Medicaid Liens

Highlights of the new Medicaid Subrogation lien statute after Wos v EMA Supreme Court Case

I'm a little late posting this new statute on my blog because I was so involved in getting the new Medicaid subrogation statute trimmed down and written in a way that it would be workable for trial lawyers.  These changes were the result of the US Supreme Court Ruling in Wos v EMA issued March 20, 2013.

The Governor signed the new bill incorporating the holding of Wos on July 18, 2013.  The bill is effective immediately.  You can view House Bill 982, in final mark-up version here:  House Bill 982 

Here are the things we KEPT in the old § 108A-57. Subrogation rights; withholding of information a misdemeanor:

  • Medicaid is still limited to a maximum of 100% of the lien OR One Third (1/3) of the gross settlement.
  • Medicaid still prorates within their 1/3 with unpaid medical providers asserting liens.
  • Payment by the lawyer of the 100% or 1/3 of the gross settelement is full and final payement of Medicaid's lien (but medical lien holders paid pro-rata still get are owed their balances pursuant to NCGS 44-49 and 50
Here are the NEW provisions that reflect the Supreme Court's determination that our previous Medicaid statute was in conflict with Federal law:
  • Medicaid recipients can challenge the 1/3 or 100% lien by filing a Petition with a court of competant jurisdiction for "a determination of the portion of the beneficiary's gross recovery that represents compensation for the Medicaid claim."
  • TIMING OF PETITION:  Those petitions must be filed within 30 days of all parties signing a settlement agreement OR court approval of the settlement OR a judgment being issued.
  • The Court will conduct an evidentiary hearing and may consider any factors it deems just and reasonable in determining the allocation of the settlement.
  • The burden of proof is on the petitioner to prove by "clear and convincing evidence" that Medicaid is demanding too large a portion of the settlement.

One other excellent part of the new statute says Medicaid can compromise the liens at any time:  

(a3) Notwithstanding the presumption arising pursuant to subsection (a1) of this section, the medical assistance beneficiary and the Department may reach an agreement on the portion of the recovery that represents compensation for the Medicaid claim. 

In the past, Medicaid took the position they could not negotiate their lien with recipients.  This new portion allows for that negotiation to occur at any time, even before a petition is filed.

Chris Nichols

www.NicholsTrialLaw.com

www.NicholsTrialLaw.com 1.800.906.5984

4th Circuit Court of Appeals upholds application of Ahlborn in NC- rejects reasoning of NC Supreme Court in Andrews

Finally!

After about 7 years of multiple protracted litigation on three separate cases, the United States Court of Appeals for the 4th Circuit has established in the matter of E.M.A. v. CANSLER,  that Ark. Dep't of Human Servs. v. Ahlborn, 547 U.S. 268 (2006) is the law of North Carolina and that the NC Supreme Court opinion of Andrews v. Haygood did not properly interpret Ahlborn as it applies to NC Medicaid reimbursement.

Congratulations to Bill Bystrynski of Kirby & Holt of Raleigh, NC for the huge win for his client.

I'm going to keep this post fairly short and then add more posts with analysis, but I think the court puts their finding best.

Given that North Carolina common law does not bar DHHS’s lien against E.M.A.’s settlement proceeds, we arefaced with the same question considered by the North CarolinaSupreme Court in Andrews: Whether North Carolina’sthird-party liability statutes comport with federal Medicaidlaw and Ahlborn merely because the subrogation statute, N.C.Gen. Stat. § 108A-57, "caps" the state’s recovery at the lesserof the actual medical expenses paid or one-third of the totalsettlement. The North Carolina Supreme Court in Andrewsand the district court in this case adopted a narrow interpretationof Ahlborn, limiting its holding to cases in which the partieshave stipulated to or otherwise allocated settlementproceeds between different categories of damages, therebyidentifying a sum certain for medical expenses. Thus, thesedecisions are based on the view that Ahlborn is inapplicablein cases involving an unallocated lump-sum settlement, suchas the instant matter.On the contrary, however, nothing in Justice Stevens’sopinion for a unanimous court in Ahlborn supports such acrabbed application of that case. The Ahlborn Court addressedthe specific issue of "whether [ADHHS] can lay claim tomore than the portion of [the recipient’s] settlement that representsmedical expenses." 547 U.S. at 280.

