Arkansas Department of Health and Human Services, et al. v. Ahlborn, 547 U.S. 268 (2006)

The U.S. Supreme Court has unanimously ruled that an Arkansas statute requiring Medicaid applicants to assign to the state the entirety of any settlement violates the federal Medicaid law's "anti-lien statute," and that the state may recover only from those portions of third-party awards allocated for medical expenses. Arkansas Department of Health and Human Services, et al. v. Ahlborn, 547 U.S. 268 (2006).

Heidi Ahlborn was rendered permanently disabled as the result of a car crash. While being treated for her injuries, Ms. Ahlborn applied for and began receiving Medicaid benefits. In applying for benefits, she assigned to the Arkansas Department of Human Services Arkansas (ADHS) her right to the entirety of any third-party payment, not just that portion made for medical care, as required by Arkansas law. Ms. Ahlborn subsequently received $550,000 in a lump-sum settlement from the tortfeasor. The Director of ADHS asserted a lien against Ms. Ahlborn's settlement for the amount of benefits ADHS provided, $215,645.30.

Ms. Ahlborn sued, arguing that ADHS can recover only that portion of her settlement representing payment for past medical expenses, estimated to be $35,581.47. In addition to medical expenses, the settlement covered loss of wages, impairment of work ability, pain and suffering, mental anxiety, and permanent disability. Ms. Ahlborn contended that the Arkansas recovery scheme conflicts with the federal "anti-lien" statute," 42 U.S.C. § 1396p(a)(1). Arkansas countered that the settlement remains property of the tortfeasor until the state is fully reimbursed for all funds expended on Ms. Ahlborn's medical care. Among other cases, the state cited Houghton v. Dep't of Health, 57 P.3d 1067, 1069 (Utah 2002).

The district court ruled that the state may recover from Ms. Ahlborn's settlement the total amount of benefits provided under the Medicaid program, regardless of whether the settlement funds represent payments for the cost of medical services. Ms. Ahlborn appealed.

The U.S. Court of Appeals for the Eighth Circuit reversed, ruling that Ms. Ahlborn's right to a settlement was her "property" and that the state could not "circumvent the restrictions of the federal anti-lien statute simply by requiring an applicant for Medicaid benefits to assign property rights to the State before the applicant liquidates the property to a sum certain." Ahlborn v. Arkansas Dept. of Human Services (8th Cir., No. 03-3377, Feb. 9, 2005). Arkansas appealed.

In a unanimous opinion written by Justice Stevens, the United States Supreme Court affirms, ruling that federal Medicaid law does not authorize the state to assert a lien on Ms. Ahlborn's settlement in an amount greater than the amount allocated for medical expenses, and that "Arkansas' statute finds no support in the federal third-party liability provisions, and in fact squarely conflicts with the anti-lien provision of the federal Medicaid laws." The Court also rejects the argument of the state (and its amici, uncluding the United States) that under its ruling parties to a tort suit will simply "allocate away the State's interest," in the Court's words.

Commenting on the ruling, William Williams, a senior associate attorney general for social and health services for Washington State, who filed a brief in support of Arkansas in the case, said, "States will have to be more actively involved in lawsuits to protect their claims, and it will result in higher recovery expenses."