Medicaid Recipient Is Entitled to Challenge State's Automatic Claim for One-Third of Settlement

The 4th Circuit Court of Appeals rules that when a personal injury settlement does not include an allocation of past medical expenses, a Medicaid recipient is entitled to an adversarial proceeding to challenge the state's automatic claim for one-third of the settlement.  E.M.A. v. Cansler (4th Cir., No. 10-1865, March 22, 2012).

E.M.A. was seriously injured during birth and immediately began receiving Medicaid benefits.  Six years later, E.M.A. settled a medical malpractice action against her doctors for $2.8 million.  By the time of the settlement, the North Carolina Department of Health and Human Services (DHHS) had provided E.M.A. some $1.9 million in medical care.  Pursuant to state law, DHHS is entitled to collect up to one-third of the settlement as reimbursement for past medical expenses, so DHHS asserted a $933,333.33 lien. 

E.M.A. filed a suit in federal court seeking a declaratory judgment and an injunction preventing DHHS from asserting its claim.  E.M.A. argued that because North Carolinacommon law prevents a minor from asserting a cause of action for past medical expenses, none of the settlement proceeds could be attributed to past medical expenses.  Therefore, DHHS was barred from asserting a lien against the settlement because the Supreme Court's decision in Arkansas Department of Health and Human Services, et al. v. Ahlborn limits a state's recovery to settlement funds allocated to past medical expenses.  In the alternative, E.M.A. claimed that the state could not recover one-third of her settlement because Ahlborn necessitates a proportional analysis of the settlement to determine the proper amount of the lien.  The district court granted summary judgment in favor of DHHS, relying on the North Carolina Supreme Court's 2008 decision in Andrews v. Haygood upholding the one-third allocation.  E.M.A. appealed.

After dismissing E.M.A.'s common law argument, the 4th Circuit Court of Appeals reverses the district court and remands the case for a hearing that will allow E.M.A. to rebut the one-third presumption.  The court specifies that "on remand, the district court must determine the true value of the case in allocating medical expenses, but Ahlborn does not mandate such a ‘proportional analysis’ . . . the sum certain allocable to medical expenses must be determined by way of a fair and impartial adversarial procedure that affords the Medicaid beneficiary an opportunity to rebut the statutory presumption in favor of the state."

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