The Court in no way rested its analysis of this issue on whether there has been a prior determination or stipulation as to the medical expensesportion of a Medicaid recipient’s settlement. Thus, Ahlborn isproperly understood to prohibit recovery by the state of morethan the amount of settlement proceeds representing paymentfor medical care already received. The North Carolina statute’sone-third cap on the state’s recovery against a Medicaidrecipient’s settlement proceeds does not satisfy Ahlborn insofaras it permits DHHS to assert a lien against settlement proceedsintended (or otherwise properly allocable) tocompensate the Medicaid recipient for other claims, such aspain and suffering or lost wages (i.e., in cases where one-thirdof the recipient’s total settlement recovery is greater than theamount DHHS expended on the recipient’s behalf).10 See Andrews, 669 S.E.2d at 607-09 (Hudson, J., dissenting) (concludingthat the North Carolina statutes conflict with federalMedicaid law by allowing the state to recover from a recipientfunds that were for purposes other than medical expenses);Andrews, 655 S.E.2d at 445 (Wynn, J., dissenting) (same).

...

We are not persuaded that a mere "reasonable cap" on astate’s recovery from an unallocated lump-sum settlement satisfiesthe federal anti-lien law as required by Ahlborn. Indeed,contrary to the Andrews court’s reliance on Justice Stevens’sfootnote, the ATLA Brief, rather than advocating full recoverysubject only to a statutory cap, discussed procedures inseveral states to have "mini-hearings" to set allocations ofproceeds from tort settlements where there is no agreementamong the interested parties. Nevertheless, the Supreme Courtof North Carolina found that footnote 18 in Ahlborn authorizesthe states to mandate full recovery up to a legislativelydetermined,across-the-board limit or cap. This reliance is misplaced.

....

On the basis of Ahlborn’s clear holding that the general anti-lien provision in federal Medicaid law prohibits a statefrom recovering any portion of a settlement or judgment not attributable to medical expenses, DHHS’s lien on E.M.A.’ssettlement proceeds in this case violates federal law. In order to comply with 42 U.S.C. §§ 1396a(a)(18), 1396p, and Ahlborn,North Carolina is free to implement a process by whichsettlement proceeds are explicitly allocated or otherwisedetermined. In this case, we must remand for an evidentiaryhearing consistent with this opinion to determine the properamount of the DHHS lien on E.M.A.’s settlement proceeds.

You can read the full opinion here:   Download F-Opinion

 

This is an outstanding opinion and reflects the excellent analysis of Judge Wynn and Judge Hudson on the NC cases of Ezell and Andrews.

I'll be writing a whole lot more on the issue, but wanted to get this out there.

I'm also proud that the 4th Circuit relied on a Memorandum issued by CMS to the states in their decision:

It is also illuminating that the Centers for Medicaid andMedicare Services ("CMS") issued a memorandum to all Associate Regional Administrators for Medicaid and State Operations in the wake of the Ahlborn decision to aid the states in understanding the effect the decision would have onstate third-party liability recovery. See Memorandum from Gale Arden, Director of CMS’s Center for Medicaid and StateOperations Disable and Elderly Health Programs Group(DEHPG) to all Associate Regional Administrators for Medicaidand State Operations, "State Options for RecoveryAgainst Liability Settlements in Light of U.S. Supreme CourtDecision in Arkansas Department of Human Services v. Ahlborn"(July 3, 2006) (hereafter "CMS Memorandum"). The CMS Memorandum stated that, post-Ahlborn, "if a State attempted to recover from more than the portion of a settlementthat the parties allocated to medical items and services,it was in violation of the federal anti-lien statute." Id. Additionally,the CMS Memorandum clarified that, "to the extent State laws permit recovery over and above what the partieshave appropriately designated as payment for medical itemsand services, the State was in violation of federal Medicaidlaws." Id.  (Page 32)

NCTrialLAw Blog was the first blog to find and publish Download CMS Advisory Ahlborn Settlement Options (July 2006)-1 after some deep searches on the Internet.  It was a sort of "smoking gun" that showed that CMS itself was telling the State of North Carolina that Ahlborn applied.

Chris Nichols

www.NicholsTrialLaw.com

www.NicholsTrialLaw.com 1.800.906.5984

When is a medical provider required to accept Medicaid in an injury case?

