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Limitations on Medicaid Liens in Personal Injury Recoveries

As with other Medicaid payors, the Oregon Department of Human Services (ODHS) is compelled by state and federal 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 brought on behalf of 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 the young woman with a brain injury, a motion was filed to move 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, expert opinion evidence was presented regarding the value of the young woman's claim unfettered by the limits of liability insurance. It was also argued that the available settlement proceeds constituted the young woman'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 the young woman 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.


The State of Oregon and the Federal government will still continue to seek recovery of Medicaid under both state and federal law. However, there are exclusions to the amount that can be recovered and it is possible to negotiate a different lien amount as the example above illustrates.

Following the Ahlborn decision the federal government passed the Medicaid Secondary Payer Act (effective October 2017). The act expanded state Medicaid agencies ability to recover Medicaid funds. The act explicitly states that recovery can come from the entire settlement proceeds, not just amount limited to medical payments.

What this means is that attorneys need to stay on top of the applicable Oregon and Federal statutes regarding Medicaid recovery. Further, it is necessary to negotiate with ODHS early in the personal injury claim process and to include them in settlement agreements.

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