• Missouri and Kansas Medicaid Liens After Wos v. E.M.A.
  • July 3, 2013 | Authors: Ambika Behal; Bryan E. Mouber
  • Law Firm: Baker Sterchi Cowden & Rice, L.L.C. - Kansas City Office
  • The U.S. Supreme Court recently held that the federal Medicaid statute’s anti-lien provision preempted a North Carolina state statute that required a Medicaid beneficiary to release up to one-third of any damages recovered for a tortious injury to the State as reimbursement for payments it made for the beneficiary’s medical treatment, up to the amount actually paid by the state. We take a look at how the ruling in Wos v. E.M.A., 133 S.Ct. 1391 (2013) could potentially affect Missouri and Kansas Medicaid lien statutes.

    The federal Medicaid statute’s anti-lien provision, 42 U.S.C. § 1396p(a)(1) prohibits any state from attaching a lien on a Medicaid beneficiary’s property to recover payments made by the state on behalf of the beneficiary. In 2006, the Supreme Court held that this provision prohibits a state from taking “any portion of a Medicaid beneficiary's tort judgment or settlement not ‘designated as payments for medical care.’” Wos, 133 S.Ct. at 1395 (citing Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 284 (2006)). Accordingly, a State has the power to attach a lien only to the portion designated as payments for medical care.

    In Wos, the parties’ $2.8 million settlement did not designate any portion for medical claims, so the district court, following the statutory scheme, ordered one-third of the settlement placed in escrow for payment of the Medicaid lien. On appeal, the Fourth Circuit overturned the trial court. E.M.A. ex rel. Plyler v. Cansler, 674 F.3d 290, 312 (4th Cir. 2012). The Fourth Circuit held that “[i]n the event of an unallocated lump-sum settlement exceeding the amount of the state's Medicaid expenditures, as in this case, the sum certain allocable to medical expenses must be determined by way of a fair and impartial adversarial procedure.” Id. Accordingly the Fourth Circuit remanded the case “for an evidentiary hearing at which the district court shall determine the proper amount of DHHS's Medicaid lien.” Id.

    The Supreme Court affirmed the Fourth Circuit holding and held that the North Carolina statutory scheme, which created an “irrebuttable, one-size-fits-all statutory presumption, [was] incompatible with the Medicaid Act’s clear mandate that a State may not demand any portion of a beneficiary’s tort recovery except the share that is attributable to medical expenses.” Wos, 133 S.Ct. at 1399. The Supreme Court likewise remanded the matter for an evidentiary hearing. Id. The problems with the North Carolina statutory scheme were twofold: (1) it allowed the state to take a portion of settlement or judgment funds that were not expressly designated as being for medical payments, in violation of 42 U.S.C. § 1396p(a)(1), and (2) it established an arbitrary percentage of funds as the presumptive amount of the settlement or judgment that should be attributable to medical payments.

    So, what does Wos mean for Missouri and Kansas Medicaid lien laws? Due to the newness of the Wos decision and minor differences in these states’ laws versus the North Carolina statute at issue, it is not entirely clear at this time. Both states’ lien laws provide for a lien up to the amount of the medical expenses paid by the state. Both states’ laws permit the states to recover funds that have not been expressly “designated as payments for medical care,” the first problem in Wos.

    Missouri’s Medicaid lien statute favorably incorporates one aspect of the Wos ruling - it provides for a judicial or administrative determination of the amount of the settlement or judgment that should be attributable to medical payments when there is no specific allocation for medical payments. Mo. Rev. Stat. § 208.215(4). The potentially problematic provision, however, is that the statute creates a lien against the settlement or judgment funds in the full amount of the medical payments made by MO HealthNet, and requires that the full amount of the third-party benefit be placed into a trust account until the amount of the state’s recovery is determined, which impairs the beneficiary’s right to that portion of the funds that should not be encumbered. It is not presently clear whether this would comport with Wos or not. As a practice tip, a defendant should seek an evidentiary hearing to determine the amount of the Medicaid lien before disbursing any proceeds. See § 208.15(9).

    Kansas’ Medicaid program, now known as KanCare, is governed by K.S.A. 39-719a. The Kansas statute also runs afoul of the first problem in Wos, in that it allows the state to claim reimbursement of any money paid without regard to the “share that is attributable to medical expenses.” Because there is no statutory procedure for holding a hearing or for weighing any of the evidentiary factors set forth in Wos, it appears the Kansas statutory scheme also runs afoul of the second problem in Wos, and that this state’s Medicaid lien statute is probably preempted by 42 U.S.C. § 1396p(a)(1). However, no court has interpreted the bounds of K.S.A. 39-719a in 25 years, providing little guidance to practitioners with respect to how the Kansas courts might adopt to Wos. In practice, KanCare liens are usually negotiated and compromised in advance of any disbursement of proceeds.