Medicaid Liens: What can you do about them?



In 1997 the 22 M.R.S.A. § 14, the Medicaid lien recovery statute, was amended to give DHS complete autonomy to grant or reject requests for lien reductions by Medicaid recipients. The 1999 amendment restored the Medicaid recipient’s right to challenge a DHS decision regarding Medicaid liens. The process is not as straightforward as it at first appears.

Medical Liens – A Trap For The Unwary Lawyer

Among the questions I am asked most frequently by other lawyers around the state are those associated with medical liens. And for good reason: if not addressed properly, medical liens are a trap for the unwary lawyer.

Trying to figure out what the lawyer’s obligations are to protect and repay liability policy medical payment claims, statutory hospital liens, health insurance repayment rights, Medicare A & B liens, and workers’ compensation liens can be very difficult and hazardous for your practice’s health.

If you fail to understand your obligations to protect a claim or lien adequately, you or your client may get an unexpected collection letter. On the other hand, failing to understand the limits of your obligations may result in your paying too much of your client’s money to satisfy a repayment obligation.

No repayment obligation generates more questions than the plaintiff’s obligation to repay Medicaid benefits. The statute has changed twice in the last couple of years, causing some confusion. Understanding the current version of the statute is critical to protecting your client’s recovery and your practice.

It is still assumed widely that Medicaid is obligated to reduce its liens on third party tort recovery by a pro-rata percentage of attorney’s fees. This assumption is wrong. Pro-rata attorney fee reductions were never part of the statutory remedy. It used to be true that DHS, which administers Medicaid, would often reduce the amount of its lien by such a pro-rata percentage. Sometimes DHS would agree to greater reductions.

The Medicaid Lien Recovery Statute

This changed in 1997. After a 1996 Superior Court ruling that DHS was entitled to be paid back a small fraction of Medicaid expenditures following a Medicaid recipient’s recovery in a catastrophic third party negligence case, DHS lobbied the Legislature for drastic changes to 22 M.R.S.A. § 14, the Medicaid lien recovery statute. As a result, in 1997 the Legislature amended the statute to strip away Medicaid recipients’ rights to take DHS to court over lien reductions. This gave DHS complete autonomy to grant – or reject – requests for lien reductions regardless of the underlying merits of the request.

In 1999, the Legislature restored the Medicaid recipient’s right to challenge a DHS decision regarding Medicaid liens. This statutory right to challenge DHS is in effect today. But you still have to jump through hoops to do so.

First, under 22 M.R.S.A. § 14 (2-D), the Medicaid recipient (personally or through counsel) must notify DHS in writing regarding the existence of any claim to recover the medical cost of “injury, disease, disability or similar occurrence” for which the party received Medicaid benefits.

The statute requires you to provide such information “as required by” DHS. It is unclear exactly what that means, but at a minimum the nature of the claim, date of injury and the parties involved ought to be disclosed.

It might be tempting to attempt to evade this notice requirement, or even the repayment obligation itself, by carving out from your claim those medical expenses that Medicaid paid for. You can’t. DHS’s recovery right is a lien for any costs that were or could have been included in the Medicaid recipient’s claim for third party damages.

Assuming you notified DHS of your claim’s existence, you must still also let DHS know when you file suit. 22 M.R.S.A. § 14 (2-E) requires you to give DHS ten days’ notice before filing the pleadings.

When you anticipate a recovery, either by settlement or verdict, you have further duties under the statute. If you do not intend to seek a Medicaid lien reduction, you must first pay DHS the statutory lien amount before disbursing recovery proceeds to your client. 22 M.R.S.A. § 14 2-F. If you succeed in working out an acceptable lien reduction with Medicaid, you must obtain a release from DHS. If you cannot work out a reduction, the statute allows you to ask a court for a ruling.

To obtain a court’s ruling on the lien reduction, you first have to determine the amount DHS is claiming as a lien. Do not forget to review it – it is not uncommon to find duplicative or unrelated charges included by mistake. If you bring these to the attention of Medicaid’s third-party recovery personnel they readily acknowledge the error and adjust accordingly.

If you and DHS disagree over the amount to which they are entitled for repayment, the current Medicaid statute permits you to go ahead and disburse your client’s proceeds, so long as you withhold from disbursement an amount equal to that which DHS claims it is to be repaid.

Either party may apply for a ruling on the lien amount. The application may be made in either Superior or District Court, so long as the underlying third-party claim could have been brought in that court.

To prove that it is entitled to recover the amount it claims, DHS must prove that “an independent action by the commissioner would have been cost-effective.” In determining whether an independent DHS action on the third-party claim would have been cost effective, all factors that diminish potential recovery must be considered. 22 M.R.S.A. § 14 (1) (emphasis added). These include, but are not limited to, questions of liability.