New York Law Review

Tag: Cricchio v. Pennisi

  • Gold v. United Health Servs. Hosps., 95 N.Y.2d 683 (2000): Medicaid Recoupment from Infant Settlements

    Gold v. United Health Servs. Hosps., 95 N.Y.2d 683 (2000)

    Medicaid agencies possess independent rights of recovery against third parties for medical expenses paid on behalf of a recipient, and these rights are not limited by restrictions applicable to other forms of public assistance under Social Services Law § 104(2), even when the recipient is an infant.

    Summary

    The New York Court of Appeals addressed whether Social Services Law § 104(2), which limits recoupment from infants receiving public assistance, applies to Medicaid’s recoupment provisions. Two cases were consolidated: one involving lead poisoning and the other involving birth injuries. The court held that Medicaid’s recoupment rights are independent of Section 104(2) due to federal mandates requiring states to seek reimbursement from liable third parties. Thus, Medicaid can seek full recovery from settlements, even those awarded to infants, for medical expenses paid, reinforcing Medicaid as the payor of last resort. The court remanded one case for proper application of CPLR 1206 regarding the allocation of settlement funds for a supplemental needs trust.

    Facts

    In Santiago, an infant, Kimberly, received Medicaid benefits after lead poisoning. Her mother sued the landlord, settling for $140,000. The NYC Department of Social Services asserted a lien to recoup $12,877 in Medicaid benefits. In Gold, Abraham suffered from cerebral palsy due to alleged medical negligence during his mother’s pregnancy, resulting in a $5 million settlement. Since birth, Abraham received Medicaid benefits. Broome County DSS and the NY Office of Mental Retardation asserted liens totaling over $1.7 million.

    Procedural History

    In Santiago, the Supreme Court vacated the City’s lien, but the Appellate Division reversed. The Appellate Division granted leave to appeal to the Court of Appeals. In Gold, the Supreme Court denied the Golds’ motion to reduce the liens proportionally, allocating funds for attorney’s fees, Medicaid liens, a reserve for future medical care, and a supplemental needs trust. The Appellate Division affirmed, and the Golds were granted leave to appeal to the Court of Appeals.

    Issue(s)

    1. Whether Social Services Law § 104(2) limits Medicaid agencies’ ability to recoup expenditures from settlements awarded to infant recipients.
    2. In Gold, whether the trial court properly ordered a reserve for future medical needs instead of directing funds to a supplemental needs trust.

    Holding

    1. No, because Medicaid agencies’ recoupment rights derive from independent statutory provisions related to assignment, subrogation, and recoupment, distinct from Social Services Law § 104(1).
    2. No, because the trial court failed to properly exercise its discretion under CPLR 1206 regarding the allocation of funds, and instead made allocations mathematically without citing statutory authority.

    Court’s Reasoning

    The Court reasoned that federal law mandates states to seek reimbursement for Medicaid expenditures from liable third parties (42 USC § 1396a[a][25][A]-[B]). Medicaid applicants must assign their rights to seek reimbursement to the Medicaid agency (42 USC § 1396k[a][1][A]). The agency is subrogated to the recipient’s rights against third parties (42 USC § 1396a[a][25][H]). Citing Cricchio v. Pennisi, 90 N.Y.2d 296 (1997), the Court emphasized that the right to recover from third parties stems from Medicaid’s provisions, not Social Services Law § 104. The Court distinguished Baker v. Sterling, 39 N.Y.2d 397 (1976), noting that the regulatory scheme had significantly evolved since that decision. Medicaid remains the “payor of last resort.” The Court clarified that Social Services Law § 104(2) still applies when recoupment is sought under Section 104(1) for other forms of public assistance. Regarding the Golds’ argument, the court found the trial court failed to properly exercise its discretion under CPLR 1206, which governs the investment or disbursement of an infant’s recovery, and remitted the case for proper consideration.

  • Cricchio v. Pennisi, 90 N.Y.2d 296 (1997): Medicaid Lien Priority Over Supplemental Needs Trust

    Cricchio v. Pennisi, 90 N.Y.2d 296 (1997)

    Medicaid liens on personal injury settlements must be satisfied before the remaining funds are transferred to a supplemental needs trust, ensuring Medicaid remains the payer of last resort.

    Summary

    This case addresses whether a Medicaid lien on the proceeds of a personal injury settlement must be satisfied before those funds are transferred to a supplemental needs trust (SNT). The New York Court of Appeals held that the Department of Social Services (DSS) is entitled to first satisfy the lien, aligning with federal Medicaid statutes prioritizing recoupment from responsible third parties. The court reasoned that Medicaid, as the payer of last resort, has priority in recovering funds from liable third parties before the injured party can place the remaining funds into a trust. This ensures that the assignment and subrogation rights of DSS are not circumvented.

    Facts

    Plaintiffs, injured due to third-party negligence, received Medicaid benefits. As a condition of eligibility, they assigned their rights to recover from responsible third parties to DSS. Subsequently, they commenced personal injury actions and reached settlement agreements. The parties proposed transferring the net settlement proceeds, after attorney’s fees, into supplemental needs trusts (SNTs), designed to enhance the quality of life without affecting Medicaid eligibility. DSS objected, asserting its right to satisfy Medicaid liens from the settlement proceeds before funding the trusts.

    Procedural History

    The Supreme Court approved the settlements and directed the creation of SNTs with the net proceeds, denying DSS’s request for immediate lien payment. The Appellate Division affirmed, reasoning the State’s reimbursement interest was protected by its right to recoup from remaining trust assets upon the recipient’s death. The New York Court of Appeals granted DSS leave to appeal and reversed the lower courts’ decisions.

    Issue(s)

    Whether a Medicaid lien placed on the proceeds of a personal injury settlement pursuant to Social Services Law § 104-b must be satisfied before those funds may be transferred to a supplemental needs trust that complies with EPTL 7-1.12.

    Holding

    Yes, because Federal and State Medicaid laws mandate that the Department of Social Services is entitled to first satisfy the lien from the proceeds of a personal injury settlement before any remaining funds can be used to fund a supplemental needs trust. This ensures that Medicaid remains the payer of last resort and that the State’s right to recover from responsible third parties is protected.

    Court’s Reasoning

    The court reasoned that federal law (42 USC § 1396k) mandates states to “retain” amounts collected from third parties to reimburse Medicaid payments before any remainder is paid to the individual. DSS, as the Medicaid recipient’s assignee, obtains all rights to recover medical expenses from the third party. The settlement proceeds, therefore, belong to the third-party tortfeasor and are owed to DSS. The court emphasized the distinction between assets of a responsible third party and assets belonging to the Medicaid recipient, stating that the lien attaches to the property of the third party, not the beneficiary. The court stated that “the government has priority in recouping funds from third parties who are liable for a Medicaid recipient’s medical expenses, and that only the remainder of those funds becomes available to the Medicaid recipient for placement in a trust or other uses” (42 USC § 1396k [b]).

    The court rejected the argument that immediate lien satisfaction conflicts with provisions protecting SNT assets, clarifying those provisions concern eligibility determination, not recoupment from third parties. The court reasoned allowing funds to be sheltered in a trust would defeat the reimbursement obligation. The court referenced the legislative history, showing the intention was to encourage long-term financial planning with funds *not* earmarked for government reimbursement, stating supplemental needs trusts would be created with “funds the State would not obtain to reimburse itself for public assistance in any event.”

    The court also noted that the Health Care Financing Administration (HCFA) concurs with this interpretation, and such agency interpretations are entitled to deference. Finally, the court remanded to determine what portion of the personal injury settlement should satisfy the lien, i.e., that portion attributable to past medical expenses.