Source: https://www.scribd.com/document/1052960/US-Supreme-Court-04-1506
Timestamp: 2019-11-22 18:56:49
Document Index: 129368770

Matched Legal Cases: ['§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§433', '§1396', '§1396', '§20', '§20', '§20', '§20', '§20', '§20', '§20', '§20', '§20', '§20', '§20', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§3907', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§1396', '§20', '§433', '§1396', '§433', '§433', '§433', '§1396', '§1396', '§1396', '§1396', '§1396']

US Supreme Court: 04-1506 | Medicaid | Damages
saveSave US Supreme Court: 04-1506 For Later
Health and Human Services: AdvOpn07-18E
1208 Budget Address News Release
star resource list gno-mc
Final Report Special Master September 11 Victim Compensation Fund
Committee on Health Newsletter, June 2013
family plan sample portfolio
What Is Individual Health Insurance Mandate
ARKANSAS DEPARTMENT OF HEALTH AND HUMAN
SERVICES ET AL. v. AHLBORN
No. 04–1506. Argued February 27, 2006—Decided May 1, 2006
Federal Medicaid law requires participating States to “ascertain the
legal liability of third parties . . . to pay for [an individual benefits re
cipient’s] care and services available under the [State’s] plan,” 42
U. S. C. §1396a(a)(25)(A); to “seek reimbursement for [medical] assis
tance to the extent of such legal liability,” 1396a(a)(25)(B); to enact
“laws under which, to the extent that payment has been made . . . for
medical assistance for health care items or services furnished to an
individual, the State is considered to have acquired the rights of such
individual to payment by any other party for such health care items
or services,” §1396a(a)(25)(H); to “provide that, as a condition of
[Medicaid] eligibility . . . , the individual is required . . . (A) to assign
the State any rights . . . to payment for medical care from any third
party; . . . (B) to cooperate with the State . . . in obtaining [such]
payments . . . and . . . (C) . . . in identifying, and providing informa
tion to assist the State in pursuing, any third party who may be li
able,” 1396k(a)(1). Finally, “any amount collected by the State under
an assignment made” as described above “shall be retained by the
State . . . to reimburse it for [Medicaid] payments made on behalf of”
the recipient. §1396k(b). “[T]he remainder of such amount collected
shall be paid” to the recipient. Ibid. Acting pursuant to its under
standing of these provisions, Arkansas passed laws under which,
when a state Medicaid recipient obtains a tort settlement following
payment of medical costs on her behalf, a lien is automatically im
posed on the settlement in an amount equal to Medicaid’s costs.
When that amount exceeds the portion of the settlement representing
medical costs, satisfaction of the State’s lien requires payment out of
proceeds meant to compensate the recipient for damages distinct
2 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
from medical costs, such as pain and suffering, lost wages, and loss of
Following respondent Ahlborn’s car accident with allegedly negli
gent third parties, petitioner Arkansas Department of Health Ser
vices (ADHS) determined that Ahlborn was eligible for Medicaid and
paid providers $215,645.30 on her behalf. She filed a state-court suit
against the alleged tortfeasors seeking damages for past medical
costs and for other items including pain and suffering, loss of earn
ings and working time, and permanent impairment of her future
earning ability. The case was settled out of court for $550,000, which
was not allocated between categories of damages. ADHS did not par
ticipate or ask to participate in the settlement negotiations, and did
not seek to reopen the judgment after the case was dismissed, but did
intervene in the suit and assert a lien against the settlement pro
ceeds for the full amount it had paid for Ahlborn’s care. She filed this
action in Federal District Court seeking a declaration that the State’s
lien violated federal law insofar as its satisfaction would require de
pletion of compensation for her injuries other than past medical ex
penses. The parties stipulated, inter alia, that the settlement
amounted to approximately one-sixth of the reasonable value of Ahl
born’s claim and that, if her construction of federal law was correct,
ADHS would be entitled to only the portion of the settlement
($35,581.47) that constituted reimbursement for medical payments
made. In granting ADHS summary judgment, the court held that
under Arkansas law, which it concluded did not conflict with federal
law, Ahlborn had assigned ADHS her right to recover the full amount
of Medicaid’s payments for her benefit. The Eighth Circuit reversed,
holding that ADHS was entitled only to that portion of the settlement
that represented payments for medical care.
Held: Federal Medicaid law does not authorize ADHS to assert a lien
on Ahlborn’s settlement in an amount exceeding $35,581.47, and the
federal anti-lien provision affirmatively prohibits it from doing so.
Arkansas’ third-party liability provisions are unenforceable insofar
as they compel a different conclusion. Pp. 9–23.
(a) Arkansas’ statute finds no support in the federal third-party li
ability provisions. That ADHS cannot claim more than the portion of
Ahlborn’s settlement that represents medical expenses is suggested
by §1396k(a)(1)(A), which requires that Medicaid recipients, as a
condition of eligibility, “assign the State any rights . . . to payment for
medical care from any third party” (emphasis added), not their rights
to payment for, e.g., lost wages. The other statutory language ADHS
relies on is not to the contrary, but reinforces the assignment provi
sion’s implicit limitation. First, statutory context shows that
§1396a(a)(25)(B)’s requirement that States “seek reimbursement for
Cite as: 547 U. S. ____ (2006) 3
[medical] assistance to the extent of such legal liability” refers to “the
legal liability of third parties . . . to pay for care and services available
under the plan,” §1396a(a)(25)(A) (emphases added). Here, because
the tortfeasors accepted liability for only one-sixth of Ahlborn’s over
all damages, and ADHS has stipulated that only $35,581.47 of that
sum represents compensation for medical expenses, the relevant “li
ability” extends no further than that amount. Second,
§1396a(a)(25)(H)’s requirement that the State enact laws giving it
the right to recover from liable third parties “to the extent [it made]
payment . . . for medical assistance for health care items or services
furnished to an individual” does not limit the State’s recovery only by
the amount it paid out on the recipient’s behalf, since the rest of the
provision makes clear that the State must be assigned “the rights of
[the recipient] to payment by any other party for such health care
items or services.” (Emphasis added.) Finally, §1396k(b)’s require
ment that, where the State actively pursues recovery from the third
party, Medicaid be reimbursed fully from “any amount collected by
the State under an assignment” before “the remainder of such
amount collected” is remitted to the recipient does not show that the
State must be paid in full from any settlement. Rather, because the
State’s assigned rights extend only to recovery of medical payments,
what §1396k(b) requires is that the State be paid first out of any
damages for medical care before the recipient can recover any of her
own medical costs. Pp. 9–13.
