Medicaid TPL Rights Postponed

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.’’.

 

FEHBP Plans Not Subject to State Laws

FEHBP Plans Not Subject to State Laws

Coventry Health Care of Missouri, Inc. v. Nevils

April 18, 2017

  • S. Sup. Ct.
  • 16–149

The U.S. Supreme Court ruled yesterday that Contractual subrogation and reimbursement rights of federal employees’ private health insurance carriers override state laws barring subrogation and reimbursement (Ginsburg, J.) In a unanimous decision, the Court reviewed the Federal statute creating the Federal Employees Health Benefit Program (FEHBP) and held that

  1. Because contractual subrogation and reimbursement prescriptions plainly “relate to . . . payments with respect to benefits,” §8902(m)(1), they override state laws barring subrogation and reimbursement. Pp. 6–9.

5 U. S. C. §8902(a), (d). FEHBA contains an express-preemption provision, §8902(m)(1), which states that the “terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law . . . which relates to health insurance or plans.”

 

In this case Nevils is a former federal employee who enrolled in and was insured under a FEHBA plan offered by petitioner Coventry Health Care of Missouri.1 Nevils v. Group Health Plan, Inc., 418 S. W. 3d 451, 453 (Mo. 2014) (Nevils I ). When Nevils was injured in an automobile accident, Coventry paid the medical expenses. Nevils sued the driver who caused his injuries and recovered a settlement award. Coventry asserted a lien for $6,592.24 against part of the settlement proceeds to cover medical bills it had paid. Nevils I, 418 S. W. 3d, at 453. Nevils repaid that amount, thereby satisfying the lien. Nevils then filed this class action against Coventry in Missouri state court, alleging that Coventry had unlawfully obtained reimbursement.  Nevils premised a claim on Missouri law, which does not permit subrogation or reimbursement in this context, Coventry asserted a lien for $6,592.24 against part of the settlement proceeds to cover medical bills it had paid. Nevils I, 418 S. W. 3d, at 453. Nevils repaid that amount, thereby satisfying the lien. Nevils then filed this class action against Coventry in Missouri state court, alleging that Coventry had unlawfully obtained reimbursement.   Coventry countered that §8902(m)(1) makes subrogation and reimbursement clauses in FEHBA contracts enforceable notwithstanding state law. The trial court granted summary judgment in Coventry’s favor, The Missouri Supreme Court reversed. Nevils I, 418 S. W. 3d, at 457. The Court granted certiorari, vacated the Missouri Supreme Court’s judgment, and remanded for further consideration in light of OPM’s recently adopted rule. Coventry Health Care of Mo., Inc. v. Nevils, 576 U. S. ___ (2015). On remand, the Missouri Supreme Court adhered to its earlier decision. Nevils v. Group Health Plan, Inc., 492 S. W. 3d 918, 920, 925 (2016) The Court granted certiorari to resolve conflicting interpretations of §8902(m)(1). 580 U. S. ___ (2016). Compare 492 S. W. 2d, at 925 (majority opinion), with Bell v. Blue Cross & Blue Shield of Okla., 823 F. 3d 1198, 1199 (CA8 2016)

Nevils contended that, if §8902(m)(1) covers subrogation and reimbursement clauses in OPM contracts, then the statute itself would violate the Supremacy Clause by assigning preemptive effect to the terms of a contract, not to the laws of the United States. The Court concluded, however, that the statute, not a contract, strips state law of its force. Without §8902(m)(1), there would be no preemption of state insurance law. FEHBA contract terms have preemptive force only as they “relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits),” §8902(m)(1)—i.e., when the contract terms fall within the statute’s preemptive scope. It is therefore the statute that “ensures that [FEHBA contract] terms will be uniformly enforceable nationwide, notwithstanding any state law relating to health insurance or plans.”

 

In its analysis the Court referred to the broad preemptive powers of ERISA as an analogy, the substantive difference being that ERISA does preempt State law, but not State insurance laws. Here the Court clearly stated that State Insurance laws in as far as they relate to FEHBP plans are Preempted by Sec. 8902(m)(1).

See the full case at:

https://www.supremecourt.gov/opinions/16pdf/16-149_6jfm.pdf