Arkansas Department of Human Services v. Ahlborn

In Arkansas Department of Human Services v. Ahlborn 547 U.S. 268, Heidi Ahlborn, a 19-year-old college student, suffered brain damage as the result of a car accident. (Id. at pp. 272-273.) Because her assets were insufficient to pay for her medical care, the Arkansas Department of Health and Human Services (ADHS) determined that she was eligible for Medicaid assistance and paid providers $ 215,645.30 on her behalf under Arkansas's Medicaid plan. (Id. at p. 273.) ADHS sent Ahlborn's attorney periodic letters advising him about Medicaid outlays and that ADHS had a claim for reimbursement from any settlement, judgment, or award that Ahlborn might obtain from a third party responsible for her injuries. (Ibid.) Ahlborn sued two alleged tortfeasors in state court seeking compensation for the injuries she suffered in the car accident. (Ahlborn, supra, 547 U.S. at p. 273.) In addition to seeking damages for past medical costs, Ahlborn sought damages for permanent physical injuries, future medical expenses, past and future pain and suffering, and past and future lost earnings. (Ibid.) ADHS intervened in Ahlborn's state court action to assert a lien on any proceeds recovered from the alleged third party tortfeasors. (Ahlborn, supra, 547 U.S. at p. 274.) The case eventually settled for $ 550,000, but the parties did not allocate the settlement between or among categories of damages. (Ibid.) ADHS did not participate in the settlement negotiations or seek to reopen the judgment after the case had been dismissed. (Ibid.) But ADHS continued to assert a lien against the settlement proceeds in the total amount of the cost it paid for Ahlborn's care--i.e., $ 215,645.30. (Ibid.) Ahlborn filed an action in the federal district court seeking a declaration that the lien violated federal Medicaid laws to the extent it sought recovery from compensation for injuries other than past medical expenses. (Ahlborn, supra, 547 U.S. at p. 274.) The parties stipulated that the value of Ahlborn's total claim was $ 3,040,708.12; that the settlement was approximately one-sixth of that total; and that the portion of the settlement allocable to past medical expenses was $ 35,581.47. (547 U.S. at p. 274.) The district court ruled that under Arkansas law, ADHS was entitled to recover the entire lien amount of $ 215,645.30. (Ibid.) The Court of Appeals, however, reversed, holding that ADHS was entitled to recover only that portion of the settlement that represented payments for medical care. (Id. at p. 275.) In a footnote, the significance of which the parties dispute, (see pp. 259-260, post), the court in Ahlborn, supra, 547 U.S. 268, observed that "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. 281, fn. 10.) "States are not required to participate in Medicaid, but all of them do. The program is a cooperative one; the Federal Government pays between 50% and 83% of the costs the State incurs for patient care, and, in return, the State pays its portion of the costs and complies with certain statutory requirements for making eligibility determinations, collecting and maintaining information, and administering the program. See 1396a. One such requirement is that the state agency in charge of Medicaid ... 'take all reasonable measures to ascertain the legal liability of third parties ... to pay for care and services available under the plan.' 1396a(a)(25)(A) (2000 ed.). The agency's obligation extends beyond mere identification, however; 'in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery, the State or local agency will seek reimbursement for such assistance to the extent of such legal liability.' 1396a(a)(25)(B)." (Ahlborn, supra, 547 U.S. at pp. 275-276.) "To facilitate its reimbursement from liable third parties, the State must, 'to the extent that payment has been made under the State plan for medical assistance in any case where a third party has a legal liability to make payment for such assistance, have in effect laws under which, to the extent that payment has been made under the State plan for medical assistance for health care items or services furnished to an individual, the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or services.' 1396a(a)(25)(H)." (Ahlborn, supra, 547 U.S. at p. 276.) "The obligation to enact assignment laws is reiterated in another provision of the SSA, which reads as follows: '(a) For the purpose of assisting in the collection of medical support payments and other payments for medical care owed to recipients of medical assistance under the State plan approved under this subchapter, a State plan for medical assistance shall--(1) provide that, as a condition of eligibility for medical assistance under the State plan to an individual who has the legal capacity to execute an assignment for himself, the individual is required--(A) to assign the State any rights ... to support (specified as support for the purpose of medical care by a court or administrative order) and to payment for medical care from any third party; (B) to cooperate with the State ... in obtaining support and payments (described in subparagraph (A)) for himself ... ; and (C) to cooperate with the State in identifying, and providing information to assist the State in pursuing, any third party who may be liable to pay for care and services available under the plan ... .' 1396k(a)." (Ahlborn, supra, 547 U.S. at pp. 276-277.) In Ahlborn, ADHS conceded that if a jury or a judge had allocated a specific sum for medical expenses, ADHS 'would be entitled to reimburse itself only from the portion so allocated.' (Ahlborn, supra, 547 U.S. at p. 282, fn. 12.) The court went on to find: 'Given the stipulation between ADHS and Ahlborn, there is no textual basis for treating the settlement here differently from a judge-allocated settlement or even a jury award; all such awards typically establish a third party's "liability" for both "payment for medical care" and other heads of damages.' (Ibid.)