Opinion ID: 2602444
Heading Depth: 2
Heading Rank: 2

Heading: legality of the priority lien

Text: ¶ 8 It is well settled in Utah that liens against third-party settlement proceeds do not violate federal law because settlement payments do not become a recipient's property until Medicaid is reimbursed. [4] S.S., 972 P.2d at 442 (Utah 1998) (Payments made by a third party do not legally become the property of the recipient until after a valid settlement, which necessarily must include reimbursement to Medicaid. ) (emphasis added); State v. McCoy, 2000 UT 39, ¶ 10, 999 P.2d 572; Wallace, 972 P.2d at 448. Plaintiffs concede that the State's lien itself does not violate federal law, but argue that the lien's priority status gives it an illegal effect. Specifically, plaintiffs contend that because the priority of the State's lien allows the State to reimburse itself completely and before Medicaid recipients can use the settlement proceeds to satisfy their claims, the lien could result in a seizure of the recipient's property. They argue that this could occur because, after the State takes its share of settlement proceeds, there may be nothing left with which Medicaid recipients can be compensated for their nonmedical claims, and nonmedical claims are a Medicaid recipient's property. We disagree. ¶ 9 The federal statute requires only that a lien not encumber a Medicaid recipient's property and places no additional restrictions on the priority of otherwise valid liens. We have already held on three occasions that liens against third-party settlement proceeds are valid because those proceeds do not become a Medicaid recipient's property until Medicaid is reimbursed, see McCoy, 2000 UT 39 at ¶ 10, 999 P.2d 572, S.S., 972 P.2d at 442, Wallace, 972 P.2d at 448; thus, a priority lien on a recipient's third-party settlement proceeds does not encumber the recipient's property, even if those proceeds include compensation for nonmedical claims. Accordingly, the district court correctly concluded that the State's priority lien on Medicaid recipients' third-party settlement proceeds did not violate federal law prohibiting liens against Medicaid recipients' property. [5]