A federal court in Maryland rules that the state Medicaid agency is entitled to complete reimbursement from a personal injury claimant's settlement that had been placed in a special needs trust, and the court further rules that the state does not have to pay a pro-rata share of the attorneys' fees incurred in pursuit of the personal injury claim. Special Needs Trust for K.C.S. v. Folkemer (D. Maryland, No. C8:10-CV-1077-AW, March 28, 2011).
KCS suffered multiple injuries during birth and requires 24-hour medical care. The Maryland Department of Health and Mental Hygiene spent $298,585.75 on KCS's care between 2004 and 2009, when she recovered $3 million from a personal injury settlement with her doctors. Two-thirds of the settlement was placed into a special needs trust and the remaining $1 million was paid to KCS's attorney; the settlement did not allocate the settlement funds for past medical expenses, pain and suffering, or future medical expenses. The Department sought recovery for the full amount it spent, and KCS, through her guardians, sought a declaratory judgment preventing the recovery from the trust. Both parties filed motions for summary judgment.
KCS alleged that the Maryland Medicaid recovery statute violates federal law because it allows the Department to seek recovery from her entire settlement instead of from the tortfeasor directly. The Department argued that KCS had assigned her rights to recovery to the Department when she accepted medical assistance and therefore the portion of the settlement that represented past medical expenses actually belonged to the Department and not to KCS. KCS also argued that even if the Department was allowed to recover its expenses from her settlement, the recovery should come only from the portion of the settlement that represents past medical expenses and that there should be a pro-rata set-off for the share of attorneys' fees that were attributable to the Department's recovery.
The U.S. District Court for Maryland grants the Department's motion for summary judgment on all counts. The court rules that the Department is entitled to full recovery, despite the fact that the settlement does not stipulate which funds represent past medical expenses, because "it was inevitable that the damage award represented payments for both past and future medical costs. The fact that these two compensation categories were placed in the same award should not result in the Department being prohibited from recouping amounts for past awards. Again, there is no indication from the record that [the Department is] attempting to recover anything more than expenses for past medical care." The court also rules that the Maryland recovery statute was designed specifically to prevent the Department from having to pay for attorneys' fees in recovery actions.
For the full text of this decision, go to: https://attorney.elderlawanswers.com/special-needs-trust-for-kcs-v-folkemer-d-maryland-no-c810-cv-1077-aw-march-28-2011-9061
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