Appellants received Medicaid benefits for injuries allegedly caused by the negligence of third parties. Appellants brought personal injury suits against the third parties. The suits settled. Medicaid liens were attached to the settlements, but the settlements did not have provisions for payment to satisfy the liens. The settlement proceeds instead went to cover Appellants' pain and suffering costs. The New York Supreme Court approved the transfer of the settlement funds to supplemental needs trusts for Appellants' benefit. The Appellate Division reversed the Supreme Court orders establishing the supplemental needs trusts, holding that all settlement proceeds are available to satisfy a Medicaid lien.
Whether all proceeds from a personal injury settlement, rather than the portion of the settlement specifically allocated to past medical expenses, are available to satisfy a Medicaid lien.
Yes. The entire amount of a personal injury settlement is available to satisfy a Medicaid lien since no statutory provision limits the right to recovery to the amount allocated to past medical expenses.
Social Services Law § 104-b allows the Department of Social Services ("DSS") to pursue reimbursement of Medicaid expenses. The Department may do so by placing a lien on personal injury suits brought by the recipient against a third party. See Social Services Law § 104-b. In Cricchio v. Pennisi, 90 N.Y.2d 296 (N.Y. 1997), the court held that before a Medicaid recipient transfers funds to a special needs trust, the DSS is entitled to satisfy a Medicaid lien placed on the proceeds of the personal injury suit.
Answering a question left open in Cricchio v. Pennisi, 90 N.Y.2d 296 (N.Y. 1997), the Court of Appeals held that the entire amount of a personal injury settlement, not just the portion of the settlement allocated to past medical expenses, is available to satisfy a Medicaid lien. The Court reasoned that federal law requires Medicaid recipients to cooperate with the State in its attempts to get reimbursement. In addition, no statutory provision restricts the right of recovery to past medical expenses. Therefore, all proceeds are available to satisfy Medicaid liens. The Court re-emphasized the holding in Costello v. Geiser, 85 N.Y.2d 103, 110 (N.Y. 1995) in which it held that the DSS could not impose a lien or subrogate a claim for more than the actual Medicaid benefits paid out, and that in the case of an award for personal injuries to a minor, the recovery by the DSS for Medicaid benefits is limited to those specifically allocated for medical expenses. The Court further noted that limiting the DSS's ability to meet its broad statutory requirement of reimbursement from third parties would jeopardize the goal that Medicaid be the payor of last resort.
In Calvanese the Court of Appeals answered the narrow question of what portions of personal injury settlements are subject to Medicaid liens. The opinion, however, makes no mention of how proceeds from court or jury awards are restricted by such liens. Another unaddressed issue is whether Medicaid liens can attach to a settlement to reimburse future costs from pre-existing conditions.
In addition, appellants argued that the Court's decision would discourage recipients from pursuing claims, and thus reduce Medicaid's possible recovery. The Court of Appeals dismissed this assertion because public welfare officials can address that problem by reducing or discharging a lien. The Court, however, fails to provide any guidelines on how those welfare officials might recognize or implement such controls.
The Court recognizes that the Department can directly sue the responsible third party, and that placing a lien on a personal injury suit settlement is an alternative to bringing its own action. Does this mean that the Department has the right to sue before a plaintiff? The Court's opinion obviates this enquiry to a large degree. Since the Department can satisfy its actual costs out of any part of a settlement, it can wait for Plaintiff to litigate and place a lien. The Department can also rely on the Plaintiff to seek an amount that at least covers the Department's cost since he or she only gets the excess from such a settlement.
Another question is what happens where the Medicaid recipient waives its right to sue and the Department brings an action against the responsible third party. Geiser held that it would be inequitable for the Department to recoup the additional public charge component of a medical assistance payment from a private citizen. In this scenario, however, there is no private citizen interest. As a practical matter, however, this issue is not likely to arise. The Department will likely seek only to recover actual costs as this may best facilitate quick settlement and avoid costly legal fees.
Jurisdictions are divided on the issue of whether all settlement proceeds are available to satisfy the state's medical assistance program lien.
Some states explicitly allow full recovery regardless of the intended allocation of the proceeds. In a case similar to Calvanese, a New Jersey court held that "a state may require a Medicaid lien imposed on the proceeds of a personal injury award or settlement to be satisfied before the remaining funds are placed in [a supplemental needs trust]." Waldman v. Candia, 722 A.2d 581, 586 (N.J. Super. Ct. App. Div. 1999). The court suggested that allowing the supplemental needs trust to shield tort recoveries would "render the state's right of recovery meaningless." Id. According to a Florida statute, a settlement agreement shall not impair the state department's rights of recovery under a Medicaid lien. See Fla. Stat. Ann. § 409.910(12)-(13) (West 1998 & Supp. 1999).
Illinois and Massachusetts have statutes that seemingly allow full recovery. An Illinois law provides that the state program "shall have the right to recover the benefits it paid from any amounts that the covered person has received or may receive." 215 Ill. Comp. Stat. 105/8(h)(1) (West 1993 & Supp. 1998). A Massachusetts law similarly provides that "[a]ny person receiving public assistance benefits . . . shall assign to the commonwealth an amount equal to the benefits so provided from the proceeds of any such claim against the third party." Mass. Ann. Laws ch. 118E, § 22 (Law. Co-op. 1994 & Supp. 1999).
Similarly, California statutes indicate that in actions brought by a beneficiary and the Director of Medi-Cal, "the court shall first apply out of the balance of the judgement or award an amount sufficient to reimburse the director the full amount of the reasonable value of benefits provided on behalf of the beneficiary under the Medi-Cal program." See Cal. Welf. & Inst. Code §§ 14124.72, 14124.74(b) (West 1991 & Supp. 1999), "but in no event shall the claim [of the director of social services] exceed one-half of the beneficiary's recovery after deducting for attorney's fees, litigation costs, and medical expenses relating to the injury paid for by the beneficiary." Cal. Welf. & Inst. Code § 14124.78.