch: parent's claim had run prior to suit being brought, thus the entire settlement was for minor's pain and suffering, future lost wages, and future medical expenses.  Under Ahlborn it would seem that Medicaid has no right of recovery (a percentage of nothing is nothing) but that the SEHP and Medical Providers would get paid in full.

Have you seen an NC case like this go through the system post-Ahlborn or has the scenario been discussed at any of the meetings you have attended?

MY Answer:
You win the award for "best law school exam question on liens"!

No case like yours has come forward yet, but I was expecting one.  The folks at SEHP were sort of surprised when I told them this would happen, they seemed to think that if you had SEHP ALL your bills would be paid.  They never thought about people losing jobs, losing insurance coverage, etc.

MEDICAID
The analysis should start with Ahlborn.  Ahlborn tells us that Medicaid can not claim repayment from any portion of a settlement not apportioned to medical payments.  Clearly, the settlement in this case has no component of medical bills because the medical bill claim was that of the parents, and the statute of limitations for the parents claim (and therefore Medicaid's derivative claim) had run before the suit was filed.  The only possible argument that Medicaid could make would be to argue that the parents "assigned" the right of collection to Medicaid upon the child's receipt of Medicaid benefits under 108A-57.  As is noted in a recent publication by John Saxon at the UNC School of Government:

It is clear that both statutes involve the recovery of Medicaid payments from third parties who are liable to Medicaid beneficiaries. G.S. 108A-57, however, uses the term "subrogation" to define the state Medicaid agency's rights against third parties while G.S. 108A-59 defines the State's right as one arising by virtue of "assignment." Subrogation and assignment, though, are distinct legal concepts. So, it is not entirely clear whether the State's claim against a third party is a claim based on subrogation or a claim based on assignment, whether the State may assert a claim based on subrogation and assignment, whether the State must elect to pursue its claim based on subrogation or assignment, and whether the scope of the State's rights under G.S. 108A-59 is coextensive with, broader than, or narrower than the scope of its right of subrogation under G.S. 108A-57. Nor is it clear whether the "pro rata" and "one-third cap" provisions of G.S. 108A-57 apply if the State's claim is based on an assignment under G.S. 108A-59 rather than subrogation under G.S. 108A-57.

So at the outset, we have the argument that Medicaid has NO lien or right of subrogation pursuant to Ahlborn.  The Ezell case, of course, is directly contradictory to this, with Judge Steelman's dissent at the Court of Appeals (adopted per curiam by NCSC)saying:

Notwithstanding any other provisions of the law, to the extent of payments under this Part, the State, or the county providing medical assistance benefits, shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of this assistance, or of the beneficiary's personal representative, heirs, or the administrator or executor of the estate, against any person. . . .

N.C. Gen. Stat. § 108A-57(a) (2005) (emphasis added).

The above language contemplates a broad right of subrogation, which is indicated by the reference to "all rights of recovery." Subrogation is not limited to tort recovery, as the statute expressly covers contractual rights or "otherwise." See State v. Shade, 115 N.C. 757, 759, 20 S.E. 537, 537 (1894) (noting that when the words "or otherwise," follows an explicit example in a statute, the legislature intends to include every other manner of fulfilling the purpose of the statute, for example here, recovery, no matter what might be the attendant circumstances). The causation language discussed by the majority is from the portion of the statute dealing with the duty of a plaintiff's attorney to distribute settlement proceeds to DMA, not from the portion of the statute defining the scope of DMA's right of subrogation, which is set forth verbatim above.

STATE EMPLOYEE HEALTH PLAN
The next matter to address is the lien of the State Employee's Health Plan.   Of course, the SEHP lien will attach to the proceeds regardless of whether they are for medical bills or not:

§ 135-40.13A. Liability of third person; right of subrogation; right of first recovery.

(a) Whenever the Plan pays benefits for hospital, surgical, medical, or prescription drug expenses, with respect to any Plan member, the Plan shall be subrogated, to the extent of any payments under the Plan, to all of the Plan member's rights of recovery against liable third parties, regardless of the entity or individual from whom recovery may be due.

Though, one might argue that the logic of Ahlborn would apply and SEHP would not have a lien on the minor's damages (though it seems the statute allows the lien to attach to any proceeds).

The Plan's lien language gives SEHP the "right of first recovery" which would seemingly place SEHP in a higher priority than Medicaid, though Medicaid could argue that because they are federally funded, the state law would be preempted.

