Medicaid Lien Tweaking: Can it Now be Done?

 In Law Planet

lawbookandgavelEvery lawyer doing personal injury work has on occasion had to deal with an injured Medicaid insured and the ensuing Medicaid lien. Until recently, there was no real way to tweak a settlement agreement such that the lien would be as little as possible. However, there is now a way that appears to have passed muster of several seminal cases dealing with such liens. How is this possible? The way to do this involves allocating the settlement monies in such a manner that a judge would likely say was fair and equitable. Then the standard analysis on reduction of liens can be used.

Knowing about the several main cases on this issue is helpful. The first decision everyone should know about is the United States Supreme Court case of Arkansas DH&HS v. Ahlborn, 547 US 268 (2006). This case held that the federal requirements of state Medicare programs to seek reimbursement “does not sanction an assignment of rights to payment for anything other than medical expenses, not lost wages, not pain and suffering, not an inheritance.” Under Ahlborn, states can’t force an assignment of or place a lien on any other portion of the settlement other than that which represents payment for medical care. With that said, most personal injury settlements don’t allocate what the money is for. When that happens, the plaintiff is stuck having the entire amount of the settlement used in the calculations for reducing the outstanding Medicaid lien. However, savvy personal injury practitioners know that if there are percentage allocations done as part of the settlement and those allocations can be deemed to be reasonable, Medicaid is stuck with the allocations.

In order to make this argument in a successful manner, there are several cases that need to be considered and cited when dealing with a Medicaid lien reduction. The first case is Smith v. AHCA, 24 So.3d 590 (Fla. 5th DCA 2009). In this case, there was a large Medicaid lien from severe injuries. The parties failed to allocate what percentage of the settlement agreement dealt with medical bills. The Plaintiff’s attorney then tried to argue allocation after the fact and that effort was rejected. However, this opinion contains language that: “when an apportionment exists, a plaintiff should be afforded an opportunity to seek a reduction of the Medicaid lien amount by demonstrating, with evidence, that the lien amount exceeds the amount recovered for medical expenses.” This was great news for personal injury attorneys as this signaled the way to go when dealing with a Medicaid plaintiff.

The language in this opinion was subsequently supported by another U.S. Supreme Court opinion known as Wos v. E.M.A., 133 S. Ct. 1391 (2013) which involved a North Carolina statute that is almost identical to Florida’s. In this opinion, the Supreme Court states that: “a rebuttable, one size fits all statutory presumption is incompatible with the federal Medicaid, clear mandate that a state may not demand any portion of the beneficiaries’ tort recovery, except the share that is attributable to medical expenses.” As a result of this opinion, the strict Medicaid recovery formula  was struck down to the extent that it permitted recovery beyond the portion of a Medicaid recipient’s third-party settlement that represents compensation for past medical expenses. Having this opinion in your back pocket is vital when dealing with Medicaid reductions. Be aware that the failure to allocate percentages of settlement monies can actually prevent you from making this argument. In the case of Russell v. AHCA, 23 So.3d 1266 (Fla.2d DCA 2010) the failure to allocate resulted in the entire amount being used in the formula.

Another important case is Davis v. Roberts, 130 So.3d 264 (Fla. 5th DCA 2013). This is the ace in the hole indicating that all of the prior decisions are now compatible with getting a Medicaid lien reduced using the system. In the Davis case, all of the parties to a settlement agreed to an allocation of the plaintiff’s past medical expenses as well as the projected total value of all the damages and the amount of money paid to the plaintiff for various mitigating circumstances. Plaintiff’s wise counsel filed motions seeking to approve the settlement of the minor plaintiff and to determine the reasonableness of the allocations indicated in the settlement agreement. The Fifth DCA approved this method and said a plaintiff has the right to petition the court to demonstrate that the lien amount exceeds the amount recovered for past medical expenses. Obviously, having supportive testimony from our personal injury attorney brothers and sisters is vital to supporting this position.

What do all these cases mean? It means that when you go to mediation with a Medicaid plaintiff, you need to be prepared to allocate the settlement amongst the various areas of damages so that you can demonstrate to a judge that the allocation is fair given the circumstances of the case. In a situation where you have not filed suit yet, you might have a problem with pursuing this line. However, having the settlement agreement set up such that the plaintiff can file a friendly suit and the defense will simply sit back and do nothing is the way to go. Of importance, don’t forget to notify the Medicaid agency so that they are on notice of the hearing and any subsequent ruling. There are several reported decisions where no one showed up on behalf of Florida’s Medicaid offices and the judge pretty much followed through with whatever was presented.

What type of language is necessary? I think just about anything that reasonably allocates the amount of the settlement amongst the various areas of available compensation will work.

Here is a good start:

“The parties to this agreement agree that the above settlement amount does not fully compensate plaintiff ________________ for all of the damages sustained. Although this settlement is being made for a full and complete  release of all claims and causes of action (without regard to the settlement only compensating a portion of the plaintiff’s damages) the settling parties are making this settlement in order to resolve a disputed claim and agree that an analysis of the various elements of damages sustained by the plaintiff has led to this settlement. Therefore, the parties, through their experienced attorneys and with the assistance of the mediator, have agreed that the settlement monies are being allocated towards the indicated damages:

Plaintiff is recovering ___ percent of the total value of plaintiff’s damages. This percentage has been calculated based upon the combined experience of the attorneys and mediator involved. Plaintiff is recovering ___ percent of his or her claim for past medical expenses, ___ percent for past lost wages or earning capacity, ___ percent for future lost wages or earning capacity, ___ percent for pain and suffering, ___ percent for future medical expenses, ___ percent for loss of consortium claims of plaintiff spouse, and ___ percent for (see standard jury instructions for any other damages classification).”

Obviously, if you have a case involving unique damages, you should add those descriptive damages to this agreement. The limits on verbiage are only limited by your reasonable experiences and what you think is acceptable in the local jurisdiction where you practice. Going to mediation on a Medicaid case without language like this is a dangerous way to practice. If you don’t bring the language with you, at least be aware that this type of percentage allocation is acceptable under the above case law and will normally be followed by a judge unless the percentages are simply outrageous. If a defense attorney balks at this language, remind him of who he is supposed to be protecting.

Image courtesy of by Nirots

Start typing and press Enter to search