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Can State Be Reimbursed for Entire Medicaid Settlement?

Posted on: Wednesday, 12 October 2005, 21:00 CDT

By Lawyers Weekly USA Staff

(This article originally ran in Lawyers Weekly USA, Boston, MA, another Dolan Media publication.)

Is a state agency seeking reimbursement of Medicaid benefits paid to an accident victim entitled to recover the entire settlement, or limited to settlement expenses paid for medical care?

The U.S. Supreme Court has agreed to answer this question.

The court will review a decision from the 8th Circuit, which said that the agency was only entitled to be reimbursed for settlement expenses paid for medical care.

The victim suffered severe injuries in an automobile accident. She applied for Medicaid coverage. In accordance with federal and state law, she agreed to assign to the state her right to any settlement, judgment, or award she might receive from any third parties.

The state paid Medicaid benefits in the amount of $215,645. Although the victim suffered $3 million in damages, she settled claims against her automobile insurer and the third parties responsible for her injuries for $550,000. Pursuant to the assignment of rights, the state sought to recover the full amount of benefits paid.

The victim argued that the state could only recover that portion of her settlement representing payment for past medical expenses, which the parties stipulated as being $35,581.

The court agreed.

[T]he federal statutory scheme requires only that the state recover payments from third parties to the extent of their legal liability to compensate the beneficiary for medical care and services incurred by the beneficiary. Under [42 U.S.C.] Sect. 1396a(a)(25)(H), a state Medicaid plan must include provisions specifying that, when the state provides medical benefits to an applicant, 'the state is considered to have acquired the rights of such individual to payment by any other party for such health care items or services. ... This acquisition of rights occurs only in cases where 'a third party has a legal liability to make payment for [medical] assistance.' Section 1396k(a)(1)(A) similarly requires that an applicant assign to the state her right to payment for medical care from any third party.' ... Both statutes are thus limited to rights to third-party payments made to compensate for medical care, the court said.

A decision from the Court is expected this term.

Arkansas Department of Human Services v. Ahlborn U.S. Supreme Court No. 04-1506. Certiorari granted Sept. 27, 2005.

Source: Daily Record and the Kansas City Daily News-Press

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