Increasingly, lawyers find that even when an injured client has some type of health care coverage, when the client has been injured by the negligence of a third party, it is often difficult to get the health insurer to pay the bills.  Typically, this stems from the Health Insurance contract having language that says the insurer is a "secondary payer" or "payer of last resort".

In the not too distant past, Medicaid was a reliable source for payment of medical bills for clients who were from low incomes homes or disabled (but not eligible for Medicare).

In the last five years, Medicaid has changed rules which emphasize that Medicaid is a secondary payer to third party liability insurance.  While this seems "fair" in the sense that the negligent third party caused the injury, the reality is that Liability Insurance Companies rarely, if ever, "pay as you go" for medical treatment.  To protect their insured (and their bottom line) they refuse to pay for services as they are rendered and choose to pay "at the end" of the case, after treatment is completed.

This makes it hard for clients to get needed medical treatment, makes that treatment more "expensive" for the client, and takes away Medicaid's 1/3 "cap" on recovery from liability settlements.

I frequently get inquiries from lawyers about how to "make Medicaid pay" for medical treatment.  Alternatively, the question is also "How can I force the medical provider to submit the bills to Medicaid?"  Many medical providers do not like being paid by Medicaid because the reimbursement rates are low and the provider must accept Medicaid's payment as payment in full (aside from the $3 co-pay Medicaid allows).

Below I have pasted the relevant sections from Medicaid's manual to medical providers which provide the framework for how to get the bills paid.

You can view the entire Medicaid manual here.


Retroactive Eligibility
Retroactive coverage may be approved for up to three calendar months prior to the month of the application if the applicant meets all eligibility conditions in the retroactive period. Medicaid will pay for covered services received during the retroactive period provided that all other Medicaid guidelines are met. Providers may choose to accept or decline retroactive eligibility. However, the provider's office policy should be consistently enforced. If a provider accepts retroactive eligibility, upon receipt of Medicaid reimbursement, the provider shall refund to the recipient all money paid by the recipient for services covered by Medicaid.
 
Accepting a Medicaid Recipient
In accordance with 10A NCAC22J.0106, a provider may choose whether to accept a patient as a Medicaid patient.  However, Medicaid providers must be consistent with their policies and procedures when accepting or refusing Medicaid recipients. Providers may not discriminate against a Medicaid recipients based on the recipient's race, religion, national origin, color, or handicap.
Agreeing to provide services to a Medicaid recipient and submission of a claim to the N.C. Medicaid Program for payment constitutes agreement to accept the Medicaid payment (in addition to any authorized copayment or third-party payment) as payment in full.

A provider may refuse to accept a Medicaid recipient and bill the recipient as private pay only if the provider informs the recipient prior to rendering the service, either orally or in writing, that the service will not be billed to Medicaid and that the recipient will be responsible for payment.


But of course, you have to compare those passages to the rules regarding Third Party Laibility situations: 
 
Third-Party Liability
State and federal regulations for third-party liability (TPL) require responsible third-party insurance carriers to pay for medical services prior to a provider's submitting a claim to Medicaid. Providers are required to seek payment from third-party insurance carriers when they know of their existence. A third-party insurance carrier is an individual or company who is responsible for the payment of medical services. These third parties are Medicare, private health insurance, automobile, or other liability carriers. DMA's third party recovery (TPR) unit is responsible for implementing and enforcing TPL laws. The TPR unit implements and enforces these laws through both cost avoidance and recovery methods. Refer to Section 7, Third-Party Insurance, for additional information.

Continue reading "When is a medical provider required to accept Medicaid in an injury case?" »

www.NicholsTrialLaw.com 1.800.906.5984

Attorney fees and Medicaid lien cap in North Carolina personal injury cases

Just had a great straight forward question about the interaction of Medicaid Liens, Attorney Fees, and medical provider liens pursuant to NCGS 44-49-50.

QUESTION:  Is Medicaid's lien capped at one third of liability proceeds received or half of what is left over after attorney's fees?  In other words, if I am pro-rating a Medicaid lien with 44-49 liens and my fee is 25%, are they still sharing a third or are they sharing 37.5%?

