1. NASP 2008 Annual Conference Subro Goes Hollywood! SUBRO GOES HOLLYWOOD NASP 2008 Annual Conference

2. Subrogation Of A Medicaid Claim – What You Need To Know

3. Medicaid Overview Medicaid vs Medicare Medicaid – In general, health insurance for the indigent Medicare – In general, health insurance for the elderly or disabled

4. Federal / State Medicaid Roles Federal government (Centers for Medicare and Medicaid Services - CMS) establishes and enforces guidelines, rules, and regulations States enact State specific “State Plans” with corresponding Statutes and Regulations, and administer programs

5. Medicaid Payment Models Fee for Service Vs Managed Care Vs Dual Plans Fee for Service –States pay Medicaid claims directly to providers equivalent to being self-insured –State has subrogation rights Managed Care –State contracts with Managed Care Plans (MCP) to cover medical expenses of Medicaid recipients. –Depending on the State, the State may have subrogation rights to these expenses or the State may contract the subrogation rights to the MCP Some States have “Dual Plan” situations, where the State retains subrogation rights for certain services and the MCPs have subrogation rights for other services.

6. Medicaid Subrogation Overview Payer of Last Resort – all third party resources must be expended before Medicaid will pay for medical service. States must identify and pursue all legally liable third parties. –42 Code Federal Regulations § 433.138 –42 U.S.C. § 1396a(a)(25) Assignment of rights for Medicaid subrogation is mandatory. –42 U.S.C. § 1396a(a)(45), § 1396k

7. State Statutes Subrogation Items Subrogation / Assignment Notice Notice usually required prior to settlement Attorney Fees / Costs contribution Some statutes establish attorney fee and cost contributions, some are silent, others prohibit contribution. Settlement formulas Priority Reimbursement Co-operation

8. Common Law Subrogation Doctrines Applied to Medicaid Subrogation Made Whole Doctrine –Most court decision do not apply Made Whole Doctrine to Medicaid subrogation. Made Whole Doctrine is a common law equity principle based on general theory that Health Insurance plan can not subrogate until injured party has been made whole. Common Fund –Common law principle, most State Medicaid subrogation statutes specifically address attorney fees / expenses, thus overriding common law principles. Other Items –Balance Billing

9. Supreme Court Ahlborn Decision Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268, 126 S. Ct. 1752 (2006) Pre-Ahlborn –Medicaid agencies could make a claim against the full amount of a settlement. Post Ahlborn –Medicaid agencies can only make a claim against the “medical portion” of a settlement

10. Ahlborn Key Facts Heidi Ahlborn was a 19-year old college student who suffered severe and permanent brain damage as a result of an auto accident. Arkansas Medicaid program paid $215,645.30 Ahlborn sued and Arkansas intervened into the case.to assert a lien, but apparently not to pursue the defendants under its own statutory authority and did not seek to be involved in settlement negotiations. Case settled out of court for $550,000. Declaratory judgment suit filed in Federal Court over lien. Parties stipulated that Ahlborn’s damages were $3,040,708.18, and she recovered approximately one-six of that amount. Parties also stipulated that if Arkansas was limited to medical portion of award, that the State could get only $35,581.47. This is approximately, but not exactly, a pro-rata reduction based on the ratio of the award to total damages.

11. Supreme Court Decision Federal law requires Medicaid recipient to assign no more than the right to recover payment for medical care from a third party. The anti-lien provision of the Medicaid statute, 42 U.S.C. §1396p(a) prohibits States from recovering more than the medical portion. However, assignment under §1396k is an exception to the anti-lien provision. Explicitly rejects the argument that tort proceeds in the hands of a third party are not property of the recipient protected by the anti-lien provision. Equates the assignment with a lien on the tort proceeds. Duty to cooperate arises principally, if not exclusively, in proceedings initiated by the State to recover from third parties. Federal law does not authorize the State to demand reimbursement from portions of the settlement allocated or allocable to non-medical damages; instead, it gives the State a priority disbursement from the medical expenses portion alone

12. CMS Letter To States July 2006 States should be involved in the litigation and settlement process. States can pass laws that require mandatory joinder of a State when a Medicaid lien is at issue. The States can strengthen their laws regarding the duty of attorneys to notify and cooperate to include provisions which could render voidable any settlement of which the State was not notified and given an opportunity to present its recovery claim for medical assistance paid State can enact laws which give priority to the repayment of medical expenses, or only permit compromising a claim with the State’s consent State Medicaid agency may determine that it is not cost- effective to pursue its direct right of recovery against the potentially liable party. States should use the State plan process to adopt a threshold for determining whether to seek reimbursement.

13. Post Ahlborn Questions Does a Medicaid lien attach only to the portion of the medical award attributable to past medical expenses, or to the entire medical portion including future medicals? What are total medical damages? Total billed amount vs total paid amount. Is the ratio of the actual tort recovery to total damages controlling in determining the proportion of the State’s medical claim that is recoverable? Can a Medicaid recipient obtain a refund based on Ahlborn? Can a Medicaid recipient evade a Medicaid lien in its entirety by refusing to recover medical expenses? Can States enact laws giving medical expenses paid by Medicaid priority in the award of damages? How does Ahlborn affect Medicaid’s right of priority over ERISA plans, if ERISA plans are not subject to Ahlborn limitations?

14. POST-AHLBORN COURT DECISIONS Admin Coll vs. Salizar, 525 F.Supp.2d. 1103 –ERISA plans are not subject to Ahlborn limitations on recovery. Andrews vs Heygood, 655 S.E.2d 440. –Ahlborn does not apply in NC. Lugo vs Beth Israel, 819 N.Y.S. 2d 892 –Absent stipulations, Court was empowered to conduct a hearing to allocate the settlement proceeds.

15. Practical Guidelines Subrogation professionals with Medicaid recipient involved in personal injury case Be Proactive –Attorneys / Insurance adjusters with Medicaid recipient as client - Contact agency / entity responsible for subrogation claim early and often. –Attorneys / Insurance adjusters representing Medicaid plans – get involved prior to settlement.

16. Questions / Comments? Contact Information: Jon Hutcheson, Esq. VP Subrogation Services Hms, Inc 5615 High Point Drive Irving, TX 75038 Phone: 214-453-3040 Email: jhutcheson@hms.com