Buried in the recent budget compromise in Washington is legislation that changes the way state Medicaid agencies can recover Medicaid benefits from the proceeds of personal injury settlements and awards. The legislation overrules two prominent United States Supreme Court cases that had limited the rights of states to recover from the proceeds of personal injury cases.
When someone is injured in an accident, the Medicaid system will often pay for hospitalization and medical care of the injured. The costs from some accidents can be astronomical, easily reaching six and sometimes seven figures. After the accident, the injured can receive financial settlements or awards from insurance or the parties responsible for the accident. State Medicaid agencies have the legal right to recover Medicaid benefits paid to the injured from the proceeds from any settlement or award.
When personal injury proceeds are given to the injured, they are categorized as either reimbursement for medical expenses or for pain and suffering associated with the accident. In two recent United States Supreme Court cases, the Court ruled that the states recovery from the personal injury proceeds was limited to the portion allocated for medical expenses, not the pain and suffering. Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006) and Wos v. E.M.A., 568 U.S. 2 ___ (2013). These rulings drastically limited the amount of the state’s recovery, as the medical expenses portion of any settlement or award is typically a smaller percentage of the proceeds.
Congress has now amended the law pertaining to Medicaid liens, setting forth that the states are not limited to the medical expenses portion of the personal injury proceeds and can recover against all of the settlement or award. Section 202(b) of the Bipartisan Budget Act of 2013. This new provision has the effect of reducing the amount of any settlement or damage that the injured party will receive after the lien has been paid. Consequently, there will be less available to pay for the injured party’s future care and living expenses. It will also make it more difficult for parties to settle cases where there is a large Medicaid lien that must be paid.