The Plan has the right to first recovery on any amounts so recovered, whether by the Plan or the Plan member, and whether recovered by litigation, arbitration, mediation, settlement, or otherwise.

The Plan's subrogation right is limited to recovering no more than 50% of the net settlement after "reasonable" attorney fees and costs (presumed to be 1/3) have been paid.

There is currently no guidance on how SEHP would "compete" with Medicaid if both have valid liens.  SEHP told me during our meeting that they were "working with the AG's office and Medicaid" on a way to handle this type of situation.  My best guess is that if both liens are valid, Medicaid and SEHP would devise some sort of pro-rata sharing.

SEHP and Medical Liens
SEHP claims to have priority over all Medical Provider liens.  Thus, because SEHP's lien formula is almost exactly the same as the Medical Provider lien formula, if SEHP's lien is equal to 50% of the NET settlement (after reasonable collection costs) then the Medical providers would not be entitled to any payment under the statute (though their balances would still be owed by the client).

If SEHP's lien was LESS than 50% of the NET (after reasonable costs of collection) then the question would first be to determine if there is a valid Medicaid lien.  If there is a valid Medicaid lien, AND Medicaid does NOT have to share with SEHP, then the Medicaid and Medical provider liens would be prorated up to 1/3 of the settlement (for Medicaid) or 50% of the net after Attorney Fees (for Medical providers).

MEDICAL LIENS
Finally, you have medical liens under NCGS 44-49 and 44-50. Medicaid must share "pro-rata" with any unpaid medical providers pursuant to the requirements of:

§ 108A-57. Subrogation rights: withholding of information a misdemeanor

(a)  . . . Any attorney retained by the beneficiary of the assistance shall, out of the proceeds obtained on behalf of the beneficiary by settlement with, judgment against, or otherwise from a third party by reason of injury or death, distribute to the Department the amount of assistance paid by the Department on behalf of or to the beneficiary, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, but the amount paid to the Department shall not exceed one-third of the gross amount obtained or recovered. (emphasis added)

This was discussed in the previous section.  Further, SEHP claims that they do NOT pro-rate with medical providers within the 50% of Net after attorney fees limitation.

Thus, I see two scenarios that could result from your case:

1)  Medicaid Valid, SEHP Valid, Medical Liens Valid

In this scenario Medicaid and SEHP would first need to determine if one or the other had priority in payment or if they prorate within the 1/3 limitation set by medicaid.  If SEHP has first priority, then the question would be does Medicaid get 1/3 of what is left after SEHP is paid or are they limited to no more than 1/3 of the total settlement minus what SEHP has been paid.  Medical providers would receive the remainder, pro-rated with Medicaid up to the 1/3 limit of medicaid or the 50% after attorney fees of Medical Provider liens.

2.  Medicaid INVALID, SEHP Valid, Medical Liens Valid

If our courts apply Ahlborn as written, then Medicaid should have no lien on the minor child's pain and suffering or future medicals recovery.  Then SEHP would recover it's full lien, up to 50% of the net after "reasonable costs of collection" and then Medical providers would share among themselves, pro-rata, up to 50% of the net after attorney fees. (Which is essentially the same 1/3 that SEHP claims).  Medical providers could argue that their share should be 50% of the NEt AFTER SEHP is paid, but I don't see any real basis for that argument.

I think that you will probably need to litigate this matter.  In that regard, you need to give Medicaid notice of all hearings.  My guess is that you would make these arguments at the minor settlement hearing and that Medicaid (AG) would need to participate.

If you have not read my posts on these issue on my Blog, you might want to check it out: Ahlborn Resources

Chris Nichols

Nichols Law Firm

Ahlborn Amicus Brief from ATLA

I've been looking for a copy of the Amicus brief filed by the Center for Constitutional Litigation and ATLA in the Ahlborn case.  Finally, one of my friends sent me a copy.

Click here to view the Ahlborn Amicus Brief.

To see all of the other information about the Ahlborn case, follow this link to the post.

Chris Nichols

Nichols Law Firm

NC Injury Lawyers: Ahlborn Resources for Medicaid

This post is a collection of important links for anyone dealing with an Ahlborn issue in relation to a Medicaid lien on a personal injury settlement.  Ahlborn allows an attorney to argue that Medicaid should not receive full reimbursement of a lien for payment of medical bills if the lien exceeds the portion of the settlement "allocated" for medical costs.

