OPINION OF THE COURT
ARKANSAS DEPT. OF HEALTH AND HUMAN SERVS. V.AHLBORN
547 U. S. ____ (2006)
SUPREME COURT OF THE UNITED STATES
NO. 04-1506
ARKANSAS DEPARTMENT OF HEALTH AND HUMAN SERVICES,
et al., PETITIONERS
v. HEIDI AHLBORN
on writ of certiorari to the united states court of
appeals for the eighth circuit
[May 1, 2006]
Justice Stevens delivered the
opinion of the Court.
When a Medicaid recipient in
Arkansas obtains a tort settlement following payment of medical
costs on her behalf by Medicaid, Arkansas law automatically imposes
a lien on the settlement in an amount equal to Medicaid’s costs.
When that amount exceeds the portion of the settlement that
represents medical costs, satisfaction of the State’s lien requires
payment out of proceeds meant to compensate the recipient for
damages distinct from medical costs—like pain and suffering, lost
wages, and loss of future earnings. The Court of Appeals for the
Eighth Circuit held that this statutory lien contravened federal
law and was therefore unenforceable.
Ahlborn v.
Arkansas Dept. of Human Servs., 397 F. 3d 620 (2005).
Other courts have upheld similar lien provisions. See,
e.g.,
Houghton v.
Dept. of Health, 2002
UT 101, 57 P. 3d 1067;
Wilson v.
Washington,
142 Wash. 2d 40, 10 P. 3d 1061 (2000) (en banc). We granted
certiorari to resolve the conflict, 545 U. S. ___ (2005), and now
affirm.
I
On January 2, 1996, respondent
Heidi Ahlborn, then a 19-year-old college student and aspiring
teacher, suffered severe and permanent injuries as a result of a
car accident. She was left brain damaged, unable to complete her
college education, and incapable of pursuing her chosen career.
Although she possessed a claim of uncertain value against the
alleged tortfeasors who caused her injuries, Ahlborn’s liquid
assets were insufficient to pay for her medical care. Petitioner
Arkansas Department of Health Services (ADHS) accordingly
determined that she was eligible for medical assistance and paid
providers $215,645.30 on her behalf under the State’s Medicaid
plan.
ADHS required Ahlborn to complete
a questionnaire about her accident, and sent her attorney periodic
letters advising him about Medicaid outlays. These letters noted
that, under Arkansas law, ADHS had a claim to reimbursement from
“any settlement, judgment, or award” obtained by Ahlborn from “a
third party who may be liable for” her injuries, and that no
settlement “shall be satisfied without first giving [ADHS] notice
and a reasonable opportunity to establish its interest.”[
Footnote 1] ADHS has never asserted,
however, that Ahlborn has a duty to reimburse it out of any other
subsequently acquired assets or earnings.
On April 11, 1997, Ahlborn filed suit against
two alleged tortfeasors in Arkansas state court seeking
compensation for the injuries she sustained in the January 1996 car
accident. She claimed damages not only for past medical costs, but
also for permanent physical injury; future medical expenses; past
and future pain, suffering, and mental anguish; past loss of
earnings and working time; and permanent impairment of the ability
to earn in the future.
ADHS was neither named as a party nor formally
notified of the suit. Ahlborn’s counsel did, however, keep ADHS
informed of details concerning insurance coverage as they became
known during the litigation.
In February 1998, ADHS intervened in Ahlborn’s
lawsuit to assert a lien on the proceeds of any third-party
recovery Ahlborn might obtain. In October 1998, ADHS asked
Ahlborn’s counsel to notify the agency if there was a hearing in
the case. No hearing apparently occurred, and the case was settled
out of court sometime in 2002 for a total of $550,000. The parties
did not allocate the settlement between categories of damages. ADHS
did not participate or ask to participate in settlement
negotiations. Nor did it seek to reopen the judgment after the case
had been dismissed. ADHS did, however, assert a lien against the
settlement proceeds in the amount of $215,645.30—the total cost of
payments made by ADHS for Ahlborn’s care.
On September 30, 2002, Ahlborn filed this
action in the United States District Court for the Eastern District
of Arkansas seeking a declaration that the lien violated the
federal Medicaid laws insofar as its satisfaction would require
depletion of compensation for injuries other than past medical
expenses. To facilitate the District Court’s resolution of the
legal questions presented, the parties stipulated that Ahlborn’s
entire claim was reasonably valued at $3,040,708.18; that the
settlement amounted to approximately one-sixth of that sum; and
that, if Ahlborn’s construction of federal law was correct, ADHS
would be entitled to only the portion of the settlement
($35,581.47) that constituted reimbursement for medical payments
made. See App. 17–20.
Ruling on cross-motions for summary judgment,
the District Court held that under Arkansas law, which it concluded
did not conflict with federal law, Ahlborn had assigned to ADHS her
right to any recovery from the third-party tortfeasors to the full
extent of Medicaid’s payments for her benefit. Accordingly, ADHS
was entitled to a lien in the amount of $215,645.30.
