Many attorneys and agencies have interpreted the U.S. Supreme Court’s decision in Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268,126 S.Ct. 1752 (2006), to mean that, Social Services agencies may be entitled to a lien on only that portion of personal injury litigation proceeds that reasonably represents the past medical portion of the award or settlement. In fact, the New York State Office of Medicaid Management published a memorandum dated September 14, 2006, which has confirmed that limitation, as applied in New York Cases.Since Ahlborn was decided, some trial courts have held allocation hearings to determine the medical portion of a recovery, so that the Medicaid ‘lien’ could be computed.

Recently, in Homan v. County of Cattaraugus Department of Social Service, 74 A.D, 3d, 1754, 2010 WL2332742 (N.Y.A.D. 4th Dept.), New York’s Appellate Division, Fourth Department, rejected the theory that one could avoid a Medicaid lien by settling for “pain and suffering” only, and sent the case back to the trial court for such an allocation.However, for almost four years now, I have taken the position that Ahlborn gave us much more guidance, and, implied that the various Medicaid agencies might not be entitled to any ‘lien’ against personal injury proceeds-even on the portion of the proceeds that reasonably represents medical payments:
“Read literally and in isolation, the anti-lien prohibition contained in Section 1396p(a) would appear to ban even a lien on that portion of the settlement proceeds that represents payments for medical care. ” Ahlborn, 547 U.S. at 284-285

The Federal Anti- Lien Statute is but a piece of the Federal legislation, which governs the state’s use of Medicaid funds.  Specifically, 42 U.S.C. Section 1396p states in relevant part:

“Section 1396p. Liens, adjustments and recoveries, and transfers of assets. (a) Imposition of lien against property of an individual on account of medical assistance rendered to him under a State plan
(1) No lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan…”

Last year, the Federal District Court for the Western District of Pennsylvania, citing Ahlborn but, relying on the clear mandate of 42 U.S.C. Section 1396p, declared parts of Pennsylvania’s Medicaid recovery statute void. This was true, even though the Pennsylvania statute had recently been modified to attempt to comply with Ahlbornby limiting the local Social Services agency’s recovery rights to that portion of the award that was related to medical expenses.

In Tristani v. Richmond, 609 F. Supp. 2d 423 (W.D. PA Mar. 25, 2009) (No. CIV. A 06-694) the Court, in an exhaustive review of  Section 1396p, found that,

 “The Court  holds only that the assignment provisions of Title XIX do not provide the DPW with a license to ignore the clear,unambiguous mandates of the anti-lien and anti-recovery provisions when the DPW chooses to remain on the sidelines in actions commenced by Medicaid beneficiaries against liable third parties.” Tristani, 609 F. Supp. 2d at 473.

Furthermore, the Court found that, “The liens imposed by the DPW against the settlement awards obtained by Tristani and Valenta contravened the anti-lien provisions, and the payments extracted from Tristani and Valenta by the DPW contravened the anti-recovery provisions.” Tristani, 609 F. Supp.2d at 471.

Over the past several years, even before Tristani, some of my clients had used this argument to significantly reduce or eliminate the plaintiff’s Medicaid “lien”. It is my belief, that with  Tristani’s indisputable logic in hand, every plaintiff attorney should consider making the same argument (i.e. the Supremacy Clause prevents giving effect to a State lien which conflicts with the Federal Anti-Lien Statute) until the issue is resolved with finality.Let there be no mistake about it: the Courts will do everything possible to protect the state’s interests in these recoveries, especially where state recovery statutes have been modified to conform to the allocation view of Ahlborn (see, Andrews v. Haygood, 188 N.C. App. 244, 655 S.E.2d 440 (N.C. Ct. App. 2008), Russell v. Agency for Health Care, 23 So. 3d 1266 (Fla. 2d DCA 2010), and Scharba v Everett,2010, WL 1380121 (M.D. Fla, Mar. 31, 2010) (No. CIV. 1294-T-33). But, Ahlborn does not control since, there, it was stipulated by the parties that a lien existed.

Remember, this does not mean that the Department of Social Services cannot proceed directly against the parties responsible for the injuries. However, when they sit back and do nothing, they may be precluded from obtaining a recovery from the plaintiff’s proceeds.

I recommend that plaintiff’s counsel make the argument.  There is nothing to lose.