New Law Reverses Case Where U.S. Supreme Court Restricted Medicaid’s Right to Put a Lien Against Personal Injury Settlement

New Law Reverses Case where U.S. Supreme Court Restricted Medicaid's Right to Put a Lien Against Personal Injury Settlement

By Scott Koldin

In a Blog we published on April 26, 2013, we wrote:

"When someone receiving Medicaid settles or wins a personal injury lawsuit, a portion of the award is for medical expenses and usually there is a portion for pain and suffering along with possible punitive damages.

The U.S. Supreme Court in a case decided a few years ago held that the Medicaid Agency has the right to be reimbursed for expenses it paid on the injured person, but solely from the portion of the award allocated to medical expenses. Any funds remaining after the Medicaid reimbursement has been satisfied can be transferred to a Supplemental Needs Trust.

A Supplemental Needs Trust allows the injured person to remain covered by Medicaid and the funds in the Trust can be used to pay for any expenses not covered by Medicaid so that the quality of life of the injured person can be enhanced.

The State of North Carolina had a statute that made one-third of all personal injury awards automatically be deemed to be for medical expenses and recoverable by Medicaid for expenses it paid out. In a recent case, the U.S. Supreme Court struck down this statute and held that each case is unique and there must either be an agreement among the parties or a judicial determination of the portion of the injury award that is to be allocated for reimbursement of medical expenses.

These two Supreme Court cases show that it is critical that parties to a personal injury case where Medicaid is involved need to be mindful that the Medicaid Agency is entitled to reimbursement from the medical portion of the settlement award and therefore when negotiating a settlement, there should be discussion on how the settlement is to be allocated between medical and pain and suffering and also there should be a discussion on the advisability of establishing a Supplemental Needs Trust.

The Koldin Law Center, P.C. has been retained by many personal injury attorneys to prepare Supplemental Needs Trusts for their clients."

The law has now changed and reversed all of the above.

OLD LAW:

In a case decided a few years ago, the U.S. Supreme Court held that the Medicaid Agency has the right to be reimbursed for expenses it paid on the injured person, but solely from the portion of the personal injury lawsuit award allocated to medical expenses. Funds allocated to pain and suffering or lost wages could be retained by the injured person. Any funds remaining after the Medicaid reimbursement had been satisfied could then be transferred to a "First Party Supplemental Needs Trust."

NEW LAW:

In the recent federal budget agreement under the Bipartisan Budget Act of 2013 enacted by Congress and signed by the President, the U.S. Supreme Court restriction on Medicaid recovery being limited solely from the portion of the award allocated to medical expenses has been reversed.

Now, originally effective October 1, 2014, but now delayed by Congress for 2 years for an opportunity for comments to be submitted, the Medicaid Agency will be entitled to be reimbursed from the entire personal injury award. This means that if the Medicaid Agency has spent more on medical care than the amount of the personal injury award, the Medicaid Agency will be entitled to collect the entire award and the injured person will receive nothing.

We encourage all of our readers to contact their Congressperson or Senator and urge them to repeal this legislation.

It is critical that parties to a personal injury case where Medicaid is involved need to be mindful that the Medicaid Agency is entitled to reimbursement from the entire settlement award and therefore when negotiating a settlement, the Medicaid Agency should be consulted to negotiate the amount of the recovery it will seek. Sometimes, to encourage settlements and in the interest of fairness, the Medicaid Agency may accept a lower recovery amount.

Once the settlement has been negotiated, there should then be a discussion on the advisability of establishing a First Party Supplemental Needs Trust to hold the funds.

The Koldin Law Center, P.C., is available to review your options regarding establishing a Supplemental Needs Trust. We have been retained by many personal injury attorneys to prepare Supplemental Needs Trusts for their clients.

To review your options in light of the new law regarding Medicaid, contact us.