Ahlborn Legislatively Overruled

By Michael Laffey, October 17, 2016

October  1, 2017 Medicaid Third Party Liability roars back to life.

The U.S. Supreme Court on May 1, 2006 decided Arkansas Dep’t of Health & Human Services v. Ahlborn. That case has enabled Medicaid recipients to avoid repayment of substantial portions of Medicaid liens from Third Party recoveries for the past 10 years.   In catastrophic cases where there was limited coverage or limited liability Plaintiff attorneys have often argued that the recovery was only 10-20% of the amount the case was worth, courts in the Medicaid arena have been forced to determine the value of the Medicaid claims as compared with the value of all claims in the case.  This Case was legislatively trumped on December 26, 2013, by the Bipartisan Budget Act of 2013. Section 202 entitled “Strengthening Medicaid Third-Party Liability. The effective date of this law however was extended in 2014 by HR 4303 The ‘‘Protecting Access to Medicare Act of 2014’’ which extended the effective date of Section 202 of the Bipartisan Budget act from October 1, 2014 to October 1, 2016. Medicaid effective October 1, 2017 will be statutorily ( depending upon your state Medicaid Statute) entitled to recover from any recovery, not just the portion of the settlement that may be arguably related to medicals.


In it’s slip opinion released May 1, 2006, the U.S. Supreme Court reasoned: There is no question that the State can require an assignment of the right, or chose in action, to receive payments for medical care. So much is expressly provided for by §§1396a(a)(25) and 1396k(a). And we assume, as do the parties, that the State can also demand as a condition of Medicaid eligibility that the recipient “assign” in advance any payments that may constitute reimbursement for medical costs. To the extent that the forced assignment is expressly authorized by the terms of §§ 1396a(a)(25) and 1396k(a), it is an exception to the anti-lien provision. See Washington State Dept. of Social and Health Servs. v. Guardianship Estate of Keffeler, 537 U.S. 371, 383–385, and n. 7 (2003). But that does not mean that the State can force an assignment of, or place a lien on, any other portion of Ahlborn’s property. As explained above, the exception carved out by §§ 1396a(a)(25) and 1396k(a) is limited to payments for medical care. Beyond that, the anti-lien provision applies.”


The Bipartisan Budget Act of 2013. Section 202 stated that:

SEC. 202. STRENGTHENING MEDICAID THIRD-PARTY LIABILITY. (a) PAYMENT FOR PRENATAL AND PREVENTIVE PEDIATRIC CARE AND IN CASES INVOLVING MEDICAL SUPPORT.—Section 1902(a)(25) of the Social Security Act (42 U.S.C. 1396a(a)(25)) is amended—(b) RECOVERY OF MEDICAID EXPENDITURES FROM BENEFICIARY LIABILITY SETTLEMENTS.— (1) STATE PLAN REQUIREMENTS.—Section 1902(a)(25) of the Social Security Act (42 U.S.C. 1396a(a)(25)) is amended— (A) in subparagraph (B), by striking ‘‘to the extent of such legal liability’’; and (B) in subparagraph (H), by striking ‘‘payment by any other party for such health care items or services’’ and inserting ‘‘any payments by such third party’’. (2) ASSIGNMENT OF RIGHTS OF PAYMENT.—Section 1912(a)(1)(A) of such Act (42 U.S.C. 1396k(a)(1)(A)) is amended by striking ‘‘payment for medical care from any third party’’ and inserting ‘‘any payment from a third party that has a legal liability to pay for care and services available under the plan’’. (3) LIENS.—Section 1917(a)(1)(A) of such Act (42 U.S.C. 1396p(a)(1)(A)) is amended to read as follows: ‘‘(A) pursuant to— ‘‘(i) the judgment of a court on account of benefits incorrectly paid on behalf of such individual, or ‘‘(ii) rights acquired by or assigned to the State in accordance with section 1902(a)(25)(H) or section 1912(a)(1)(A), or’’. (c) EFFECTIVE DATE.—The amendments made by this section shall take effect on October 1, 2014.

The effective date however has been delayed again until October 1, 2017 by the  MEDICARE ACCESS AND CHIP REAUTHORIZATION ACT OF 2015, 114 P.L. 10 , enacted April 16, 2015 which provided:


Section 202(c) of the Bipartisan Budget Act of 2013 (division A of Public Law 113-67; 42 U.S.C. 1396a note), as amended by section 211 of the Protecting Access to Medicare Act of 2014 (Public Law 113-93; 128 Stat. 1047) is amended by striking “October 1, 2016” and inserting “October 1, 2017”.


Medicaid effective October 1, 2017 will have a right to recover from ANY settlement, NOT just those allocated for medical expenses.