The "thumbnail" legalese version of the Ahlborn holding is this:

1) Arkansas statute automatically imposing lien in favor of ADHS on tort settlement proceeds was not authorized by federal Medicaid law, to extent that statute allowed encumbrance or attachment of proceeds meant to compensate recipient for damages distinct from medical costs, and

2) anti-lien provision of federal Medicaid law precluded Arkansas statute's encumbrance or attachment of proceeds related to damages other than medical costs

The OYEZ summary of the case (one page) can be viewed HERE.

My "practical" version of the implications of Ahlborn can be found here:
NC Trial Law Blog on Ahlborn

SUPREME COURT DECISION
The Ahlborn Supreme Court Decision .pdf link

Click HERE for the Rich Text Format of the Ahlborn case from Westlaw as posted by the Alaska Trial Lawyers which contains "hotlinks" to all cited authority and briefs.  You can dowload the case for free but to link to the other authority and briefs you will need a Westlaw password.

Here is the list of all the lawyers involved and all of the Supreme Court filing milestones.

BRIEFS AT THE SUPREME COURT
The Petitioner's Brief (Arkansas Medicaid)

The Respondent's Brief (Ahlborn)

The Petitioner's Reply Brief (Arkansas Medicaid)

AMICUS BRIEFS FROM ALL LEVELS
The Amicus Brief by ATLA/Center for Constitutional Law at Arkansas Supreme Court.(I need a copy of this brief, so if anyone has it, please send me a link or an upload)

The SC Amicus Brief by the United States in Support of Arkansas

SUBSEQUENT CASES CITING AHLBORN
Hat Tip to Steve Bricker of the Bricker Law Firm in Richmond, VA for sending me a New York case where the NY Supreme Court (their highest trial court, like NC's Superior Court) used Ahlborn the way it was intended.  Hopefully this will be a good "go-by" for other courts.

Click Here to Download Lugo_v_Beth_Israel_NY_42_USC_1396p.pdf

OTHER USEFUL AHLBORN LINKS
The Center for Constitutional Law's memo on "How to Use Ahlborn".  These are the folks that wrote the Amicus brief that was quoted by the Supreme Court in the majority opinion.  This is written by Lou Bograd from CCL and is a great guide.Download ahlborn_opinion_letter.pdf

This highly useful memo from the Department of Health and Human Services dated July 3, 2006,  provides the summary of how DHHS (The Fed. department charged with overseeing Medicare and Medicaid) interprets the Ahlborn decision in light of their own statutes.  This is a GREAT memo because it is the Fed's own instructions to "All Associate Regional Administrators for Medicaid and State Operations". This is a downloadable Word document that will allow you to argue against the State's probably "stricter" interpretation of the rules.  In North Carolina we have seen our Medicaid office argue "we have to get paid in full, the Federal Government mandates that."  No they don't.  Read it.

Social Services Law Bulletin # 41from the North Carolina Institute of Government by John Saxon. (.pdf download) This law bulletin was written as a "review" of the Ahlborn case to provide guidance to NC Medicaid.  The issue also addresses a NC Supreme Court opinion in the matter Ezell and explains how the author does not see how the two opinions can be squared with each other.  I wrote the Amicus in the Ezell case.

Medicaid Letter (Ohlahoma) Setting Out Ahlborn Criteria.  This letter appears to be a letter from Oklahoma Medicaid to a lawyer setting out what Oklahoma wants/needs to make a reduction in a Medicaid lien.  I think this is helpfu information to "guide" lawyers in jurisdictions where Medicaid has not figured out what they want or need to accomodate Ahlborn.  The link downloads the letter in word or allows for HTML viewing.

National Association of State Medicaid Directors Website.  This link takes you to the Medicaid Directors website where you will find all sorts of interesting information. Take a loom at the "insiders view".  The Oklahoma letter above came from the bowels of this website.

If you have any useful links to add to this collection, please email them to me or simply post below in the comments.  I'll make sure to credit you and provide a link to your blog/website if you want.

Chris Nichols
www.NicholsTrialLaw.com

Want Medicaid? Be a citizen, not an illegal

My friend Holly sent me this bit of news. New law becomes effective today; Medicaid recipients required to provide proof of citizenship (See below my comments for the story)  I have mixed feelings, but in the end, I don't think this is the right move for our government.  On the one hand we don't want to "give" medical help to the poor who are not citizens, but at the same time our country doesn't do much to prevent people from coming here to provide cheap labor. 

