Arkansas Dept. of Health and Human Servs. v. Ahlborn
In Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268 (2006), the state agency provided Medicaid assistance of $ 215,645.30 for medical care arising from the injuries sustained by the Medicaid recipient in an automobile accident.
The Medicaid recipient, without the prior knowledge of the state agency, settled the tort action arising out of the accident for $ 550,000.
Although the terms of the settlement did not contain an allocation of damages between medical costs and other damages, such as lost or impaired earnings and pain and suffering, the state agency and the Medicaid recipient stipulated that $ 35,581.47, one sixth of the net settlement proceeds, should be allocated to past medical expenses. T
he state agency contended that it was entitled to a lien on the settlement in an amount equal to all of the Medicaid assistance provided, while the Medicaid recipient contended that the state agency's lien was limited to the stipulated portion of the settlement that was allocated to past medical expenses.
In Ahlborn (supra), the Court began its analysis by noting that, as a general rule, states have no right to recover from a Medicaid recipient for Medicaid assistance that was correctly paid.
Specifically, under the federal Medicaid law, states are prohibited from imposing liens "against the property of any individual prior to his death on account of medical assistance paid ... on his behalf under the State plan" (42 USC 1396p a 1).
Thus, the Court reasoned that the state agency could not prevail unless its claim was encompassed by one of the exceptions to the antilien provision of 1396p (a), as set forth in 1396p (b), or by an exception arising by implication from the provisions of 42 USC 1396k (a) (1) (A).
As none of the 1396p (b) exceptions to the antilien provision of 1396p (a) applied, the state agency could only base its right to a lien on 1396k (a) (1) (A), which requires the Medicaid recipient, as a condition of eligibility, to assign to the state agency "any rights ... to payment for medical care from any third party."
The Supreme Court ruled in favor of the Medicaid recipient, holding that because the 1396k (a) (1) (A) assignment covers only "payment for medical care," the provision had to be construed to limit the state agency's lien to the portion of the settlement proceeds that were allocated to past "medical care."
Consequently, the state agency had no lien on the portion of the settlement allocated to pain and suffering, loss of earnings, or other damages that did not arise from the medical care that Medicaid assistance paid on behalf of the plaintiff.