ANSWER:  Medicaid gets no more than 1/3 of the total settlement.  Your attorney fees are irrelevant to Medicaid's share.   The most Medicaid can get is 1/3 of the settlement, even if you charge only 1 dollar as a fee.
 
Medicaid will prorate with NCGS 44-49/50 liens within their 1/3 share.  But remember that paying the parorata share of the 44-49/50 liens does not extinguish the balance of the medical bill.  The client still owes the balance after the prorata share unless you negotiate a "final payment"  compromise with the mediacl provider.  44-49/50 simply act as as a way to get the lawyer out of the middle and get the provider some money before they have to turn to a collection action to get it.
 
The 1/3 (or Medicaid's portion thereof) DOES take care of Medicaid, in full.

_________________________

Chris Nichols

www.NicholsTrialLAw.com

www.NicholsTrialLaw.com 1.800.906.5984

PA Federal Western District tosses out Medicaid Lien...sorta

Congratulations to attorney Patrick J. Loughren of Pennsylvania for his victory in Tristani v. Richman, a medicaid subrogation case.


I don't have a lot of time today to dig through this case, which is 50 pages long and denser than a fruitcake, but this is, in my opinion, and "extension" on Ahlborn.  also, it addresses that tricky part of Ahlborn stemming from the "stipulation" of the meds and the "either/or' aspect of the case as presented to  SCOTUS.


Here is a good summary from Med Law Blog by Michael Cassidy: 

 http://www.medlawblog.com/archives/medicare-reimbursement-tristanis-blow-to-state-medicaid-agencys-third-party-liability-collection-practices.html

www.NicholsTrialLaw.com 1.800.906.5984

How does Medicaid interact with medical payments insurance?

I received a good question today and thought I would share my thoughts on the issue.  The question concerns Medicaid and "med pay".  In NC, Medicaid gets 100% of med pay (first party) insurance proceeds.  The problem is that quite often physicians and chiropractors often receive the med pay before the lawyer is involved.  Or, alternatively, the medpay is the only way for the client to receive certain non-Medicaid covered treatment. 

So when you make a settlement which will not cover "all" the bills, how do you handle this scenario?  I see two ways to go about making the disbursement.  I can't say if one or the other is "right" as I don't think the statutes clearly cover this.

It should go like this, hypothetically:

Scenario 1

Assume:

Med pay $2,000 (already paid to Chiro 1)

Settlement $10,000
Medicaid Lien: $5,000
Chiro 1:  $1,000 (balance after med pay received of $2,000)
Chiro 2: $2,000 balance

So, now let's apply the law and do the math:

$10,000 Settlement
-$3,333.33 Atty Fees
$6,666.66   Balance

1/3 of settlement is $3,333.33 for Medicaid purposes (Medicaid is limited to recovering 1/3 of settlement)

1/2 of Net is $3,333.33 for NCGS 44-49 lien purposes (Medical liens can only force the attorney to pay 1/2 of the Net settlement after attorney fees and it makes it easier when 1/2 of net and 1/3 are the same thing).

Medicaid shares pro-rata with unpaid medical providers within the 1/3.

$5,000 Medicaid
$1,000 Chiro 1
$2,000 chiro 2
$8,000                    $3,333,3/$8,000 = 41.66% shares of the 1/3

Now we figure the prorata share for each lien holder using the percentage from above:

5,000 x 41.66% =$2,083.31
1,000 x 41.66% = $416.6
2,000 x 41.66% = 833.20

That's how the 1/3 should be distributed BUT, since Medicaid is entitled to 100% of the medpay, they will get another $2,000 on top of the share above.

So:
$10,000 Settlement
-$3,333.33 Atty Fees
$6,666.66   Balance

-$2,083.31  Medicaid
-$416.6  Chiro 1
-833.20  Chiro 2

$3,333.50

-$2,000 Medicaid Med pay
1,333.50 to Client

But there appears to be another way to do this.  In the first scenario above we prorated Medicaid's full lien,  then paid Medicaid the $2,000 from the remainder of the settlement.

The second method would pay Medicaid the $2k medpay FIRST, then use the balance of the lien for proration purposes.  That would give the other providers more money under pro-ration.