The Eighth Circuit reversed. It held that ADHS
was entitled only to that portion of the judgment that represented
payments for medical care. For the reasons that follow, we
affirm.
II
The crux of the parties’ dispute
lies in their competing constructions of the federal Medicaid laws.
The Medicaid program, which provides joint federal and state
funding of medical care for individuals who cannot afford to pay
their own medical costs, was launched in 1965 with the enactment of
Title XIX of the Social Security Act (SSA), as added 79 Stat. 343,
42 U. S. C. §1396
et seq. (2000 ed. and Supp. III).
Its administration is entrusted to the Secretary of Health and
Human Services (HHS), who in turn exercises his authority through
the Centers for Medicare and Medicaid Services (CMS).[
Footnote 2]
States are not required to
participate in Medicaid, but all of them do. The program is a
cooperative one; the Federal Government pays between 50% and 83% of
the costs the State incurs for patient care,[
Footnote 3] and, in return, the State pays its
portion of the costs and complies with certain statutory
requirements for making eligibility determinations, collecting and
maintaining information, and administering the program. See
§1396a.
One such requirement is that the state agency
in charge of Medicaid (here, ADHS) “take all reasonable measures to
ascertain the legal liability of third parties . . . to pay for
care and services available under the plan.” §1396a(a)(25)(A) (2000
ed.).[
Footnote 4] The agency’s
obligation extends beyond mere identification, however;
“in any case where such a legal liability is found to exist
after medical assistance has been made available on behalf of the
individual and where the amount of reimbursement the State can
reasonably expect to recover exceeds the costs of such recovery,
the State or local agency will seek reimbursement for such
assistance to the extent of such legal liability.”
§1396a(a)(25)(B).
To facilitate its reimbursement from liable third
parties, the State must,
“to the extent that payment has been made under the
State plan for medical assistance in any case where a third party
has a legal liability to make payment for such assistance, [have]
in effect laws under which, to the extent that payment has been
made under the State plan for medical assistance for health care
items or services furnished to an individual, the State is
considered to have acquired the rights of such individual to
payment by any other party for such health care items or services.”
§1396a(a)(25)(H).
The obligation to enact assignment laws is
reiterated in another provision of the SSA, which reads as
follows:
“(a) For the purpose of assisting
in the collection of medical support payments and other payments
for medical care owed to recipients of medical assistance under the
State plan approved under this subchapter, a State plan for medical
assistance shall—
“(1) provide that, as a condition of
eligibility for medical assistance under the State plan to an
individual who has the legal capacity to execute an assignment for
himself, the individual is required—
“(A) to assign the State any rights . . . to
support (specified as support for the purpose of medical care by a
court or administrative order) and to payment for medical care from
any third party;
“(B) to cooperate with the State . . . in
obtaining support and payments (described in paragraph (A)) for
himself … ; and
“(C) to cooperate with the State in
identifying, and providing information to assist the State in
pursuing, any third party who may be liable to pay for care and
services available under the plan . . . .” §1396k(a).
Finally, “any amount collected by the State under
an assignment made” as described above “shall be retained by the
State as is necessary to reimburse it for medical assistance
payments made on behalf of” the Medicaid recipient. §1396k(b).
“[T]he remainder of such amount collected shall be paid” to the
recipient.
Ibid.
Acting pursuant to its understanding of these
third-party liability provisions, the State of Arkansas passed laws
that purport to allow both ADHS and the Medicaid recipient, either
independently or together, to recover “the cost of benefits” from
third parties. Ark. Code Ann. §§20–77–301 through 20–77–309 (2001).
Initially, “[a]s a condition of eligibility” for Medicaid, an
applicant “shall automatically assign his or her right to any
settlement, judgment, or award which may be obtained against any
third party to [ADHS] to the full extent of any amount which may be
paid by Medicaid for the benefit of the applicant.” §20–77–307(a).
Accordingly, “[w]hen medical assistance benefits are provided” to
the recipient “because of injury, disease, or disability for which
another person is liable,” ADHS “shall have a right to recover from
the person the cost of benefits so provided.”
§20–77–301(a).[
Footnote 5]
ADHS’ suit “shall” not, however, “be a bar to any action upon the
claim or cause of action of the recipient.” §20–77–301(b). Indeed,
the statute envisions that the recipient will sometimes sue
together with ADHS, see §20–77–303, or even alone. If the latter,
the assignment described in §20–77–307(a) “shall be considered a
statutory lien on any settlement, judgment, or award received . . .
from a third party.” §20–77–307(c); see also §20–77–302(a) (“When
an action or claim is brought by a medical assistance recipient . .
