New York Law Review

Tag: Medicaid Lien

  • Calvanese v. Calvanese, 93 N.Y.2d 111 (1999): Medicaid Liens and Personal Injury Settlements

    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].

  • 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.