The second method would look like this:

Scenario 2

$10,000 Settlement
-$3,333.33 Atty Fees
$6,666.66   Balance

1/3 of settlement is $3,333.33 for Medicaid purposes

1/2 of Net is $3,333.33 for 44-49 lien purposes (makes it easier when 1/2 of net and 1/3 are the same thing)

Medicaid shares pro-rata with unpaid medical providers within the 1/3.  (We've already taken out the $2k Medicaid will receive)

$3,000 Medicaid lien
$1,000 Chiro 1
$2,000 chiro 2
$6,000                    $3,333.33/$6,000 =  55.55% shares of the 1/3

Now we figure the prorata share for each lien holder using the percentage from above:

3,000 x 55.55% = $1,666.50
1,000 x 55.55% = $555.55
2,000 x 55.55% = $1111.11

Since Medicaid is entitled to 100% of the medpay, they will get another $2,000 on top of the share above.

So:
$10,000 Settlement
-$3,333.33 Atty Fees
$6,666.66   Balance

-$1,666.50 Medicaid
-$555.55 Chiro 1
-$1111.11 Chiro 2
$3,333.50

-$2,000 Medicaid (Med pay)
1,333.50 to Client

Let's compare scenarios now:

Scenario 1:

$2,083.31 (Medicaid prorated share) + $2,000 for med pay = 4,083.31 to Medicaid
$ 416.6 Chiro 1
$ 833.20 Chiro 2

Scenario 2:
$1,666.50 (Medicaid prorated share) + $2,000 for med pay = 3,666.50 to Medicaid
-$555.55  Chiro 1
-$1111.11  Chiro 2

So, technically, Scenario 2 is better for your client in my mind because Medicaid is paid in full with $3,666.50 and there is more money available for the doctors (who are not paid in full but might be more likely to accept the higher % payment as payment in full).

I don't know if there is a right or wrong to his one.  I'm sure Medicaid would prefer to be paid more, and they may have a point since technically, the Medpay should have gone to them in the first place.

--Chris Nichols

www.NicholsTrialLaw.com

www.NicholsTrialLaw.com 1.800.906.5984

Liens and Workers' Compensation

I had the pleasure of speaking this  morning at the North Carolina Academy of Trial Lawyer's Workers' Compensation Roundtable Seminar.  I was pinch hitting for a number of State and federal Employees who were supposed to talk about:  Medicaid, Medicare, State Employee Health Plan, and TriCare.

Instead, they got me.

I am posting a link to my PowerPoint presentation for  those in attendance who wantde the "paper" copy of my talk.  Here is the link:  Ahlborn PowerPoint Slide show

Thanks for all the great questions!

Chris Nichols

www.NicholsTrialLaw.com

www.NicholsTrialLaw.com 1.800.906.5984

Lien manual published by Chris Nichols

Well, it finally happened- I'm officially a published author now (and editor!)

The NC Lien Manual is now on the shelves, the one I edited and wrote chapters for and that was published by the North Carolina Academy of Trial Lawyers and Lexis.  Before you think that I'm pitching my own product, you should know that 100% of proceeds go to NCATL to further the fight for people's rights, not to me!

Here is the link Nichols_lien_manual_2 to check it out: NC Lien Manual

Here is what Lexis says:

Description

New Publication!

The Personal Injury Liens Manual is a brand new publication that is intended to help simplify the complexity that characterizes personal injury liens, and to provide information you need to secure maximum net recovery for your clients.

Edited by Christopher R. Nichols, a leading personal injury attorney and Academy member, the first edition is authoritative, comprehensive, and user-friendly. The 380+ page manual contains 6 chapters and provides fingertip access to more than 35 sample forms, letters, and complaints, and includes dozens of practice tips and pointers from the experienced authors. It also contains the text of relevant state and federal statutes, regulations, and case law.

www.NicholsTrialLaw.com 1.800.906.5984

Medicaid v. State Employees v. Medical Provider Liens: An Epic Battle

I recently received a great question from an attorney regarding the interplay of Medicaid, State Employee Helath Plan, and Medical Provider Liens.  With the recent developments in Medicaid subrogation law (The SCOTUS decision in Ahlborn and North Carolina Supreme Court ruling in Ezell) and the "new" amended statute for the State employee Health Lien, lawyers are left scratching their heads on hoow to address the competing liens of these entities.