(b) Arkansas’ statute squarely conflicts with the federal Medicaid
law’s anti-lien provision, §1396p(a)(1), which prohibits States from
imposing liens “against the property of any individual prior to his
death on account of medical assistance paid . . . on his behalf under
the State plan.” Even if the State’s lien is assumed to be consistent
with federal law insofar as it encumbers proceeds designated as
medical payments, the anti-lien provision precludes attachment or
encumbrance of the remainder of the settlement. ADHS’ attempt to
avoid the anti-lien provision by characterizing the settlement pro
ceeds as not Ahlborn’s “property,” but as the State’s, fails for two rea
sons. First, because the settlement is not “received from a third
party,” as required by the state statute, until Ahlborn’s chose in ac
tion has been reduced to proceeds in her possession, the assertion
that any of the proceeds belonged to the State all along lacks merit.
Second, the State’s argument that Ahlborn lost her property rights in
the proceeds the instant she applied for medical assistance is incon
sistent with the creation of a statutory lien on those proceeds: ADHS
would not need a lien on its own property. Pp. 13–17.
(c) The Court rejects as unpersuasive ADHS’ and the United
States’ arguments that a rule permitting a lien on more than medical
4 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
damages ought to apply here either because Ahlborn breached her
duty to “cooperate” with ADHS or because there is an inherent dan
ger of manipulation in cases where the parties to a tort case settle
without judicial oversight or input from the State. As
§1396k(a)(1)(C) demonstrates, the duty to cooperate arises princi
pally, if not exclusively, in proceedings initiated by the State to re
cover from third parties. In any event, the aspersions cast upon Ahl
born are entirely unsupported; all the record reveals is that ADHS
neither asked to be nor was involved in the settlement negotiations.
Whatever the bounds of the duty to cooperate, there is no evidence
that it was breached here. Although more colorable, the alternative
argument that a rule of full reimbursement is needed generally to
avoid the risk of settlement manipulation also fails. The risk that
parties to a tort suit will allocate away the State’s interest can be
avoided either by obtaining the State’s advance agreement to an allo
cation or, if necessary, by submitting the matter to a court for deci
sion. Pp. 17–19.
(d) Also rejected is ADHS’ contention that the Eighth Circuit ac
corded insufficient weight to two decisions by the Departmental Ap
peals Board (Board) of the federal Department of Health and Human
Services (HHS) rejecting appeals by two States from denial of reim
bursement for costs they paid on behalf of Medicaid recipients who
had settled tort claims. Although HHS generally has broad regula
tory authority in the Medicaid area, the Court declines to treat the
Board’s reasoning in those cases as controlling because they address a
different question from the one posed here, make no mention of the
anti-lien provision, and rest on a questionable construction of the
federal third-party liability provisions. Pp. 19–23.
397 F. 3d 620, affirmed.
Cite as: 547 U. S. ____ (2006) 1
No. 04–1506
SERVICES, ET AL., PETITIONERS v. HEIDI AHLBORN
When a Medicaid recipient in Arkansas obtains a tort
settlement following payment of medical costs on her
behalf by Medicaid, Arkansas law automatically imposes a
lien on the settlement in an amount equal to Medicaid’s
costs. When that amount exceeds the portion of the set
tlement that represents medical costs, satisfaction of the
State’s lien requires payment out of proceeds meant to
compensate the recipient for damages distinct from medi
cal costs—like pain and suffering, lost wages, and loss of
future earnings. The Court of Appeals for the Eighth
Circuit held that this statutory lien contravened federal
law and was therefore unenforceable. Ahlborn v. Arkan
sas Dept. of Human Servs., 397 F. 3d 620 (2005). Other
courts have upheld similar lien provisions. See, e.g.,
Houghton v. Dept. of Health, 2002 UT 101, 57 P. 3d 1067;
Wilson v. Washington, 142 Wash. 2d 40, 10 P. 3d 1061
(2000) (en banc). We granted certiorari to resolve the
conflict, 545 U. S. ___ (2005), and now affirm.
On January 2, 1996, respondent Heidi Ahlborn, then a
19-year-old college student and aspiring teacher, suffered
severe and permanent injuries as a result of a car acci
dent. She was left brain damaged, unable to complete her
college education, and incapable of pursuing her chosen
career. Although she possessed a claim of uncertain value
against the alleged tortfeasors who caused her injuries,
Ahlborn’s liquid assets were insufficient to pay for her
medical care. Petitioner Arkansas Department of Health
Services (ADHS) accordingly determined that she was
eligible for medical assistance and paid providers
$215,645.30 on her behalf under the State’s Medicaid
ADHS required Ahlborn to complete a questionnaire
about her accident, and sent her attorney periodic letters
advising him about Medicaid outlays. These letters noted
that, under Arkansas law, ADHS had a claim to reim
bursement from “any settlement, judgment, or award”
obtained by Ahlborn from “a third party who may be liable
for” her injuries, and that no settlement “shall be satisfied
without first giving [ADHS] notice and a reasonable op
portunity to establish its interest.”1 ADHS has never
asserted, however, that Ahlborn has a duty to reimburse it
out of any other subsequently acquired assets or earnings.
