Great questions! Some answers:

Back on Feb. 4, 2019, the North Carolina Department of Health and Human Services announced the selection of Prepaid Health Plans that will participate in Medicaid managed care when the program launches in November 2019. The Department awarded contracts to five entities:

• Statewide PHP contracts were awarded to the following entities which will offer Standard Plans in all regions in North Carolina:
  • AmeriHealth Caritas North Carolina, Inc.
  • Blue Cross and Blue Shield of North Carolina
  • UnitedHealthcare of North Carolina, Inc.
  • WellCare of North Carolina, Inc.
  • A regional PHP contract was awarded to Carolina Complete Health, a provider-led entity, which will offer plans in Regions 3 and 5.

Plaintiff lawyers who represent clients who are Medicaid recipients who have been in car wrecks need to track what these entities pay for medical treatment in order to account for the Medicaid lien and repay the government.

Before this privatization of Medicaid, all of the subrogation has been handled by a group called HMS. Now that the PHPs have come along, we have to request subrogation information from each PHP.

Here is a list of the subrogation contacts for the Medicaid PHPs.

PHP Medicaid Lien Contact Information

Carolina Complete Health

Rawlings Group
4 Eden Parkway
La Grange, KY 40031
Phone: 888-285-1276
Fax: MANUAL FILE COORDINATOR at 502-440-1100
Email: CenteneReferrals@rawlingscompany.com

WellCare

Rawlings Group
4 Eden Parkway
La Grange, KY 40031
Phone: 888-285-1276
Fax: MANUAL FILE COORDINATOR at 502-440-1100
Email: CenteneReferrals@rawlingscompany.com

Healthy Blue

 P.O. Box 659940
San Antonio, TX 78265-9939
Phone: 844-916-3651
Fax: 844-634-2520
Email: NCCompliance@healthybluenc.com

AmeriHealth

Attn: Subrogation Unit
200 Stevens Drive
Philadelphia, PA 19113
Phone:215-863-5837
Fax: 215-863-5221
Email: subrogation@amerihealthcaritas.com

United Healthcare

Optum Subrogation
11000 Optum Circle
Eden Prairie, MN 55344
Fax: 800-842-8810
Email: subrogationreferrals@optum.com

Trillium: www.trilliumnc.org 

Phone: 877-695-1296
Email: Trillium@gainwelltechnologies.com

_________

The subrogation providers above are subject to change, but this is the list as of 8/25/2022.

Chris Nichols
Nichols Law Firm
North Carolina and Raleigh Personal Injury Lawyer

The problem is that it is hard to find the statute that allows the hearing. The reason for that is that due to some federal law changes, which were eventually reversed, North Carolina law changed, but then the new law was rendered inoperable by the federal law changing back. Sounds complicated, and it is, but this post explains all of that.

The practical issue is this: if you google “NC Medicaid Lien Statute” you will find the 2017 “changed” statute in NC that is no longer good law. What you need is that statute language from before the 2017 changes.

That law is from House Bill 982 from 2013. Below is a link to the bill that was signed into law. This is, by way of the federal law changes and the magic of retroactive legal language, the real law on Medicaid liens now. This statute contains the procedure and deadlines you need to successfully challenge a Medicaid lien claim in North Carolina.

www.ncleg.net/Sessions/2013/Bills/House/PDF/H982v5.pdf

If you find yourself needing to challenge the lien claim, my office does this work for other lawyers on a case by case basis. So give me a call to discuss.

Chris Nichols
www.NicholsTrialLaw.com

If you settled a case (by minor settlement, signed release, or Industrial Commission approval) in which Medicaid claimed a lien, between October 1, 2017 and February 9, 2018, you have 30 days from February 9 to file a motion in Superior or District court to seek a reduction of the lien under NCGS 108A-57. 30 days runs on the weekend of March 10-11, so calendar that for Friday March 9, 2018(unless you want to play chicken with the weekend rule). Example: You settled a claim on October 15, 2017 that had a Medicaid lien that exceeded 1/3 of the settlement. You paid Medicaid 1/3 of their lien (or held the money) because there was no longer a statutory mechanism to reduce the lien. You now have until March 9, 2018 to file a motion to reduce Medicaid’s lien.

Let’s define “settled” since that is the event that triggers the 30 day time limit to file the motion. Medicaid defines “settled” as:

1. The date upon which all parties execute a full Release of Claims; or,
2. For a minor, the date upon which the settlement is approved in a minor settlement hearing; or,
3. For a case in litigation that is tried, the date upon which Judgment is entered, or,
4. For a Workers Compensation case, the date upon which the Clincher is approved.

In addition to cases “Settled” during the period of October 1, 2017 and February 9, 2018, if you had a claim that settled up to 29 days before October 1, 2017, you may still have time to file for the lien reduction. I can’t tell you if you get only the remaining time you had left as of October 1, 2017, or if you get until March 9, 2018. Play it safe and choose the shorter time and file. Example: You settled a claim on September 15, 2017. Your 30 day window to file a motion for reduction would have run on Sunday, October 15, 2017. But because federal law and state law changed on October 1, 2017, you could not file for a hearing. I think, in the most conservative view, you now have the remainder of the time you would have had after and including October 1. And that remaining time begins to run again starting February 9, 2018. October 1 to October 15 is 15 days. February 9, 2018 plus 15 days is Saturday, February 24, 2018. You would need to FILE the motion before February 24, 2018. Think of it as a statute of limitations which is stayed because a person goes into a coma and becomes incompetent, but then they regain consciousness 5 months later and the statute starts ticking again where it left off.

Below I set out the history on this and then pose some questions you might have. Pay attention to the part where we discuss what happens if you paid Medicaid from October 1, 2017 until February 9, 2018. You may have an obligation to ask for a refund.

How did this get so screwed up, and what’s Medicaid subrogation?

Up until 2006, the law was clear that NC Medicaid was entitled to 100% of their lien, not to exceed 1/3 of a settlement, prorated with medical providers who had valid liens.

In 2006, SCOTUS ruled in Arkansas v. Ahlborn that state medicaid subrogation statutes could not just set a percentage recovery of the settlement as the amount of subrogation and ingnore the relationship between the gross settlement, the client’s recovery and the amount claimed in the medicaid lien. Ahlborn said states had to allow for a hearing mechanism for courts to set the lien in light of the recovery amount and how much of the recovery was for medical treatment as a proportion to the whole recovery. Most states revised their Medicaid subrogation statues in 2006 and started to allow hearings to reduce Medicaid recovery. They called them “Ahlborn hearings.”

North Carolina did NOT follow Ahlborn. Much to everyone’s frustration.

Several lawyers in NC challenged Medicaid’s refusal to follow SCOTUS’ ruling in Ahlborn. All of the state actions challenging Medicaid’s refusal failed in our appellate courts.

Then in April of 2013 SCOTUS issued an opinion in Wos v. E.M.A., upholding a 4th Circuit opinion (coming from North Carolina), and declaring that the North Carolina medicaid lien statute was in violation of the court’s ruling Ahlborn. By July of 2013, NCAJ had negotiated changes to the Medicaid lien statute to bring it into compliance with Wos and Ahlborn and provide a statutory mechanism to request a lien reduction hearing. Those hearings need to be requested (i.e., filed with a court) within 30 days of the settlement (defined by the signing of a Release or a minor settlement or Industrial Commission approval). This is the statute that was passed: NCGS 108A-57

Finally, NC was compliant with Ahlborn and the few others states that ignored Ahlborn were changing too. Meanhwile, in December of 2013, Congress was battling with President Obama to pass the first budget in years. In October of that year, Congress allowed the government to shut down for 16 days until they passed a temporary continuing funding resolution. On December 26, 2013, Congress (to the surprise of many) passed the Bipartisan Budget Act of 2013. Not until after it was signed into law did anyone notice this section:

SEC. 202. STRENGTHENING MEDICAID THIRD-PARTY LIABILITY.

(b) RECOVERY OF MEDICAID EXPENDITURES FROM BENEFICIARY

LIABILITY SETTLEMENTS.— (1) STATE PLAN REQUIREMENTS.—Section 1902(a)(25) of the Social Security Act (42 U.S.C. 1396a(a)(25)) is amended— (A) in subparagraph (B), by striking ‘‘to the extent of such legal liability’’; and (B) in subparagraph (H), by striking ‘‘payment by any other party for such health care items or services’’ and inserting ‘‘any payments by such third party’’. (2) ASSIGNMENT OF RIGHTS OF PAYMENT.—Section 1912(a)(1)(A) of such Act (42 U.S.C. 1396k(a)(1)(A)) is amended by striking ‘‘payment for medical care from any third party’’ and inserting ‘‘any payment from a third party that has a legal liability to pay for care and services available under the plan’’.(3) LIENS.—Section 1917(a)(1)(A) of such Act (42 U.S.C. 1396p(a)(1)(A)) is amended to read as follows: ‘‘(A) pursuant to— ‘‘(i) the judgment of a court on account of benefits incorrectly paid on behalf of such individual, or‘‘(ii) rights acquired by or assigned to the State in accordance with section 1902(a)(25)(H) or section 1912(a)(1)(A), or’’.EFFECTIVE DATE.—The amendments made by this section shall take effect on October 1, 2014.

