The Latest Developments in Medicaid Lien Resolution

From time to time we have taken a look at either statutory or case law that has affected the extent to which the federal government, and Medicaid in particular, have any lien rights when it comes to settlements in personal injury actions.  These rights can have a dramatic impact on the ability of the parties to settle a personal injury claim, especially when there is the possibility of the entire settlement proceeds being taken away from the claimant.  The latest changes in this ongoing saga occurred as a result of the passage of the Bipartisan Budget Act of 2018.

First, same history.  Before October 1, 2017, it appeared that Medicaid liens could not be taken against the property of a plaintiff.  This position is rooted in the unambiguous terminology of the federal Anti-Lien Statute (42 U.S.C. § 1396p(a)(1) which states:

No lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan, except . . . .

This is not to say that the Medicaid agency does not have recovery rights, however. The Medicaid right was limited to subrogation by means of “automatic assignment” of the medical component of the case. That is because the Medicaid act also mandates:

(a)  For the purpose of assisting in the collection of medical support payments and other payments for medical care owed to recipients of medical assistance under the State plan approved under this title [42 USCS §§ 1396 et seq.], a State plan for medical assistance shall–(1) provide that, as a condition of eligibility for medical assistance under the State plan to an individual who has the legal capacity to execute an assignment for himself, the individual is required—

(A)  to assign the State any rights, of the individual or of any other person who is eligible for medical assistance under this title [42 USCS §§ 1396 et seq.] and on whose behalf the individual has the legal authority to execute an assignment of such rights, to support (specified as support for the purpose of medical care by a court or administrative order) and to any payment from a third party that has a legal liability to pay for care and services available under the plan; 42 USCS § 1396k (emphasis added).

Even though this statutory scheme was in place, Medicaid had been made the claim that it could seek the entire amount of its lien.  That situation was addressed in Ahlborn, 547 U.S. 268 (2006). In Ahlborn, the Arkansas Medicaid agency sought to recover the entire amount of its lien on a limited recovery, and plaintiff then sought to limit the lien collection against the “automatically assigned” medical component of the claim. The United States Supreme Court agreed.

That changes in 2013, when Congress passed the 2013 Bipartisan Budget Act.  Language within that act overruled Ahlborn, removing the plain language and intent of the federal anti-lien statute.   That Act created a lien that previously had not existed.

What then followed was the Bipartisan Budget Act of 2018.  In Section 53102 (b) (1), there was a complete repeal of the Medicaid changes that were included in the 2013 budget bill, the very section which extended the Medicaid lien to reach the entire settlement proceeds that became effective October 1, 2017, after which Medicaid could have arguably collected on 100% of its lien, regardless of the settlement amount, and regardless of whether any part of the settlement included a past medical component.

As a result, it now appears that the 2018 repeal of the Medicaid provisions enacted in 2013 restored the Ahlborn allocation, as well as the original congressional intent of the Medicaid Act (Social Security Act).

With the lien rights of Medicaid curtailed, litigants have more flexibility in the settlement of claims.  Since claimants will be allowed to maintain a larger portion of their settlement, there is an additional incentive for more claims to settle.