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Medical Malpractice

Medicaid "Liens"

A Personal Injury Lawyer's Perspective

Kathleen Howard Meredith I

begin with a disclaimer. I am no expert in the complex and esoteric subject of “Medicaid law.” I am a plaintiff ’s personal injury lawyer. And until recently, my study of

Medicaid law had been quite superficial. I’d learned only what was necessary to successfully negotiate “liens” asserted against my clients’ recoveries by the Maryland Department of Health and Mental Hygiene (the “Department”) on behalf of the Maryland Medicaid Program.1

I suspect my understanding

of the law in this area was substantially similar to that of most folks reading this article. We knew that under §15-109(d) of the Health General

Article, Md. Annotated Code, the Department is “deemed” an assignee of all rights a Medicaid Recipient may have to recover from responsible third parties for medical expenses paid by the Medicaid program. We knew that §15-120(a) of the same Article granted the Department statutory rights of subrogation to any cause of action a Medicaid Recipient might have against a third party for payment of medical services. We knew that other provisions of §15-120 required an attorney, representing a Medicaid Recipient on a cause of action involving a Medicaid subrogation interest, to notify the Department of that interest before resolving the cause of action. And finally, we knew that an attorney, recovering funds on behalf of a Beneficiary, was statutorily required to hold those funds for the benefit of the Department to “the extent required for the subrogation claim, after deducting applicable attorneys fees and litigation costs” and that failure to hold such funds could result in the attorney’s personal liability for any amount not collected by the Department as a consequence of that failure.2

In short, we knew that in any

1 Under Maryland law, the Department though colloquially referred to as a “Medicaid lien,” the Department’s interest in a Medicaid Recipient’s recovery is not actually a “lien” but a “subrogation interest.”

2 Section §15-120(b)(1) provides that an “attorney representing a Program recipient in a cause of action to which the Department has a right of subrogation shall notify the Department prior to filing a claim, commencing an action, or negotiating a settlement.” Section 15-120(b)(2) provides that an “attorney shall notify the Department in advance of the resolution of a cause of action and shall allow the Department 3 business days from the receipt of the notice to establish its subrogated interest.” And §15-120(c)(1) provides that any “Program recipient or attorney, guardian, or personal representative of a Program recipient who receives money in settlement of or under a judgment or award in a cause of action in which the Department has a subrogation claim shall, after receiving written notice of the subrogation claim, hold that money, for the benefit

case handled on behalf of a Medicaid Recipient, we had to obtain a detailed statement from the Department as to the medical expenses paid on behalf of the Recipient and to “take care of” the Department’s subrogation claim when making final disbursement of any tort recovery. And for a long time that knowledge of Medicaid

law, limited though it may have been, was enough. Te Department, though not a full fledged member of the Medicaid Recipient’s team, was at least a willing and effective participant in the dispute resolution process. Te Department routinely provided statements of medical expenses paid on behalf of Medicaid Recipients so the amount of its subrogation interest could be determined and periodically updated. And when settlement negotiations took place, the Department habitually evidenced a willingness to discuss and entertain compromise of its subrogation interest in order to protect against the downside risk on no recovery on that interest and to facilitate global resolution of a Recipient’s

of the Department, to the extent required for the subrogation claim, after deducting applicable attorney fees and litigation costs.” Some lawyers have suggested that if the Department is properly notified of an impending settlement under §§15-120(b) and (c) and the Department thereafter fails “to establish” its subrogated interest within 3 business days, the Department’s subrogation claim is waived and the Program recipient’s attorney need not hold the funds for the benefit of the Department. In my view, this is an incorrect, unwarranted, and dangerous reading of the statute. Te subrogation interest arises by operation of law and the Department, therefore, need do nothing to “establish” its existence. Clearly the, the 3 day period is the time allowed the Department to establish the amount of the interest, not its existence. Te Department’s failure to calculate the amount within the 3 day time frame may relieve the Program Recipient’s attorney or other fiduciary of the obligation to hold the funds for the benefit of the Department, but it does not effectuate a waiver of the Department’s interest and the Program recipient will continue to be obligated to satisfy that interest.

Trial Reporter / Summer 2010 29

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