Medicaid and Medicare are often mistaken for each other yet they share very little in common. It is particularly important to understand the differences between the two when you are resolving a personal injury case in which the plaintiff’s medical care has been funded by one or the other. The following is a very basic description of Medicaid and Medicare focusing on their right to reimbursement from third party recoveries.
“Medicaid is a joint federal-state program that provides medical services to certain persons in need. Through Medicaid, the federal and state governments share the cost of reimbursing health care providers for the cost of treating individuals who are unable to pay for necessary medical care. The State of New Hampshire is obligated to administer its program pursuant to a plan approved by the Health Care Financing Administration that complies with the requirements set forth in the Medicaid Act and its implementing federal regulations.”i
“Some people require medical care as a consequence of an accident or illness for which a third party is liable. Federal law mandates that States require Medicaid recipients to assign any rights they possess against such third parties to the State, and requires States to make reasonable efforts to collect on all third-party claims that are assigned. RSA 167:14-a complies with this mandate.”ii
R.S.A. 167:14-a , III states that “[w]henever a recipient of medical assistance shall receive a settlement or award from a liable third person or party, such recipient shall repay the amount of medical assistance furnished by the state to the extent that the amount of the recovery makes repayment possible.”
To enforce this right, the statute requires the plaintiff to provide the State with at least thirty days notice of any scheduled trial or ADR session.iii
Once a settlement is reached, the State is entitled to seek reimbursement from the net recovery after the deduction of attorneys’ fees, litigation costs, and claims by other creditors.iv In addition, the statute allows the plaintiff to keep at least ten percent of the net recovery after the foregoing deductions.v Unlike workers’ compensation liens, the statute says that the State need not pay its pro rata share of the attorneys’ fees incurred by the plaintiff.vi
Recently, courts in other jurisdictions have held that a State Medicaid plan may only obtain reimbursement from the portion of a verdict or settlement that is intended to compensate the plaintiff for past medical expenses.vii
Those courts begin their analysis with the observation that the federal anti-lien statute prohibits the States from placing a lien on the personal property of a Medicaid recipient. The courts then conclude that a plaintiff’s tort cause of action is “personal property” subject to the anti-lien statute.viii Finally, they hold that, since a Medicaid recipient is only required by law to assign to the State the portion of his or her tort cause of action that seeks recovery for medical payments, it follows that all other elements of the plaintiff’s cause of action are “personal property” protected by the anti-lien statute.
Therefore, in the case of a negotiated lump sum settlement where no specific allocation has been made among the plaintiff’s various claims, the court must determine how much of the settlement was intended to compensate the plaintiff for his or her past medical bills. The State’s right of recovery is limited to that figure.
The United States Supreme Court recently agreed to review this issue and will hear oral arguments in the matter of Arkansas Department of Human Services v. Ahlborn on February 27, 2006. A decision should be issued before the end of the Court’s term in June 2006.
New Hampshire’s statute also permits either the State or the plaintiff to apply to the trial court for an equitable apportionment of the third party settlement funds.ix The statute gives no guidance as to how to determine an “equitable apportionment” and this provision has not yet been construed by our Supreme Court.
In Robichaud v. Cheney, et al,x we asked Judge Houran to reduce the State’s Medicaid lien under the equitable apportionment provision of R.S.A. 167:14-a, IV.
In that case, the plaintiff, a woman in her late 30s, alleged that several medical care providers failed to diagnose and treat a bowel injury leading to multi-system failure, a heart attack, and a kidney transplant. Unfortunately, the defendants’ malpractice insurance carrier was declared insolvent. As a result, the plaintiff recovered the maximum available from the New Hampshire Guaranty Association, $2.1 million, despite the fact that her special damages alone exceeded that figure. In addition, one of the defendants agreed to pay the plaintiff $50,000 per year for the next eight years from its own funds.
The State asserted a lien pursuant to R.S.A. 167:14-a, III in the amount of $438,009.79 and flatly refused all efforts to discuss a compromise resolution.
