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As with other Medicaid payors, the Oregon Department of Human Services (ODHS) is compelled by state law to seek reimbursement out of personal injury recoveries for paid Medicaid benefits.  The lien rights of such state agencies are not without limitation, however, and those limitations can make a huge difference for clients when their damages exceed the available liability coverage. 

This was the situation in a recent case we brought for an unfortunate young girl who suffered severe brain injury in a single car motor vehicle accident.  Her medical expenses far exceeded the available motor vehicle liability coverage, and the majority of her medical expenses were paid by two private health insurers and the ODHS.   Fortunately, one of the private insurers agreed to substantially reduce its lien against the subsequent policy limits settlement, and the other agreed to waive its lien, making it possible to substantially fund a supplemental needs trust for our client’s future care needs.  However, ODHS sought full reimbursement of its six figured lien, which, if paid, would have significantly reduced the monies available to fund the trust.

Under Oregon law, ODHS has a lien against a personal injury judgment or settlement for Medicaid benefits paid from the date of injury to the date of judgment or settlement.  By statute, the lien attaches to the net amount of the recovery after payment of attorneys fees, costs and expenses incurred in securing the judgment or settlement; and after payment of other medical expenses (or health insurance liens) incurred in treatment of the injuries giving rise to the personal injury claim. By statute, the department’s lien attaches to all available net proceeds, regardless of whether the proceeds are apportionable to past medical expenses, lost wages or pain and suffering.

In Arkansas v. Ahlborn, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006), however, the United States Supreme Court held that federal Medicaid law did not authorize the Arkansas Department of Human Services to enforce liens against settlement proceeds attributable to lost wages or pain and suffering.  The court ruled that to do so would violate federal anti-lien provisions precluding states from enforcing Medicaid liens against private property.   A subsequent state court decision out of New York held that Ahlborn must be read to limit Medicaid recoupment to the amount of the settlement proceeds allocated to past medical expenses.  Lugo v. Beth Israel Medical Center,  819 N.Y. S2d, 192, 13 Misc.3d 681 (2006).  

Oregon's reimbursement statutes are similar to the Arkansas and New York recoupment statutes.  Accordingly, on behalf of our client we moved the court to limit the amount of the ODHS attachable lien to the net settlement proceeds apportionable to past medical expenses.  In support of the motion, we presented expert opinion evidence regarding the value of our client’s claim unfettered by the limits of liability  insurance.  We also argued that the available settlement proceeds constituted our client’s private property for the additional reason that the proceeds ODHS sought to attach were available solely because of the lien reductions agreed to by her private insurers. 

Because our client was a minor, the lien rights of ODHS were also subject to a state statute which provides that the department's lien shall not attach to a settlement obtained on behalf of a minor to the extent of the sum "needed for the minor's complete physical rehabilitation."   Expert opinion evidence was presented on this issue as well.  After the motion was filed, ODHS agreed to accept the amount determined pursuant to the described Ahlborn analysis in full satisfaction of its lien.

Douglas G. Schaller is a shareholder of the firm Johnson, Clifton , Larson & Schaller P.C..  Mr. Schaller's practice focuses on product liability, wrongful death, medical malpractice, truck and motor vehicle collisions, and appellate law.