The very small change to the subrogation language in federal law had the effect of rendering Ahlborn and Wos moot as both cases depended on the specific language which said “payment by any other party for such health care items or services” and “payment for medical care from any third party” as the basis for the court’s reasoning that Medicaid must, for lack of a better term, prorate settlement funds with the victim of negligence.

I called several members of Congress and found out that the provisions had been slipped in at the last minute and had been pushed by private third-party subrogation companies like Rawlings and HMS who are contractors for many state Medicaid offices. Because these private companies take a percentage of recoveries they recover for the statse, they did not want to have payments to Medicaid (and their profits) lowered in favor of injured victims.

The statute changes did not go into effect until October of 2014, and under pressure from consumer groups, advocates for the disabled, and AAJ, the effective date was pushed to October of 2016. Then as we got closer to October of 2016, it was pushed to October of 2017. Victims of negligence who faced massive injuries with small liability policies were receiving relief from unwieldy Medicaid liens. Injured Plaintiffs could then use those funds to pay for services that Medicaid would not cover for the disabled Plaintiffs. Additionally, Medicaid was still prorating their recovery with valid medical lien holders under NCGS 44-49.

Meanwhile, in 2017, with a new Congress and new President, the North Carolina legislature inserted a change to NCGS 108A-57 in the July 2017 Budget (Senate Bill 257). The changes included a complete re-write of NCGS 108A-57, which eliminated a lien reduction hearing, re-instituted the 1/3 cap on Medicaid recovery (the Plaintiff repaid Medicaid 100% of the lien up to 1/3 of the gross settlement) and the proration with unpaid medical providers with valid liens was eliminated.

This new law only went into effect IF the federal changes from 2013 went into effect on October 1, 2017. The prelude to the change in NC law was a classic “IF/THEN” proposition (highlight added):

NC Senate Bill 257

MEDICAID SUBROGATION RIGHTS CONFORMING CHANGES

SECTION 11H.23.If Section 202(b) of the Bipartisan Budget Act of 2013, P.L. 113-67, takes effect on October 1, 2017, as provided in Section 202(c) of that act, as amended by Section 211 of the Protecting Access to Medicare Act of 2014, P.L. 113-93, and Section 220 of the Medicare Access and CHIP Reauthorization Act of 2015, P.L. 114-10, then G.S. 108A-57 reads as rewritten:

Ҥ 108A-57. Subrogation rights; withholding of information a misdemeanor.

(a) As used in this section, the term “beneficiary” means (i) the beneficiary of….. (then went on to rewrite the subrogation statute)

Consumer lobbying groups were unable to persuade Congress and HHS to delay the implementation of the October 1, 2017 changes, and therefore NC law changed on October 1, 2017 pursuant to the “IF/THEN” portion of the statute.

Which brings us to February 9, 2017. As many of you will recall, after a brief shut down of the US government from midnight of February 8 to the early hours of February 9, Congress passed and the President signed H.R.1892 – Bipartisan Budget Act of 2018.

Thanks to consumer lobbying by AAJ and other disability advocacy groups, the new federal budget repealed the changes to Medicaid law in the 2013 budget as follows:

H.R.1892 – BIPARTISAN BUDGET ACT OF 2018

SEC. 53102. THIRD PARTY LIABILITY IN MEDICAID AND CHIP.

(b) Delay In Effective Date And Repeal Of Certain Bipartisan Budget Act Of 2013 Amendments.—

(1) REPEAL.—Effective as of September 30, 2017, subsection (b) of section 202 of the Bipartisan Budget Act of 2013 (Public Law 113–67; 127 Stat. 1177; 42 U.S.C. 1396a note) (including any amendments made by such subsection) is repealed and the provisions amended by such subsection shall be applied and administered as if such amendments had never been enacted.

(2) [Does not apply to subrogation]

(3) EFFECTIVE DATE; TREATMENT.—The repeal and amendment made by this subsection shall take effect as if enacted on September 30, 2017, and shall apply with respect to any open claims, including claims pending, generated, or filed, after such date. The amendments made by subsections (a) and (b) of section 202 of the Bipartisan Budget Act of 2013 (Public Law 113–67; 127 Stat. 1177; 42 U.S.C. 1396a note) that took effect on October 1, 2017, are null and void and section 1902(a)(25) of the Social Security Act (42 U.S.C. 1396a(a)(25)) shall be applied and administered as if such amendments had not taken effect on such date.

So where does this leave us?

Based upon the language of the Bipartisan Budget Act of 2018, the changes to the key language which vitiated Ahlborn and Wos in 2013 and went into effect on October 1, 2017, are now a nullity. According to the newest federal law, the changes in 2013 were never put into effect on October 1, 2017, because they were repealed on September 30, 2017.

And because Section 202(b) of the Bipartisan Budget Act of 2013, did not take effect on October 1, 2017, there is no change to NCGS 108A-57, the Medicaid subrogation statute.

Which means that 108A-57’s requirements to request a lien reduction hearing are still in effect. NCGS 108A-57requires:

(a2) A medical assistance beneficiary may dispute the presumptions established in subsection (a1) of this section by applying to the court in which the medical assistance beneficiary’s claim against the third party is pending, or if there is none, then to a court of competent jurisdiction, for a determination of the portion of the beneficiary’s gross recovery that represents compensation for the Medicaid claim. An application under this subsection shall be filed with the court and served on the Department pursuant to the Rules of Civil Procedure no later than 30 days after the date that the settlement agreement is executed by all parties and, if required, approved by the court, or in cases in which judgment has been entered, no later than 30 days after the date of entry of judgment. The court shall hold an evidentiary hearing no sooner than 30 days after the date the action was filed. All of the following shall apply to the court’s determination under this subsection:

So what is the deadline to file for 108A-57 hearings to reduce Medicaid’s lien for cases settled from October 1, 2017 to February 9, 2018?

The way the federal changes were implemented on February 9, 2018 leaves a vacuum from October 1, 2017 until February 9, 2018 for all settlements where Medicaid claimed a lien on settlement proceeds. Obviously, during that time period, a Plaintiff had no statutory mechanism to file for a Medicaid reduction hearing under NCGS 108A-57. So there can be no 30 day time limit to file during those months.

So what happens to Plaintiff cases that settled (by release, minor settlement of Industrial Commission Order) from October 1, 2017 until February 9, 2018?

The only logical conclusion is that the 30 day time limit to file a motion for Medicaid lien determination for cases settled from October 1, 2017 through February 9, 2018, begins on February 9, 2018 and runs 30 days until and including Friday March 9, 2018 (or Monday March 12, 2018 if you want to use the “weekend rule”, but why risk it?).

This means that if you settled a case during that time, you MUST file,”by applying to the court in which the medical assistance beneficiary’s claim against the third party is pending, or if there is none, then to a court of competent jurisdiction, for a determination of the portion of the beneficiary’s gross recovery that represents compensation for the Medicaid claim. An application under this subsection shall be filed with the court and served on the Department pursuant to the Rules of Civil Procedure no later than 30 days after the date that the settlement agreement is executed by all parties and, if required, approved by the court, or in cases in which judgment has been entered, no later than 30 days after the date of entry of judgment.”

Practically, this means you need to file a motion for determination if you have a case pending, and if you don’t, you will need to file a Complaint in the underlying action and include a motion to determine Medicaid’s lien. 

What if I had a case settle less than 30 days before October 1, 2017, but I didn’t get a motion filed before October 1, 2017?

I think that the most conservative approach would be that you get whatever time you had left in your 30 day time limit added on beginning February 9, 2018. So if 25 days had gone past from the settlement of your case in September of ’17 when October 1 happened, you would get 5 more days to file, beginning February 9, 2018 and ending February 13 (or maybe 14th depending on how you count it).

What if I paid Medicaid 100% or 1/3 of the settlement from October 1, 2017 through February 9, 2018?

If you paid Medicaid during the “vacuum time” of October 1, 2017 through February 9, 2018, I think you have a 30 day window to request a hearing to have the lien payment evaluated by a court. I would assume that if you convinced the Judge that your client did not need to pay the Medicaid lien 1005 of 1/3 of the settlement, that the Judge could order Medicaid to issue a refund for the overpayment. Also keep in mind that Medicaid now has to pro-rate with unpaid medical providers with valid liens.

What if I paid Medicaid 100% or 1/3 of the settlement from October 1, 2017 through February 9, 2018 and I’m ok with the amount BUT I wasn’t able to pay valid medical lien holders because Medicaid would no pro-rate under the revised statute in effect at that time?

