Understanding the Relationship Between Medicare and Medicaid Liens and Litigation

Behind many personal injury and professional malpractice cases lurks a nagging reality that will almost always impact settlement negotiations – a Medicare or Medicaid lien. In general, a lien is a security interest granted over property to enforce payment of a debt. This article addresses the general difference between Medicare and Medicaid, and discusses how counsel should account for Medicare and Medicaid liens when negotiating clients’ tort recoveries. Finally, this article highlights a recent state court decision that involved preemption issues and the intersection of federal Medicaid anti-lien laws and Florida’s statutory formula for calculating Medicaid liens in tort recovery cases.

Generally, what is the difference between Medicare and Medicaid assistance?

Medicare is a federally funded health insurance program available to individuals ages 65 and over, individuals under age 65 with certain disabilities and individuals of all ages with a diagnosis of End-Stage Renal Disease.

Medicaid is a federally and state funded health insurance program with eligibility based upon an individual’s income. Commonly, Medicaid recipients are children (and families of eligible children), pregnant women, the elderly and individuals with disabilities. Factors affecting the amount of coverage received include, but are not limited to, income, household size and the applicant’s State of residency’s discretion in expanding the State’s Medicaid program.

Where does the lien come from?

At some point during the medical care related to an injury that is the underlying cause of pending litigation, a Plaintiff may receive medical benefits through the Medicare and/or Medicaid programs. In cases where the Plaintiff received such benefits, States and the federal government may attach a lien on the property of the Plaintiff-beneficiary to recover benefits paid by the government on the beneficiary's behalf. The Centers for Medicare and Medicaid Services (CMS) track and enforce these liens, as they are entitled to full reimbursement of medical benefits paid where settlements have been awarded. CMS is a government agency whose stated goals are to provide Americans with access to medical coverage, quality care and improved health. CMS is not responsible for notifying Plaintiff of an existing lien; rather, Plaintiff through counsel must put CMS on notice of pending litigation and any resulting settlement in order to avoid penalties for failure to satisfy a lien.

As a litigator, how do I deal with these liens?

The answer is a bit trickier for Plaintiff than for Defendant. Plaintiff bears the burden of satisfying these liens, either by paying them off with a chunk of the settlement check or through detailed negotiations between Plaintiff’s counsel and CMS to reduce and/or “forgive” the lien.

As defense counsel, it is imperative to request all outstanding lien information early in the litigation process and to follow-up with Plaintiff’s counsel to ensure the Plaintiff has provided the most up-to-date information before entering settlement negotiations. It is not uncommon to hear a Plaintiff argue that he/she “needs more money” to account for and satisfy his/her Medicare or Medicaid liens. It is important to recognize that such liens will impact settlement discussions and to remind clients to consider this fact when engaging in settlement discussions with a Plaintiff.

Medicaid Liens in the News

On July 28, 2014, the Florida’s First District Court of Appeal reversed a lower Court’s ruling favoring the Agency for Health Care Administration (AHCA) in a dispute with Joy D. Harrell and Greg A. Harrell over a Medicaid lien related to medical expenses incurred in relation to their daughter’s care¹. Due to oxygen deprivation during birth in 2002, the Harrell’s daughter was born with cerebral palsy, mental retardation and quadriplegia. The family eventually settled a lawsuit with the hospital for damages related to their daughter’s birth. After settlement, AHCA (the agency primarily responsible for Florida’s Medicaid program) asserted that it was entitled to full recovery of an outstanding $360,741 Medicaid lien it had against the Harrell’s daughter.

The Harrell’s argued that the lien asserted by AHCA pursuant to Florida’s statutory formula² for calculating Medicaid liens was unenforceable both because the lien exceeded the amount the Harrell’s received in settlement and because the statutory formula itself was preempted by the federal Medicaid anti-lien laws³. The District Court fell in line with the Supreme Court’s recent decision in Wos v. E.M.A. and reversed the lower court’s decision that upheld AHCA’s Medicaid lien. Specifically, the District Court held that Florida’s statutory formula for calculating Medicaid liens is preempted by federal Medicaid law because the State law does not allow plaintiffs to prove that the lien amount exceeds the amount recovered for medical expenses. The District Court remanded the case to the trial court for consideration of the Harrell’s evidence to support their position for reduction of the lien.