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Supreme Court Looks at Medicaid Liens

Trying to successfully resolve clients’ medical liens has to be one of the most difficult challenges facing personal injury lawyers in large cases. I have had many cases where the hardest part of the case was not getting the settlement or verdict’ but getting the medical liens resolved. It also can be most frustrating because while defense lawyers take a lot of crazy positions in our cases, the threat of an eventual trial usually allows logic and reason to surface. In dealing with medical lien holders, logic and reason and even their own economic interest are rarely prominent players in the mix.

Most of these frustrations are shared only among plaintiffs’ lawyers and their clients while the rest of the world worries about their own problems. Which is why I have enjoyed watching the U.S. Supreme Court wrestle with these issues in Delia v. E.M.A.

At the center of this tragedy sits an oblivious twelve year old girl who lives – peacefully, I pray – in Taylorsville, North Carolina. As a result of medical malpractice during delivery by a doctor who had a history of drug abuse, and surrendered his North Carolina medical license, she has severe mental retardation and suffers from a seizure disorder. She is deaf, blind, unable to sit, walk, crawl or talk.

[Brief intermission: You know, I'm writing about this case because these lien issues impact a lot of people. This matters to people who are really suffering and really deserve justice which is money damages in our judicial system. And I can't tell you how often I drive by the most horrific facts in a case, digging for some teachable point on the collateral source rule, without giving it much thought. I like myself 15% less than I otherwise would because of this, but what choice do we have? Become immersed in every case that we read and put ourselves in the shoes of everyone suffering? But, this one today just gets me and I'm finding myself imagining being in the shoes of every single person in this tragedy.]
The case settled for $2.8 million. Of course, the settlement agreement did not – because it really can’t – allocate separate amounts for past medical expenses and pain and suffering and other damages. North Carolina’s Medicaid claimed its one-third lien. The law allows the state to take the lesser of either the total amount of the lien or one-third of the court-ordered malpractice payment.

The one-third rule has a real upside: it is easy. Bright line rules are always that way. But as the Supreme Court told us in Arkansas Dep’t of Health & Human Serus. v. Ahlborn, pure bright line justice is not always acceptable and the sum allocable to medical expenses must be determined by some sort of reasonable process before the state can recover on its claim. The 4th Circuit agreed, overturning the North Carolina law because North Carolina statute’s one-third cap on the state’s recovery against a Medicaid recipient’s settlement proceeds did not satisfy Ahlborn because there was no showing that the settlement proceeds were intended to compensate the plaintiff for that amount of the medical claims. Accordingly, the case was remanded to the trial court for an “evidentiary hearing” at which the district court would figure out how much DHHS should get.

I’m not sure how effective that evidentiary hearing is going to be because how are they really going to get to the bottom of the allocations of a settlement like that? There are so many variables, so much of it is speculative, it is just one big “who the heck knows?” Then again, it is better than the an arbitrary statute.

The Supreme Court has the case now. The oral arguments are a fantastic read. Because this is a relatively non-partisan issue, it is harder to know how the normally tragically predictable justices will rule (although the justice may end up being split in their usual alignments). If you read the transcript, the court seems to be playing it straight and really wrestling with what the right thing to do is.

I love how Justice Sonia Sotomayor jumps on the state’s lawyer about 10 seconds into his presentation, hitting him with a Latin expression that – let me be honest – I didn’t know what it meant. I’d bet money she sides with the child. “How can you predict, particularly with a statute that wasn’t based on any empirical data, that 30 percent is normally the right amount?” she asked. Of course, that is the problem here. The law is just not fair. But that does not mean the Supreme Court will not find that it is the lesser of evils. I certainly hope the plaintiff/appellee win. But it is anyone’s guess.

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