This is a harder question. Before October 1, 2017, you could tell Medicaid you had valid lien holders, prove that with copies of the liens, and reduce Medicaid’s lien by the prorated amounts of the medical lien holders. You didn’t need a hearing to make Medicaid prorate. It was by operation of law in all scenarios where you pay subrogation:.

NCGS 108A-57

(a5) The medical assistance beneficiary or any attorney retained by the beneficiary shall, out of the proceeds obtained by or on behalf of the beneficiary by settlement with, judgment against, or otherwise from a third party by reason of injury or death, distribute to the Department the amount due pursuant to this section as follows:

(1) If, upon the expiration of the time for filing an application pursuant subsection (a2) of this section, no application has been filed, then the amount presumed pursuant to subsection (a1) of this section, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, shall be paid to the Department within 30 days of the beneficiary’s receipt of the proceeds, in the absence of an agreement pursuant to subsection (a3) of this section.

(2) If an application has been filed pursuant to subsection (a2) of this section and no agreement has been reached pursuant to subsection (a3) of this section, then the Department shall be paid as follows:

a. If the beneficiary rebuts the presumption arising under subsection (a1) of this section, then the amount determined by the court pursuant to subsection (a2) of this section, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, shall be paid to the Department within 30 days of the entry of the court’s order.

b. If the beneficiary fails to rebut the presumption arising under subsection (a1) of this section, then the amount presumed pursuant to subsection (a1) of this section, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, shall be paid to the Department within 30 days of the entry of the court’s order.

(3) If an agreement has been reached pursuant to subsection (a3) of this section, then the agreed amount, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, shall be paid to the Department within 30 days of the execution of the agreement by the medical assistance beneficiary and the Department.

I do not think the 30 day deadline to file a motion applies to this situation if you have already paid Medicaid.

I think you should only have to write a letter to HMS/Medicaid, show them what you paid, prove that there were valid liens when you overpaid Medicaid, and ask that Medicaid refund the portion of the proceeds which should have been paid to valid medical lien holders. I don’t know if Medicaid would want to make that check payable to your client (I’m guessing they will want to do that), or to the medical providers. Then it would be up to you to distribute the funds.

Practically, if you had the valid medical liens during this time, you need to notify your client of the changes in the law and that the client has the option of having you ask Medicaid to make a refund that will be paid toward their unpaid medical balances.

But wait, I paid Medicaid on some liens from October of 2017 until February of 2018. I don’t think those cases needed a lien reduction hearing. Do I HAVE to look back and see if any of those files had valid medical liens that should (had the law allowed at the time) have been prorated with Medicaid?

Do you HAVE to ask for a refund of the (now) overpayment to Medicaid when there were valid medical provider?  Probably so. 

Why? You have a legal duty pursuant to NCGS 44- 49 and 50, and now an ethical duty, pursuant to 2017 Formal Ethics Opinion 4, to honor valid medical provider liens, regardless of the client’s desires. When you combine your duty to pay a valid medical lien under NCGS 44-49 and 50 with the ethical duty imposed to honor valid legal liens, I think you have to go back and look at any Medicaid payments you made from October 1, 2017 until February 9, 2018.

In summary, this is all great news for Plaintiffs, but we have to watch the potential deadline issues!

Questions? Feel free to email at Chris@NicholsTrialLaw.com
Chris Nichols

The Governor signed the new bill incorporating the holding of Wos on July 18, 2013. The bill is effective immediately. You can view House Bill 982, in final mark-up version here: House Bill 982 

Here are the things we KEPT in the old § 108A-57. Subrogation rights; withholding of information a misdemeanor:

• Medicaid is still limited to a maximum of 100% of the lien OR One Third (1/3) of the gross settlement.
• Medicaid still prorates within their 1/3 with unpaid medical providers asserting liens.
• Payment by the lawyer of the 100% or 1/3 of the gross settlement is full and final payment of Medicaid’s lien (but medical lien holders paid pro-rata still get are owed their balances pursuant to NCGS 44-49 and 50. 

Here are the NEW provisions that reflect the Supreme Court’s determination that our previous Medicaid statute was in conflict with Federal law:

• Medicaid recipients can challenge the 1/3 or 100% lien by filing a Petition with a court of competant jurisdiction for “a determination of the portion of the beneficiary’s gross recovery that represents compensation for the Medicaid claim.”
• TIMING OF PETITION: Those petitions must be filed within 30 days of all parties signing a settlement agreement OR court approval of the settlement OR a judgment being issued.
• The Court will conduct an evidentiary hearing and may consider any factors it deems just and reasonable in determining the allocation of the settlement.
• The burden of proof is on the petitioner to prove by “clear and convincing evidence” that Medicaid is demanding too large a portion of the settlement.

One other excellent part of the new statute says Medicaid can compromise the liens at any time:

(a3) Notwithstanding the presumption arising pursuant to subsection (a1) of this section, the medical assistance beneficiary and the Department may reach an agreement on the portion of the recovery that represents compensation for the Medicaid claim. 

In the past, Medicaid took the position they could not negotiate their lien with recipients. This new portion allows for that negotiation to occur at any time, even before a petition is filed.

Chris Nichols
www.NicholsTrialLaw.com

After about 7 years of multiple protracted litigation on three separate cases, the United States Court of Appeals for the 4th Circuit has established in the matter of E.M.A. v. CANSLER, that Ark. Dep’t of Human Servs. v. Ahlborn, 547 U.S. 268 (2006) is the law of North Carolina and that the NC Supreme Court opinion of Andrews v. Haygood did not properly interpret Ahlborn as it applies to NC Medicaid reimbursement.

Congratulations to Bill Bystrynski of Kirby & Holt of Raleigh, NC for the huge win for his client.

I’m going to keep this post fairly short and then add more posts with analysis, but I think the court puts their finding best.

Given that North Carolina common law does not bar DHHS’s lien against E.M.A.’s settlement proceeds, we arefaced with the same question considered by the North CarolinaSupreme Court in Andrews: Whether North Carolina’sthird-party liability statutes comport with federal Medicaidlaw and Ahlborn merely because the subrogation statute, N.C.Gen. Stat. § 108A-57, “caps” the state’s recovery at the lesserof the actual medical expenses paid or one-third of the totalsettlement. The North Carolina Supreme Court in Andrewsand the district court in this case adopted a narrow interpretationof Ahlborn, limiting its holding to cases in which the partieshave stipulated to or otherwise allocated settlementproceeds between different categories of damages, therebyidentifying a sum certain for medical expenses. Thus, thesedecisions are based on the view that Ahlborn is inapplicablein cases involving an unallocated lump-sum settlement, suchas the instant matter.On the contrary, however, nothing in Justice Stevens’sopinion for a unanimous court in Ahlborn supports such acrabbed application of that case. The Ahlborn Court addressedthe specific issue of “whether [ADHHS] can lay claim tomore than the portion of [the recipient’s] settlement that representsmedical expenses.” 547 U.S. at 280.

The Court in no way rested its analysis of this issue on whether there has been a prior determination or stipulation as to the medical expensesportion of a Medicaid recipient’s settlement. Thus, Ahlborn isproperly understood to prohibit recovery by the state of morethan the amount of settlement proceeds representing paymentfor medical care already received. The North Carolina statute’sone-third cap on the state’s recovery against a Medicaidrecipient’s settlement proceeds does not satisfy Ahlborn insofaras it permits DHHS to assert a lien against settlement proceedsintended (or otherwise properly allocable) tocompensate the Medicaid recipient for other claims, such aspain and suffering or lost wages (i.e., in cases where one-thirdof the recipient’s total settlement recovery is greater than theamount DHHS expended on the recipient’s behalf).10 See Andrews, 669 S.E.2d at 607-09 (Hudson, J., dissenting) (concludingthat the North Carolina statutes conflict with federalMedicaid law by allowing the state to recover from a recipientfunds that were for purposes other than medical expenses);Andrews, 655 S.E.2d at 445 (Wynn, J., dissenting) (same).

…

We are not persuaded that a mere “reasonable cap” on astate’s recovery from an unallocated lump-sum settlement satisfiesthe federal anti-lien law as required by Ahlborn. Indeed,contrary to the Andrews court’s reliance on Justice Stevens’sfootnote, the ATLA Brief, rather than advocating full recoverysubject only to a statutory cap, discussed procedures inseveral states to have “mini-hearings” to set allocations ofproceeds from tort settlements where there is no agreementamong the interested parties. Nevertheless, the Supreme Courtof North Carolina found that footnote 18 in Ahlborn authorizesthe states to mandate full recovery up to a legislativelydetermined,across-the-board limit or cap. This reliance is misplaced.

….

