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ElderLaw News

ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C., William S. Fralin, Esq., President.

Medicaid's Rights of Recovery in Personal Injury Cases

The United States District Court for the District of Colorado recently decided a case that could have an impact on personal injury settlements and awards.

In this case, the court found that the state Medicaid agency may obtain recovery from not only the settlement proceeds allocated to the cost of the beneficiary’s future medical care, but also from proceeds allocated to future care.

In Perez v. Henneberry (D. Colo., No. 09-cv-01681-WJM-MEH, April 26, 2011), the plaintiff, Isabelle Perez, was a minor who suffered a brain injury at birth and, as a result, is permanently disabled. She had been receiving Medicaid benefits since birth, and as of April 24, 2009, these benefits totaled $836,673.71. Perez, through her mother, filed a medical malpractice suit against the doctor and the hospital. The suit against the doctor was settled for an undisclosed amount, but resulted in the state being paid $100,000 from the settlement proceeds for care provided to Perez before the settlement. Perez later reached a confidential settlement with the hospital, and, pursuant to Colorado’s recovery statute, the state placed a lien upon the settlement proceeds for the remaining $736,673.71.

Perez then filed suit against the state in federal court seeking a declaration that Colorado’s Medical Assistance Act lien provisions are inconsistent with the anti-lien provisions of the Medicaid Act, and that Colorado could only recover amounts from the settlement for past medical damages, apportioned in accordance with Arkansas Dep’t. of Health & Human Services v. Ahlborn, 547 U.S. 268 (2006). Colorado argued that Ahlborn did not prevent it from asserting a claim against the portion of the settlement allocated towards future medical care as well as past medical care.

The court compared Ahlborn to this case, noting that in Ahlborn the parties stipulated as to what portion of the damages represented compensation for medical costs, whereas in this case, no such stipulation existed and no allocation occurred. The court rejected Perez’s position that the court should therefore adopt the Ahlborn formula to determine what portion of the settlement to which Colorado should be entitled. The court found that the Ahlborn formula was strictly a product of the parties’ stipulation, and in the absence of a similar stipulation in this case, the court would not dictate how the parties should allocate the proceeds in the settlement.

The court then analyzed the issue of the past versus future medical care costs, noting that while it is true that Colorado may only be reimbursed for its past medical expenses, Ahlborn does not require that, in seeking this reimbursement, Colorado is limited to funds allocated to past medical expenses. The court noted that the Ahlborn court made no such distinction, instead stating only “that the federal third-party liability provisions require an assignment of no more than the right to recover that portion of a settlement that represents payments for medical care.”

In granting the defendant’s motion for summary judgment, the court concluded that:

“Colorado’s Medicaid lien statute is not invalid, i.e., it is consistent with the federal Medicaid statute’s anti-lien provisions as interpreted by the Supreme Court in Ahlborn, and

“[T]he Department can seek reimbursement from that portion of Plaintiff’s settlement proceeds that represents medical expenses – past and future – up to the total amount it spent on Plaintiff’s behalf.…” The court ordered the case to continue to trial to determine what portion of the plaintiff’s settlement represents those medical expenses.

It is unknown at this time whether this decision will be upheld if appealed. The court in Perez v. Henneberry, however, has provided an argument that, if successful, could permit Medicaid to recover from a larger pool of settlement funds than previously thought possible. The Estate Planning & Elder Law Firm will continue to monitor developments in this case and report on them in future issues of ElderLaw News.

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