Implications of Changes to the Medicaid-Third Party Liability Statute for Tort Plaintiffs

After a life-altering event, a victim's focus is generally on recovery and restoring the quality of life before a car accident or a surgeon's malpractice. However, medical bills can quickly escalate into hundreds of thousands of dollars and a settlement or judgment is critical for victims to repay healthcare costs. Rather than alleviate financial burdens on those covered by federal healthcare programs, Congress has recently enacted statutory amendments that will have the effect of preventing plaintiffs from obtaining recoveries until they have reimbursed Medicaid and Medicare. Specifically, a private tort plaintiff can be forced to repay the government in full for all medical expenses before receiving any portion of a tort recovery.

Medicaid-Third Party Liability Statute

Currently, under the Medicaid-Third Party Liability statute, Medicaid is generally the payer of last resort for a recipient's medical costs. This statute ensures that if there is another primary payer with responsibility for a medical bill, that other payer is billed first, before Medicaid. For example, if a Medicaid recipient is hit by a car, becomes injured and requires hospital stays and physical therapy, the insurance held by the driver of the car would be considered the primary payer before Medicaid would be ultimately responsible for any medical bills. However, changes to the Medicaid-Third Party Liability Statute substantially alter this process, negatively impacting plaintiffs.

Specifically, the new law overturns a Supreme Court decision, United States vs. Ahlborn, 547 U.S. 268 (2006), where Medicaid was limited in what it could recover from a settlement or judgment to the amount awarded for medical care. Ahlborn held that a successful tort plaintiff can be forced to reimburse federal healthcare programs for tort-related medical expenses only in proportion to the judgment or settlement representing payment for medical expenses. For example, if the damages attributed to medical expenses is fifty percent and a plaintiff settles for $500,000, the government can obtain a lien for no more than $250,000.

Unfortunately, under the new law, Medicaid can claim all of a settlement up to the amount spent by Medicaid for reimbursement. The result is that plaintiffs who are Medicaid recipients--an already financially vulnerable population--will recover less and in many cases, will be unable to pursue claims at all because any recovery would be subject to reimbursement to Medicaid. Moreover, even in cases where a judgment is for a larger amount, plaintiffs will recover less money overall because Medicaid will be owed a higher reimbursement amount. Ironically, the government also suffers under this change. Whereas previously Medicaid would receive some compensation from a settlement, after the new law, there may no longer be any settlement funds from which Medicaid can draw upon since victims will be disinclined to bring suit at all.

Reach Out to Our Attorneys

At The Pittman Firm, we have counseled clients through hundreds of settlements where financial obligations to Medicaid was a consideration. Because each case is different, call us today to schedule a consultation and ensure that you satisfy all of the requirements under the Medicaid-Third Party Liability statute while still being able to obtain appropriate compensation from the parties responsible for your injuries.

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