This post is an update on an earlier post concerning changes to the law of Medicaid subrogation in North Carolina. The earlier post can be seen here: Medicaid: “Ahlborn hearings” are back thanks to the 2018 federal budget which makes Medicaid provide lien reduction hearings again. But watch the deadlines!

Here is the short version of the history: In 2013 NC amended the law on Medicaid subrogation to allow for a reduction hearing to determine Medicaid’s final lien in a third party injury case. That law stood until October 1 of 2017 when a small change to the Federal law had the effect of making the NC statute inapplicable. In anticipation of the Federal change, NC lawmakers had inserted a law in the July 2017 state budget that said in essence, “if the federal changes happen on October 1, then our law changes to this…”. The new state law eliminated the reduction hearings and also eliminated Medicaid sharing prorata with valid medical lien holders. 

Then on February 9, 2018, the Federal Budget was passed and it retroactively repealed the changes that went into effect on October 1 in the federal law. In my opinion, this had the effect of essentially time traveling back to the last day of September, 2017 and making the October 1 federal changes never happen. Which means, of course, that the NC changes conditioned on the Federal changes, never happened either.

The end result is that as of February 8, 2018, the Medicaid lien law in NC was back to the statute that existed since 2013. Or at least that’s what i thought.

That leads me to now. I filed a declaratory judgment suit and motion to determine Medicaid lien in March of 2018 to request a Medicaid lien reduction under the 2013 NC law. In the Compliant I set out all of the changes described above and that the law of NC had “reverted” to the pre-October 1, 2018 law.

The State of North Carolina filed an Answer to the complaint an unequivocally Admitted all of the following allegations in the Complaint.

Long story short, my legal theory set out above is correct.

Below are the legal allegations in the Complaint.

Jurisdiction, Venue, and Governing Law

1. This Court has subject matter jurisdiction over this action pursuant to N.C. Gen. Stat. §7A-240 and §7A-243. This Court has personal jurisdiction in this matter pursuant to N.C. Gen. Stat. §1-75.4.
2. Venue is properly laid in this Court pursuant to N.C. Gen. Stat. §1-80 and §1-82.
3. That NCGS §108A-57 governs Medicaid lien recovery in North Carolina.
4. That NCGS §108A-57 was written, in part, to comply with the requirements set out in Wos v. E.M.A., __ U.S. __, 133 S. Ct. 1391, 1402 (2013) which affirmed that Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 284, 126 S. Ct. 1752 (2006) applied in North Carolina. Ahlborn established that the Department of Health and Human Services is prohibited from recovering “a portion of a Medicaid beneficiary’s tort judgment or settlement not designated as payments for medical care” because such recovery is barred by the federal Medicaid statute’s anti-lien provision, 42 U.S.C. § 1396p(a)(1).
5. That NCGS §108A-57(a2) provides a mechanism for a determination of the portion of the beneficiary’s gross recovery that represents compensation for the Medicaid claim and requires that an application for determining the lien under this subsection shall be filed with the court “no later than 30 days after the date that the settlement agreement is executed by all parties and, if required, approved by the court.”
6. That on October 1, 2017, NCGS §108A-57, was amended pursuant to NC Senate Bill 257. The amendment, which was conditioned upon changes to federal law going into effect the same day, said:
   
   “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…”
   
7. On October 1, 2017, the changes to the federal law went into effect which triggered the changes to North Carolina law, eliminating procedure to request a court for the determination of a medicaid lien pursuant to NCGS §108A-57(a2).
8. On February 9, the United States Congress passed, and the President signed, H.R.1892 – Bipartisan Budget Act of 2018, which contained “SEC. 53102. THIRD PARTY LIABILITY IN MEDICAID AND CHIP”.
9. SEC. 53102 of H.R.1892, the Bipartisan Budget Act of 2018, repealed subsection (b) of section 202 of the Bipartisan Budget Act of 2013. The repeal stated that it “includ[es]any amendments made by such subsection” and the repeal “shall be applied and administered as if such amendments had never been enacted.”
10. The effect of all of these statutory changes on February 9, 2018 was that because the federal changes “had never been enacted” the changes to NCGS §108A-57 set out in NC Senate Bill 257 never took effect and the provisions of NCGS §108A-57(a2) allowing for judicial determination of Medicaid’s lien came back into existence on February 9, 2018.
11. That any matter settled between October 1, 2017 and February 9, 2018, could not apply for a lien determination during that time period and that NC DHHS properly refused to grant requests for reductions during that time frame.
12. That Plaintiff’s Workers’ Compensation case was approved for settlement in an Order of the Industrial Commission in IC. File No. Y26729 filed on January 24, 2018.
13. That upon the reinstatement of NCGS §108A-57(a2) on February 9, 2018, cases settled during the October 1, 2017 through February 9, 2018 period should have 30 days to file for hearings pursuant to NCGS §108A-57(a2) and that the first day they could request such hearing was February 9, 2018.
14. That Plaintiff in this matter has filed for this hearing pursuant to NCGS §108A-57(a2) within 30 days of February 9, 2018 and has satisfied the filing requirements of NCGS §108A-57(a2).

