Created in 1965 as a result of Title XIX of the Social Security Act, Medicaid is a medical assistance program for persons who qualify based on financial and medical need. The program is funded by state and federal governments, and each state has its own Medicaid agency that manages the care of its beneficiaries according to certain federal standards. At the federal level, the Centers for Medicare and Medicaid Services (CMS) oversees the program, providing funding to the states based on each state’s medical assistance plans. As a condition of funding, federal law requires states to implement “lien” laws.3 Unlike the federal Medicare program, however, each state’s individual statutory framework determines how it administers benefits and collects repayment—and these statutes vary from state to state. To complicate matters further, both federal and state case law can affect how a state is able to recover funds in personal injury settlements. Because both federal and state governments have a stake in recovering third-party liability payments, it is important for plaintiff’s counsel to be aware of these complicating factors when addressing statutory Medicaid reimbursement claims.

Medicaid Resolution: Best Practices

Although there is no “one size fits all” approach to different state Medicaid liens, the following practices will help attorneys manage the resolution process without their clients losing healthcare coverage from a state Medicaid agency.

1. Comply with Notice Requirements.

Perhaps one of the most important obligations Medicaid recipients and personal injury attorneys have is to comply with notice requirements. The Medicaid recipient (and often, the recipient’s attorney) has a duty to notify Medicaid of a settlement, judgment, or pending case. Failure to provide notification may result in the denial of future benefits.4 One state may require the Medicaid recipient to put Medicaid on notice that there is a possible third-party recovery. Another state may not require notice, but may still pursue the recipient for repayment of a lien. Still another state, like Indiana, may need to file a lien before a particular court to perfect its recovery rights.5 If the beneficiary has received Medicaid benefits for injury-related care in multiple states, an attorney may also be obligated to place each state on notice and reimburse each state. Best practice requires that attorneys familiarize themselves with state Medicaid notice requirements, which often have short timelines.

2. Utilize Ahlborn as appropriate.

Over a decade ago, the U.S. Supreme Court’s 9-0 decision in Ahlborn changed the Medicaid lien landscape considerably by placing a limit on a state’s ability to recover against third-party settlements. Attorneys know that a client who applies for Medicaid automatically assigns third-party recovery rights to the state Medicaid agency that will provide coverage once the application is approved, but states are still limited to that part of the settlement that represents past medical expenses paid by their Medicaid agencies.6 States may not demand reimbursement from portions of the settlement allocated to non-medical damages, such as pain and suffering, lost wages, and other compensatory damages. During the lifetime of the Medicaid beneficiary who settles a personal injury case, non-medical damages are not subject to the reach of state Medicaid agencies seeking such recovery.

Attorneys must understand their case and be able to prove up each category of damages using a “black-boarded damages” analysis. Initially, attorneys can blackboard damages by using expert witness statements, economist reports, and other reports used to build up the client’s case. For a policy limits case where an attorney does not obtain such reports, attorneys can use similar factors like the client’s age, the nature of the injuries, the incident type, and in some cases, jury awards in similar cases in the same jurisdiction as their clients’ cases, in order to identify damage buckets.  Although that may not be as persuasive as third-party opinions and expert reports, when an attorney has a basis to build a damages model and uses objective data or actual medical records to compare against gross settlement values, they can make additional arguments to further identify the past medical portion of a client’s settlement.

In some cases, an attorney may also find court involvement necessary to determine what part of a settlement actually represented payment by the defendant for a Medicaid beneficiary’s medical damages. Some states will compromise their lien amount based on hardship or other criteria without requiring court involvement. Other states, like Florida and Ohio,7 have created an administrative appeals process partly in response to Ahlborn.  Attorneys should know that applying Ahlborn means, in some cases, coordinating federal laws with state statutory allocations or formulas.

3. Know the Difference between Third-Party Liens and Medicaid Estate Recovery (MER)

One of the more confounding issues attorneys face is knowing which Medicaid “lien” is at issue. In addition to staying in front of the legal rules to follow and remedies available, attorneys should also be aware that Medicaid liens and Medicaid Estate Recovery claims are different. These claims share similarities, so plaintiff’s counsel should consider both when resolving third-party liability claims in settlements, judgments, and other payments involving deceased clients.

When a Medicaid recipient dies, the federal anti-lien provision that limits Medicaid lien recoveries (per Ahlborn) kicks in to permit a full recovery for any long-term medical expenses, regardless whether or not the expenses are related to a personal injury settlement. Many states, to maximize federal funding, follow the federal laws and establish Medicaid Estate Recoveries (MERs) against the assets of deceased Medicaid beneficiaries who received such benefits after age 55 or were living in a nursing home at the time of death. The purpose of such recovery is to reduce taxpayers’ expenditures by the amount of assets owned by the recipient. Exceptions exist if recovery would cause an undue hardship.

MER is a factor for every Medicaid beneficiary, regardless of the existence or absence of a personal injury settlement. The claim is not limited to injury-related care and the litigation attorney must ensure that the estate or probate attorney negotiates the MER claims in conjunction with other creditors’ claims against the deceased Medicaid beneficiary’s estate. Finally, attorneys should carefully audit Medicaid liens and MER claims to ensure there is no overlap where injured-related care could also comprise long-term care. 

4. Beware of “private” plans with Medicaid MCO coverage.

Increasingly, attorneys are finding that the private health insurance plan they thought paid for their clients’ medical care is really a Medicaid Managed Care Organization (MCO) plan in disguise. Medicaid MCOs add to the complexity of settling personal injury cases because instead of contractual recovery rights, the plan has statutory ones. Knowing how state Medicaid lien statutes apply to MCOs is an important part of identifying the recovery rights of the health insurance plan. A careful review of the state statutes as well as an even closer look at the client’s health insurance card and lien profile to is needed to ensure that this coverage is not missed, especially since a third of states report that a majority of beneficiaries receive managed care.

5. Protect Your Client’s Medicaid Eligibility

Lastly, attorneys must inform injured clients about the impact of accepting settlement proceeds on eligibility for needs-based benefits like Medicaid, which has distinct threshold tests for qualification and retention. Different states and Medicaid programs have different rules regarding whether a client can maintain Medicaid eligibility. Attorneys should inform their clients that, similar to Medicaid lien notice rules, there are strict financial eligibility and notice rules. For example, some rules specify that if a Medicaid beneficiary does not report a financial change of circumstances, they could lose Medicaid coverage for as long as the new asset (whether settlement monies or inheritance or otherwise) exceeds those Medicaid asset eligibility levels. For clients who cannot lose their Medicaid health insurance post-settlement, attorneys should safeguard their clients and help them understand what options exist to preserve benefits before they receive a settlement.

Epiq has a dedicated staff and deep subject matter expertise when it comes to Medicaid liens and MER claims. Our experience helps provide attorneys with efficient and cost-effective closure to their cases, while maximizing the client’s recovery and protecting their health benefits.

For more information or to speak with our subject matter experts, call us at (704) 559-4300.