Do Medicaid Liens On Recipient Settlements Violate Federal Law? A Federal Judge Says "Yes"

The propriety of the Pennsylvania Medicaid Agency’s recovery directly from a Medicaid recipient was recently decided in Tristani v. Richmond W.D.Pa (3-25-2009). After the two recipients entered into settlements with the liable third party, Pennsylvania’s Department of Public Works, pursuant to state law, placed a lien on the settlement proceeds up to the amount of medical expenses paid.

On March 25, 2009, Federal Judge Joy Conti issued an opinion in Tristani ruling that Pennsylvania’s laws allowing the State to place a lien on recipient settlement proceeds violated the Federal Anti-Lien statute at 42 U.S.C. §1396p(a)(1). If this ruling is upheld, the methodology of State recovery for third party liability (“TPL”) awards will be drastically altered.

 Relying on the holding of the U.S. Supreme Court in ADHS v. Ahlborn, 547 U.S. 268 (2006), the commonly accepted view by most states is that sections of the Social Security Act concerning States’ obligation to recover TPL funds, and a Medicaid recipient’s assignment of rights of TPL recovery to the State, carve an exception to the anti-lien provision found in §1396p(a)(1). The federal Anti-lien statute provides “[n]o 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 except [in circumstances irrelevant here].”

Contrary to the states’ position, Judge Conti found that the Ahlborn decision ignored the overarching question of whether a state could place a lien on a recipient at all. Judge Conti focused on several statements made by the Supreme Court in which it said the anti-lien provision, when read “literally and in isolation”, would appear to prevent the State from recovering benefits paid on behalf of the recipient. However, the Supreme Court noted, and as pointed out in Tristani, the “big” question was not addressed in Ahlborn because the recipient in that case had already assumed the Arkansas lien was consistent with federal law, therefore rendering a determination of the larger issue unnecessary.

Judge Conti held Pennsylvania violated the recipients’ rights when it put a lien on the tort settlements, because (1) of the “clear and unambiguous” language of the anti-lien provision and (2) the issue had not been previously addressed by the Supreme Court.

If a State is prevented from placing a lien against the recipient for medical assistance paid on his/her behalf, how does the State recover its expenditures? Judge Conti focused on the federal rules allowing for the State to pursue the liable party directly. Pennsylvania, like other states, has a notice requirement in which a Medicaid beneficiary must provide reasonable notice to the State when he/she is commencing a claim so the State can intervene if it so chooses. If the recipient decides not to bring a claim, then in most cases, the State can, and the recipient has a duty to cooperate with the prosecution of the case.

If the Tristani decision stands, and the above-described scenario becomes the only means to recovery, States will have no choice but to become much more involved in the business of recovery litigation if they want to recoup the benefits paid.