On the basis of Ahlborn’s clear holding that the general anti-lien provision in federal Medicaid law prohibits a statefrom recovering any portion of a settlement or judgment not attributable to medical expenses, DHHS’s lien on E.M.A.’ssettlement proceeds in this case violates federal law. In order to comply with 42 U.S.C. §§ 1396a(a)(18), 1396p, and Ahlborn,North Carolina is free to implement a process by whichsettlement proceeds are explicitly allocated or otherwisedetermined. In this case, we must remand for an evidentiaryhearing consistent with this opinion to determine the properamount of the DHHS lien on E.M.A.’s settlement proceeds.

This is an outstanding opinion and reflects the excellent analysis of Judge Wynn and Judge Hudson on the NC cases of Ezell and Andrews.

I’ll be writing a whole lot more on the issue, but wanted to get this out there.

I’m also proud that the 4th Circuit relied on a Memorandum issued by CMS to the states in their decision:

It is also illuminating that the Centers for Medicaid andMedicare Services (“CMS”) issued a memorandum to all Associate Regional Administrators for Medicaid and State Operations in the wake of the Ahlborn decision to aid the states in understanding the effect the decision would have onstate third-party liability recovery. See Memorandum from Gale Arden, Director of CMS’s Center for Medicaid and StateOperations Disable and Elderly Health Programs Group(DEHPG) to all Associate Regional Administrators for Medicaidand State Operations, “State Options for RecoveryAgainst Liability Settlements in Light of U.S. Supreme CourtDecision in Arkansas Department of Human Services v. Ahlborn”(July 3, 2006) (hereafter “CMS Memorandum”). The CMS Memorandum stated that, post-Ahlborn, “if a State attempted to recover from more than the portion of a settlementthat the parties allocated to medical items and services,it was in violation of the federal anti-lien statute.” Id. Additionally,the CMS Memorandum clarified that, “to the extent State laws permit recovery over and above what the partieshave appropriately designated as payment for medical itemsand services, the State was in violation of federal Medicaidlaws.” Id. (Page 32)

NCTrialLAw Blog was the first blog to find and publish CMS Advisory Ahlborn Settlement Options (July 2006)-1 after some deep searches on the Internet. It was a sort of “smoking gun” that showed that CMS itself was telling the State of North Carolina that Ahlborn applied.

Chris Nichols
www.NicholsTrialLaw.com

Rest my fingers.

In the not too distant past, Medicaid was a reliable source for payment of medical bills for clients who were from low incomes homes or disabled (but not eligible for Medicare).

In the last five years, Medicaid has changed rules which emphasize that Medicaid is a secondary payer to third party liability insurance. While this seems “fair” in the sense that the negligent third party caused the injury, the reality is that Liability Insurance Companies rarely, if ever, “pay as you go” for medical treatment. To protect their insured (and their bottom line) they refuse to pay for services as they are rendered and choose to pay “at the end” of the case, after treatment is completed.

This makes it hard for clients to get needed medical treatment, makes that treatment more “expensive” for the client, and takes away Medicaid’s 1/3 “cap” on recovery from liability settlements.

I frequently get inquiries from lawyers about how to “make Medicaid pay” for medical treatment. Alternatively, the question is also “How can I force the medical provider to submit the bills to Medicaid?” Many medical providers do not like being paid by Medicaid because the reimbursement rates are low and the provider must accept Medicaid’s payment as payment in full (aside from the $3 co-pay Medicaid allows).

Below I have pasted the relevant sections from Medicaid’s manual to medical providers which provide the framework for how to get the bills paid.

You can view the entire Medicaid manual here.

Retroactive Eligibility
Retroactive coverage may be approved for up to three calendar months prior to the month of the application if the applicant meets all eligibility conditions in the retroactive period. Medicaid will pay for covered services received during the retroactive period provided that all other Medicaid guidelines are met. Providers may choose to accept or decline retroactive eligibility. However, the provider’s office policy should be consistently enforced. If a provider accepts retroactive eligibility, upon receipt of Medicaid reimbursement, the provider shall refund to the recipient all money paid by the recipient for services covered by Medicaid.
 
Accepting a Medicaid Recipient
In accordance with 10A NCAC22J.0106, a provider may choose whether to accept a patient as a Medicaid patient. However, Medicaid providers must be consistent with their policies and procedures when accepting or refusing Medicaid recipients. Providers may not discriminate against a Medicaid recipients based on the recipient’s race, religion, national origin, color, or handicap.

Agreeing to provide services to a Medicaid recipient and submission of a claim to the N.C. Medicaid Program for payment constitutes agreement to accept the Medicaid payment (in addition to any authorized copayment or third-party payment) as payment in full.

A provider may refuse to accept a Medicaid recipient and bill the recipient as private pay only if the provider informs the recipient prior to rendering the service, either orally or in writing, that the service will not be billed to Medicaid and that the recipient will be responsible for payment.

But of course, you have to compare those passages to the rules regarding Third Party Liability situations: 

Third-Party Liability
State and federal regulations for third-party liability (TPL) require responsible third-party insurance carriers to pay for medical services prior to a provider’s submitting a claim to Medicaid. Providers are required to seek payment from third-party insurance carriers when they know of their existence. A third-party insurance carrier is an individual or company who is responsible for the payment of medical services. These third parties are Medicare, private health insurance, automobile, or other liability carriers. DMA’s third party recovery (TPR) unit is responsible for implementing and enforcing TPL laws. The TPR unit implements and enforces these laws through both cost avoidance and recovery methods. Refer to Section 7, Third-Party Insurance, for additional information.

Time Limits for Filing Claims
All Medicaid claims, except inpatient claims and nursing facility claims, must be received by HP Enterprise Services within 365 days of the date of service in order to be accepted for processing and payment. All Medicaid hospital inpatient and nursing facility claims must be received within 365 days of the last date of service on the claim.

Third Party Liability – Commercial Health Insurance and Medicare – Medicaid Payment Guidelines for Third Party Coverage
Federal regulations require Medicaid to be the “payer of last resort.” This means that all third-party insurance carriers, including Medicare and private health insurance carriers, must pay before Medicaid processes the claim. Additionally, providers must report any such payments from third parties on claims filed for Medicaid payment.
 
Determining Third-Party Liability- Commercial Health Insurance and Medicare
The following information helps providers to determine if a Medicaid recipient has third-party liability (TPL):

1. Check the recipient’s eligibility for third-party insurance information. (Refer to Appendix F, Verifying Recipient Eligibility, for additional information on verifying eligibility and checking for third-party insurance.)
2. Before rendering service, providers should ask the recipient if s/he has any additional health insurance coverage or other TPL, including Medicare. If health insurance is indicated, the provider must bill the carrier before billing Medicaid written denial from the insurance company.

Time Limit Override on Third-Party Insurance – Commercial Health Insurance
All requests for time limit overrides due to a third-party insurance carrier that does not respond within its time limit must be submitted to the TPR section and include documentation verifying that the claim was timely filed to the third-party insurance carrier.

If the third-party insurance carrier does not respond within the Medicaid time limit, time limit overrides may be granted if the claim is filed within 180 days of the third-party denial or payment. Submit the claim with a completed Medicaid Resolution Inquiry Form.

Billing for Personal Injury Cases

The provider must choose between billing Medicaid and submitting the bill of charges to the liability insurer. Providers cannot initially file a casualty claim with Medicaid, receive payment, and then submit the bill of charges to the liability insurer (or the recipient) for the same service, even if the provider refunds Medicaid.

The provider cannot bill the recipient, Medicaid, or the liability insurer for the difference between the amount Medicaid paid and the provider’s full charges. (See Evanston Hospital v. Hauck, 1 F.3d 540 [7th Cir. 1993])

Providers who withhold billing Medicaid have six months from the date of a denial letter or receipt of payment from the insurance company to file with Medicaid, even if the end of the six months is after the end of the usual 365-day filing deadline.

In order for the provider to obtain a time limit override, however, the following requirements must be met:

• The provider must have filed the claim with the liability insurer or attorney within 365 days from the date of service.
• The provider must have made bona fide and timely efforts to recover reimbursement from the third party.
• The provider must submit documentation of partial payment or denial with a claim to Medicaid within six months of such payment or denial.

Payment for Personal Injury Cases
When Medicaid payment is received, the provider is paid in full and there is no outstanding balance on that claim. Once Medicaid makes a payment for a service, only Medicaid has the right to seek reimbursement for payment of service. If the provider withholds billing Medicaid and receives payment from a liability insurer , the provider may bill Medicaid with the liability payment indicated on the claim. Medicaid may pay the difference if the Medicaid allowable amount is greater than the liability payment. Pursuant to federal regulations and the Evanston case, there is a distinction between private health insurance payments and other liable third-party payments.