On April 11, 1997, Ahlborn filed suit against two alleged
tortfeasors in Arkansas state court seeking compensation
for the injuries she sustained in the January 1996 car
accident. She claimed damages not only for past medical
costs, but also for permanent physical injury; future medi
cal expenses; past and future pain, suffering, and mental
anguish; past loss of earnings and working time; and
permanent impairment of the ability to earn in the future.
ADHS was neither named as a party nor formally noti
fied of the suit. Ahlborn’s counsel did, however, keep
ADHS informed of details concerning insurance coverage
1 Affidavit of Wayne E. Olive, Exhs. 5 and 6 (Mar. 6, 2003).
as they became known during the litigation.
In February 1998, ADHS intervened in Ahlborn’s law
suit to assert a lien on the proceeds of any third-party
recovery Ahlborn might obtain. In October 1998, ADHS
asked Ahlborn’s counsel to notify the agency if there was a
hearing in the case. No hearing apparently occurred, and
the case was settled out of court sometime in 2002 for a
total of $550,000. The parties did not allocate the settle
ment between categories of damages. ADHS did not par
ticipate or ask to participate in settlement negotiations.
Nor did it seek to reopen the judgment after the case had
been dismissed. ADHS did, however, assert a lien against
the settlement proceeds in the amount of $215,645.30—
the total cost of payments made by ADHS for Ahlborn’s
On September 30, 2002, Ahlborn filed this action in the
Arkansas seeking a declaration that the lien violated the
federal Medicaid laws insofar as its satisfaction would
require depletion of compensation for injuries other than
past medical expenses. To facilitate the District Court’s
resolution of the legal questions presented, the parties
stipulated that Ahlborn’s entire claim was reasonably
valued at $3,040,708.18; that the settlement amounted to
approximately one-sixth of that sum; and that, if Ahlborn’s
construction of federal law was correct, ADHS would be
entitled to only the portion of the settlement ($35,581.47)
that constituted reimbursement for medical payments
made. See App. 17–20.
Ruling on cross-motions for summary judgment, the
District Court held that under Arkansas law, which it
concluded did not conflict with federal law, Ahlborn had
assigned to ADHS her right to any recovery from the
third-party tortfeasors to the full extent of Medicaid’s
payments for her benefit. Accordingly, ADHS was entitled
to a lien in the amount of $215,645.30.
The Eighth Circuit reversed. It held that ADHS was
entitled only to that portion of the judgment that repre
sented payments for medical care. For the reasons that
The crux of the parties’ dispute lies in their competing
constructions of the federal Medicaid laws. The Medicaid
program, which provides joint federal and state funding of
medical care for individuals who cannot afford to pay their
own medical costs, was launched in 1965 with the enact
ment of Title XIX of the Social Security Act (SSA), as
added 79 Stat. 343, 42 U. S. C. §1396 et seq. (2000 ed. and
Supp. III). Its administration is entrusted to the Secre
tary of Health and Human Services (HHS), who in turn
exercises his authority through the Centers for Medicare
and Medicaid Services (CMS).2
States are not required to participate in Medicaid, but
all of them do. The program is a cooperative one; the
Federal Government pays between 50% and 83% of the
costs the State incurs for patient care,3 and, in return, the
State pays its portion of the costs and complies with cer
tain statutory requirements for making eligibility deter
minations, collecting and maintaining information, and
administering the program. See §1396a.
One such requirement is that the state agency in charge
of Medicaid (here, ADHS) “take all reasonable measures to
ascertain the legal liability of third parties . . . to pay for
care and services available under the plan.”
§1396a(a)(25)(A) (2000 ed.).4 The agency’s obligation
2 Until 2001, CMS was known as the Health Care Financing Admini
stration or HCFA. See 66 Fed. Reg. 35437.
3 The exact percentage of the federal contribution is calculated pursu
ant to a formula keyed to each State’s per capita income. See 42
U. S. C. §1396d(b).
4 A “third party” is defined by regulation as “any individual, entity or
Cite as: 547 U. S. ____ (2006) 5
extends beyond mere identification, however;
“in any case where such a legal liability is found to ex
ist after medical assistance has been made available
on behalf of the individual and where the amount of
reimbursement the State can reasonably expect to re
cover exceeds the costs of such recovery, the State or
local agency will seek reimbursement for such assis
tance to the extent of such legal liability.”
§1396a(a)(25)(B).
To facilitate its reimbursement from liable third parties,
the State must,
“to the extent that payment has been made under the
State plan for medical assistance in any case where a
third party has a legal liability to make payment for
such assistance, [have] in effect laws under which, to
the extent that payment has been made under the
State plan for medical assistance for health care items
or services furnished to an individual, the State is
considered to have acquired the rights of such indi
vidual to payment by any other party for such health
care items or services.” §1396a(a)(25)(H).
The obligation to enact assignment laws is reiterated in
another provision of the SSA, which reads as follows:
“(a) For the purpose of assisting in the collection of
medical support payments and other payments for
medical care owed to recipients of medical assistance
under the State plan approved under this subchapter,
a State plan for medical assistance shall—
“(1) provide that, as a condition of eligibility for
medical assistance under the State plan to an indi
program that is or may be liable to pay all or part of the expenditures
for medical assistance furnished under a State plan.” 42 CFR §433.136
6 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
vidual who has the legal capacity to execute an as
signment for himself, the individual is required—
“(A) to assign the State any rights . . . to support
(specified as support for the purpose of medical care
by a court or administrative order) and to payment for
medical care from any third party;
“(B) to cooperate with the State . . . in obtaining
support and payments (described in paragraph (A))
for himself . . . ; and
“(C) to cooperate with the State in identifying, and
providing information to assist the State in pursuing,
any third party who may be liable to pay for care and
services available under the plan . . . .” §1396k(a).
Finally, “any amount collected by the State under an
assignment made” as described above “shall be retained by
the State as is necessary to reimburse it for medical assis
tance payments made on behalf of” the Medicaid recipient.