Ruling on the plaintiff’s petition for an equitable apportionment, Judge Houran determined that the malpractice insurance carrier’s insolvency had deprived the plaintiff of approximately one-third of the value of her case. Accordingly, he determined that the State should reduce its Medicaid lien by one-third. The State did not appeal that ruling.
Medicare is a federal health insurance program that covers the following classes of individuals:
Individuals 65 or older who are entitled to Social Security or Railroad Retirement benefits;
Disabled individuals of any age who have been receiving Social Security Disability or Railroad Retirement benefits for 24 months;
Individuals of any age with end-stage renal disease who require dialysis or kidney transplant; and
Individuals over the age of 65 who are not eligible under any of the foregoing categories but who purchase medicare insurance and pay the premiums.
When Medicare pays medical bills for which a third party is liable, it has a right of reimbursement under federal law.xi According to the government’s Medicare Intermediary Manualxii, the lien is limited to the sum of the medical expenses that are related to the accident for which a third party is liable and any expenses that, despite being unrelated to the accident, were nevertheless used by the recipient to obtain the third party recovery.xiii In other words, if the plaintiff includes any medical expenses in his third party claim, he cannot later argue that they were unrelated to the injury that led to the suit.
Unlike Medicaid, Medicare automatically reduces its lien by its share of the plaintiff’s “procurement costs” such as attorneys’ fees and litigation expenses.xiv Medicare will also consider partial or complete waivers of its lien under carefully defined circumstances. For example, 42 U.S.C. §1395gg(c) permits a waiver when reimbursement would either cause financial hardship by depriving the recipient of income required for ordinary and necessary living expensesxv or would be “against equity and good conscience.”xvi The Medicare Intermediary Manual provides detailed instructions as to how staff members are to determine whether a waiver is appropriate under these provisions.xvii
A partial or complete waiver is also authorized by 42 U.S.C. §1395y(b)(2)(B)(iv) when waiver is deemed to be “in the best interests of the program.” The application of this provision is left to the government’s discretion.xviii
Lastly, waiver is authorized by the Federal Claims Collection Act.xix This statute allows the government to compromise its lien where: a) the cost of collection does not justify the effort; b) the recipient cannot make repayment within a reasonable time; or c) the chances of successful litigation are questionable.xx
If a lien is not paid by the plaintiff or formally compromised, the federal government has a statutory right to seek reimbursement from the defendant’s liability insurance carrier, even if it has already paid the agreed upon settlement amount to the plaintiff.xxi
Similarly, the government may seek reimbursement from an attorney who has received funds from a liability settlement such as attorneys’ fees and litigation expenses.xxii If the government is forced to take legal action to enforce its right to reimbursement, it is entitled to double damages.xxiii
Medicaid and Medicare are not interchangeable and their rules governing reimbursement when a recipient recovers money from a liable third party are completely different. It is important to understand those rules before you resolve a claim by any such client.
In re Estate of Raduazo, 148 N.H. 687, 689 (2002) (citations omitted).
Id., 148 N.H. at 689-90 (citations omitted).
See R.S.A. 167:14-a, IV.
See R.S.A. 167:14-a, III-a.
See Martin v. City of Rochester, 642 N.W.2d 1 (Minn. 2002); Ahlborn v. Arkansas Department of Human Services, 397 F.3d 620 (8th Cir. 2005).
42 U.S.C. §1396p(a)(1).
See R.S.A. 167:14-a, IV.
Docket No. 01-C-023 (Coos County Superior Court).
See 42 U.S.C. §1395y(b)(2)(B)(i).
Available online at http://www.cms.hhs.gov/manuals.
See Medicare Intermediary Manual §3418.6(C).
See 42 C.F.R. §411.37(c); Medicare Intermediary Manual §3418.8.
20 C.F.R. §404.508.
See Medicare Intermediary Manual §3418.13.
See Medicare Intermediary Manual §3418.15.
31 U.S.C. §3711.
See Medicare Intermediary Manual §3418.16.
See 42 C.F.R. 411.24(i); Medicare Intermediary Manual §3418.21.
See 42 C.F.R. 411.24(g).
See 42 U.S.C. §1395y(b)(2)(B)(ii).