Refunds and Recoupments for Personal Injury Cases
If Medicaid discovers that a provider received Medicaid payment and communicated with a third-party payer or attorney in an attempt to receive payment of any balance,Medicaid will recoup its payment to that provider immediately, regardless of whether the provider ultimately receives payment from that third party. 

The following is an example of how a liability payment should be treated:

• Amount billed by provider to Medicaid $100.00
• Amount paid by Medicaid $50.00
• Amount paid by attorney/liability carrier $100.00
• Amount to be refunded to Medicaid $50.00
• Amount to be refunded to attorney/liability $50.00

The following is from a “Frequently Asked Questions” portion of the Medicaid rules book:

2. Why was my claim denied for EOB 094, “Indicate private insurance payment or attach denial and submit as a new claim. (UB users may use insurance denial occurrence codes.) Attach Medicare vouchers if applicable.”?

The TPL database indicates the recipient had third-party insurance on the date of service for which you are requesting reimbursement and that this type of insurance should cover the diagnosis submitted for payment. If your service could be covered by the type of insurance indicated, you must file a claim with that insurance company prior to billing the Medicaid program. If you receive a denial that does not indicate noncompliance with the insurance plan, or if you are paid for less than your charges,bill the Medicaid program and, if appropriate, your claim will be processed.

9. May I have an office policy that states I will not accept Medicaid in conjunction with a private insurance policy?

Yes. A provider can refuse to accept Medicaid for recipients who also have third-party coverage, even though they accept Medicaid for recipients who do not have third-party coverage. However, providers must advise the recipient of the responsibility for payment before the services are rendered. The provider must obtain proper consent from the recipient for this arrangement prior to any services being rendered. The signed form must be in the recipient’s record.

11. When do I file my claim with HP Enterprise Services and when do I file it with the TPR section? Send your claim directly to HP Enterprise Services when

• The recipient has no private health insurance
• The insurance EOB reflects an insurance payment
• There is an insurance denial with the following reasons: 
  • Applied to the deductible 
  • Benefits exhausted 
  • Noncovered services (meaning the service was not and will never be covered under this policy) 
  • Pre-existing condition

_______________________________________________ 

My advice to lawyers is to contact the medical providers immediately and explain that payment from a liability claim may not be forthcoming in any short period of time. Encourage the provider to submit the bills to Medicaid. It may also be persuasive to have the Liability carrier write a “denial letter” or send a copy of a letter where the carrier cites “pre-existing conditions” as a reason for not settling the case. This may encourage the provider to submit the bills to Medicaid.

Further, if a provider refuses to accept Medicaid, and that provider is a hospital, inquiries into the consistency of those submissions to Medicaid may encourage submission. 

Chris Nichols
www.NicholsTrialLaw.com

QUESTION: Is Medicaid’s lien capped at one third of liability proceeds received or half of what is left over after attorney’s fees? In other words, if I am pro-rating a Medicaid lien with 44-49 liens and my fee is 25%, are they still sharing a third or are they sharing 37.5%?

ANSWER: Medicaid gets no more than 1/3 of the total settlement. Your attorney fees are irrelevant to Medicaid’s share. The most Medicaid can get is 1/3 of the settlement, even if you charge only 1 dollar as a fee.
 
Medicaid will prorate with NCGS 44-49/50 liens within their 1/3 share. But remember that paying the parorata share of the 44-49/50 liens does not extinguish the balance of the medical bill. The client still owes the balance after the prorata share unless you negotiate a “final payment” compromise with the mediacl provider. 44-49/50 simply act as as a way to get the lawyer out of the middle and get the provider some money before they have to turn to a collection action to get it.
 
The 1/3 (or Medicaid’s portion thereof) DOES take care of Medicaid, in full.

_________________________

Chris Nichols
www.NicholsTrialLAw.com

I don’t have a lot of time today to dig through this case, which is 50 pages long and denser than a fruitcake, but this is, in my opinion, and “extension” on Ahlborn. also, it addresses that tricky part of Ahlborn stemming from the “stipulation” of the meds and the “either/or’ aspect of the case as presented to SCOTUS.

Here is a good summary from Med Law Blog by Michael Cassidy: 

 http://www.medlawblog.com/archives/medicare-reimbursement-tristanis-blow-to-state-medicaid-agencys-third-party-liability-collection-practices.html

So when you make a settlement which will not cover “all” the bills, how do you handle this scenario? I see two ways to go about making the disbursement. I can’t say if one or the other is “right” as I don’t think the statutes clearly cover this.

It should go like this, hypothetically:

Scenario 1

Assume:

Med pay $2,000 (already paid to Chiro 1)

Settlement $10,000
Medicaid Lien: $5,000
Chiro 1: $1,000 (balance after med pay received of $2,000)
Chiro 2: $2,000 balance

So, now let’s apply the law and do the math:

$10,000 Settlement
-$3,333.33 Atty Fees
$6,666.66 Balance

1/3 of settlement is $3,333.33 for Medicaid purposes (Medicaid is limited to recovering 1/3 of settlement)

1/2 of Net is $3,333.33 for NCGS 44-49 lien purposes (Medical liens can only force the attorney to pay 1/2 of the Net settlement after attorney fees and it makes it easier when 1/2 of net and 1/3 are the same thing).

Medicaid shares pro-rata with unpaid medical providers within the 1/3.

$5,000 Medicaid
$1,000 Chiro 1
$2,000 chiro 2
$8,000 $3,333,3/$8,000 = 41.66% shares of the 1/3

Now we figure the prorata share for each lien holder using the percentage from above:

5,000 x 41.66% =$2,083.31
1,000 x 41.66% = $416.6
2,000 x 41.66% = 833.20

That’s how the 1/3 should be distributed BUT, since Medicaid is entitled to 100% of the medpay, they will get another $2,000 on top of the share above.

So:
$10,000 Settlement
-$3,333.33 Atty Fees
$6,666.66 Balance

-$2,083.31 Medicaid
-$416.6 Chiro 1
-833.20 Chiro 2
$3,333.50

-$2,000Medicaid Med pay
1,333.50 to Client

But there appears to be another way to do this. In the first scenario above we prorated Medicaid’s full lien, then paid Medicaid the $2,000 from the remainder of the settlement.

The second method would pay Medicaid the $2k medpay FIRST, then use the balance of the lien for proration purposes. That would give the other providers more money under pro-ration.

The second method would look like this:

Scenario 2

$10,000 Settlement
-$3,333.33 Atty Fees
$6,666.66 Balance

1/3 of settlement is $3,333.33 for Medicaid purposes

1/2 of Net is $3,333.33 for 44-49 lien purposes (makes it easier when 1/2 of net and 1/3 are the same thing)

Medicaid shares pro-rata with unpaid medical providers within the 1/3. (We’ve already taken out the $2k Medicaid will receive)

$3,000 Medicaid lien
$1,000 Chiro 1
$2,000 chiro 2
$6,000 $3,333.33/$6,000 = 55.55% shares of the 1/3

Now we figure the prorata share for each lien holder using the percentage from above:

3,000 x 55.55% = $1,666.50
1,000 x 55.55% = $555.55
2,000 x 55.55% = $1111.11

Since Medicaid is entitled to 100% of the medpay, they will get another $2,000 on top of the share above.

So:
$10,000 Settlement
-$3,333.33 Atty Fees
$6,666.66 Balance

-$1,666.50 Medicaid
-$555.55 Chiro 1
-$1111.11 Chiro 2
$3,333.50

-$2,000 Medicaid (Med pay)
1,333.50 to Client

Let’s compare scenarios now:

Scenario 1:

$2,083.31 (Medicaid prorated share) + $2,000 for med pay = 4,083.31 to Medicaid
$ 416.6 Chiro 1
$ 833.20 Chiro 2

Scenario 2:

$1,666.50 (Medicaid prorated share) + $2,000 for med pay = 3,666.50 to Medicaid
-$555.55 Chiro 1
-$1111.11 Chiro 2

So, technically, Scenario 2 is better for your clientin my mind because Medicaid is paid in full with $3,666.50 and there is more money available for the doctors (who are not paid in full but might be more likely to accept the higher % payment as payment in full).

I don’t know if there is a right or wrong to his one. I’m sure Medicaid would prefer to be paid more, and they may have a point since technically, the Medpay should have gone to them in the first place.

–Chris Nichols
www.NicholsTrialLaw.com

Instead, they got me.

I am posting a link to my PowerPoint presentation for those in attendance who wantde the “paper” copy of my talk. Here is the link: Ahlborn PowerPoint Slide show

Thanks for all the great questions!

Chris Nichols
www.NicholsTrialLaw.com

The NC Lien Manual is now on the shelves, the one I edited and wrote chapters for and that was published by the North Carolina Academy of Trial Lawyers and Lexis. Before you think that I’m pitching my own product, you should know that 100% of proceeds go to NCATL to further the fight for people’s rights, not to me!