§1396k(b). “[T]he remainder of such amount collected
shall be paid” to the recipient. Ibid.
Acting pursuant to its understanding of these third-
party liability provisions, the State of Arkansas passed
laws that purport to allow both ADHS and the Medicaid
recipient, either independently or together, to recover “the
cost of benefits” from third parties. Ark. Code Ann. §§20–
77–301 through 20–77–309 (2001). Initially, “[a]s a condi
tion of eligibility” for Medicaid, an applicant “shall auto
matically assign his or her right to any settlement, judg
ment, or award which may be obtained against any third
party to [ADHS] to the full extent of any amount which
may be paid by Medicaid for the benefit of the applicant.”
§20–77–307(a). Accordingly, “[w]hen medical assistance
benefits are provided” to the recipient “because of injury,
disease, or disability for which another person is liable,”
ADHS “shall have a right to recover from the person the
Cite as: 547 U. S. ____ (2006) 7
cost of benefits so provided.” §20–77–301(a).5 ADHS’ suit
“shall” not, however, “be a bar to any action upon the
claim or cause of action of the recipient.” §20–77–301(b).
Indeed, the statute envisions that the recipient will some
times sue together with ADHS, see §20–77–303, or even
alone. If the latter, the assignment described in §20–77–
307(a) “shall be considered a statutory lien on any settle
ment, judgment, or award received . . . from a third party.”
§20–77–307(c); see also §20–77–302(a) (“When an action or
claim is brought by a medical assistance recipient . . . , any
settlement, judgment, or award obtained is subject to the
division’s claim for reimbursement of the benefits provided
to the recipient under the medical assistance program”).6
The State, through this statute, claims an entitlement
to more than just that portion of a judgment or settlement
that represents payment for medical expenses. It claims a
right to recover the entirety of the costs it paid on the
Medicaid recipient’s behalf. Accordingly, if, for example, a
recipient sues alone and settles her entire action against a
third-party tortfeasor for $20,000, and ADHS has paid
that amount or more to medical providers on her behalf,
ADHS gets the whole settlement and the recipient is left
with nothing. This is so even when the parties to the
settlement allocate damages between medical costs, on the
one hand, and other injuries like lost wages, on the other.
5 Under the Arkansas statute, ADHS’ right to recover medical costs
appears to be broader than that of the recipient. When ADHS sues, “no
contributory or comparative fault of a recipient shall be attributed to
the state, nor shall any restitution awarded to the state be denied or
reduced by any amount or percentage of fault attributed to a recipient.”
§20–77–301(d)(1) (2001).
6 The Arkansas Supreme Court has held that ADHS has an inde
pendent, nonderivative right to recover the cost of benefits from a third-
party tortfeasor under §20–77–301 even when the Medicaid recipient
also sues for recovery of medical expenses. See National Bank of
Commerce v. Quirk, 323 Ark. 769, 792–794, 918 S. W. 2d 138, 151–152
8 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
The same rule also would apply, it seems, if the recovery
were the result not of a settlement but of a jury verdict. In
that case, under the Arkansas statute, ADHS could re
cover the full $20,000 in the face of a jury allocation of,
say, only $10,000 for medical expenses.7
That this is what the Arkansas statute requires has
been confirmed by the State’s Supreme Court. In Arkan
sas Dept. of Human Servs. v. Ferrel, 336 Ark. 297, 984
S. W. 2d 807 (1999), the court refused to endorse an equi
table, nontextual interpretation of the statute. Rejecting a
Medicaid recipient’s argument that he ought to retain
some of a settlement that was insufficient to cover both his
and Medicaid’s expenses, the court explained:
“Given the clear, unambiguous language of the stat
ute, it is apparent that the legislature intended that
ADHS’s ability to recoup Medicaid payments from
third parties or recipients not be restricted by equita
ble subrogation principles such as the ‘made whole’
rule stated in [Franklin v. Healthsource of Arkansas,
328 Ark. 163, 942 S. W. 2d 837 (1997)]. By creating
an automatic legal assignment which expressly be
comes a statutory lien, [Ark. Code Ann. §20–77–307
(1991)] makes an unequivocal statement that the
ADHS’s ability to recover Medicaid payments from in
surance settlements, if it so chooses, is superior to
that of the recipient even when the settlement does
not pay all the recipient’s medical costs.” Id., at 308,
984 S. W. 2d, at 811.
Accordingly, the Arkansas statute, if enforceable against
Ahlborn, authorizes imposition of a lien on her settlement
proceeds in the amount of $215,645.30. Ahlborn’s argu
7 ADHS denies that it would actually demand the full $20,000 in such
a case, see Brief for Petitioners 49, n. 13, but points to no provision of
the Arkansas statute that would prevent it from doing so.
Cite as: 547 U. S. ____ (2006) 9
ment before the District Court, the Eighth Circuit, and
this Court has been that Arkansas law goes too far. We
agree. Arkansas’ statute finds no support in the federal
third-party liability provisions, and in fact squarely con
flicts with the anti-lien provision of the federal Medicaid
We must decide whether ADHS can lay claim to more
than the portion of Ahlborn’s settlement that represents
medical expenses.8 The text of the federal third-party
liability provisions suggests not; it focuses on recovery of
payments for medical care. Medicaid recipients must, as a
condition of eligibility, “assign the State any rights . . . to
payment for medical care from any third party,” 42
U. S. C. §1396k(a) (1)(A) (emphasis added), not rights to
payment for, for example, lost wages. The other statutory
language that ADHS relies upon is not to the contrary;
indeed, it reinforces the limitation implicit in the assign
ment provision.
