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Medical Malpractice

its proportionate share of the applicable attorney’s fee and expenses. Te Department’s response was always the same. While the Department agreed that the quoted language entitled me to assess and collect the full applicable attorney’s fee and expenses before the duty to withhold for the benefit of the Department even arose, it nevertheless claimed that another provision, §15-120(c)(4), entitled it to collect its subrogation interest undiminished by its proportionate share of the attorney’s fee.3

Even though the Department steadfastly

claim. In this regard, the Department was on sound legal footing. Section 15-120(c)(3) of the Health General Article authorizes the Department to compromise or settle and release its subrogation interest. While the Department never publicly adopted a precise

formula that would enable the plaintiff ’s bar to calculate the extent to which it would compromise its interest in any given case, the Department did identify factors it considered in making this decision, including the extent of the Recipient’s injuries and future life care needs, the expenses incurred by the Recipient and the Recipient’s attorney in procuring the proposed settlement, the extent to which recovery was limited due to absent or restricted insurance coverage for the defendant, and the extent to which recovery was limited due to liability issues. One factor the Department specifically refused to consider in calculating a compromise of its subrogation interest was its proportionate share of the attorney’s fee. On more than one occasion, I argued to the Department’s counsel that §15-120(c)(1) directed me to hold money for the benefit of the Department , but only “to the extent required for the subrogation claim, after deducting applicable attorney fees and litigation costs.” Tis language, I contended, required the Department to reduce its subrogation claim by

30 Trial Reporter / Summer 2010

refused to reduce its interest by it proportionate share of attorney’s fees – or at least refused to acknowledge that it was doing so – and refused to disclose exactly how it determined the amount by which it would reduce its subrogation interest in any given case, it nevertheless regularly and routinely cut its subrogation interest by somewhere between 30% and 40%.4 Te willingness of the Department to routinely compromise its subrogation interest in this fashion – regardless of its stated reasons for doing so – made it unnecessary to challenge the Department’s interpretation of §§15-120(c)(1) and (c)(4). We were happy. Our clients were happy. And the Department was happy, or at least we thought it was! Te legal landscape in “Medicaid law” changed in 2006 with a unanimous decision by the United States Supreme Court in Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268, 126 S. Ct. 1752, 164 L.Ed. 459 (2006). Ahlborn involved a challenge by Heidi Ahlborn, a seriously injured college student and Medicaid Recipient, to the state’s assertion of a $215,000 Medicaid lien against her $550,000 tort settlement. Ahlborn’s settlement did not allocate her recovery amongst her various claims for past and future lost wages, pain and suffering, permanent physical injury, and past and future medical expenses, but Ahlborn and Arkansas reached a stipulation that the settlement amounted to approximately one sixth of the full value of all damages claimed by Ahlborn in her underlying tort action. Arkansas law required that Medicaid Recipients, as a condition of eligibility, automatically assign the state their rights to recover from responsible third parties for medical expenses paid by the Medicaid program. Arkansas law also provided the state with a statutory lien (as opposed to a subrogation interest) on any settlement received from a third party. Ahlborn argued that the anti lien provision of federal Medicaid law, 42 U.S.C. §1396p – which prohibits a state from imposing a lien “against the property of an individual . . . on account of [correctly paid] medical assistance benefits” – trumped

3 Section 15-120(c)(4) provides that “the Department is not liable for payment of or contribution to any attorney fees or litigation costs of any Program Recipient” and that “the deduction of applicable attorney fees and litigation costs under paragraph [15-120(c)(1)] may not be considered as payment for or contribution to those fees or costs by the Department.”

4 Tese figures represent my experience with the Department and the Medicaid Program between approximately 1995 and 2009. A non-scientific survey of several other personal injury lawyers revealed a similar experience over the same time frame.

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