Ark. HHS v. Ahlborn, 547 U.S. 268 (U.S. 2006)

In Arkansas Dept. Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), Heidi Ahlborn suffered severe and permanent injuries at age 19 as a result of an automobile accident. She was left partially brain damaged and unable to complete her education. Medicaid determined she was eligible for benefits and paid providers $215,645.30 on her behalf. Later, she filed suit for past and future medical expenses, permanent physical injury, past and future pain, suffering and mental anguish, loss of earning and working time and permanent impairment. Medicaid intervened in the lawsuit to assert its lien. The case later settled out of court for $550,000 and Medicaid asserted its right to full recovery of all amounts spent on Ahlborn’s behalf. On September 30, 2002, Ahlborn filed suit in District Court seeking a declaration that the lien violated federal Medicaid law. The parties stipulated that Ahlborn’s entire claim was valued at $3,040,708.12 and that the settlement amounted to approximately one-sixth of that sum. Ahlborn contended that Medicaid was only entitled to the portion of the settlement that constituted reimbursement for medical payments made ($35,581.47), while Medicaid contended it was entitled to full recovery under 42 U.S.C. § 1396k(a)(1)(A). The court held 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 expenses. If Section 1396k(a)(1)(A) was not limited by other law, then States might be able to assert a right of full recovery; however, 42 U.S.C. § 1396a(a)(18) requires compliance with other Medicaid program rules. In turn, 42 U.S.C. § 1396p prohibits liens except in permitted circumstances. The court held that permitted circumstances included reimbursement of medical payment recovered, but beyond that, the anti-lien provision applies. The Court held that Medicaid’s anti-lien provision prohibited Arkansas from asserting a claim against a settlement in excess of $35,581.47, the amount recovered that related to medical expenses paid by Medicaid. Decided: May 1, 2006.

Note: In Chambers v. Jain, Case No. 1240/03, 2007 N.Y. Misc. LEXIS 2479 (Sup. Ct. Queens County April 13, 2007), the court applied Ahlborn in reducing a Medicaid lien from $141,638 to $40,083.55. Applying Ahlborn’s reasoning, the court determined that the full value of the case was $6 million and the case settled for $1.7 million. This suggested that Plaintiffs recovered only 28.3% of the past medical expenses and, therefore, the agency could collect only 28.3% of its lien.

In Ezell v. Grace Hospital, Inc., 631 S.E.2d 131 (NC 2006), the North Carolina Supreme Court reversed a court of appeals decision that Medicaid was entitled to recover its entire claim. The Plaintiff had settled for $100,000. The court found that Medicaid could recover only one-third of its $86,540 claim.

In Lugo v. Beth Israel Medical Center, 819 N.Y. Supp. 2d 892 (Sup. Court, New York County 2006), claims against the hospital were settled for $3.5 million. When Medicaid presented its claim for payment, Plaintiff argued that the claim ($47,349.58) was limited to the amount allocated for past medical expenses and that the court was entitled to reduce the claim by comparing the agreed upon settlement to the actual value of the case. Medicaid countered that it was entitled to its entire claim. The State further argued that it was not necessary to calculate the full value of the claim because it was “inconceivable” that its claim could not be paid in full considering the settlement amount. Rather than accepting the State’s argument, the Court reviewed Ahlborn, finding that the Court cited AAJ’s Amicus Brief with approval. That brief suggested that were a stipulation regarding the full value of the claim is not forthcoming, it is appropriate for the court to hold an allocation hearing. In support of Plaintiff’s valuation argument, affidavits were presented, as well as citation to jury verdicts in similar cases. Plaintiff argued that the actual value of the claim was $7 million and, therefore, Medicaid was only entitled to 50% of its claim. The court found that Medicaid was entitled to an opportunity to challenge Plaintiff’s assessment and directed the parties to appear at a conference to discuss issues to be tried and directed Plaintiff to hold $47,349.58 in escrow pending the court’s decision.

These cases, taken together, indicate that an allocation hearing may be necessary where Plaintiff seeks to pay less than Medicaid’s full claim. Where a stipulation as to the claim’s actual value can be agreed upon, the Ahlborn formula may facilitate resolution. In situations where there is no agreement, Plaintiff should present evidence as to the actual value of the claim, as well as the value of non-medical damages. Medicaid’s claim should be limited to its pro-rata share of the amount recovered compared to the true value of the case.

Note 1: “The effect of the stipulation is the same as if a trial judge had found that Ahlborn’s damages amounted to $3,040,708.12 (of which $215,645.30 were for medical expenses), but because of her contributory negligence, she could only recover one-sixth of those damages.”

