In 2006 the United States Supreme Court decided Ahlborn v. Arkansas 547 U.S. 268 (2006). There, the Court in interpreting Medicaid’s long standing statutory rights of recovery held that from an unallocated third party settlements, Medicaid was only entitled to recover that portion of an unallocated settlement that represented past medicals. Thus extinguishing Medicaid’s long standing, automatic right to first dollar and full recovery. This ruling has caused an allocation to be required in almost every Medicaid Third party case. Medicaid’s statutory lien now no longer automatically attaches to the entirety of every settlement.
The aftermath of Ahlborn has resulted in a significant drop in Medicaid tort recoveries to the Medicaid system. Plaintiff attorneys instead of being obligated to reimburse Medicaid are now obligated to advocate favorable allocations for their clients. This has caused huge disputes and potential abuses where settlements are made either without recognizing medical losses or where allocations are made which force Medicaid to continue paying claims while large portions of settlements are allocated to other non-economic damages.
The general thought being that since Medicaid as an entitlement program funded by taxpayers, if there was a settlement payable by a liable third party, any settlement recoveries should first reimburse Medicaid, thus lowering the burden on Medicaid and taxpayers.
In the Bipartisan Budget Act of 2013, President Obama amended portions of the States obligations regarding Medical Assistance (42 U.S.C. 1396a) to clarify the pre Ahlborn interpretation of the law that Medicaid should be entitled to a first recovery from any responsible third party and from any and all third party monies available as a result of a liability settlement. The clarifying amendments were supposed to take effect on October 1, 2015 , that effective date was later delayed 2 years until October 1, 2017.
On February 9, 2018 President Trump signed the Balanced Budget Act of 2018 and on page 599 enacted a third postponement until October 1, 2019. ( see Act below)
Hopefully in the next 8 months congress will do the fiscally responsible thing and allow Medicaid to return to its pre Ahlborn 2006 first dollar recovery rights.
The Budget Act provided:
SEC. 53102. THIRD PARTY LIABILITY IN MEDICAID AND
16 CHIP.
17 (a) MODIFICATION OF THIRD PARTY LIABILITY RULES
18 RELATED TO SPECIAL TREATMENT OF CERTAIN TYPES OF
19 CARE AND PAYMENTS.— …..
(b) DELAY IN EFFECTIVE DATE AND REPEAL OF CER5
TAIN BIPARTISAN BUDGET ACT OF 2013 AMENDMENTS.—
6 (1) REPEAL.—Effective as of September 30,
7 2017, subsection (b) of section 202 of the Bipartisan
8 Budget Act of 2013 (Public Law 113–67; 127 Stat.
9 1177; 42 U.S.C. 1396a note) (including any amend10
ments made by such subsection) is repealed and the
11 provisions amended by such subsection shall be ap12
plied and administered as if such amendments had
13 never been enacted.
14 (2) DELAY IN EFFECTIVE DATE.—Subsection (c)
15 of section 202 of the Bipartisan Budget Act of 2013
16 (Public Law 113–67; 127 Stat. 1177; 42 U.S.C.
17 1396a note) is amended to read as follows:
18 ‘‘(c) EFFECTIVE DATE.—The amendments made by
19 subsection (a) shall take effect on October 1, 2019.’’.