TX/UP! GLOBAL WARMING UPDATE:  Our in-house weather department advises that the most comfortable temperature for standing outside naked is 72 degrees.  Considering looming climatic changes, we recommend you start now.

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Have you ever had a settlement derailed or delayed when Medicare is being unreasonable in insisting on a full recovery or near full recovery of its medical lien?  Well, we sure have, but maybe that’s about to change.  On May 1 2006, the United States Supreme Court handed down a notable decision, holding that a state could not enforce the full amount of its Medicare lien when a plaintiff settles her third party liability case for an amount less that its full value. 

Following Heidi Ahlborn’s car accident with allegedly negligent third parties, the Arkansas Department of Health Services (ADHS) determined that Ahlborn was eligible for Medicaid and paid $ 215,645.30 in medical expenses on her behalf.  She filed a state court suit against the alleged tortfeasors seeking damages for past medical costs and for other items including pain and suffering, loss of earnings and permanent impairment.  The case against the tortfeasors was settled out of court for $ 550,000, which was not allocated between categories of damages.  ADHS did not participate or ask to participate in the settlement negotiations, and did not seek to reopen the judgment after the case was dismissed, but did intervene in the suit and asserted a lien against the settlement proceeds for the full amount it had paid for Ahlborn’s care.

Ahlborn filed this action in Federal District Court seeking a declaration that the State's lien violated federal law insofar as its satisfaction would require depletion of compensation for her injuries other than past medical expenses.  The parties stipulated that the settlement amounted to approximately one-sixth of the reasonable value of Ahlborn’s claim and that, if her construction of federal law was correct, ADHS would be entitled to only the portion of the settlement ($ 35,581.47) that constituted reimbursement for medical payments made.  [Apparently, Ahlborn had a weak third party liability case necessitating a relatively modest settlement].  In granting ADHS summary judgment, the trial court held that under Arkansas law, which it concluded did not conflict with federal law, Ahlborn had assigned ADHS her right to recover the full amount of Medicaid's payments for her benefit.  The Eighth Circuit reversed, holding that ADHS was entitled only to that portion of the settlement that represented payments for medical care.
 

The United States Supreme Court upheld the Eighth Circuit’s decision and stated that federal Medicaid law does not authorize ADHS to assert a lien on Ahlborn’s settlement in an amount exceeding its fair share (in this case, $ 35,581.47)  and the federal anti-lien provision affirmatively prohibits it from doing so.  Arkansas' third-party liability provisions are unenforceable insofar as they compel a different conclusion.  Arkansas Department of Health v. Ahlborn, 2006 U.S. Lexis 3455  (U.S. 2006).

We learn a couple of important things from this case.  First, Arkansas has a health department.  We wouldn’t have guessed that.  Second, this case clarifies the law regarding a state Medicaid agency's right to reimbursement from a Medicaid recipient's proceeds of settlement of claims against a third party.  Many state Medicaid agencies have taken the position that they are entitled to reimbursement of the full amount of their statutory lien (or mostly the full amount) for medical expenses from Plaintiff's settlement proceeds, even though the Plaintiff is not receiving the full amount of Plaintiff's other alleged damages (e.g.; for lost earning capacity, pain and suffering, mental anguish, disfigurement, etc.)

Of course, this case does not give free reign to the parties to settle around a Medicare lien no matter what.  It would seem that the best course of action would be to reach a fair and reasonable apportionment of the damages during the settlement process and to formally invite the Medicare agency to participate in the process (fat chance they will accept the invitation, but we recommend a written invitation nonetheless). 

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Congratulations to our lawyer Amy Welborn who has been elected Treasurer of the Austin Young Lawyers Association.

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Last week, David Chamberlain and Brad Compere obtained a summary judgment on behalf of a premise owner against an independent contractor (security guard) who claimed he was injured in a fall at the worksite of an unfinished building.  The client was Cousins Properties, L.P., and its insurer, Chubb Insurance Company.

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In the Next Edition of Texas Update!  we will explore this question: If Jimmy cracks corn and no one cares, why is there a song about him?

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Chamberlain McHaney is an A-V (highest) Rated Law Firm and is listed in Best’s Directory of Recommended Attorneys.

David E. Chamberlain

Chamberlain-McHaney

Austin & San Antonio

512.474.9124