The 1999 revised Medicaid third party liability and estate recovery laws: how to satisfy the liens and preserve the client's public assistance.

• Author: Hefren, Judith
• Position: Florida law

Imagine, if you will, that you are a trial attorney who has successfully settled a lawsuit for a client who was injured due to the negligence of a third party. Imagine further that either as a result of, or subsequent to, the incident the plaintiff received public assistance benefits such as Medicaid. Are you aware of the Medicaid Third Party Lien law (TPL) and your client's rights and obligations under that law? Do you know how the deceased client's estate's receipt of the net proceeds is affected by the Medicaid Estate Recovery Lien? Do you know that there are exceptions to enforcement of the estate recovery lien?

This article analyzes the revisions to the Medicaid Third Party Liability and Estate Recovery laws, evaluates the impact on clients receiving public assistance, and offers suggestions to practitioners on how to maximize the benefits derived from the net settlement proceeds for the client with a long-term disability or illness. Trial lawyers, elder law attorneys, and probate lawyers are affected by these laws. The practical consequences of the revisions to the law will be explored in simple hypotheticals.

Elder Law and the Aging and Disabled Population

In order to understand the impact of the new laws it is appropriate to first explain what is an "elder law attorney." In the U.S. today, our elder and disabled populations are increasing and with it their diverse legal needs. "Elder law" focuses on the legal needs of elders and disabled persons as they age and works with a variety of legal tools and planning techniques to meet the goals and objectives. Elder law attorneys take a holistic approach in counseling the client, thereby evaluating and discussing the effect a decision may have on several planning areas in the client's life. For example, their working knowledge of elder and disability issues allows them to ignore the myths relating to aging and properly evaluate the competence of the client. Similarly, they can take into account and identify the impact of actual physical and mental difficulties that accompany the aging process and determine the difference between physical and mental disability of a client.

Importance of Obtaining or Maintaining Public Assistance Eligibility

In certain cases, young people with disabilities and older people who require skilled nursing care may not have sufficient assets or income to pay for the medical care and health-related services necessitated by their illness. These clients can apply for public assistance programs if they satisfy financial and/or medical eligibility requirements.(1) However, receipt (whether actual or constructive) of any type of monetary settlement can potentially render a client ineligible for public assistance. If no advance planning has been implemented, receipt of the settlement proceeds will render the client ineligible for public assistance.(2) The settlement proceeds must then be "spent down" and the client can reapply for public assistance.

In cases where the client's illness or disability is permanent and severe, the settlement proceeds (even if properly invested) may be depleted during the person's lifetime on care and special equipment. Therefore, advance planning should be implemented so the settlement proceeds can be used to "supplement" and not "supplant" the government assistance. Thus, the trial lawyer and the elder law attorney must work together to explore the possible options for maintaining both the client's public assistance and access to the settlement proceeds.

Medicaid Third Party Liability Act(3)

* When Is Medicaid Entitled to Collect its Third Party Liability Lien?

The Medicaid Third Party Liability (TPL) statute provides that when a third party is liable for payment of medical assistance (i.e., hospital, physician, nursing home) paid for by Medicaid, Medicaid has an automatic lien for the full amount of medical assistance provided.(4) The lien is against the third party, who can be the defendant or his insurance carrier. The definition of a third party benefit is

any benefit that is or may be available at any time through contract, court award, judgment, settlement, agreement, or any arrangement between a third party and any person or entity, including, without limitation, a Medicaid recipient, a provider, another third party, an insurer, or the agency, for any Medicaid-covered injury, illness, goods, or services, including costs of medical services related thereto, for personal injury or for death of the recipient.... The term includes ... health insurance, any benefit under a health maintenance organization, a preferred provider arrangement, a prepaid health clinic, liability insurance, uninsured motorist insurance or personal injury protection coverage, medical benefits under workers' compensation, and any obligation under law or equity to provide medical support.(5)

Claims filed by Medicaid through the Agency for Health Care Administration (AHCA) under F.S. [sections] 409.910 result from a detailed review of claims paid on behalf of the recipient. The total amount claimed is the total of the individual claims that are related to the incident. The claim should not include any amounts that Medicaid would have paid if the incident had not occurred.

Consequently, the type of claim asserted by the client (i.e., violation of resident rights, negligence, personal injury, wrongful death) must be evaluated to determine whether medical services paid for by Medicaid were related or unrelated to the incident. If Medicaid was not required to pay for medical services (i.e., violation of resident rights) then there is no Medicaid Third Party Liability Lien. If Medicaid was required to pay for medical services (i.e., negligence), there is a Medicaid Third Party Liability Lien.

* From Whom Can the Lien be Collected?

The lien can be collected from the recipient of the judgment, award, or settlement or the legal representative (i.e., guardian, attorney-in-fact) who receives the proceeds on the recipient's behalf.(6) AHCA must be paid within 60 days of settling the case; failure to pay results in civil and criminal penalties, and failure to notify Medicaid of the availability of third party resources is considered Medicaid fraud.(7) There can be no release or satisfaction unless AHCA joins in the release or satisfaction or executed a release of the lien.(8)

* Formula for Payment of Third Party Liability Lien(9)

Florida law provides a formula for determining the maximum amount Medicaid can collect under the third party liability statute. The attorney receives a fee of 25 percent of the recovery after costs and expenses of litigation; taxable costs are paid in full; of the balance, one-half is paid to AHCA up to the total amount of medical assistance provided by Medicaid.(10) Medicaid is to be repaid the lesser of this amount, or the actual third party lien; the remaining sum is then paid to the client or the client's estate.(11) The legislative intent behind the change to the statute was to ensure that the plaintiff would receive an amount equal to the amount paid to Medicaid. This is an improvement from the prior statute which gave AHCA two-thirds and the plaintiff one-third of the remaining recovery.(12) AHCA agreed to this change in an effort to help ensure that cases would be settled more timely. Example: Jane Smith, a Medicaid recipient, is involved in an accident. Medicaid expends $100,000 for medically necessary goods and services that are directly related to the incident being litigated. The attorney incurs $10,000 in taxable costs. The liable third party offers $200,000 to settle the claim. In this case, Medicaid would be entitled to recover $70,000 in full satisfaction of Medicaid's claim under F.S. [sections] 409.910. This amount was...