Medicaid Subrogation Right Restricted

The Eighth Circuit Court of Appeals has limited Medicaid’s subrogation interest in a tort recovery.

Plaintiff received substantial injuries in an auto wreck. She applied for Medicaid coverage and agreed to assign to the state her “right to any settlement, judgment or award” she might receive from any third parties. Medicaid paid over $215,000 in benefits on her behalf.

Medicaid and plaintiff agreed that plaintiff’s damages exceeded $3,000,000. However, plaintiff settled her case against the tortfeasors for $550,000.

Medicaid claimed their full subrogation interest. Plaintiff argued that because plaintiff only recovered 16.5% of her damages she should only have to reimburse Medicaid 16.5% of the subrogation interest (approximately $35,000).

The appellate court reversed a ruling in favor of Medicaid and held that the subrogation interest should be reduced to the lower amount. The Court found that the Arkansas Medicaid Statute was in conflict with federal law and therefore was pre-empted. The decision is Ahlborn v. Arkansas Dept. of Human Services.

Tennessee’s Medicaid law (called “Tenncare”) takes into account the fact of a limited recovery and reduces the subrogation interest accordingly. However, this decision will be helpful to Tennessee lawyers who have personal injury cases in other states.