Category Archives: Subrogation

Ahlborn is Resurrected: Medicaid Subrogation Again Limited to Settlement Funds Attributable to Medical Costs

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Ahlborn has been brought back to life by Congress. The Bipartisan Budget Act (BBA) of 2018, just passed by Congress and signed into law by the President on February 9th, permanently repeals a provision from 2013 that would have allowed states to recover medical expense subrogation claims from any portion of a Medicaid beneficiary’s legal settlement. In other words, the law contains an outright repeal of language from an earlier budget bill that had overturned a Supreme Court decision in Arkansas Department of Health and Human Services et al. v. Ahlborn, 547 U.S. 268 (2006).

In Ahlborn, the Supreme Court held that Medicaid could only seek reimbursement from Medicaid enrollees injured by a third party from the portion of a settlement attributable to medical costs. The Ahlborn decision was universally lauded as promoting fair and proportionate settlements for Medicaid recipients. But, in 2013, the BBA included a provision overturning Ahlborn. This granted Medicaid a right of first recovery for full reimbursement of covered medical costs before plaintiffs could receive any recovery for lost wages, non-economic damages, or any other type of recovery. That was not fair, and sometimes gave Medicaid recipients little incentive to even seek recovery of damages from a third party.

Implementation of the 2013 language was delayed for several years, thanks primarily to lobbying by the American Association for Justice. The second and final delay expired on October 1, 2017, effectively overturning Ahlborn. However, repeal of the overturn was finally secured as part of the budget deal recently reached by the House and Senate.  From this point forward, states cannot take more than their fair share of a Medicaid recipient’s legal settlement in a tort case, but they can be reimbursed from the portion of any settlement attributable to medical costs.

The 2018 BBA also extends third party liability requirements to CHIP benefits (Children’s Health Insurance Program) for the first time, however. So as we see states implementing the new provisions of the law, reimbursement for CHIP benefits may also have to be considered when settling a case involving a client eligible for CHIP.

ERISA Plan Ordered to Pay Penalties for Not Providing Documents to Plaintiff

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In Hartman v. Dana Holding Corp., (N.D. IN, 10/21/13) 1:12-CV-445, the court assessed penalties of $4,470 against an ERISA plan for refusing to provide historical documents requested by the plaintiff. The applicable documents related to the deceased’s “survivor annuity” and were in effect 1979. The ERISA plan refused to comply with plaintiff’s request on the basis that part of the language of 29 U.S.C. 1024(b)(4) encompasses “latest updated summary, summary plan description, and the latest annual report.” But, the court rejected that argument stating,

But § 1024(b)(4) also requires that a plan administrator furnish “other instruments under which the plan was established or operated.”

And also stating,

Here, the 1979 Plan document and SPD are critical to Mrs. Hartman’s understanding of her rights and eligibility. These documents control not only whether the Plan required spousal consent to elect against a survivor annuity in 1979, but also what fiduciary duties the Plan owed to Mr. Hartman before he made his election.

ERISA plans are often difficult to deal with, so it is important to put them on the defensive by requesting plan documents when the plan asserts a subrogaton or reimbursement claim in a personal injury case by requesting all documents within the scope of 29 U.S.C. 1024(b)(4), which provides:

“The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. The administrator may make a reasonable charge to cover the cost of furnishing such complete copies.”

Supreme Court Rules on Reimbursement Rights by ERISA Plans

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U.S. Airways, Inc. v McCutchen, ____ U.S. ____ (4/16/13) holds that in an ERISA action under §502(a)(3) by the plan administrators to obtain “appropriate equitable relief . . . to enforce . . . the terms of the plan,” the plan’s terms govern and override any doctrines designed to prevent unjust enrichment.  The plan paid $66,866 in medical expenses to McCutchen due to a car wreck.  A settlement of $110,000 was reached and McCutchen received $66,000 after attorneys’ fees were deducted.  The plan sued and demanded reimbursement of the entire $66,866 it had paid on McCutchen’s behalf.  The Supreme Court held that the plan could obtain the funds its beneficiary had promised to turn over under the terms of the plan.  However, the Court also held that while equitable rules would not trump a reimbursement provision in the ERISA plan, they may aid in properly construing it, and as to allocation of attorneys’ fees this particular plan was silent.  This plan did not address cost of recovery, so the Court applied the common fund doctrine, which governs in the absence of a contrary agreement.  The Court pointed out that without the common fund rule, the insurer would get a free ride on the beneficiary’s efforts, and the beneficiary, as in this case, could be made worse off by having procured a recovery from a third party.  This decision leave the door open for appropriate allocation of attorneys’ fees and litigation costs when an ERISA plan seeks reimbursement from its beneficiary, but it does little to benefit the injured beneficiary. 

 For the complete opinion, click here.

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