In an unexpected addition to the recent federal budget agreement that could have far-reaching consequences, Congress has negated the U.S. Supreme Court's decisions in Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006) and Wos v. E.M.A, 568 U.S. 2 ___(2013), and given states the ability to recover Medicaid costs from a beneficiary's full personal injury settlement or award.
When a Medicaid beneficiary settles a personal injury lawsuit or wins a personal injury case, the state may assert a claim for recovery of medical expenses provided through the Medicaid program, since Medicaid is supposed to be the payer of last resort. However, in 2006 the Supreme Court issued its Ahlborn decision, finding that under the anti-lien restrictions of the Social Security Act, states had a right to recover only from the portion of a settlement or award that was allocated to medical expenses. Seven years later, in Wos, the court struck down a state statute imposing a mandatory Medicaid lien on up to one-third of a recovery, reiterating that "[a]n irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act's clear mandate that a State may not demand any portion of a beneficiary's tort recovery except the share that is attributable to medical expenses."
This system is now scheduled to change on October 1, 2014, when Section 202 of the Bipartisan Budget Act of 2013 kicks in. Without any warning or hints that changes were on the horizon, Congress inserted language into the recent budget compromise amending the Social Security Act to give states the right to recover from Medicaid beneficiaries' entire settlements, and the bill – signed into law by President Obama -- also gives states the right to place a lien on those settlements or awards.
When the budget proposal's details first became public in December, Peter V. Berns, CEO of the Arc, worried that the changes "could affect payments owed to individuals and families who have been harmed, received compensation, and depend on the compensation to pay for expenses beyond what Medicaid covers." Given the timing of the legislation, it was impossible for advocates, many of whom were taken by surprise, to mount any serious opposition to the revisions.
Were Private Estate Recovery Companies Behind the Change?
Although there is no public record of why Congress decided to reverse Ahlborn now, in an interview with the Academy of Special Needs Planners, Florida elder law attorney and lien resolution expert Floyd Faglie explained that in some states well-connected collection companies pursue Medicaid recovery claims in return for a percentage of the recovery, and those companies had been some of Ahlborn's most vociferous and well-funded opponents. Faglie posits that "this legislative change may have been pushed through or tacked on or added to the amendment by way of some private collections company wanting this change."
Faglie also points out that the effect of the October 1st implementation date is "going to be argued for a very long time." Because the change is not retroactive, it is unclear whether the legislation gives states the increased right to recover against settlements that take place after October 1st or only against beneficiaries who made the assignment of their recovery rights to Medicaid after October 1st. In the latter case, according to Faglie, since the assignment occurs at the time of enrollment into Medicaid, a person who is injured at birth and enrolls in Medicaid today may not fall under the new strengthened recovery system, even though his claim is not settled for years, because he assigned his recovery rights to Medicaid under the old system.
AAJ Says Repeal Is Top Priority
In a letter to its membership, the American Association for Justice (formerly the Association of Trial Lawyers of America) writes that it is "tirelessly working to eliminate this provision before it goes into effect in October 2014. . . We expect the result of the new law to be that plaintiffs who are Medicaid recipients will recover less and in many cases will be unable to pursue claims at all because any recovery would have to be reimbursed to Medicaid. This provision was added because it was deemed to raise revenue by Congressional Budget Office economists, despite the fact that the provision will have the opposite effect. Reversing this unfair, unnecessary, ill-advised policy is AAJ's highest priority. We have time to do this before the law goes into effect." Members are urged to direct questions, comments or cases that reflect issues similar to those in Ahlborn or Wos to AAJ Director of Communications Michelle Kimmel, firstname.lastname@example.org.
Read the full text of the changes in Section 202(b) of the Bipartisan Budget Act of 2013 here (scroll down to page 31).
For a CMS informational bulletin explaining this and three other changes to the Medicaid program contained in the budget bill, click here.