Appeals court judges earn their pay interpreting the meaning of laws that seemingly conflict.
Consider, for example, a recent case about Medicaid liens. (Tristani v. Richman, Nos. 09-3537, 09-3538, rendered by the United States Court of Appeals for the Third Circuit, June 29, 2011.)
Pennsylvania had asserted liens on proceeds from lawsuit settlements that several Medicaid recipients had received. The state said it was entitled to the liens because the proceeds were compensation for medical expenses, which Pennsylvania had paid for the recipients through Medicaid benefits.
The recipients objected, saying there were two problems with a lien to recover Medicaid benefits. First, federal law prohibits liens on the property of Medicaid recipients. Second, another federal law bars the state from recovering Medicaid benefits from recipients. How can Pennsylvania have a lien to recover its Medicaid benefits if there’s a law against liens and another against recovering benefits from Medicaid recipients?
Pennsylvania, on the other hand, pointed to two other statutes – one requiring the state to recover medical expenses paid by third parties, and another saying that Medicaid recipients must assign their rights to recovery of medical expenses to the state. We have to go after these proceeds, the state said, and these recipients were required to assign us their recovery rights.
How can you reconcile these laws that seem to mandate recovery of medical expenses while simultaneously barring recovery?
Making these decisions is what courts are for.
Here’s the short answer: the state can assert a lien against the Medicaid recipients’ settlement proceeds, as long as the recipients have a chance to contest the amount of the lien.
To see how the court arrived at this decision, let’s look more closely at the statutes:
Under federal Medicaid law, states must require recipients of benefits “to assign [to] the State any rights … to support … and to payment for medical care [the recipient has] from any third part.” 42 U.S.C. § 1396k(a)(1)(A). This is called the assignment provision.
States must also “ascertain the legal liability of third parties … to pay for care and services” for Medicaid recipients and “in any case where such a legal liability is found to exist after [Medicaid benefits have been paid, to] seek reimbursement … to the extent of such legal liability.” 42 U.S.C. § 1396a(a)(25)(A)-(B). This is called the reimbursement provision.
No lien may be imposed against the property of nay individual prior to his death on account of [Medicaid benefits] paid or to be paid on his behalf … except –
(A) pursuant to the judgment of a court on account of benefits incorrectly paid on behalf of such individual, or
(B) in the case of the real property of an individual – [who is in a nursing home and required by law to spend his own income on those expenses, and who cannot reasonably be expected to return home].
42 U.S.C. § 1396p(a)(1). This is called the anti-lien provision.
Federal law also provides that “[n]o adjustment or recovery of any [Medicaid benefits] correctly pai9d on behalf of an individual … may be made, except [in limited circumstances not at issue in this case].” 42 U.S.C. § 1396p(b)(1). This is called the anti-recovery provision.
Resolving the conflict
When statutes conflict, courts try to read the statutes together and try to give each its fullest possible meaning.
In this case, the trial court where the case was originally brought had ruled that the state could recoup its medical costs paid by third parties. However, because of the anti-lien and anti-recovery provisions, the state could not collect from the property of Medicaid recipients (and the trial court considered lawsuit proceeds to be the recipients’ “property”). Instead, the court held that the state had to recoup its Medicaid dollars by its own action – either filing suit directly against third parties or “intervening” (becoming an additional party) in lawsuits filed by Medicaid recipients.
The appeals court agreed that Pennsylvania could recoup its medical costs from lawsuit recoveries. “[T]he only way to harmonize the conflicting language of the anti-lien and anti-recovery provisions with the later-enacted reimbursement and forced assignment provisions is to conclude that the anti-lien and anti-recovery provisions do not apply to medical costs recoverable from third parties,” the court ruled.
But the appeals court disagreed that the state had to intervene in lawsuits to recover those costs. It noted that over 30 states use liens to recoup these costs and that Congress has “chosen not to prohibit this widespread and pervasive practice.” As a result, Pennsylvania can recoup such costs simply by imposing a lien, the court said.
Then there is the question of how much the state is due. A lawsuit may seek recovery for medical costs, pain and suffering, lost wages, and other damages. The state’s lien is limited by law to medical costs only. But a settlement is typically a lump sum, with no allocation made between the types of damages. So how much goes to the state?
Pennsylvania’s answer was to adopt the rule that it is entitled to one-half of the lawsuit proceeds (after expenses) or the state’s actual expenditures of medical costs on behalf of the recipient, whichever is less. A dissatisfied litigant has appeal rights. “If a court does not adjudicate the amount of the [state’s] claim against a settlement, the Bureau of Hearings and Appeals has jurisdiction to hear and determine an appeal by a beneficiary contesting the amount of the claim.” 55 Pa. Code § 259.2(d).
The appeals court found Pennsylvania’s apportionment scheme to be valid.
How would this ruling apply in a typical case?
Suppose you’re a Pennsylvania resident who was injured in an automobile accident, which resulted in medical costs that the state paid through Medicaid benefits. You receive a settlement of $100,000 (after attorney fees and other litigation costs).
Under this new ruling, Pennsylvania can impose a lien to recoup it actual medical costs paid on your behalf, but this lien cannot exceed $50,000. There is no requirement that the state intervene in your case against the negligent driver or file its own lawsuit. If you disagree with the amount of the lien, you can appeal (as long as a court did not apportion the amount of the settlement attributable to medical costs).