Also, I recently heard a statistic that many illegal immigrants actually pay a lot of taxes.  Here is how that works.  Most illegals will use a fake Social Security number to get low paying jobs.  Or they will apply for a Tax Id so they can get driver's licenses, etc.  The employer, in a typical wink and nod fashion, says, "Ok, you have a Social Security #, you MUST be legal."  Then the employer does the standard state and federal witholding to "prove" that they "thought" the employee was legal.  The employee gets a W-2 at the end of the year.  The employee/illegal usually never files a tax return, and they never get a tax refund.  Thus, millions of "unclaimed" dollars flow into the Federal Reserve that probably would not be there if the workers were naturalized and were scurrying to H&R Block for their "tax refund loan" at the annualized interest rate of 98%. (A subject for another day!) 

Medicaid, is, of course, funded with tax dollars as is Medicare, which has it's own separate tax right on the W-2.  So, in many instances, these "illegals" are absolutely paying for their right to receive Medicaid. 

Finally, people get sick whether they have health benefits or not.  Hospitals are not allowed to refuse treatment to very sick people in the ER.  So by denying Medicaid benefits, the federal government is simply passing the buck on to private  and state local hospitals, who will, in turn, pass the buck to consumers.  Also, by denying Medicaid, which will pay for "well" visits and preganacy care, when people do come to the ER they will be sicker and the the treatment will be costlier.  In the end, this will "cost" as much as it supposedly saves, I think.

I think this is classic penny wise-pound foolish thinking and is more motivated by politics than good sense.  Not to mention, we are a wealthy nation, we can afford to take care of the poor.  Especially when they are the ones doing the dirty work.

New law becomes effective today; Medicaid recipients required to provide proof of citizenship

By James Romoser

JOURNAL REPORTER

Friday, September 1, 2006

Starting today, people in North Carolina who are on Medicaid will have to prove that they are U.S. citizens, or they will risk losing their health-care coverage.

The new documentation requirements are part of a federal law intended to prevent illegal immigrants from getting health benefits through Medicaid, the government-run health-insurance program for the poor.

The Congressional Budget Office estimates that the law will save the federal government $735 million over 10 years.

But local Medicaid officials and some national health-care advocates say the new rules are too strict and mostly unnecessary. There is not a widespread problem of illegal immigrants getting Medicaid, they say. Some critics worry that the rules will hurt Medicaid recipients who are citizens but for some reason are unable to produce a passport, an original birth certificate or other required documents.

The rules will further complicate a process that is already strenuous for both Medicaid applicants and social-services caseworkers.

"You can basically get a million-dollar mortgage easier than you can get Medicaid," said Joe Raymond, Forsyth County's director of social services. Medicaid, a federal program, is run mostly by the states and is administered at the local level through county social-services departments. Applicants must meet income requirements and other eligibility criteria.

READ the full story here.

Chris Nichols

www.NicholsTrialLaw.com

NC Lawyer seeks Declaratory Judgment on Ahlborn and NC Medicaid

Lawyer Seeks Federal Ruling on NC Medicaid Law

My friend Carlos Mahoney of Glenn, Mills and Fisher of Durham has filed a Federal DJ action seeking a ruling on whether NC Medicaid (Department of Health and Human Services) is actually following the law (since Ahlborn) in the way it attempts to collect from personal injury settlements.

You can see my previous discussion on what Ahlborn means to NC lawyers here.

Good Newspaper Coverage

Carlos' suit was actually covered by the local newspaper, and covered well, in my opinion.

Here is a clip:

Official sued for blocking injury settlement

By John Stevenson, The Herald-Sun
August 24, 2006   11:20 pm

DURHAM -- N.C. Department of Health and Human Services Secretary Carmen Hooker Odom is being sued on grounds that she allegedly imposed an unconstitutional Medicaid lien on $75,000 owed to an 11-year-old Durham girl injured in a motorcycle accident.

The suit, drafted by lawyer Carlos Mahoney and filed this week in the Durham Division of U.S. Middle District Court, identifies the child only as "D.J.M."

According to the suit, the $75,000 was part of a settlement to reimburse D.J.M. for pain, suffering and permanent scarring that arose after she was hit by a motorcycle in Durham on June 25, 2005.

The suit contends that the Department of Health and Human Services, which administers the state's Medicaid program, has no right to the money because it was not intended for medical expenses. But Odom imposed a lien on the settlement funds anyway, apparently to recover $11,190.45 spent on D.J.M.'s hospital and physician bills, the suit says.

You can read the full story here:  Herald Sun

I'm crossing my fingers that the Federal Court will make sure that Ahlborn is being applied correctly and that the North Carolina Supreme Court will use this as yet another reason to take another look at Ezell.