First, ADHS points to §1396a(a)(25)(B)’s requirement
that States “seek reimbursement for [medical] assistance
to the extent of such legal liability” (emphasis added) and
suggests that this means that the entirety of a recipient’s
settlement is fair game. In fact, as is evident from the
context of the emphasized language, “such legal liability”
refers to “the legal liability of third parties . . . to pay for
§1396a(a)(25)(A) (emphasis added). Here, the tortfeasor
8 The parties here assume, as do we, that a State can fulfill its obliga
tions under the federal third-party liability provisions by requiring an
“assignment” of part of, or placing a lien on, the settlement that a
Medicaid recipient procures on her own. Cf. §§1396k(a)(B)–(C) (the
recipient has a duty to identify liable third parties and to “provid[e]
information to assist the State in pursuing” those parties (emphasis
10 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
has accepted liability for only one-sixth of the recipient’s
overall damages, and ADHS has stipulated that only
$35,581.47 of that sum represents compensation for medi
cal expenses. Under the circumstances, the relevant
“liability” extends no further than that amount.9
Second, ADHS argues that the language of
§1396a(a)(25)(H) favors its view that it can demand full
reimbursement of its costs from Ahlborn’s settlement.
That provision, which echoes the requirement of a manda
tory assignment of rights in §1396k(a), says that the State
must have in effect laws that, “to the extent that payment
has been made under the State plan for medical assistance
for health care items or services furnished to an individ
ual,” give the State the right to recover from liable third
parties. This must mean, says ADHS, that the agency’s
recovery is limited only by the amount it paid out on the
recipient’s behalf—and not by the third-party tortfeasor’s
particular liability for medical expenses. But that reading
ignores the rest of the provision, which makes clear that
the State must be assigned “the rights of [the recipient] to
payment by any other party for such health care items or
services.” §1396a(a)(25)(H) (emphasis added). Again, the
statute does not sanction an assignment of rights to pay
ment for anything other than medical expenses—not lost
wages, not pain and suffering, not an inheritance.
Finally, ADHS points to the provision requiring that,
where the State actively pursues recovery from the third
party, Medicaid be reimbursed fully from “any amount
collected by the State under an assignment” before “the
remainder of such amount collected” is remitted to the
recipient. §1396k(b). In ADHS’ view, this shows that the
9 Theeffect of the stipulation is the same as if a trial judge had found
that Ahlborn’s damages amounted to $3,040,708.12 (of which
$215,645.30 were for medical expenses), but because of her contributory
negligence, she could only recover one-sixth of those damages.
Cite as: 547 U. S. ____ (2006) 11
State must be paid in full from any settlement. See Brief
for Petitioners 13. But, even assuming the provision
applies in cases where the State does not actively partici
pate in the litigation, ADHS’ conclusion rests on a false
premise: The “amount recovered . . . under an assignment”
is not, as ADHS assumes, the entire settlement; as ex
plained above, under the federal statute the State’s as
signed rights extend only to recovery of payments for
medical care. Accordingly, what §1396k(b) requires is that
the State be paid first out of any damages representing
payments for medical care before the recipient can recover
any of her own costs for medical care.10
At the very least, then, the federal third-party liability
provisions require an assignment of no more than the
right to recover that portion of a settlement that repre
sents payments for medical care.11 They did not mandate
10 Implicit in ADHS’ interpretation of this provision is the assumption
that there can be no “remainder” to remit to the Medicaid recipient if
all the State has been assigned is the right to damages for medical
expenses. That view in turn seems to rest on an assumption either that
Medicaid will have paid all the recipient’s medical expenses or that
Medicaid’s expenses will always exceed the portion of any third-party
recovery earmarked for medical expenses. Neither assumption holds
up. First, as both the Solicitor General and CMS acknowledge, the
recipient often will have paid medical expenses out of her own pocket.
See Brief for United States as Amicus Curiae 12 (under §1396k(b), “the
beneficiary retains the right to payment for any additional medical
expenses personally incurred either before or subsequent to Medicaid
eligibility and for other damages”); CMS, State Medicaid Manual §3907
(last modified Sept. 16, 2005) (envisioning that “medical insurance
payments,” for example, will be remitted to the recipient if possible).
Second, even if Medicaid’s outlays often exceed the portion of the
recovery earmarked for medical expenses in tort cases, the third-party
liability provisions were not drafted exclusively with tort settlements in
mind. In the case of health insurance, for example, the funds available
under the policy may be enough to cover both Medicaid’s costs and the
recipient’s own medical expenses.
11 ADHS concedes that, had a jury or judge allocated a sum for medi
cal payments out of a larger award in this case, the agency would be
12 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
the enactment of the Arkansas scheme that we have
If there were no other relevant provisions in the federal
statute, the State might plausibly argue that federal law
supplied a recovery “floor” upon which States were free to
build. In fact, though, the federal statute places express
limits on the State’s powers to pursue recovery of funds it
paid on the recipient’s behalf. These limitations are con
tained in 42 U. S. C. §§1396a(a)(18) and 1396p. Section
1396a(a)(18) requires that a State Medicaid plan comply
with §1396p, which in turn prohibits States (except in
circumstances not relevant here) from placing liens
against, or seeking recovery of benefits paid from, a Medi
caid recipient:
“(a) Imposition of lien against property of an indi
vidual on account of medical assistance rendered to
him under a State plan
“(1) No lien may be imposed against the property of
any individual prior to his death on account of medical
assistance paid or to be paid on his behalf under the
State plan, except—
“(A) pursuant to the judgment of a court on account
of benefits incorrectly paid on behalf of such individ
ual, or
“(B) [in certain circumstances not relevant here]
entitled to reimburse itself only from the portion so allocated. See Brief
for Petitioners 49, n. 13; see also Brief for United States as Amicus
Curiae 22, n. 14 (noting that the Secretary of HHS “ordinarily accepts”
a jury allocation of medical damages in satisfaction of the Medicaid
debt, even where smaller than the amount of Medicaid’s expenses).
