On July 2, 2021, the United States Supreme Court granted certiorari in the matter of Gallardo v. Marstiller, which could have ramifications for plaintiff Medicaid recipients throughout the country. The case is on appeal from the 11th Circuit’s decision in Gallardo v. Dudek, 963 F.3d 1167 (11th Cir. 2020). The 11th Circuit’s decision expands on the power granted to the states to enforce Medicaid liens, which was endorsed by Arkansas Dep’t of Health & Human Srvs. v. Ahlborn, 547 U.S. 268 (2006).
A quick reminder of the context here: Under Ahlborn, the law of the land is that the state Medicaid agency may only place a lien on the portion of a personal injury settlement that reasonably represented compensation for past medical expenses. If the Medicaid agency attempted to place a lien for medical expenses on any other part of the settlement, it would run afoul of the Federal Anti-Lien Statute at 42 U.S.C. § 1396p: “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.” The Court’s reasoning was that because the federal Medicaid laws mandate that, as a condition of eligibility for Medicaid benefits, that the recipient assigns to the state his or her right to receive payments for medical care from a third party, the medical component of a personal injury case is assigned to the state. Therefore, the medical component is no longer considered the recipient’s “property” as defined under the Anti-Lien Statute. By extension, it is permissible for the state to impose a lien on the medical component of the case.
The 11th Circuit expanded on the power endorsed by Ahlborn by ruling that a Medicaid agency may collect its lien from both the portion of the settlement that represents compensation for past medical expenses andthe portion of the settlement that represents compensation for future medical expenses. As the court pointed out:
But while the language of the federal Medicaid statutes clearly prohibits FAHCA from seeking reimbursement for future expenses it has not yet paid (which it is not seeking to do in this case), the language does not in any way prohibit the agency from seeking reimbursement from settlement monies for medical care allocated to future care.
Gallardo, 963 F3d at 1178.
This case involved young Gianinna Gallardo, then a 13-year-old student, who was hit by a truck after getting off of the school bus. A dozen years later, Gianinna remains in a persistent vegetative state. Florida Medicaid paid $862,688.77 for her medical care. Her case settled for a total amount of $800,000. It is her counsel’s position that approximately $35,000 of that total settlement amount represented compensation for past medical expenses. However, given the plaintiff’s young age and the nature of her injuries, the future medical component of the case is much larger.
While the 11th Circuit’s decision is discouraging, it is important to note that it is very much the minority view. Dozens of cases across the country have considered this issue, and the overwhelming weight of authority is in favor of limiting a Medicaid lien to the past medical component of the case.
But the consequence of this decision is that the potential pool from which Medicaid may recover is much larger, resulting in a much larger payback of the actual lien amount. And this case is a perfect example of what kinds of plaintiffs will be affected. The decision of the 11th Circuit would disproportionately affect only the most severely injured individuals requiring extensive medical care beyond the date of a liability settlement.
What is always concerning with federal judges in cases involving government benefits like Medicaid and Medicare, is the judiciary’s desire to always point out that Medicaid is the “payor of last resort,” reflecting a general desire to “protect the public fisc.”
First, it is a little shocking that the 11th Circuit would get so deeply involved in such a highly speculative exercise. Keep in mind that not one dime of future medicals had been paid at the time of the motion. In fact, the possibility existed that the state Medicaid agency would never pay anything if the proceeds from the settlement were not properly protected by a trust established under 42 U.S.C. § 1396(p)(d)(4)(A) (supplemental needs trust) or 42 U.S.C. § 1396(p)(d)(4)(C) (pooled trust), as the dissent pointed out, “Today this court tells Florida that it can pocket funds marked for things it never paid for.” Gallardo, 963 F3d at 1182 (Wilson, Cir. J., concurring in part and dissenting in part).
Generally, receipt of a significant lump-sum settlement would likely put the recipient above the resource threshold to maintain eligibility for Medicaid benefits. In this scenario, the recipient would be disqualified from Medicaid until such time as the settlement monies are spent down and the resource level goes back below the threshold. During this time, Medicaid will not pay.
On the other hand, if the proceeds are properly protected by means of a special needs trust (“SNT”), the settlement funds are put in that trust vehicle, and, while the plaintiff is limited in the ways in which that money can be used, the funds within that trust are an exempt resource for determining eligibility for Medicaid, and so the recipient may stay eligible and Medicaid would continue to pay for their medical care. However, with the SNT, a requirement of the trust is that any remaining proceeds be paid back to the state agency upon the death of the beneficiary, thereby allowing Medicaid to recoup its expenses in some way. Another option is the pooled trust option. There, the trust proceeds are managed and disbursed by a non-profit and, in most cases, the proceeds remaining in the beneficiary’s account upon death revert to the use of the trust for its charitable purposes.