Chris Nichols

www.NicholsTrialLaw.com

Thanks to Health Plan Law for the positive mention

Fine Discussion!

Thanks to Health Plan Law.com for the positive mention of my recent post setting out practical guidelines for using the recent Supreme Court Ruling in Ahlborn to reduce Mediacid liens in personal injury settlements.  Here is what they had to say:

Nonetheless, U.S. Supreme Court has held that these provisions do not support State statutes that claim more than the portion of a Medicaid recipient’s settlement that represents medical expenses. See, Arkansas Department of Health and Human Services v. Ahlborn, 126 S.Ct. 1752 (2006). A fine discussion of the implications of this case appears in the North Carolina Trial Law Blog. Thus far, little guidance has developed from the courts as to the implications of this May 1, 2006 decision, but its taming effect on Medicaid reimbursement demands should be evident in future developments.

Good News, Bad News

I will admit that the only downside is that since www.HealthPlanLaw.com is a web site for Health Plan Administrators, they probably like Ahlborn because it means more money for them to subrogate against (ala, ERISA claim for reimbursement).  (Warning:  self congratulation ahead)  Oh well, at least they know good analysis when they read it .  The good news is that the tone of the Health Law Article suggests that they too think that Medicaid liens can be "Draconian" (their words).  Sounds like we may have some health plan administrators out there with some real heart and understanding of what happens to a severly injured Plaintiff who receives nothing from a settlement because they have to "pay back" Medicaid, ERISA, etc. 

HelathPlanLAw.com makes for interesting reading too.  If you want to see the challenges of regulatory, statutory, and monetary red tape, check out some of the things these folks have to handle.

-Chris Nichols

www.NicholsTrialLaw.com

Ahlborn: What does it mean?

Ahlborn an exciting development for Plaintiffs (maybe)

The recent United States Supreme Court decision of Arkansas Department of Human Services v. Ahlborn 547 U.S. ___, 126 S.Ct. 1752 (April 2006) has created an excellent opportunity for plaintiff's lawyers to ensure clients receive a fair share of their settlements in personal injury matters.  Those of us that follow the developments of lien law were excited when this decision was published, and considered it a big "win" for Plaintiffs.  Unfortunately, North Carolina has not immediately followed the very clear guidance of the U.S. Supreme Court. 

My very short summary of Ahlborn

If you want to read the Ahlborn slip opinion, click here.  I'm not going to summarize it much other than this short paragraph.  In Ahlborn, Arkansas Medicaid had a claim against the proceeds of a personal injury settlement.  (NOTE: I'm using fictional numbers numbers to make this easy.)  Let's say Arkansas said that Ahlborn owed $100,000 to repay payments made by Medicaid for injuries caused by a third party's negligence.  Ahlborn had a settlement of $500,000.  Normally, Medicaid would get the full $100,000, right?  Well, the lawyers for Ahlborn said, "Hey wait, we may have gotten $500,000 for our client, but our client had a lot more damages, and this was a compromise settlement, so Medicaid should not, can not, take the full $100,000.  They should only get their fair share."

For several different reasons outlines below, Justice Stevens, writing for the majority, agreed that Medicaid should only get their fair share of the total damages to the Plaintiff. 

In essence, Justice Steven's said, "Medicaid can only get paid from the part of the settlement that represents payments made for medical bills.  Thus, when there is a lump sum settlement, a court can, and should, figure out what portion of the settlement is for medical bills, and what portion is for other damages, like pain and suffering, future medical damages, lost wages, disfigurement, etc."  This is sort of a complicated way of saying that Medicaid must pro-rate with other damages.

An Example of How the Ahlborn analysis should work

So in my fictional version of Ahlborn, here is what would happen:  According to Justice Stevens, Medicaid and the Plaintiff should agree on what the total damages are worth.  (Ok, realistically, in NC, Medicaid will often balk at this part, but we'll get to that later.)  Next you determine what Medicaid's total lien will be.  Then, you determine the percentage that Medicaid's lien represents of the total value of the damages.  Finally, multiply Medicaid's total lien by the percentage, and voila, you have Medicaid's final lien. 

Medicaid and the Plaintiff can't agree? Easy solution says Justice Stevens, have a trial judge figure it out.  I call this process "pro-ration" but the Supreme Court calls it "apportionment."  Ok, I'll use their term, mostly because my spell check just does not like any version of "proration".

Mathematically, using my fictional Ahlborn numbers here is what we get:

Pre-Ahlborn:

$500,000  Settlement

-$166,666  Attorney Fees

-$100,000  Medicaid lien

$233,333 available to client

Post-Ahlborn:

What is the value of the total damages?