Given the stipulation between ADHS and Ahlborn, there is no textual
basis for treating the settlement here differently from a judge-allocated
settlement or even a jury award; all such awards typically establish a
third party’s “liability” for both “payment for medical care” and other
heads of damages.
Cite as: 547 U. S. ____ (2006) 13
“(b) Adjustment or recovery of medical assistance
correctly paid under a State plan
“(1) No adjustment or recovery of any medical assis
tance correctly paid on behalf of an individual under
the State plan may be made, except [in circumstances
not relevant here].” §1396p.
Read literally and in isolation, the anti-lien prohibition
contained in §1396p(a) would appear to ban even a lien on
that portion of the settlement proceeds that represents
payments for medical care.12 Ahlborn does not ask us to
go so far, though; she assumes that the State’s lien is
consistent with federal law insofar as it encumbers pro
ceeds designated as payments for medical care. Her ar
gument, rather, is that the anti-lien provision precludes
attachment or encumbrance of the remainder of the
We agree. There is no question that the State can re
quire an assignment of the right, or chose in action, to
receive payments for medical care. So much is expressly
provided for by §§1396a(a)(25) and 1396k(a). And we
assume, as do the parties, that the State can also demand
as a condition of Medicaid eligibility that the recipient
“assign” in advance any payments that may constitute
reimbursement for medical costs. To the extent that the
forced assignment is expressly authorized by the terms of
§§1396a(a)(25) and 1396k(a), it is an exception to the anti
12 Likewise, subsection (b) would appear to forestall any attempt by
the State to recover benefits paid, at least from the “individual.” See,
e.g., Martin ex rel. Hoff v. Rochester, 642 N. W. 2d 1, 8, n. 6 (Minn.
2002); Wallace v. Estate of Jackson, 972 P. 2d 446, 450 (Utah 1998)
(Durham, J., dissenting) (reading §1396p to “prohibi[t] not only liens
against Medicaid recipients but also any recovery for medical assis
tance correctly paid”). The parties here, however, neither cite nor
discuss the anti-recovery provision of §1396p(b). Accordingly, we leave
for another day the question of its impact on the analysis.
14 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
lien provision. See Washington State Dept. of Social and
Health Servs. v. Guardianship Estate of Keffeler, 537 U. S.
371, 383–385, and n. 7 (2003). But that does not mean that
the State can force an assignment of, or place a lien on,
any other portion of Ahlborn’s property. As explained
above, the exception carved out by §§1396a(a)(25) and
1396k(a) is limited to payments for medical care. Beyond
that, the anti-lien provision applies.
ADHS tries to avoid the anti-lien provision by character
izing the settlement proceeds as not Ahlborn’s “prop
erty.”13 Its argument appears to be that the automatic
assignment effected by the Arkansas statute rendered the
proceeds the property of the State.14 See Brief for Peti
tioners 31 (“[U]nder Arkansas law, the lien does not attach
to the recipient’s ‘property’ because it attaches only to
those proceeds already assigned to the Department as a
condition of Medicaid eligibility”). That argument fails for
two reasons. First, ADHS insists that Ahlborn at all
times until judgment retained her entire chose in action—
a right that included her claim for medical damages. The
statutory lien, then, cannot have attached until the pro
ceeds materialized. That much is clear from the text of
the Arkansas statute, which says that the “assignment
shall be considered a statutory lien on any settlement . . .
received by the recipient from a third party.” Ark. Code
Ann. §20–77–307(c) (2001) (emphasis added). The settle
13 “Property” is defined by regulation as “the homestead and all other
personal and real property in which the recipient has a legal interest.”
42 CFR §433.36(b) (2005).
14 The United States as amicus curiae makes the different argument
that the proceeds never became Ahlborn’s “property” because “to the
extent the third party’s payment passes through the recipient’s hands
en route to the State, it comes with the State’s lien already attached.”
Brief as Amicus Curiae 18. Even if that reading were consistent with
the Arkansas statute (and it is not, see infra, at 16), the United States’
characterization of the “assignment” simply reinforces Ahlborn’s point:
This is a lien that attaches to the property of the recipient.
Cite as: 547 U. S. ____ (2006) 15
ment is not “received” until the chose in action has been
reduced to proceeds in Ahlborn’s possession. Accordingly,
the assertion that any of the proceeds belonged to the
State all along lacks merit.
Second, the State’s argument that Ahlborn lost her
property rights in the proceeds the instant she applied for
medical assistance is inconsistent with the creation of a
statutory lien on those proceeds. Why, after all, would
ADHS need a lien on its own property? A lien typically is
imposed on the property of another for payment of a debt
owed by that other. See Black’s Law Dictionary 922 (6th
ed. 1990). Nothing in the Arkansas statute defines the
term otherwise.
That the lien is also called an “assignment” does not
alter the analysis. The terms that Arkansas employs to
describe the mechanism by which it lays claim to the
settlement proceeds do not, by themselves, tell us whether
the statute violates the anti-lien provision. See United
States v. Craft, 535 U. S. 274, 279 (2002); Drye v. United
States, 528 U. S. 49, 58–61 (1999). Although denominated
an “assignment,” the effect of the statute here was not to
divest Ahlborn of all her property interest; instead, Ahl
born retained the right to sue for medical care payments,
and the State asserted a right to the fruits of that suit
once they materialized. In effect, and as at least some of
the statutory language recognizes, Arkansas has imposed
a lien on Ahlborn’s property.15 Since none of the federal
15 Because ADHS insists that “Arkansas law did not require Ahlborn
to assign her claim or her right to sue,” Brief for Petitioners 33 (empha
sis in original), we need not reach the question whether a State may
force a recipient to assign a chose in action to receive as much of the
settlement as is necessary to pay Medicaid’s costs. The Eighth Circuit
thought this would be impermissible because the State cannot “circum
vent the restrictions of the federal anti-lien statute simply by requiring
an applicant for Medicaid benefits to assign property rights to the State
before the applicant liquidates the property to a sum certain.” App. to
Pet. for Cert. 6. Indeed, ADHS acknowledges that Arkansas cannot, for
16 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
third-party liability provisions excepts that lien from
operation of the anti-lien provision, its imposition violates
ADHS and its amici urge, however, that even if a lien on
more than medical damages would violate federal law in
some cases, a rule permitting such a lien ought to apply
here either because Ahlborn breached her duty to “cooper
ate” with ADHS or because there is an inherent danger of
manipulation in cases where the parties to a tort case
settle without judicial oversight or input from the State.