In either scenario, the issue of future medical care is well considered. The extensive rules for Medicaid eligibility post-settlement also reflect the general notion that future medicals are considered in every case involving a Medicaid recipient, and there are specific rules and procedures, and a host of options to consider for every recipient receiving a personal injury settlement.
Until there is precedent directing us to the contrary, Precision Resolution will continue to attack Medicaid liens under the holdings of those two United States Supreme Court cases and the Federal Anti-Lien and Anti-Recovery Statutes on which they were based.
SCOTUS to Weigh in on Dangerous Case from 11th Circuit Expanding Medicaid RecoveryDev Dev2021-07-27T19:21:40-04:00
At Precision Resolution, we often see medical malpractice cases come our way where Plaintiff’s counsel has already reported a settlement to Medicare and received a closure letter, only to be surprised to learn that a new Medicare file has been opened upon the insurer’s mandatory Section 111 reporting, with a significant increase in the Medicare payments.
In one such case, Plaintiff, who had been suffering from hypertension and kidney disease for years, had an MRI of the kidneys in 2010. While a small mass was identified in his right kidney, it was dismissed as benign. Plaintiff continued to treat his kidney disease. Several years later, in 2015, it was discovered that the mass had actually been cancerous. Plaintiff asserted a medical malpractice action against the defendant-doctor for failure to timely diagnose and treat the kidney cancer in 2010.
Plaintiff’s attorney proceeded to open a file with Medicare using the date of the cancer diagnosis–2015. No conditional payments were identified by Medicare and the file was closed. However, a few months later, Medicare issued a new letter with a new date of injury: plaintiff’s first encounter with the defendant-doctor in 2010. The insurance carrier had reported this case under Section 111. Medicare was seeking over $145,000 in conditional payments for the kidney under this new file, including treatment for end-stage renal disease and kidney transplant surgery.
After a thorough analysis of the medical records, expert reports, and review of the individual conditional payments, Precision’s attorneys developed substantial arguments that demonstrated the conditional payments were unrelated. Medicare agreed and reduced the file to zero.
Best Practices Tip: This scenario may be prevented by providing Medicare with the proper date of incident. At Precision Resolution, we ensure that your case has the proper Medicare date of incident. We monitor and remove all unrelated charges, so that the risk-of-loss is not borne by the Plaintiff and counsel after settlement – and we take care of any duplicate files opened under Section 111 reporting.
Avoid Unexpected, Duplicate Medicare Files Created by Section 111 Insurer Reporting in Medical Malpractice CasesDev Dev2021-07-27T19:04:08-04:00
In this case, the available policy limit was only $1,000,000. There were three claims asserted under a Federal Employee Health Benefit (“FEHB”) Plan, which totaled approximately $240,000. The plaintiff required future coverage under the Plan, including several future surgeries and ongoing therapy.
Although the plaintiff had no issue securing the full policy limit, the large purported FEHB lien overshadowed the case and prevented settlement.
The plaintiff’s personal injury attorney reached out to Precision Resolution for assistance in resolving the FEHB claim. We carefully reviewed the FEHB Plan language and developed factual and legal arguments, while stressing the severity of the plaintiff’s injury and his age.
The plaintiff was only 15 years old on the date of injury. He had a severe injury involving a crushed hand and forearm. The plaintiff’s arm got caught in construction equipment while he was helping the defendant on his farm. For the challenge, we scrutinized the plan language that seemed to be in our favor and applied our interpretation of the language to our argument. We also relied on input from Precision’s nurse paralegal team who added context regarding the severity of the injuries and the future treatment that would be needed.
Precision Resolution was successful in the end, reducing the liens by nearly $200,000.00.
Another interesting aspect of this case was the fact that there were three FEHB plans involved. It turned out that initially the plaintiff was admitted to the hospital near his residence. However, because the facility didn’t have the means to treat him properly, they flew him out to another facility in a neighboring state. He then came back to his state of permanent residence once he got better.
Since FEHB has contracts in different territories, different plans administered the benefits in each territory, hence the three separate plans that were involved.
Further, we secured agreements with the Plan that coverage would continue for the plaintiff uninterrupted, and that the Plan would not seek reimbursement for any future incident-related medical bills.