Assume there are the following damages:

$   100,000  Medicaid Lien

$1,500,000  Future medical bills (life care plan)

$   250,000  Past lost wages

$   250,000  Future lost wages

$ 2,100,000  TOTAL Damages  (we're leaving pain and suffering out to make this simple)

What portion of the total damages is Medicaid's "lien"?

$100,000 divided by $2,100,000  =   .047619  (pro-ration percentage)

What should Medicaid receive as part of the final settlement?

$100,000 lien x .047619 (pro-rata share) = $4,761.90

Final Analysis of Lien under Ahlborn:

$500,000  Settlement

-$166,666  Attorney Fees

-$4,761.90  ($100,000 x .47619) Final Medicaid Lien

$328,572.10   available to client

The reasons behind Ahlborn (Statutory analysis)

The reasons behind this interpretation of Medicaid law depend in part of how the Supreme Court interpreted federal statutes that enable the States to collect for Medicaid payments.  The analysis is fairly complicated, but is well summarized in a Petition for Rehearing filed in the NC Supreme Court case of Ezell v. DHHS.  (Since our Supremes adopted the dissenting COA opinion, you really need to read the dissent to make sense of the NCSC decision. Read the COA opinion here.) Ezell involved an issue that should be controlled by Ahlborn, though right now it looks like the N.C. Supreme Court has ignored the ruling in Ahlborn by adopting the dissenting opinion of the N.C. Court of Appeals which was decided pre-Ahlborn and gives no consideration of the analysis and "apportionment" required by Ahlborn.

Here is the summary of Ahlborn from the Petition for Rehearing in Ezell: 

Writing for a unanimous court in Ahlborn, Justice Stevens noted that 42 U.S.C. §1396k requires Medicaid beneficiaries to “assign the State any rights … to payment for medical care from any third party”— specifically excepting rights to payment for lost wages or pain and suffering.  547 U.S. ___, 126 S.Ct. at 1761.  Second, Stevens observed that the language of 42 U.S.C. §1396a(a)(25)(B) requiring state Medicaid programs to seek reimbursement from third parties expressly refers to “the legal liability of third parties … to pay for [medical] care and services available under the [Medicaid] plan.” Ibid. Third, Stevens determined that the rights acquired by state Medicaid programs pursuant to 42 U.S.C. §1396a(a)(25)(H) were only “the rights of [a Medicaid beneficiary] to payment by [a third party] for … health care items or services” —not rights to payment for lost wages, pain and suffering, an inheritance, or anything other than medical expenses.  Ibid.

            Reading these statutory provisions together in context, Justice Stevens concluded that “the federal third-party liability provisions require an assignment of no more than the right to recover that portion of a settlement that represents payments for medical care.”  Ibid., 547 U.S. ___, 126 S.Ct. at 1762. 

Despite the complicated statutory analysis in Ahlborn, the actual application of the decision is fairly simple.  Unfortunately, NC Medicaid (DHHS), via the NC Attorney General's office, is ignoring the opinion.  I am personally aware of at least three cases (four counting Ezell) where DHHS has said, in essence" "that's not what Ahlborn means, pay us our full lien."

DHHS seems to be taking the position that their lien is superior to any other lien (except Medicare) and that their lien is to be paid in full, up to NC's statutory "cap" of 1/3 of the gross settlement. 

Other Issues Ahlborn Raises in NC

Ahlborn also calls into question the constitutionality of the arbitrary 1/3 cap because the cap has absolutely no relationship to the settlement value.  If this is true, "smaller" cases, those with no long term medical costs or future damages, may have to pay more of a small settlement (no 1/3 cap) but those cases with large damages  and future losses will benefit.

Another disturbing aspect of Ahlborn is that is may lead a court to consider future liens by Medicaid.  In other words, in my fictional Ahlborn case above, the State might argue that they should be compensated for medical costs that will be paid.  This is already happening with Medicare set-aside trusts in Worker's Compensation cases. 

Keep reading here for further analysis and hints and tips about using Ahlborn.

Chris Nichols

www.NicholsTrialLaw.com

Medicaid Liens and Wrongful Death Cap

Under the North Carolina wrongful death statute, NCGS 28A-18, medical providers that have helped treat a person who then dies can only recover a maximum of $4,500 from a wrongful death settlement.  Unfortunately, that cap does not apply to Medicaid's lien if they have paid over $4,500 in medical bills.