Here is the link to check it out: NC LIEN MANUAL

Here is what Lexis says:

The Question

We recently settled a case on behalf of a minor. There is a Medicaid, a SEHP and a hospital lien. Medicaid lien is much greater than the other two, but payment in full of all three would be less than 1/3 of the total net proceeds to the minor.

By way of example (not actual numbers): Assume a $100,000 settlement and attorney fees and costs of $30,000. Liens total $30,000. $15,000 Medicaid, $10,000 SEHP and $5,000 Medical providers. Here’s the catch: parent’s claim had run prior to suit being brought, thus the entire settlement was for minor’s pain and suffering, future lost wages, and future medical expenses. Under Ahlborn it would seem that Medicaid has no right of recovery (a percentage of nothing is nothing) but that the SEHP and Medical Providers would get paid in full.

Have you seen an NC case like this go through the system post-Ahlborn or has the scenario been discussed at any of the meetings you have attended?

MY Answer

You win the award for “best law school exam question on liens”!

No case like yours has come forward yet, but I was expecting one. The folks at SEHP were sort of surprised when I told them this would happen, they seemed to think that if you had SEHP ALL your bills would be paid. They never thought about people losing jobs, losing insurance coverage, etc.

MEDICAID

The analysis should start with Ahlborn. Ahlborn tells us that Medicaid can not claim repayment from any portion of a settlement not apportioned to medical payments. Clearly, the settlement in this case has no component of medical bills because the medical bill claim was that of the parents, and the statute of limitations for the parents claim (and therefore Medicaid’s derivative claim) had run before the suit was filed. The only possible argument that Medicaid could make would be to argue that the parents “assigned” the right of collection to Medicaid upon the child’s receipt of Medicaid benefits under 108A-57. As is noted in a recent publication by John Saxon at the UNC School of Government:

It is clear that both statutes involve the recovery of Medicaid payments from third parties who are liable to Medicaid beneficiaries. G.S. 108A-57, however, uses the term “subrogation” to define the state Medicaid agency’s rights against third parties while G.S. 108A-59 defines the State’s right as one arising by virtue of “assignment.” Subrogation and assignment, though, are distinct legal concepts. So, it is not entirely clear whether the State’s claim against a third party is a claim based on subrogation or a claim based on assignment, whether the State may assert a claim based on subrogation and assignment, whether the State must elect to pursue its claim based on subrogation or assignment, and whether the scope of the State’s rights under G.S. 108A-59 is coextensive with, broader than, or narrower than the scope of its right of subrogation under G.S. 108A-57. Nor is it clear whether the “pro rata” and “one-third cap” provisions of G.S. 108A-57 apply if the State’s claim is based on an assignment under G.S. 108A-59 rather than subrogation under G.S. 108A-57.

So at the outset, we have the argument that Medicaid has NO lien or right of subrogation pursuant to Ahlborn. The Ezell case, of course, is directly contradictory to this, with Judge Steelman’s dissent at the Court of Appeals (adopted per curiam by NCSC)saying:

Notwithstanding any other provisions of the law, to the extent of payments under this Part, the State, or the county providing medical assistance benefits, shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of this assistance, or of the beneficiary’s personal representative, heirs, or the administrator or executor of the estate, against any person. . . .

N.C. Gen. Stat. § 108A-57(a) (2005) (emphasis added).

The above language contemplates a broad right of subrogation, which is indicated by the reference to “all rights of recovery.” Subrogation is not limited to tort recovery, as the statute expressly covers contractual rights or “otherwise.” See State v. Shade, 115 N.C. 757, 759, 20 S.E. 537, 537 (1894) (noting that when the words “or otherwise,” follows an explicit example in a statute, the legislature intends to include every other manner of fulfilling the purpose of the statute, for example here, recovery, no matter what might be the attendant circumstances). The causation language discussed by the majority is from the portion of the statute dealing with the duty of a plaintiff’s attorney to distribute settlement proceeds to DMA, not from the portion of the statute defining the scope of DMA’s right of subrogation, which is set forth verbatim above.

STATE EMPLOYEE HEALTH PLAN

The next matter to address is the lien of the State Employee’s Health Plan. Of course, the SEHP lien will attach to the proceeds regardless of whether they are for medical bills or not:

§ 135-40.13A. Liability of third person; right of subrogation; right of first recovery.

(a) Whenever the Plan pays benefits for hospital, surgical, medical, or prescription drug expenses, with respect to any Plan member, the Plan shall be subrogated, to the extent of any payments under the Plan, to all of the Plan member’s rights of recovery against liable third parties, regardless of the entity or individual from whom recovery may be due.

Though, one might argue that the logic of Ahlborn would apply and SEHP would not have a lien on the minor’s damages (though it seems the statute allows the lien to attach to any proceeds).

The Plan’s lien language gives SEHP the “right of first recovery” which would seemingly place SEHP in a higher priority than Medicaid, though Medicaid could argue that because they are federally funded, the state law would be preempted.

The Plan has the right to first recovery on any amounts so recovered, whether by the Plan or the Plan member, and whether recovered by litigation, arbitration, mediation, settlement, or otherwise.

The Plan’s subrogation right is limited to recovering no more than 50% of the net settlement after “reasonable” attorney fees and costs (presumed to be 1/3) have been paid.

There is currently no guidance on how SEHP would “compete” with Medicaid if both have valid liens. SEHP told me during our meeting that they were “working with the AG’s office and Medicaid” on a way to handle this type of situation. My best guess is that if both liens are valid, Medicaid and SEHP would devise some sort of pro-rata sharing.

SEHP and Medical Liens

SEHP claims to have priority over all Medical Provider liens. Thus, because SEHP’s lien formula is almost exactly the same as the Medical Provider lien formula, if SEHP’s lien is equal to 50% of the NET settlement (after reasonable collection costs) then the Medical providers would not be entitled to any payment under the statute (though their balances would still be owed by the client).

If SEHP’s lien was LESS than 50% of the NET (after reasonable costs of collection) then the question would first be to determine if there is a valid Medicaid lien. If there is a valid Medicaid lien, AND Medicaid does NOT have to share with SEHP, then the Medicaid and Medical provider liens would be prorated up to 1/3 of the settlement (for Medicaid) or 50% of the net after Attorney Fees (for Medical providers).

MEDICAL LIENS

Finally, you have medical liens under NCGS 44-49 and 44-50. Medicaid must share “pro-rata” with any unpaid medical providers pursuant to the requirements of:

§ 108A-57. Subrogation rights: withholding of information a misdemeanor

(a) . . . Any attorney retained by the beneficiary of the assistance shall, out of the proceeds obtained on behalf of the beneficiary by settlement with, judgment against, or otherwise from a third party by reason of injury or death, distribute to the Department the amount of assistance paid by the Department on behalf of or to the beneficiary, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, but the amount paid to the Department shall not exceed one-third of the gross amount obtained or recovered. (emphasis added)

This was discussed in the previous section. Further, SEHP claims that they do NOT pro-rate with medical providers within the 50% of Net after attorney fees limitation.

Thus, I see two scenarios that could result from your case:

1. Medicaid Valid, SEHP Valid, Medical Liens Valid

In this scenario Medicaid and SEHP would first need to determine if one or the other had priority in payment or if they prorate within the 1/3 limitation set by medicaid. If SEHP has first priority, then the question would be does Medicaid get 1/3 of what is left after SEHP is paid or are they limited to no more than 1/3 of the total settlement minus what SEHP has been paid. Medical providers would receive the remainder, pro-rated with Medicaid up to the 1/3 limit of medicaid or the 50% after attorney fees of Medical Provider liens.

2. Medicaid INVALID, SEHP Valid, Medical Liens Valid

If our courts apply Ahlborn as written, then Medicaid should have no lien on the minor child’s pain and suffering or future medicals recovery. Then SEHP would recover it’s full lien, up to 50% of the net after “reasonable costs of collection” and then Medical providers would share among themselves, pro-rata, up to 50% of the net after attorney fees. (Which is essentially the same 1/3 that SEHP claims). Medical providers could argue that their share should be 50% of the NEt AFTER SEHP is paid, but I don’t see any real basis for that argument.

I think that you will probably need to litigate this matter. In that regard, you need to give Medicaid notice of all hearings. My guess is that you would make these arguments at the minor settlement hearing and that Medicaid (AG) would need to participate.

If you have not read my posts on these issue on my Blog, you might want to check it out: Ahlborn Resources

Chris Nichols
Nichols Law Firm

Click here to view the Ahlborn Amicus Brief.

To see all of the other information about the Ahlborn case, follow this link to the post.