FEHB Plan Liens Reduction & Securing Continuation of Coverage for the PlaintiffDev Dev2021-07-27T19:19:17-04:00
100% of Proceeds – Including Attorney’s Fee Earned – Paid to Self-Funded ERISA Plan
By: Paul K. Isaac, Esq., ChSNC | Managing Partner, Precision Resolution, LLC | Click to Email Paul
“Defendants are directed to turn over the entire amount of the settlement recoveries, up to $38,262.19, to the plaintiff immediately upon receipt of this order or as soon as such funds become available.”
(Hereinafter, the use of the term “Plaintiff’ in my text refers to the injury victim in the state court action, even though the “Plaintiff” in the Federal court reimbursement action was the 1199SEIU Health Fund.)
THIS CASE IS DISTURBING FOR A NUMBER OF REASONS:
The court grants 100% recovery of a $25,000 (limits of coverage) automobile settlement to 1199SEIU Health Fund, on a case where shoulder surgery was performed, and a number of other serious injuries were inflicted on the Plaintiff.
Even though the injuries arose out of a New York automobile crash, and, where it appears that the large expenses associated with the shoulder surgery occurred two months after the accident, no-fault insurance coverage apparently was never extended. It appears that the vehicle which the plaintiff was operating was registered in Pennsylvania and may not have had NY coverage. In the Federal court case, Plaintiff’s counsel, who was also named as a defendant in the enforcement action, alleged in his Memorandum in opposition to the motion for summary judgment that no-fault coverage existed, and, therefore, the 1199SEIU Health Fund should not have paid these bills and did so improperly. Unfortunately, there does not appear to have been any resolution of the no-fault issues spelled out in the court documents.
In spite of the Plaintiff’s attorney’s relentless advocacy in the state court action in his 3-year pursuit of an exception to the Graves Amendment (49 U.S.C. § 30106), no doubt seeking to get more coverage for his client, the Federal Court decision denies recovery of attorney fees to plaintiff’s counsel altogether on the $25,000 settlement. Plaintiff’s counsel in his submission to Federal court, seeking at least a reduction in the lien to equate to his fees so that some proceeds would flow to the client, argued for the application of the “Common Fund Doctrine.” The Court rejected that argument stating:
“In other words, the plan expressly limits the common-fund doctrine by providing that the Fund’s recovery takes priority over the payment of the defendants’ attorneys’ fees. “Neither general principles of unjust enrichment nor specific doctrines reflecting those principles—such as the double-recovery or common-fund rules—can override the applicable contract.” McCutchen, 569 U.S. at 106. Therefore, the defendants are not entitled [*17] to recover their attorneys’ fees until the Fund is paid in full.” Cotto, 2020 U.S. Dist. LEXIS 178207 at *16-17.
Fourth, even though the case arose out of a 2015 auto accident, at the time of the decision granting summary judgment by United State District Court for the Eastern District of NY on September 28, 2020, over five years after the accident, the court still did not have a copy of the Plan Document. The court acknowledged that it had not reviewed the actual plan document. Ultimately, the court had no choice but to decide the case based on the Summary Plan Description (SPD), which, of course, purported to waive the Common Fund Doctrine.
“However, the parties have not put forth the actual ERISA plan in question here. Nor have they suggested that the terms of the SPD differ materially from those in the official plan. Thus, I analyze this dispute according to the language in the SPD.” Id. At *2, f.n. 2.
The court also took a swipe at the Plaintiff’s failure to exhaust administrative remedies but did not decide directly on that issue. “The Plan sets forth a procedure for disputing the amount of a lien, including bringing an ERISA action against the Fund once a party has exhausted his administrative remedies. Id. At *6.
Plaintiff and his attorney each get $0.00!
Best Practices for Plan Documents: When dealing with an ERISA plan, we recommend that you request a full set of plan documents from the plan administrator, including the plan document, SPD, trust agreement, amendments to the plan, and Forms 5500. Many times, the SPD will contain subrogation and reimbursement provisions that are different and stronger than the plan document; or, the SPD may contain provisions that the plan document is completely silent on. The purpose of the SPD is to provide plan beneficiaries with an explanation of their benefits and rights. It does not constitute the terms of the plan. It has been consistently held that the plan document contains the terms of the plan, especially when there is a conflict between the two documents. See, e.g.,CIGNA Corp. v. Amara, 131 S. Ct. 1866, 1878 (2011); US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013). Aside from ensuring that an ERISA plan is “self-funded,” the more documents you have that are related to the plan, the more opportunities there may be to attack deficiencies in any of the documents.
100% of Proceeds – Including Attorney’s Fee Earned – Paid to Self-Funded ERISA PlanDev Dev2021-07-27T19:01:21-04:00