The Question:

We recently settled a case on behalf of a minor.  There is a Medicaid, a SEHP and a hospital lien.  Medicaid lien is much greater than the other two, but payment in full of all three would be less than 1/3 of the total net proceeds to the minor. 

By way of example (not actual numbers): Assume a $100,000 settlement and attorney fees and costs of $30,000.  Liens total $30,000.  $15,000 Medicaid, $10,000 SEHP and $5,000 Medical providers.  Here's the catch: parent's claim had run prior to suit being brought, thus the entire settlement was for minor's pain and suffering, future lost wages, and future medical expenses.  Under Ahlborn it would seem that Medicaid has no right of recovery (a percentage of nothing is nothing) but that the SEHP and Medical Providers would get paid in full.

Have you seen an NC case like this go through the system post-Ahlborn or has the scenario been discussed at any of the meetings you have attended?

MY Answer:
You win the award for "best law school exam question on liens"!

No case like yours has come forward yet, but I was expecting one.  The folks at SEHP were sort of surprised when I told them this would happen, they seemed to think that if you had SEHP ALL your bills would be paid.  They never thought about people losing jobs, losing insurance coverage, etc.

MEDICAID
The analysis should start with Ahlborn.  Ahlborn tells us that Medicaid can not claim repayment from any portion of a settlement not apportioned to medical payments.  Clearly, the settlement in this case has no component of medical bills because the medical bill claim was that of the parents, and the statute of limitations for the parents claim (and therefore Medicaid's derivative claim) had run before the suit was filed.  The only possible argument that Medicaid could make would be to argue that the parents "assigned" the right of collection to Medicaid upon the child's receipt of Medicaid benefits under 108A-57.  As is noted in a recent publication by John Saxon at the UNC School of Government:

It is clear that both statutes involve the recovery of Medicaid payments from third parties who are liable to Medicaid beneficiaries. G.S. 108A-57, however, uses the term "subrogation" to define the state Medicaid agency's rights against third parties while G.S. 108A-59 defines the State's right as one arising by virtue of "assignment." Subrogation and assignment, though, are distinct legal concepts. So, it is not entirely clear whether the State's claim against a third party is a claim based on subrogation or a claim based on assignment, whether the State may assert a claim based on subrogation and assignment, whether the State must elect to pursue its claim based on subrogation or assignment, and whether the scope of the State's rights under G.S. 108A-59 is coextensive with, broader than, or narrower than the scope of its right of subrogation under G.S. 108A-57. Nor is it clear whether the "pro rata" and "one-third cap" provisions of G.S. 108A-57 apply if the State's claim is based on an assignment under G.S. 108A-59 rather than subrogation under G.S. 108A-57.

So at the outset, we have the argument that Medicaid has NO lien or right of subrogation pursuant to Ahlborn.  The Ezell case, of course, is directly contradictory to this, with Judge Steelman's dissent at the Court of Appeals (adopted per curiam by NCSC)saying:

Notwithstanding any other provisions of the law, to the extent of payments under this Part, the State, or the county providing medical assistance benefits, shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of this assistance, or of the beneficiary's personal representative, heirs, or the administrator or executor of the estate, against any person. . . .

N.C. Gen. Stat. § 108A-57(a) (2005) (emphasis added).

The above language contemplates a broad right of subrogation, which is indicated by the reference to "all rights of recovery." Subrogation is not limited to tort recovery, as the statute expressly covers contractual rights or "otherwise." See State v. Shade, 115 N.C. 757, 759, 20 S.E. 537, 537 (1894) (noting that when the words "or otherwise," follows an explicit example in a statute, the legislature intends to include every other manner of fulfilling the purpose of the statute, for example here, recovery, no matter what might be the attendant circumstances). The causation language discussed by the majority is from the portion of the statute dealing with the duty of a plaintiff's attorney to distribute settlement proceeds to DMA, not from the portion of the statute defining the scope of DMA's right of subrogation, which is set forth verbatim above.

STATE EMPLOYEE HEALTH PLAN
The next matter to address is the lien of the State Employee's Health Plan.   Of course, the SEHP lien will attach to the proceeds regardless of whether they are for medical bills or not:

§ 135-40.13A. Liability of third person; right of subrogation; right of first recovery.

