Understanding Medicaid Recovery in Workers’ Compensation Settlements

The expansion of Medicaid under the Affordable Care Act (ACA) is starting to impact workers’ compensation settlements nationwide.  This is based primarily on the new pressures placed on state health programs who administer these programs.



What is Medicaid?


Medicaid came into existence at the same time as the Medicare program.  While there are some similarities between the two government programs, they should never be confused.  Medicaid is a state-based health program, which receives part of its funding and coordination from the federal government.  The Medicaid program has some unique differences that provide healthcare for millions of Americans.


Prior to implementation of the ACA, Medicaid served only low-income individuals with a disability.  Since 2014, persons with an income up to 133% of the poverty line to qualify for coverage.  This also includes adults without dependent children.  Individuals receiving Medicaid can also be eligible for Medicare.



Medicaid Recovery in Workers’ Compensation Cases


Due to the fact that Medicaid is mainly a state-government program, federal regulations had little impact on the ability of these programs to recover for medical funds related to medical care and treatment in workers’ compensation cases.  This is an area where significant changes in law have been made on the federal level, which will impact your cases.


Arkansas Department of Human Services v. Ahlborn, 547 U.S. 268 (2006), represents an important case related to the rights of recovery for state Medicaid programs.  In this case, the Arkansas Department of Human Services sought 100% recovery of funds paid on behalf of a personal injury victim.  Based on the settlement amounts and costs for associated medical care, this practice would have nearly taken away all of the available settlement monies and left the injured party without compensation.  In a unanimous decision, the Court held this program could not recovery against a plaintiff related to portions of their settled attributable to pain and suffering or wage loss.



Post-Alborn and Congressional Action


Notwithstanding this settlement, state programs have continued to seek reimbursements in these cases.  This has included congressional action that threatens workers’ compensation settlements and insurance carriers who make payments to injured parties.


In early 2014, Congress passed a series of amendments to the Social Security Act that covers Medicaid.  This law is sometimes referred to as “Section 202 of the Bipartisan Budget Act of 2013,” or the “Medicaid Secondary Payer Act.”  Under this law, state programs were given additional recovery opportunities that overrode the unanimous Alborn decision preventing recovery against the non-medical aspects of a personal injury or workers’ compensation claim.  The effective date of these provisions was initially October 1, 2014.  The law was later amended to move that date out two years.



Ramping Up Enforcement in the States


Several states have taken their new recovery powers seriously and are ramping up their enforcement and recovery efforts in anticipation of full-fledged Medicaid Secondary Payer becoming effective on October 1, 2016.  These states include Rhode Island, Kentucky and Mississippi.  The initial steps in this process includes sending warning letters to attorneys and members of the claim management team.



Practice Pointers


Claim management teams need to be proactive when dealing with issues related to Medicaid recovery.  This can include the following:


  • Proactively identify claims who potentially will become Medicaid beneficiary, or who are beneficiaries at the time of the claim.
  • Identify and place appropriate state agencies on notice of their potential intervention rights.
  • Keep all parties updated regarding Medicaid recovery efforts and include the appropriate government officials in your settlements.
  • Continue to stay updated regarding changes in Medicaid Secondary Payer recovery.





Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, and founder of COMPClub an interactive training program teaching workers’ comp cost containment best practices.  Through this platform he is in the trenches on a monthly basis with risk managers, brokers, consultants, attorney’s, and adjusters teaching timeless workers’ comp cost containment strategies, as well as working with members to develop new tactics and systems to address the issues facing organizations today. This unique position allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.


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