Chris Nichols
Nichols Law Firm

The “thumbnail” legalese version of the Ahlborn holding is this:

1. Arkansas statute automatically imposing lien in favor of ADHS on tort settlement proceeds was not authorized by federal Medicaid law, to extent that statute allowed encumbrance or attachment of proceeds meant to compensate recipient for damages distinct from medical costs, and
2. anti-lien provision of federal Medicaid law precluded Arkansas statute’s encumbrance or attachment of proceeds related to damages other than medical costs

The OYEZ summary of the case (one page) can be viewed HERE.

My “practical” version of the implications of Ahlborn can be found here:
NC Trial Law Blog on Ahlborn

SUPREME COURT DECISION

The Ahlborn Supreme Court Decision .pdf link

Click HERE for the Rich Text Format of the Ahlborn case from Westlaw as posted by the Alaska Trial Lawyers which contains “hotlinks” to all cited authority and briefs. You can dowload the case for free but to link to the other authority and briefs you will need a Westlaw password.

Here is the list of all the lawyers involved and all of the Supreme Court filing milestones.

BRIEFS AT THE SUPREME COURT

The Petitioner’s Brief (Arkansas Medicaid)

The Respondent’s Brief (Ahlborn)

The Petitioner’s Reply Brief (Arkansas Medicaid)

AMICUS BRIEFS FROM ALL LEVELS

The Amicus Brief by ATLA/Center for Constitutional Law at Arkansas Supreme Court.(I need a copy of this brief, so if anyone has it, please send me a link or an upload)

The SC Amicus Brief by the United States in Support of Arkansas

SUBSEQUENT CASES CITING AHLBORN

Hat Tip to Steve Bricker of the Bricker Law Firm in Richmond, VA for sending me a New York case where the NY Supreme Court (their highest trial court, like NC’s Superior Court) used Ahlborn the way it was intended. Hopefully this will be a good “go-by” for other courts.

Click Here to Download Lugo_v_Beth_Israel_NY_42_USC_1396p.pdf 

OTHER USEFUL AHLBORN LINKS

The Center for Constitutional Law’s memo on “How to Use Ahlborn”. These are the folks that wrote the Amicus brief that was quoted by the Supreme Court in the majority opinion. This is written by Lou Bograd from CCL and is a great guide.Download ahlborn_opinion_letter.pdf

This highly useful memo from the Department of Health and Human Services dated July 3, 2006, provides the summary of how DHHS (The Fed. department charged with overseeing Medicare and Medicaid) interprets the Ahlborn decision in light of their own statutes. This is a GREAT memo because it is the Fed’s own instructions to “All Associate Regional Administrators for Medicaid and State Operations”. This is a downloadable Word document that will allow you to argue against the State’s probably “stricter” interpretation of the rules. In North Carolina we have seen our Medicaid office argue “we have to get paid in full, the Federal Government mandates that.” No they don’t. Read it.

Social Services Law Bulletin # 41from the North Carolina Institute of Government by John Saxon. (.pdf download) This law bulletin was written as a “review” of the Ahlborn case to provide guidance to NC Medicaid. The issue also addresses a NC Supreme Court opinion in the matter Ezell and explains how the author does not see how the two opinions can be squared with each other. I wrote the Amicus in the Ezell case.

Medicaid Letter (Ohlahoma) Setting Out Ahlborn Criteria. This letter appears to be a letter from Oklahoma Medicaid to a lawyer setting out what Oklahoma wants/needs to make a reduction in a Medicaid lien. I think this is helpfu information to “guide” lawyers in jurisdictions where Medicaid has not figured out what they want or need to accomodate Ahlborn. The link downloads the letter in word or allows for HTML viewing.

National Association of State Medicaid Directors Website. This link takes you to the Medicaid Directors website where you will find all sorts of interesting information. Take a loom at the “insiders view”. The Oklahoma letter above came from the bowels of this website.

If you have any useful links to add to this collection, please email them to me or simply post below in the comments. I’ll make sure to credit you and provide a link to your blog/website if you want.

Chris Nichols
www.NicholsTrialLaw.com

Also, I recently heard a statistic that many illegal immigrants actually pay a lot of taxes. Here is how that works. Most illegals will use a fake Social Security number to get low paying jobs. Or they will apply for a Tax Id so they can get driver’s licenses, etc. The employer, in a typical wink and nod fashion, says, “Ok, you have a Social Security #, you MUST be legal.” Then the employer does the standard state and federal withholding to “prove” that they “thought” the employee was legal. The employee gets a W-2 at the end of the year. The employee/illegal usually never files a tax return, and they never get a tax refund. Thus, millions of “unclaimed” dollars flow into the Federal Reserve that probably would not be there if the workers were naturalized and were scurrying to H&R Block for their “tax refund loan” at the annualized interest rate of 98%. (A subject for another day!) 

Medicaid, is, of course, funded with tax dollars as is Medicare, which has it’s own separate tax right on the W-2. So, in many instances, these “illegals” are absolutely paying for their right to receive Medicaid. 

Finally, people get sick whether they have health benefits or not. Hospitals are not allowed to refuse treatment to very sick people in the ER. So by denying Medicaid benefits, the federal government is simply passing the buck on to private and state local hospitals, who will, in turn, pass the buck to consumers. Also, by denying Medicaid, which will pay for “well” visits and pregnancy care, when people do come to the ER they will be sicker and the treatment will be costlier. In the end, this will “cost” as much as it supposedly saves, I think.

I think this is classic penny wise-pound foolish thinking and is more motivated by politics than good sense. Not to mention, we are a wealthy nation, we can afford to take care of the poor. Especially when they are the ones doing the dirty work.

New law becomes effective today; Medicaid recipients required to provide proof of citizenship

By James Romoser

JOURNAL REPORTER

Friday, September 1, 2006

Starting today, people in North Carolina who are on Medicaid will have to prove that they are U.S. citizens, or they will risk losing their health-care coverage.

The new documentation requirements are part of a federal law intended to prevent illegal immigrants from getting health benefits through Medicaid, the government-run health-insurance program for the poor.

The Congressional Budget Office estimates that the law will save the federal government $735 million over 10 years.

But local Medicaid officials and some national health-care advocates say the new rules are too strict and mostly unnecessary. There is not a widespread problem of illegal immigrants getting Medicaid, they say. Some critics worry that the rules will hurt Medicaid recipients who are citizens but for some reason are unable to produce a passport, an original birth certificate or other required documents.

The rules will further complicate a process that is already strenuous for both Medicaid applicants and social-services caseworkers.

“You can basically get a million-dollar mortgage easier than you can get Medicaid,” said Joe Raymond, Forsyth County’s director of social services. Medicaid, a federal program, is run mostly by the states and is administered at the local level through county social-services departments. Applicants must meet income requirements and other eligibility criteria.

READ the full story here.

Chris Nichols
www.NicholsTrialLaw.com

My friend Carlos Mahoney of Glenn, Mills and Fisher of Durham has filed a Federal DJ action seeking a ruling on whether NC Medicaid (Department of Health and Human Services) is actually following the law (since Ahlborn) in the way it attempts to collect from personal injury settlements.

You can see my previous discussion on what Ahlborn means to NC lawyers here.

Good Newspaper Coverage

Carlos’ suit was actually covered by the local newspaper, and covered well, in my opinion.

Here is a clip:

Official sued for blocking injury settlement

By John Stevenson, The Herald-Sun
August 24, 2006 11:20 pm

DURHAM — N.C. Department of Health and Human Services Secretary Carmen Hooker Odom is being sued on grounds that she allegedly imposed an unconstitutional Medicaid lien on $75,000 owed to an 11-year-old Durham girl injured in a motorcycle accident.

The suit, drafted by lawyer Carlos Mahoney and filed this week in the Durham Division of U.S. Middle District Court, identifies the child only as “D.J.M.”

According to the suit, the $75,000 was part of a settlement to reimburse D.J.M. for pain, suffering and permanent scarring that arose after she was hit by a motorcycle in Durham on June 25, 2005.

The suit contends that the Department of Health and Human Services, which administers the state’s Medicaid program, has no right to the money because it was not intended for medical expenses. But Odom imposed a lien on the settlement funds anyway, apparently to recover $11,190.45 spent on D.J.M.’s hospital and physician bills, the suit says.

You can read the full story here: Herald Sun

I’m crossing my fingers that the Federal Court will make sure that Ahlborn is being applied correctly and that the North Carolina Supreme Court will use this as yet another reason to take another look at Ezell.

Chris Nichols
www.NicholsTrialLaw.com

Thanks to Health Plan Law.com for the positive mention of my recent post setting out practical guidelines for using the recent Supreme Court Ruling in Ahlborn to reduce Medicaid liens in personal injury settlements. Here is what they had to say:

Nonetheless, U.S. Supreme Court has held that these provisions do not support State statutes that claim more than the portion of a Medicaid recipient’s settlement that represents medical expenses. See, Arkansas Department of Health and Human Services v. Ahlborn, 126 S.Ct. 1752 (2006). A fine discussion of the implications of this case appears in the North Carolina Trial Law Blog. Thus far, little guidance has developed from the courts as to the implications of this May 1, 2006 decision, but its taming effect on Medicaid reimbursement demands should be evident in future developments.

