The American Association of Justice announced today that it was instrumental in achieving a delay in the implementation of a provision of the Bipartisan Budget Act that would have adversely affected our clients on Medicaid. The provision would have allowed states to recover all of a Medicaid recipient's settlement or judgment. This is a departure from the law as it stands, and it would be very burdensome to many Medicaid recipients, whose cases may become difficult to impossible to settle if the provision went into effect as scheduled in October 2014. Fortunately, the implementation of the provision will not go into effect until 2016, during which time opponents will work to educate Congress about the unfairness of the provision in hopes that the provision can be fixed in some manner before it takes effect. Let me explain why this provision is dangerous to Medicaid recipients.
Medicaid is, by law, a payer of last resort. Medicaid may pay bills that are the legal responsibility of the party who injured the Medicaid recipient, in which case Medicaid is entitled to be repaid out of the proceeds of any settlement that the Medicaid recipient receives from the responsible party. However, our US Supreme Court held, in Arkansas Dept. of Health and Human Services, et al. v. Ahlborn, that states could only recover the portion of a Medicaid recipient's settlement that was specifically for medical expenses for which the responsible third party was liable. The Supreme Court held that states were not allowed to recover from portions of a settlement intended to compensate the injured person for pain and suffering, wage loss, and future lost earnings. This case has been particularly important in facilitating settlements for Medicaid recipients. You see, many times, cases are settled for far less than their full value, due to the fact that the responsible party may have limited insurance coverage or due to the fact that the injured person may be partially responsible for his or her own injuries. The Ahlborn case made it possible to settle cases for clients whose claims fit these scenarios without having to pay the entire settlement over to Medicaid.
The harmful provision of the Bipartisan Budget Act would have changed the effects of this Supreme Court decision and would have allowed states to recover the full extent of a Medicaid recipient's settlement which, in many cases, would mean that the Medicaid recipient would not be able to keep any portion of their settlement. This might encourage many injured Medicaid recipients from even attempting to collect from the person responsible for their injuries, or from dropping their cases altogether. This would not only harm the Medicaid recipient, but the Medicaid program itself.
Thankfully, this harmful provision of the BBA is delayed for a few years and during that time, opponents such as the American Association of Justice hope to convince our Congress how harmful this provision can be not only to Medicaid recipients, but to the Medicaid program itself.