stipulated that her claim could be reason- ably valued at $3,040,708.18. Medicaid’s outlay was $215,645.30. The parties also stipulated that $35,581.47 of the settle- ment was attributable to reimbursement for medical payments made. The Court noted the Federal statute
limiting States to enforcing “rights ... to payment for medical care from any third party,” Id., at 1761, quoting 42 U.S.C. § 1396k(a)(1) (A)(emphasis added), and on the flip side the general limitation on Medicaid recovery except as otherwise provided – from real property or from a probate estate after death. In light of this, it concluded, Medicaid subroga- tion claims are “limited to payments for medical care,” and may not attach or encumber “the remainder of the settlement.” Id. at 1763. The Court spoke disapprovingly of older cases that re- jected “equitable subrogation principles such as the ‘made whole’ rule,” and while its approach was to avoid rather than
reject them, the effect is to strike off in a parallel direction. To be sure, the Court appears to say that to the extent there is a recovery for medical expenses, Federal law “requires ... that the State [Medicaid program] be paid first out of any dam- ages representing payments for medical care before the recipient can recover any of her own costs for medical care.” Id. at 1762. But its direct causation approach is plainly a significant limit on what Med- icaid may claim, even if it won’t resolve every aspect of every case favorably for injured plaintiffs. The Court noted at the outset that
everyone agreed that a litigated deter- mination of allocation, whether by judge or jury, would be binding, Id. at 1762, and dismissed as solvable the potential problem – not presented in that case be- cause of the parties’ stipulation – of how to determine allocation in the context of settlements. The risk of post-settlement manipulation is easily solved, it said. The
State Medicaid program agrees to an al- location or the issue can be submitted to the court. In any event, the Court said, there is as much to be concerned with over-allocation as under-allocation, “unfair to the recipients” in the former situation. Also, it cited with approval AAJ’s observation in its amicus brief that some States have methods for al- locating tort settlements where private insurers are also involved. This appears to be a back-door ap-
proval of equitable contribution. As in Ahlborn itself, a settlement that reflects a discount on reasonably claimed losses because of all of the many risks of liti- gation should affect how much of the recovery is attributed to medical costs as it is to any other element of dam- ages. That is exactly where subsequent cases have gone. See, e.g., Lugo ex rel. Lugo v. Beth Israel Medical Center, 819 N.Y.S.2d 892, 13 Misc.3d 681, 2006 N.Y. Slip Op. 26340 (
N.Y.Sup. Jul 21, 2006).
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