Utah Again Rules That Entire Settlement Is Susceptible to Medicaid Lien

In a ruling that directly conflicts with that of Minnesota's high court earlier this year, the Utah Supreme Court has held that the state may place a priority lien on the entire proceeds of settlements that Medicaid recipients negotiate with third parties, not simply portions of settlements allocated to medical expenses. Houghton v. Department of Health (Utah, No. 20001103, Oct. 18, 2002).

Utah placed priority liens on proceeds from settlements that Medicaid recipients had negotiated with the third parties who had injured them. Two classes of plaintiff Medicaid recipients sued the state, claiming that the relevant state statute violated federal law prohibiting liens against Medicaid recipients' property. After a district court granted the state summary judgment, the classes appealed, maintaining that the priorityof the state's lien violates federal law. They argued that the state's lien amounted to a seizure of their property because after the state took its share of the settlement proceeds, there might be nothing left that would compensate them for their non-medical claims. Since non-medical claims are a Medicaid recipient's property, they contended, a lien on any portion of their settlement proceeds not deemed for the reimbursement of incurred medical expenses is a lien on their property.

Reiterating its conclusion in S.S. v. State, 972 P.2d 439, 442 (Utah 1998) and Wallace v. Estate of Jackson, 972 P.2d 446, 448 (Utah 1998), the Utah Supreme Court rules that liens against third-party settlement proceeds do not violate federal law because settlement payments do not become a recipient's property until Medicaid is reimbursed. "[T]hus," the court writes, "a priority lien on a recipient's third-party settlement proceeds does not encumber the recipient's property, even if those proceeds include compensation for nonmedical claims."

Earlier in the year the Minnesota Supreme Court ruled that the state's Medicaid lien entitles it to recover only that part of a settlement that pertains to its claim for medical expenses. Martin v. City of Rochester, 642 N.W.2d 1 (Minn. 2002). In its ruling, the Minnesota court was critical of the Utah court's analysis in S.S. and Wallace. Referencing Martin, the Utah court declares, "We decline to abandon our well-established precedent in favor of the Martin approach, which, in our view, would produce 'results that would jeopardize the ultimate goal of Medicaid--that the program be the pay[er] of last resort.' Calvanese v. Calvanese, 710 N.E.2d 1079, 1082 (N.Y.)."

In her dissent, Utah's Chief Justice Christine Durham charges that Utah's reimbursement scheme "viscerates [the] federal purpose of shielding some recipient assets from state collection efforts".

For the full text of this decision, go to: http://www.utcourts.gov/opinions/supopin/hought~1.htm

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