Note 2: It is worth noting that because Medicaid liens are different from Medicaid Estate Recovery, this holding would not bar an Estate Recovery claim under 42 U.S.C. § 1396p for the full amount Medicaid invests in a beneficiary’s care.

Note 3: In Chambers v. Jain, Case No. 1240/03, 2007 N.Y. Misc. LEXIS 2479 (Sup. Ct. Queens County April 13, 2007), the court applied Ahlborn in reducing a Medicaid lien from $141,638 to $40,083.55. Applying Ahlborn’s reasoning, the court determined that the full value of the case was $6 million and the case settled for $1.7 million. This suggested that Plaintiffs recovered only 28.3% of the past medical expenses and, therefore, the agency could collect only 28.3% of its lien.
Note 4: Tennessee’s subrogation rights are codified at T.C.A § 71-5-117. Acceptance of Medicaid is deemed to be an assignment of third party payments to the Medicaid program. 71-5-117(b). When a recovery is secured, attorney’s fees are deducted from TennCare’s claim. 71-5-117(c). Section 71-5-117(g) describes the method for determining the amount of the subrogation interest:

1. Before entry of judgment or settlement in a personal injury case, the attorney should contact the State to determine whether the State has a subrogation interest.

2. The plaintiff’s attorney then informs the court of the results of that contact.

3. It is the responsibility of the trial judge to calculate the amount of TennCare’s subrogation interest and to incorporate its findings into the final judgment or settlement.

4. The gross amount of the subrogation interest is based on the jury’s findings regarding medical expenses and evidence introduced after trial of the total sum paid by the State for medical expenses.

5. The gross subrogation interest is then reduced by the following factors, if applicable:

– To the extent the plaintiff was partially at fault, the subrogation interest is reduced by the percentage of fault assessed against the plaintiff;
– To the extent the jury allocated fault to a person who was immune from suit, the subrogation interest is reduced by the percentage assessed against the immune person;
– To the extent the jury allocates fault to a governmental entity that has limited liability, the subrogation interest is reduced by a percentage derived by dividing the uncollectible portion of the judgment against the governmental entity by the total damages; or
– To the extent the jury allocates fault to a non-party, the subrogation interest is reduced by the percentage of any fault assessed against the nonparty.

6. The judge should then reduce the subrogation interest pro rata by the amount of reasonable attorney’s fees and litigation costs.7. If the case is resolved without trial, then the trial judge shall hold a hearing to determine the gross and net subrogation interests.

Estate of Virginia Ramirez, 2006 N.Y. Misc. LEXIS 4587; 236 N.Y.L.J. 107 (N.Y. Misc. 2006). This is a motor vehicle case where Plaintiff cited Ahlborn, seeking to avoid reimbursing Medicaid. Decedent was injured in a collision on June 30, 2005 and died intestate on July 4, 2005 at age 85. A proposed settlement of $50,000 constituted the defendant’s insurance limits. All medical expenses associated with the collision were paid by defendant’s no-fault carrier, but Decedent had received $109,269.69 in medical assistance. The administrator argued that Ahlborn precluded Medicaid’s recovery since there was no recovery for medical expenses. However, Medicaid’s claim was not barred by Ahlborn because, after the Decedent’s death, an action against the estate exists to recover for medical assistance paid under 42 U.S.C. § 1396p and N.Y. Social Services Law § 366[4][h][1]. Medicaid did concede that its recovery was limited to the amounts allocated to the personal injury action since the estate does not own the wrongful death action. Decided: December 5, 2006.

Ross v. Agency for Health Care Administration, 947 So.2d 457 (Fla. Ct. App. 2006). Wife was personal representative of husband’s estate. Husband was killed in vehicle collision. Medicaid paid $168,691.58 in medical expenses and had an automatic lien. Medicaid filed its lien with the Court alleging a right to full payment. After wrongful death action was brought, the case settled for $900,000, plus an additional $25,000 on decedent’s UM policy. Wife then allocated funds among survivors, attorneys and the agency, giving Medicaid an allocation that paid 25% of its claim. The trial court reallocated division of the settlement so Medicaid received 50% of its claim. On appeal, the court found that the personal representative does not have the right to make an allocation that deprives Medicaid of less than its full claim. Citing Strafford v. Agency for Health Care Admin., 915 So.2d 643 (Fla. Ct. App. 2005), the trial court makes the allocation and shall order the amount allocated to Medicaid to be paid directly to the agency. The trial court’s allocation of 50% to Medicaid was affirmed.

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