The United States proposes a default rule of full reim
bursement whenever the recipient breaches her duty to
“cooperate,” and asserts that Ahlborn in fact breached that
duty.16 But, even if the Government’s allegations of ob
struction were supported by the record, its conception of
the duty to cooperate strays far beyond the text of the
statute and the relevant regulations. The duty to cooper
ate arises principally, if not exclusively, in proceedings
initiated by the State to recover from third parties. See 42
U. S. C. §1396k(a)(1)(C) (recipients must “cooperate with
example, require a Medicaid applicant to assign in advance any right
she may have to recover an inheritance or an award in a civil case not
related to her injuries or medical care. This arguably is no different; as
with assignment of those other choses in action, assignment of the right
to compensation for lost wages and other nonmedical damages is
nowhere authorized by the federal third-party liability provisions.
16 See, e.g., Brief for United States as Amicus Curiae 14 (alleging that
Ahlborn “omitt[ed] or understat[ed] the medical damages claim from
her lawsuit and attempt[ed] to horde for herself the third-party liability
payments”); id., at 15 (“[H]aving forsaken her federal and state statu
tory duties of candid and forthcoming cooperation . . . [,] respondent,
rather than the taxpayers, must bear the financial consequences of her
actions”); id., at 21, 24 (referring to Ahlborn’s “backdoor settlement”
and “obstruction and attrition,” as well as her “calculated evasion of her
legal obligations”).
Cite as: 547 U. S. ____ (2006) 17
the State in identifying . . . and providing information to
assist the State in pursuing” third parties). Most of the
accompanying federal regulations simply echo this basic
duty; all they add is that the recipient must “[p]ay to the
agency any support or medical care funds received that
are covered by the assignment of rights.” 42 CFR
§433.147(b)(4) (2005).
In any event, the aspersions the United States casts
upon Ahlborn are entirely unsupported; all the record
reveals is that ADHS, despite having intervened in the
lawsuit and asked to be apprised of any hearings, neither
asked to be nor was involved in the settlement negotia
tions. Whatever the bounds of the duty to cooperate, there
is no evidence that it was breached here.
ADHS’ and the United States’ alternative argument
that a rule of full reimbursement is needed generally to
avoid the risk of settlement manipulation is more color
able, but ultimately also unpersuasive. The issue is not, of
course, squarely presented here; ADHS has stipulated
that only $35,581.47 of Ahlborn’s settlement proceeds
properly are designated as payments for medical costs.
Even in the absence of such a post-settlement agreement,
though, the risk that parties to a tort suit will allocate
away the State’s interest can be avoided either by obtain
ing the State’s advance agreement to an allocation or, if
necessary, by submitting the matter to a court for deci
sion.17 For just as there are risks in underestimating the
value of readily calculable damages in settlement negotia
tions, so also is there a countervailing concern that a rule
17 As one amicus observes, some States have adopted special rules
and procedures for allocating tort settlements in circumstances where,
for example, private insurers’ rights to recovery are at issue. See Brief
for Association of Trial Lawyers of America 20–21. Although we
express no view on the matter, we leave open the possibility that such
rules and procedures might be employed to meet concerns about set
tlement manipulation.
18 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
of absolute priority might preclude settlement in a large
number of cases, and be unfair to the recipient in others.18
Finally, ADHS contends that the Court of Appeals’
decision below accords insufficient weight to two decisions
by the Departmental Appeals Board of HHS (Board) re
jecting appeals by the States of California and Washington
from denial of reimbursement for costs those States paid
on behalf of Medicaid recipients who had settled tort
claims. See App. to Pet. for Cert. 45–67 (reproducing In re
Washington State Dept. of Social & Health Servs., Dec. No.
1561, 1996 WL 157123 (HHS Dept. App. Bd., Feb. 7,
1996)); App. to Pet. for Cert. 68–86 (reproducing In re
California Dept. of Health Servs., Dec. No. 1504, 1995 WL
66334 (HHS Dept. App. Bd., Jan. 5, 1995)). Because the
opinions in those cases address a different question from
the one posed here, make no mention of the anti-lien
provision, and, in any event, rest on a questionable con
struction of the federal third-party liability provisions, we
conclude that they do not control our analysis.
Normally, if a State recovers from a third party the cost
of Medicaid benefits paid on behalf of a recipient, the
Federal Government owes the State no reimbursement,
and any funds already paid by the Federal Government
must be returned. See 42 CFR §433.140(a)(2) (2005)
(federal financial participation “is not available in Medi
18 The point is illustrated by state cases involving the recovery of
workers’ compensation benefits paid to an employee (or the family of an
employee) whose injuries were caused by a third-party tortfeasor. In
Flanigan v. Department of Labor and Industry, 123 Wash. 2d 418, 869
P. 2d 14 (1994), for example, the court concluded that the state agency
could not satisfy its lien out of damages the injured worker’s spouse
recovered as compensation for loss of consortium. The court explained
that the department could not “share in damages for which it has
provided no compensation” because such a result would be “absurd and
fundamentally unjust.” Id., at 426, 869 P. 2d, at 17.
