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Bipartisan Budget Act Threatens Personal Injury Awards

January 15, 2014

On December 26, 2013, President Obama and the House Budget Committee leadership reached a deal that set a new federal budget. The deal, according to Reuters, “reduces the risk of another government shutdown.” A less publicized section of the Bipartisan Budget Act, one that few news outlets have reported about, addresses personal injury claimants who receive Medicaid benefits. In short, this budget deal will make it more difficult for these individuals–many of them harmed through no fault of their own–to collect and retain the funds they were awarded in court or by way of settlement.

Though no major news sources have reported this, legal blogs have claimed that this act would effectively overturn two Supreme Court rulings (Arkansas Department of Health and Human Services v. Ahlborn in 2006 and Wos v. E.M.A. in 2013). In the case of Heidi Ahlborn, the plaintiff was permanently disabled in a car accident in 1996, and was granted funds from Medicaid in order to pay for her medical treatment. After Ahlborn collected $550,000 in a 2002 settlement, the Arkansas Department of Health and Human Services claimed it was owed nearly half this amount, $219,156.78, which is the amount of money ultimately paid by the state in the case.

Ahlborn and her team of attorneys argued that the state was entitled only to the amount allocated for past medical expenses (paid by Medicare), which totaled $35,581.47. This case made its way through the District Court in Arkansas, which sided with the state, before moving on to the Eighth Circuit Court of Appeals in Missouri, which sided with Ahlborn. In 2006, ten years after the accident that left Heidi Ahlborn permanently disabled, the Supreme Court ruled in a unanimous decision that the then-current Medicare laws did not allow the Arkansas Department of Health and Human Services to claim any amount greater than that which covered past medical expenses or any awards for pain and suffering or lost wages. In a very similar decision from October 2013, the Supreme Court reinforced its decision in Ahlborn, claiming that the anti-lien provision in Medicaid laws overrides any individual states’ laws about recovering funds by Medicaid beneficiaries.

The new Bipartisan Budget Act, in a section titled “Strengthening Medicaid Third-Party Liability,” effectively overrides both of these Supreme Court decisions. It specifically eliminates language that placed a limit on unfair recoveries in liability cases that involve Medicaid. Even a defense firm, in its blog post on the matter, claims that this new measure “unfairly reduces the beneficiaries’ recoveries for non-medical expenses and creates barriers to settling cases in the first instance.” In short, over time, plaintiffs and their injured clients may not want to spend years pursuing legitimate claims when their awards may simply be stripped away by the state. The defense firm’s blog continues, “Ironically, the provision may be self-defeating in that the legislation may lead to fewer Medicaid beneficiary settlements, leaving less funds available from which Medicaid programs can recover.”

As with many of the decisions this Congress has made, those who stand to gain from this new bill are large corporations, which are often the ones at fault in personal injury cases. Another group to benefit from this bill is insurance companies, who have to pay damages to victims who were harmed through no fault of their own.

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