Ahlborn is Resurrected: Medicaid Subrogation Again Limited to Settlement Funds Attributable to Medical Costs

Ahlborn has been brought back to life by Congress. The Bipartisan Budget Act (BBA) of 2018, just passed by Congress and signed into law by the President on February 9th, permanently repeals a provision from 2013 that would have allowed states to recover medical expense subrogation claims from any portion of a Medicaid beneficiary’s legal settlement. In other words, the law contains an outright repeal of language from an earlier budget bill that had overturned a Supreme Court decision in Arkansas Department of Health and Human Services et al. v. Ahlborn, 547 U.S. 268 (2006).

In Ahlborn, the Supreme Court held that Medicaid could only seek reimbursement from Medicaid enrollees injured by a third party from the portion of a settlement attributable to medical costs. The Ahlborn decision was universally lauded as promoting fair and proportionate settlements for Medicaid recipients. But, in 2013, the BBA included a provision overturning Ahlborn. This granted Medicaid a right of first recovery for full reimbursement of covered medical costs before plaintiffs could receive any recovery for lost wages, non-economic damages, or any other type of recovery. That was not fair, and sometimes gave Medicaid recipients little incentive to even seek recovery of damages from a third party.

Implementation of the 2013 language was delayed for several years, thanks primarily to lobbying by the American Association for Justice. The second and final delay expired on October 1, 2017, effectively overturning Ahlborn. However, repeal of the overturn was finally secured as part of the budget deal recently reached by the House and Senate.  From this point forward, states cannot take more than their fair share of a Medicaid recipient’s legal settlement in a tort case, but they can be reimbursed from the portion of any settlement attributable to medical costs.

The 2018 BBA also extends third-party liability requirements to CHIP benefits (Children’s Health Insurance Program) for the first time, however. So as we see states implementing the new provisions of the law, reimbursement for CHIP benefits may also have to be considered when settling a case involving a client eligible for CHIP.