MEDICAID "LIEN" RESOLUTION
Medicaid has only a right of Subrogation
All the money recovered in most personal injury actions should go to the injured Plaintiff.
Avoid the conflict of interests in representing two competing parties, the injured Plaintiff and the State.
Attorneys are mistakenly creating "equitible liens" by suing for medical expenses in personal injury actions to the detriment of the client.
Medicaid, nationwide, has been considered to have a "lien" on any personal injury recovery such as motor vehicle accidents and "slip and falls" since its inception. That all changed with the United States Supreme Court decision in ADHHS v Ahlborn, 547 US 268 (2006). From that point forward, it should have been recognized that the Medicaid claim is actually one of subrogation. Unfortunately, to the significant and totally unnecessary financial loss of injured plaintiffs, the full impact of this decision has not been understood by personal injury attorneys.
Medicaid has only a right of subrogation as against a wrongdoer in a personal injury action. That is the fact. The statute [42 USC 1396(a)25 ] does not give the State a "lien". Why, therefore, do plaintiffs' attorneys across the nation continue to remit part of their client's settlement for their injuries back to the State? Why do they tell the injured client that there is a lien that must be repaid? Why, when they are possibly committing legal malpractice, should the attorneys be pleased that they have been able to get the State to reduce their claim to 50% from the standard two-thirds they normally claim? We all know that the attorneys take their full one-third off the top and then negotiations begin with the State. The attorneys are being fully compensated. Perhaps the injured client should have the same privilege.
The legal rationale of the bar generally and the flaw in their legal analysis is found in the form of the pleadings and in the scope of the General Release tendered at the conclusion of the personal injury law suit. The simple version is that if a claim by the injured plaintiff is made for medical expenses paid by another (Medicaid) and there is a release given by that injured plaintiff for all damages of any kind, including medical expenses, then the injured plaintiff has collected money that belongs to Medicaid. If Medicaid has paid an expense, if that expense is to be reimbursed, it must go to the one who actually incurred the loss, the payor, Medicaid. In a subrogation action, Medicaid is the "real party in interest" relative to recovery of medical expenses. If an injured plaintiff recovers another's medical expenditures, then he has created an "equitable lien". Since he has money that does not belong to him, he must pay it back to the State.
The error occurs in collecting the State's money in the first instance. Since the recovery of medical expenses is the State's right, let it bring about the collection. If the injured plaintiff in a fall down accident does not claim, prove nor release the State's rights, then all the money recovered in the personal injury action goes to the injured plaintiff. The methodology is straight forward: Do not claim medical expenses in the lawsuit. Specifically advise opposing counsel that Medicaid may have a right of subrogation for medical expenditures and that the client is not making a claim for any of those damages. This pleading should also be sent to the State representative in charge of Medicaid. That way, everyone is on notice that no claim is being made for medical expenses arising out of this accident. Finally, when the Release is exchanged, make certain that it is for "bodily injury, pain and suffering only" and that "any and all rights of subrogation by insurance companies and Medicaid are preserved and survive this settlement". Those statements, along with some other specific language, should make it crystal clear that the claim and resolution were for the bodily injuries, pain and suffering only.
Ahlborn held generally that were there was a "global" release for pain and suffering and medical expenses but the recovery was for less that full value and all parties stipulated to those conditions, then the recovery had to be allocated on a pro rata basis with the same percentage values going to the claimant and the State. Here, the recommendation is not to issue a "global" release but only a Release for "pain and suffering". Then there will have been no "equitable lien" created and, therefore, no obligation to share any of the proceeds with the State.
Attorneys will argue that insurance companies will not take such a release in a typical motor vehicle or "slip and fall" action. They must argue this because none have ever tired it. The fact is that carriers must accept such a release if the pleadings are proper and there is notice to all sides and parties that this is only a claim for injuries, pain and suffering. If the carrier refuses, then the injured plaintiff may need take his case to verdict. There he will obtain a judgment which can be enforced against the insurance company. The insurance company now must pay. And since the injured party did not claim nor prove medical expenses, those items still remain the property of the State to initiate a lawsuit or claim aganist the wrongdoer, not the plaintiff or the plaintiff's attorney. This form of practice works. This practice directs more of the recovery to the party injured in the automobile accident or in the "slip and fall". It also avoids any conflicts of interest as the attorneys are only working for one claimant, the injured party. The attorney is not obligated to represent the injured party and the State for two separate, competing claims arising out of the same personal injury accident and being paid from a single source of money. It is better for the injured plaintiff. It is ultimately better for the attorney as there can be no claim of conflict of interests.