(a) Whenever the Plan pays benefits for hospital, surgical, medical, or prescription drug expenses, with respect to any Plan member, the Plan shall be subrogated, to the extent of any payments under the Plan, to all of the Plan member's rights of recovery against liable third parties, regardless of the entity or individual from whom recovery may be due.

Though, one might argue that the logic of Ahlborn would apply and SEHP would not have a lien on the minor's damages (though it seems the statute allows the lien to attach to any proceeds).

The Plan's lien language gives SEHP the "right of first recovery" which would seemingly place SEHP in a higher priority than Medicaid, though Medicaid could argue that because they are federally funded, the state law would be preempted.

The Plan has the right to first recovery on any amounts so recovered, whether by the Plan or the Plan member, and whether recovered by litigation, arbitration, mediation, settlement, or otherwise.

The Plan's subrogation right is limited to recovering no more than 50% of the net settlement after "reasonable" attorney fees and costs (presumed to be 1/3) have been paid.

There is currently no guidance on how SEHP would "compete" with Medicaid if both have valid liens.  SEHP told me during our meeting that they were "working with the AG's office and Medicaid" on a way to handle this type of situation.  My best guess is that if both liens are valid, Medicaid and SEHP would devise some sort of pro-rata sharing.

SEHP and Medical Liens
SEHP claims to have priority over all Medical Provider liens.  Thus, because SEHP's lien formula is almost exactly the same as the Medical Provider lien formula, if SEHP's lien is equal to 50% of the NET settlement (after reasonable collection costs) then the Medical providers would not be entitled to any payment under the statute (though their balances would still be owed by the client).

If SEHP's lien was LESS than 50% of the NET (after reasonable costs of collection) then the question would first be to determine if there is a valid Medicaid lien.  If there is a valid Medicaid lien, AND Medicaid does NOT have to share with SEHP, then the Medicaid and Medical provider liens would be prorated up to 1/3 of the settlement (for Medicaid) or 50% of the net after Attorney Fees (for Medical providers).

MEDICAL LIENS
Finally, you have medical liens under NCGS 44-49 and 44-50. Medicaid must share "pro-rata" with any unpaid medical providers pursuant to the requirements of:

§ 108A-57. Subrogation rights: withholding of information a misdemeanor

(a)  . . . Any attorney retained by the beneficiary of the assistance shall, out of the proceeds obtained on behalf of the beneficiary by settlement with, judgment against, or otherwise from a third party by reason of injury or death, distribute to the Department the amount of assistance paid by the Department on behalf of or to the beneficiary, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, but the amount paid to the Department shall not exceed one-third of the gross amount obtained or recovered. (emphasis added)

This was discussed in the previous section.  Further, SEHP claims that they do NOT pro-rate with medical providers within the 50% of Net after attorney fees limitation.

Thus, I see two scenarios that could result from your case:

1)  Medicaid Valid, SEHP Valid, Medical Liens Valid
In this scenario Medicaid and SEHP would first need to determine if one or the other had priority in payment or if they prorate within the 1/3 limitation set by medicaid.  If SEHP has first priority, then the question would be does Medicaid get 1/3 of what is left after SEHP is paid or are they limited to no more than 1/3 of the total settlement minus what SEHP has been paid.  Medical providers would receive the remainder, pro-rated with Medicaid up to the 1/3 limit of medicaid or the 50% after attorney fees of Medical Provider liens.
2.  Medicaid INVALID, SEHP Valid, Medical Liens Valid
If our courts apply Ahlborn as written, then Medicaid should have no lien on the minor child's pain and suffering or future medicals recovery.  Then SEHP would recover it's full lien, up to 50% of the net after "reasonable costs of collection" and then Medical providers would share among themselves, pro-rata, up to 50% of the net after attorney fees. (Which is essentially the same 1/3 that SEHP claims).  Medical providers could argue that their share should be 50% of the NEt AFTER SEHP is paid, but I don't see any real basis for that argument.
I think that you will probably need to litigate this matter.  In that regard, you need to give Medicaid notice of all hearings.  My guess is that you would make these arguments at the minor settlement hearing and that Medicaid (AG) would need to participate.

If you have not read my posts on these issue on my Blog, you might want to check it out: Ahlborn Resources
Chris Nichols
www.NicholsTrialLaw.com 1.800.906.5984