Arkansas Department of Health and Human Services v. Ahlborn
In Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), Heidi Ahlborn sustained serious and permanent injuries in a car accident. The Arkansas Department of Health and Human Services (ADHS) paid out $ 215,645.30 to health care providers on her behalf. (Ahlborn, supra, 547 U.S. at pp. 272-273.)
Ahlborn filed suit against third party tortfeasors for causing her injuries, claiming past medical expenses, pain and suffering, loss of future earnings, and future medical care. The case was settled out of court for $ 550,000, which was not allocated between categories of damages. ADHS did not participate or ask to participate in the settlement negotiations. (Ahlborn, supra, 547 U.S. at pp. 273-274.)
ADHS intervened in the suit, asserting a lien against the settlement proceeds for the full amount it paid for Ahlborn's care. The parties stipulated that Ahlborn's case was reasonably valued at $ 3,040,708.12 and that the settlement of $ 550,000 amounted to approximately one-sixth of that sum. Ahlborn filed a declaratory relief action in the district court, seeking a declaration that ADHS's lien violated federal Medicaid laws since its satisfaction would require depletion of compensation for injuries other than past medical expenses. (Ahlborn, supra, 547 U.S. at p. 274.)
The district court held that under Arkansas law, which it concluded did not conflict with federal law, Ahlborn had assigned to ADHS her right to any recovery from the third party tortfeasors to the full extent of Medicaid's payments for her benefit. Therefore, the court reasoned, ADHS was entitled to a lien of $ 215,645.30. (Ahlborn, supra, 547 U.S. at p. 274.)
The Eighth Circuit Court of Appeals reversed, ruling ADHS was entitled to only that portion of the judgment that represented payment for medical care. The United States Supreme Court affirmed. (Ahlborn, supra, 547 U.S. at p. 275.)
The Supreme Court reviewed federal Medicaid law and determined that ADHS's recovery for benefits could not exceed the portion of the settlement representing payments for medical care. In determining the portion of Ahlborn's settlement attributable to medical expenses, the Court stated: "Here, the tortfeasor has accepted liability for only one-sixth of the recipient's overall damages, and ADHS has stipulated that only $ 35,581.47 of that sum represents compensation for medical expenses. Under the circumstances, the relevant 'liability' extends no further than that amount." (Ahlborn, supra, 547 U.S. at pp. 280-281.) The court further found: "The effect of the stipulation is the same as if a trial judge had found that Ahlborn's damages amounted to $ 3,040,708.12 (of which $ 215,645.30 were for medical expenses), but because of her contributory negligence, she could only recover one-sixth of those damages." (Id. at p. 280, fn. 10.)
Although the court recognized that its interpretation of federal law created a potential for "settlement manipulation," in view of the stipulations in the record it declined to address the issue. (Ahlborn, supra, 547 U.S. at p. 288.) However, the court also noted: "Even in the absence of such a postsettlement agreement, . . . the risk that parties to a tort suit will allocate away the State's interest can be avoided either by obtaining the State's advance agreement to an allocation or, if necessary, by submitting the matter to a court for decision." (Ibid.) The Supreme Court held that when a Medicaid recipient settles with a tortfeasor for an amount less than her full damages, Medicaid's share of the settlement may not exceed the portion of the settlement that represents medical expenses. 547 U.S. at 280.
The Medicaid recipient in Ahlborn incurred damages of about $3,040,000, but settled with the tortfeasor for $550,000. Id. at 269, 274.
The Arkansas Department of Health and Human Services stipulated that the settlement included only $35,581 attributable to past medical expenses, but asserted a lien for $215,645, the amount it had paid for the victim's medical care. Id. at 274, 280-81.
The Supreme Court concluded that the state plan could not recover more than the portion of the settlement representing payments for medical care. Id. at 280-81.
Thus, it limited the state's recovery to the portion of the settlement attributable to past medical expenses, $35,581. Id.
The stipulation in Ahlborn resulted in the equivalency that the superior court applied in these cases: The plaintiff settled her case for roughly one-sixth of her full damages, and the state Medicaid plan was reimbursed for roughly one-sixth of what it had paid for her care. 547 U.S. at 269, 274, 281.
In Ahlborn the issue was whether the state Medicaid plan could recover the entirety of its lien against the victim's settlement, and the parties stipulated to the amount the state would recover if the Court ruled against the state. Id. at 280-81.