Wednesday, May 17, 2017

Michigan applies Ahlborn rule

The Michigan Court of Appeals has issued a decision applying the Ahlborn rule and limiting an asserted Medicaid lien. In Neal v Detroit Receiving Hospital, plaintiff filed a medical malpractice lawsuit, the nature of which is not revealed in the decision. A confidential settlement was reached, in which the parties expressly agreed to an allocation of the settlement funds as follows:
  • 55% non-economic damages 
  • 40% economic damages other than medical
  • 5% medical expenses 
Meridian Health Plan, a Medicaid HMO, had received billings for apparently related medical expenses in the amount of $298,869.10, of which it paid $110,283.19, about 37% of the total. First Recovery Group, on behalf of Meridian, asserted its lien in that amount.

Points that were not mentioned in the opinion, but are known to most Michigan litigators:
  • All or almost all Medicaid payments in Michigan are now handled by Medicaid HMOs. 
  • Most of the Medicaid HMOs have a contract with First Recovery Group to handle its reimbursement claims. 
  • First Recovery Group is typically very resistant to any attempts to compromise the amount of its lien. Its position is that the payments by the HMO have already reduced the amount of the provider charges significantly, thus saving the tort defendant a large part of the medical expenses.  
Under the Ahlborn rule, however, the Medicaid payer is required to limit its reimbursement claim to a proportion of the medical expenses which corresponds to the proportion by which the tort claimant has compromised her claim in the course of settling the case. If the total value of the plaintiff's damages was $1 million, and she settles for $350,000, under the Ahlborn rule the Medicaid payer must also take 35% of its reimbursement claim.

The Circuit Court ruled in favor of Meridian and ordered that the entirety of the $110,283 amount be repaid. The Court of Appeals reversed, holding that, under Ahlborn, the Medicaid payer is permitted only to recovery "that portion of a settlement that represents payment for medical care." Under the Federal anti-lien provision, 42 USC 1396p-a-1, no lien may be imposed for repayment of Medicaid benefits on property of the Medicaid recipient, and that includes the other portions of the settlement.

The Court of Appeals did recognize that the courts cannot simply accept the agreement of the parties as to the amount allocated to medical expenses. But, it noted, the Circuit Court made no findings as to allocation at all. It simply held that the entirety of the lien amount must be repaid.

The Court therefore remanded the case to the Circuit Court for a hearing to determine the fairness and reasonableness of the settlement, and to determine a proper and fair allocation of damages among the categories of losses. The court further held that Meridian must contribute to the "costs of recovery," attorneys' fees and costs, and reduce the amount of the lien accordingly.