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

You can download the pdf files and open them in Acrobat and then CTRL F search for the codes that show up on your conditional payment letters from Medicare. This will help you sort out medical visits that have been “coded” for payment for non-related medical procedures and visits.

This makes it easier to find and eliminate appointments for pre-existing conditions. You can also scan in a long conditional payment spread sheet, do a conversion to searchable text (OCR) and then use the search feature on that to find the billing codes.

Hope this is helpful to some of you.

Chris Nichols
www.NicholsTrialLaw.com

Can a medical provider claim a lien under NCGS 44-49 if the medical bills have been paid by the workers compensation carrier prior to injured worker pursuing a third part claim against a tortfeasor?

Worker was injured, workers comp. paid his medical bills at the local hospital. A case was pursued against the negligent third party and we just received a lien notification letter from the hospital.

Can they do this?

My answer:

No. A workers compensation (WC) medical payment is a “payment in full.” The hospital submitted to WC, WC paid what is the allowable expense and the hospital has to write off the remainder. They don’t get to double bill or bill for the unpaid portion.

I would write the hospital a letter asking them to set out in writing what what the total charges are, what they have been paid in the past, and what they are asking from your client now.

Get that in writing.

The follow up with a letter to the department that claimed the lien and make sure you copy one of the Medical Dcotors in charge with the following laws:

http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/BySection/Chapter_97/GS_97-26.html

A medical provider’s reimbursement is limited to the maximum amount approved in the NCIC Medical Fee Schedule, unless the provider has contracted with the insurer for a different amount. If neither the fee schedule nor a contractual fee applies, the maximum reimbursement allowed is the usual, customary, and reasonable charge for the service.

N.C.G.S. §97‐26(c)

N.C.G.S. §97‐90(e) governs this issue and states:

“A health care provider shall not pursue a private claim against an employee for all or part of the costs of medical treatment provided to the employee by the provider unless the employee’s claim or the treatment is finally adjudicated not to be compensable or the employee fails to request a hearing after denial of liability by the employer.”

N.C.G.S. §97‐88.3(c) establishes penalties for medical providers who improperly pursue private claims against employees:

“A health care provider who knowingly charges or otherwise holds an employee financially responsible for the cost of any services provided for a compensable injury under this Article is guilty of a Class 1 misdemeanor.”

That’s straight out of the North Carolina Medical Society guide: http://www.ncmedsoc.org/non_members/project_sustain/workerscomp_faq.pdf

I’m thinking that when faced with criminal liability, the hospital will about face on this one.

And of course, if the bill was never submitted to or paid by WC, then I think they can claim a lien. Though if they breached their duty to submit to WC, then they may just be completely out of luck.

Don’t forget that WC does have a lien for the medical bills they paid.

Chris Nichols
www.NicholsTrialLaw.com

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

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

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.

_____________

Nichols Law Firm
Chris Nichols

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

My thought is that if a State can usurp ERISA, and the SCOTUS allows that, why would the NC Anti-subrogation provision promulgated by our Commissioner of Insurance not do the same. Yeah, I know it is the whole “federal preemption argument” but if we keep seeing “holes” created in ERISA, maybe one will get big enough one of these days. I know this is a stretch. A big stretch.

From WorkPlaceProf Blog:

Ya win some, ya lose some if you’re the ERISA bar. In this instance, whereas the Supreme Court decided to hear LaRue v. DeWolff, Boberg & Associates , 06-856, it has denied review in the ERISA inalienability case of Cox v. DaimlerChrysler (06-273).

In Cox, SCOTUSBlog commented that the issue was whether:

it violates ERISA for a state to arrange to take 90 percent of a prison inmate’s pension benefits to help defray the costs of imprisonment. The Solicitor General, asked by the Court for the government’s views, had urged the Court to bypass the appeal by Michigan’s state attorney general, Mike Cox.

The whole inalienability question within ERISA in the criminal context will continue to percolate through the Courts. For example, see this post on United States v. Novak, 04-55838 (9th Cir. Feb. 22, 2007), in which the en banc Ninth Circuit found in a 10-5 decision that the Mandatory Victim Restitution Act (MVRA) trumps ERISA’s anti-alienation provisions that normally would keep retirement benefits from being disturbed by others.

____________________

Chris Nichols
www.NicholsTrialLaw.com

Here are some simple steps to follow to protect your client’s rights:

Read the Background and In-Depth Analysis of the Lien

Get caught up with the basics of the law by reading the article I wrote for the North Carolina Academy of Trial Lawyers magazine, Trial Briefs

• Download SEHP_Trial_Briefs_Article_by_Chris_Nichols.pdf (2430.4K)

Read the Current Law

Now that you know the background of the law, you need to catch up on the latest developments (like the law being amended) so read the posts on this blog listed in the left column in the category “NC State Employees Health Plan”.Or click HERE for a chronological (most recent first) listing of all the posts from this Blog covering the lien.

Get your Client’s Authorization

You need to have your client give the SEHP authorty to release information to you. This is essantially a HIPPA form for SEHP.

• Download SEHP_Authorization_Form.pdf (47.2K)(HIPPA essentially)

Request the Lien

Download the SEHP Lien request form.

• Download SEHP_Lien_Request_Form.pdf (23.0K)

You are on your way to negotiating the lien.

Chris Nichols
www.NicholsTrialLaw.com