Cite as: 547 U. S. ____ (2006) 19
caid payments if . . . [t]he agency received reimbursement
from a liable third party”); §433.140(c). Washington and
California both had adopted schemes according to which
the State refrained from claiming full reimbursement from
tort settlements and instead took only a portion of each
settlement. (In California, the recipient typically could
keep at least 50% of her settlement, see App. to Pet. for
Cert. 72; in Washington, the proportion varied from case
to case, see id., at 48–51.) Each scheme resulted in the
State’s having to pay a portion of the recipient’s medical
costs—a portion for which the State sought partial reim
bursement from the Federal Government. CMS (then
called HCFA) denied this partial reimbursement on the
ground that the States had an absolute duty to seek full
payment of medical expenses from third-party tortfeasors.
The Board upheld CMS’ determinations. In California’s
appeal, which came first, the Board concluded that the
State’s duty to seek recovery of benefits “from available
third party sources to the fullest extent possible” included
demanding full reimbursement from the entire proceeds of
a Medicaid recipient’s tort settlement. Id., at 76. The
Board acknowledged that §1396k(a) “refers to assignment
only of ‘payment for medical care,’ ” but thought that “the
statutory scheme as a whole contemplates that the actual
recovery might be greater and, if it is, that Medicaid
should be paid first.” Ibid. The Board gave two other
reasons for siding with CMS: First, the legislative history
of the third-party liability evinced a congressional intent
that “the Medicaid program . . . be reimbursed from avail
able third party sources to the fullest extent possible,”
ibid.; and, second, California had long been on notice that
it would not be reimbursed for any shortfall resulting from
failure to fully recoup Medicaid’s costs from tort settle
ments, see id., at 77. The Board also opined that the State
could not escape its duty to seek full reimbursement by
relying on the Medicaid recipient’s efforts in litigating her
20 ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. v.
claims. See id., at 79–80.
Finally, responding to the State’s argument that its
scheme gave Medicaid recipients incentives to sue third-
party tortfeasors and thus resulted in both greater recov
ery and lower costs for the State, the Board observed that
“a state is free to allow recipients to retain the state’s
share” of any recovery, so long as it does not compromise
the Federal Government’s share. Id., at 85.
The Board reached the same conclusion, by the same
means, in the Washington case. See id., at 53–64.
Neither of these adjudications compels us to conclude
that Arkansas’ statutory lien comports with federal law.
First, the Board’s rulings address a different question
from the one presented here. The Board was concerned
with the Federal Government’s obligation to reimburse
States that had, in its view, failed to seek full recovery of
Medicaid’s costs and had instead relied on recipients to act
as private attorneys general. The Board neither discussed
nor even so much as cited the federal anti-lien provision.
Second, the Board’s acknowledgment that the assign
ment of rights required by §1396k(a) is limited to pay
ments for medical care only reinforces the clarity of the
statutory language. Moreover, its resort to “the statutory
scheme as a whole” as justification for muddying that
clarity is nowhere explained. Given that the only statu
tory provisions CMS relied on are §§1396a(a)(25),
1396k(a), and 1396k(b), see id., at 75–76; id., at 54–55,
and given the Board’s concession that the first two of these
limit the State’s assignment to payments for medical care,
the “statutory scheme” must mean §1396k(b). But that
provision does not authorize the State to demand reim
bursement from portions of the settlement allocated or
allocable to nonmedical damages; instead, it gives the
State a priority disbursement from the medical expenses
portion alone. See supra, at 12. In fact, in its adjudication
in the Washington case, the Board conceded as much:
Cite as: 547 U. S. ____ (2006) 21
“[CMS] may require a state to assert a collection priority
over funds obtained by Medicaid recipients in [third-party
liability] suits even though the distribution methodology
set forth in section [1396k(b)] refers only to payments col
lected pursuant to assignments for medical care.” App. to
Pet. for Cert. 54 (emphasis added). The Board’s reasoning
therefore is internally inconsistent.
Third, the Board’s reliance on legislative history is
misplaced. The Board properly observed that Congress, in
crafting the Medicaid legislation, intended that Medicaid
be a “payer of last resort.” S. Rep. No. 99–146, p. 313
(1985). That does not mean, however, that Congress
meant to authorize States to seek reimbursement from
Medicaid recipients themselves; in fact, with the possible
exception of a lien on payments for medical care, the
statute expressly prohibits liens against the property of
Medicaid beneficiaries. See 42 U. S. C. §1396p(a). We
recognize that Congress has delegated “broad regulatory
authority to the Secretary [of HHS] in the Medicaid area,”
Wisconsin Dept. of Health and Family Servs. v. Blumer, 534
U. S. 473, 496, n. 13 (2002), and that agency adjudications
typically warrant deference. Here, however, the Board’s
reasoning couples internal inconsistency with a conscious
disregard for the statutory text. Under these circumstances,
we decline to treat the agency’s reasoning as controlling.
Federal Medicaid law does not authorize ADHS to as
sert a lien on Ahlborn’s settlement in an amount exceed
ing $35,581.47, and the federal anti-lien provision affirma
tively prohibits it from doing so. Arkansas’ third-party
liability provisions are unenforceable insofar as they
compel a different conclusion. The judgment of the Court
of Appeals is affirmed.
api-293771835
41 soc.sec.rep.ser. 582, Medicare & Medicaid Guide P 41,538 State of North Carolina, Department of Human Resources, Division of Medical Assistance v. The United States Department of Health and Human Services, Health Care Financing Administration, 999 F.2d 767, 4th Cir. (1993)
criticalthinkingcoversheet2015.docx
gildageist
In the Matter of Stanley Stroh v. Director, Office of Workers' Compensation Programs, United States Department of Labor and Benefits Review Board, United States Department of Labor, 810 F.2d 61, 3rd Cir. (1987)
46 National Marketing vs Tecson Digest
de Zuzuarregui vs Judge Rosete case digest
Types of Entreprises
Ana-maria Mihalachi
wake forest should not restrict freedom of speech
api-353796930
House Legislative Counsels Manual on Drafting Style
10kkbyelawsone
1. DAVID V. RIVERA FULL.docx