Good News, Bad News

I will admit that the only downside is that since www.HealthPlanLaw.com is a web site for Health Plan Administrators, they probably like Ahlborn because it means more money for them to subrogate against (ala, ERISA claim for reimbursement). (Warning: self congratulation ahead) Oh well, at least they know good analysis when they read it . The good news is that the tone of the Health Law Article suggests that they too think that Medicaid liens can be “Draconian” (their words). Sounds like we may have some health plan administrators out there with some real heart and understanding of what happens to a severely injured Plaintiff who receives nothing from a settlement because they have to “pay back” Medicaid, ERISA, etc.

HelathPlanLAw.com makes for interesting reading too. If you want to see the challenges of regulatory, statutory, and monetary red tape, check out some of the things these folks have to handle.

-Chris Nichols
www.NicholsTrialLaw.com

The recent United States Supreme Court decision of Arkansas Department of Human Services v. Ahlborn 547 U.S. ___, 126 S.Ct. 1752 (April 2006) has created an excellent opportunity for plaintiff’s lawyers to ensure clients receive a fair share of their settlements in personal injury matters.Those of us that follow the developments of lien law were excited when this decision was published, and considered it a big “win” for Plaintiffs.Unfortunately, North Carolina has not immediately followed the very clear guidance of the U.S. Supreme Court.

My very short summary of Ahlborn

If you want to read the Ahlborn slip opinion, click here.I’m not going to summarize it much other than this short paragraph.In Ahlborn, Arkansas Medicaid had a claim against the proceeds of a personal injury settlement.(NOTE: I’m using fictional numbers numbers to make this easy.)Let’s say Arkansas said that Ahlborn owed $100,000 to repay payments made by Medicaid for injuries caused by a third party’s negligence.Ahlborn had a settlement of $500,000.Normally, Medicaid would get the full $100,000, right?Well, the lawyers for Ahlborn said, “Hey wait, we may have gotten $500,000 for our client, but our client had a lot more damages, and this was a compromise settlement, so Medicaid should not, can not, take the full $100,000.They should only get their fair share.”

For several different reasons outlines below, Justice Stevens, writing for the majority, agreed that Medicaid should only get their fair share of the total damages to the Plaintiff.

In essence, Justice Steven’s said, “Medicaid can only get paid from the part of the settlement that represents payments made for medical bills.Thus, when there is a lump sum settlement, a court can, and should, figure out what portion of the settlement is for medical bills, and what portion is for other damages, like pain and suffering, future medical damages, lost wages, disfigurement, etc.”This is sort of a complicated way of saying that Medicaid must pro-rate with other damages.

An Example of How the Ahlborn analysis should work

So in my fictional version of Ahlborn, here is what would happen:According to Justice Stevens, Medicaid and the Plaintiff should agree on what the total damages are worth.(Ok, realistically, in NC, Medicaid will often balk at this part, but we’ll get to that later.)Next you determine what Medicaid’s total lien will be.Then, you determine the percentage that Medicaid’s lien represents of the total value of the damages.Finally, multiply Medicaid’s total lien by the percentage, and voila, you have Medicaid’s final lien.

Medicaid and the Plaintiff can’t agree? Easy solution says Justice Stevens, have a trial judge figure it out.I call this process “pro-ration” but the Supreme Court calls it “apportionment.”Ok, I’ll use their term, mostly because my spell check just does not like any version of “proration”.

Mathematically, using my fictional Ahlborn numbers here is what we get:

Pre-Ahlborn:

$500,000Settlement
-$166,666Attorney Fees
-$100,000Medicaid lien
$233,333 available to client

Post-Ahlborn:

What is the value of the total damages?

Assume there are the following damages:

$100,000Medicaid Lien
$1,500,000Future medical bills (life care plan)
$250,000Past lost wages
$250,000Future lost wages
$ 2,100,000TOTAL Damages(we’re leaving pain and suffering out to make this simple)

What portion of the total damages is Medicaid’s “lien”?

$100,000 divided by $2,100,000 =.047619(pro-ration percentage)

What should Medicaid receive as part of the final settlement?

$100,000 lien x .047619 (pro-rata share) = $4,761.90

Final Analysis of Lien under Ahlborn:

$500,000Settlement
-$166,666Attorney Fees
-$4,761.90($100,000 x .47619) Final Medicaid Lien
$328,572.10available to client

The reasons behind Ahlborn (Statutory analysis)

The reasons behind this interpretation of Medicaid law depend in part of how the Supreme Court interpreted federal statutes that enable the States to collect for Medicaid payments.The analysis is fairly complicated, but is well summarized in a Petition for Rehearing filed in the NC Supreme Court case of Ezell v. DHHS. (Since our Supremes adopted the dissenting COA opinion, you really need to read the dissent to make sense of the NCSC decision. Read the COA opinion here.) Ezell involved an issue that should be controlled by Ahlborn, though right now it looks like the N.C. Supreme Court has ignored the ruling in Ahlborn by adopting the dissenting opinion of the N.C. Court of Appeals which was decided pre-Ahlborn and gives no consideration of the analysis and “apportionment” required by Ahlborn.

Here is the summary of Ahlborn from the Petition for Rehearing in Ezell:

Writing for a unanimous court in Ahlborn, Justice Stevens noted that 42 U.S.C. §1396k requires Medicaid beneficiaries to “assign the State any rights … to payment for medical care from any third party”— specifically excepting rights to payment for lost wages or pain and suffering.547 U.S. ___, 126 S.Ct. at 1761.Second, Stevens observed that the language of 42 U.S.C. §1396a(a)(25)(B) requiring state Medicaid programs to seek reimbursement from third parties expressly refers to “the legal liability of third parties … to pay for [medical] care and services available under the [Medicaid] plan.” Ibid. Third, Stevens determined that the rights acquired by state Medicaid programs pursuant to 42 U.S.C. §1396a(a)(25)(H) were only “the rights of [a Medicaid beneficiary] to payment by [a third party] for … health care items or services” —not rights to payment for lost wages, pain and suffering, an inheritance, or anything other than medical expenses.Ibid.

Reading these statutory provisions together in context, Justice Stevens concluded that “the federal third-party liability provisions require an assignment of no more than the right to recover that portion of a settlement that represents payments for medical care.”Ibid., 547 U.S. ___, 126 S.Ct. at 1762.

Despite the complicated statutory analysis in Ahlborn, the actual application of the decision is fairly simple.Unfortunately, NC Medicaid (DHHS), via the NC Attorney General’s office, is ignoring the opinion.I am personally aware of at least three cases (four counting Ezell) where DHHS has said, in essence” “that’s not what Ahlborn means, pay us our full lien.”

DHHS seems to be taking the position that their lien is superior to any other lien (except Medicare) and that their lien is to be paid in full, up to NC’s statutory “cap” of 1/3 of the gross settlement.

Other Issues Ahlborn Raises in NC

Ahlborn also calls into question the constitutionality of the arbitrary 1/3 cap because the cap has absolutely no relationship to the settlement value.If this is true, “smaller” cases, those with no long term medical costs or future damages, may have to pay more of a small settlement (no 1/3 cap) but those cases with large damages and future losses will benefit.

Another disturbing aspect of Ahlborn is that is may lead a court to consider future liens by Medicaid.In other words, in my fictional Ahlborn case above, the State might argue that they should be compensated for medical costs that will be paid.This is already happening with Medicare set-aside trusts in Worker’s Compensation cases.

Keep reading here for further analysis and hints and tips about using Ahlborn.

Chris Nichols
www.NicholsTrialLaw.com

That’s an amazingly low number when you consider that a “life flight” on a helicopter can cost $10,000 and even the emergency room treatment required for someone to simply die at the hospital might cost another $10,000. The doctors can get a really raw deal if the person is not insured. But what happens when the person is insured by Medicaid, and Medicaid pays the doctors and the hospital?

A lot of people ask me, “isn’t Medicaid limited to the same recovery as the hospitals and doctors? 

NO.

Medicaid is not limited to the $4,500 cap on recovery from wrongful death suits. Medicaid in NC is ALWAYS limited to recovery no more than 1/3 of the gross settlement, but the cap does not apply to them. Medicaid cites the Medicare case of Cox v. Shalala, 112 F.3d 151 (4th Cir. 1997). In Cox, Medicare was allowed to recover its entire lien, despite the cap on the recovery. My lawyer friend Tim Welborn of North Wilkesboro represented the Plaintiff in that case and did a great job on the briefs and pleadings. Unfortunately, Uncle Sam usually wins these things.

Is Medicaid right? Probably, and in light of recent NC decisions like Ezell, it is unlikely that our Supreme Court would apply the limit against Medicaid.