Calvanese v. Calvanese, 93 N.Y.2d 111 (1999)
The entire amount of a personal injury settlement is available to satisfy a Medicaid lien, not just the portion specifically allocated to past medical expenses.
Summary
This case addresses whether a Medicaid lien on a personal injury settlement extends to the entire settlement or only to the portion allocated to past medical expenses. The New York Court of Appeals held that the lien applies to the entire settlement, reinforcing Medicaid’s role as the “payor of last resort.” The court reasoned that limiting the lien to medical expenses would undermine the state’s right to reimbursement from third parties and create an inequitable situation where Medicaid recipients could shield settlement funds from recoupment. This decision ensures that Medicaid can recover its expenditures from available third-party resources before settlement funds are placed in supplemental needs trusts.
Facts
Appellants received Medicaid benefits for injuries caused by third parties’ negligence. They filed personal injury lawsuits that resulted in settlements. Despite Medicaid liens on the settlements, none of the settlement funds were allocated to satisfy these liens. Instead, the net proceeds were allocated to pain and suffering and then transferred to supplemental needs trusts for the appellants’ benefit.
Procedural History
The Supreme Court approved the transfer of the settlement funds to supplemental needs trusts. The Appellate Division reversed, holding that all settlement proceeds are available to satisfy the Medicaid lien before any funds can be transferred to a supplemental needs trust. The case then went to the New York Court of Appeals.
Issue(s)
Whether the entire amount of a personal injury settlement is available to satisfy a Medicaid lien, or only that portion of the settlement specifically allocated to past medical expenses?
Holding
Yes, the entire amount of a personal injury settlement is available to satisfy a Medicaid lien, because the statutory scheme governing Medicaid reimbursement gives the Department of Social Services broad authority to recover expenditures from any available third-party reimbursement, and limiting the lien to allocated medical expenses would undermine this scheme.
Court’s Reasoning
The Court of Appeals emphasized that Medicaid is designed to be the “payor of last resort.” Federal and state laws require Medicaid recipients to assign to the state the right to seek reimbursement from any liable third party. The Court noted that New York’s assignment, subrogation, and lien provisions grant the Department of Social Services (DSS) broad authority to pursue third-party reimbursement. Social Services Law § 104-b allows the DSS to place a lien on any personal injury suit brought by a Medicaid recipient, attaching to any verdict, judgment, or settlement proceeds. The court rejected the argument that settlements could be allocated to specific categories of damages (like pain and suffering) to circumvent the Medicaid lien. The court found no statutory basis for limiting the agency’s right of recovery to only those funds specifically allocated to medical expenses. Allowing such allocation would divert resources from the Department to supplemental needs trusts, weakening assignment and subrogation provisions. The court distinguished this case from Matter of Costello (Stark) v. Geiser, stating that Geiser concerned the amount of reimbursement, not the source of funds. The court also found Baker v. Sterling inapplicable, as that case dealt with recipients under 21 years old and was governed by a different section of the Social Services Law. The court also dismissed concerns about recipients’ incentives to settle, noting the agency’s power to reduce the lien to facilitate settlement. The court quoted that States must “retain [ ]” from the recovery an amount “as is necessary to reimburse it for medical assistance payments made on behalf of an individual.” 42 USC § 1396a [a] [25] [H]; § 1396k [b].