Again, all those allegations were ADMITTED by the State.

This should settle the question of what law applies now. I will also point out that the website for the General Assembly is still displaying the “new” (but incorrect) NCGS 108A-57. You can view the “old” (but now the current) NCGS 108A-57 in the body of the budget bill, Senate Bill 257 (2017) beginning at the very bottom of page 222 and continuing on to 223. All of the “repealed” portions in that Bill are now law again. Here is the link- go to page 222 or do a search for “subrogation” within the PDF. www.ncleg.net/Sessions/2017/Bills/Senate/PDF/S257v9.pdf

My firm is now taking in limited numbers of Medicaid reduction cases for other lawyers. Make sure you remember that you only have 30 days to file and serve your Motion to Reduce Medicaid lien beginning on the date that the client settles the case (signs the Release of Claims or a court approves a settlement).

Feel free to email me or call me if you have matter you think might qualify for a reduction. 

Chris Nichols
www.NicholsTrialLaw.com
Chris@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 oral argument can be heard here: http://coop.ca4.uscourts.gov/OAarchive/mp3/10-1865-20111026.mp3#

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

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

The gist of the majority opinion is that the majority interprets Ahlborn (which you will recall is a US Supreme Court decision) to say that NC Medicaid must have some mechanism to protect the injured party from giving ALL of their settlement or verdict to Medicaid. The majority goes on to say that NC’s 1/3 rule is just that stop gap measure and thus NC law is within the requirements of Ahlborn. 

Of course, the Ahlborn opinion actuallysays that Medicaid can only collect their prorata portion of a settlement as it relates to the medical bills Medicaid paid, but that was more or less ignored by our court. Ahlborn boils down to this: If the injured party collects 25% of the actual value of their case then EVERYONE, including Medicaid, should get 25% of what they are owed. All boats rise and fall with the incoming tide. Share and share a like. What’s good for the goose is good for the gander. You get it, right?

Well, the majority didn’t. 

They think that our “1/3 of the total settlement” cap on Medicaid recovery is the same thing as the Ahlborn “fair share” requirement. How? Well, because they said so, I guess. In fact, they not only said so, but implied that the Legislature “may have” intended the “cap” to work in this fashion, despite the fact that the cap was enacted YEARS before Ahlborn.

A simple example of impossibility:

Person in wreck has $200,000 of medical bills. Medicaid pays $100,000. The defendant only has $50,000 in insurance. What should Medicaid get, what should the client get?

Ahlborn Anlaysis:

1. What’s the case worth? At least $200,000, probably more like $500,000 plus, but of course we can’t know exactly. So let’s say $500,000.
2. Ratio of settlement to Value: $50,000 : $500,000 = 10%
3. Medicaid lien of $50,000 x 10% = $5,000 to Medicaid (the fair share)

Andrews Analysis:

1. What’s the case worth? Who cares!! In Andrews, ask, how much was the settlement? $50,000
2. What is 1/3 of the settlement? $50,000/3 = $16,666.66
3. Is Medicaid’s lien > 1/3? If yes, pay only 1/3. Medicaid will get $16,666.66 here.

My question: How can $16,666.66 and $5,000.00 BOTH comply with Ahlborn (the law of the land)?

ANSWER: They can’t, and the Minority opinion, written by Justice Hudson, points this out. I’ll discuss that in my next post.

CURRENT STATUS: Petition of Cert. to the Supreme Court of the United States has been filed.

So what should a (or this Raleigh) personal injury lawyer do with similar Medicaid issues right now? Well, I’d be in no rush to get them resolved in state court. I think our Superior Court Judges are stuck with Andrews right now. One might also consider going the Federal route. Or waiting for the US Supreme Court.

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Nichols Law Firm
Chris Nichols