. , any settlement, judgment, or award obtained is subject to the
division’s claim for reimbursement of the benefits provided to the
recipient under the medical assistance program”).[
Footnote 6]
The State, through this statute, claims an
entitlement to more than just that portion of a judgment or
settlement that represents payment for medical expenses. It claims
a right to recover the entirety of the costs it paid on the
Medicaid recipient’s behalf. Accordingly, if, for example, a
recipient sues alone and settles her entire action against a
third-party tortfeasor for $20,000, and ADHS has paid that amount
or more to medical providers on her behalf, ADHS gets the whole
settlement and the recipient is left with nothing. This is so even
when the parties to the settlement allocate damages between medical
costs, on the one hand, and other injuries like lost wages, on the
other. The same rule also would apply, it seems, if the recovery
were the result not of a settlement but of a jury verdict. In that
case, under the Arkansas statute, ADHS could recover the full
$20,000 in the face of a jury allocation of, say, only $10,000 for
medical expenses.[
Footnote
7]
That this is what the Arkansas statute
requires has been confirmed by the State’s Supreme Court. In
Arkansas Dept. of Human Servs. v.
Ferrel, 336
Ark. 297, 984 S. W. 2d 807 (1999), the court refused to
endorse an equitable, nontextual interpretation of the statute.
Rejecting a Medicaid recipient’s argument that he ought to retain
some of a settlement that was insufficient to cover both his and
Medicaid’s expenses, the court explained:
“Given the clear, unambiguous language of the statute, it is
apparent that the legislature intended that ADHS’s ability to
recoup Medicaid payments from third parties or recipients not be
restricted by equitable subrogation principles such as the ‘made
whole’ rule stated in [
Franklin v.
Healthsource of
Arkansas, 328 Ark. 163, 942 S. W. 2d 837 (1997)]. By
creating an automatic legal assignment which expressly becomes a
statutory lien, [Ark. Code Ann. §20–77–307 (1991)] makes an
unequivocal statement that the ADHS’s ability to recover Medicaid
payments from insurance settlements, if it so chooses, is superior
to that of the recipient even when the settlement does not pay all
the recipient’s medical costs.”
Id., at 308, 984
S. W. 2d, at 811.
Accordingly, the Arkansas
statute, if enforceable against Ahlborn, authorizes imposition of a
lien on her settlement proceeds in the amount of $215,645.30.
Ahlborn’s argument before the District Court, the Eighth Circuit,
and this Court has been that Arkansas law goes too far. We agree.
Arkansas’ statute finds no support in the federal third-party
liability provisions, and in fact squarely conflicts with the
anti-lien provision of the federal Medicaid laws.
III
We must decide whether ADHS can
lay claim to more than the portion of Ahlborn’s settlement that
represents medical expenses.[
Footnote 8] The text of the federal third-party liability
provisions suggests not; it focuses on recovery of payments for
medical care. Medicaid recipients must, as a condition of
eligibility, “assign the State any rights . . .
to payment for
medical care from any third party,” 42 U. S. C. §1396k(a)
(1)(A) (emphasis added), not rights to payment for, for example,
lost wages. The other statutory language that ADHS relies upon is
not to the contrary; indeed, it reinforces the limitation implicit
in the assignment provision.
First, ADHS points to
§1396a(a)(25)(B)’s requirement that States “seek reimbursement for
[medical] assistance
to the extent of such legal
liability” (emphasis added) and suggests that this means that
the entirety of a recipient’s settlement is fair game. In fact, as
is evident from the context of the emphasized language, “such legal
liability” refers to “the legal liability of third parties . . .
to pay for care and services available under the plan.”
§1396a(a)(25)(A) (emphasis added). Here, the tortfeasor has
accepted liability for only one-sixth of the recipient’s overall
damages, and ADHS has stipulated that only $35,581.47 of that sum
represents compensation for medical expenses. Under the
circumstances, the relevant “liability” extends no further than
that amount.[
Footnote 9]
Second, ADHS argues that the language of
§1396a(a)(25)(H) favors its view that it can demand full
reimbursement of its costs from Ahlborn’s settlement. That
provision, which echoes the requirement of a mandatory assignment
of rights in §1396k(a), says that the State must have in effect
laws that, “to the extent that payment has been made under the
State plan for medical assistance for health care items or services
furnished to an individual,” give the State the right to recover
from liable third parties. This must mean, says ADHS, that the
agency’s recovery is limited only by the amount it paid out on the
recipient’s behalf—and not by the third-party tortfeasor’s
particular liability for medical expenses. But that reading ignores
the rest of the provision, which makes clear that the State must be
assigned “the rights of [the recipient] to payment by any other
party
for such health care items or services.”
§1396a(a)(25)(H) (emphasis added). Again, the statute does not
sanction an assignment of rights to payment for anything other than
medical expenses—not lost wages, not pain and suffering, not an
inheritance.
Finally, ADHS points to the provision
requiring that, where the State actively pursues recovery from the
third party, Medicaid be reimbursed fully from “any amount
collected by the State under an assignment” before “the remainder
of such amount collected” is remitted to the recipient. §1396k(b).
In ADHS’ view, this shows that the State must be paid in full from
any settlement. See Brief for Petitioners 13. But, even assuming
the provision applies in cases where the State does not actively
participate in the litigation, ADHS’ conclusion rests on a false
premise: The “amount recovered … under an assignment” is not, as
ADHS assumes, the entire settlement; as explained above, under the
federal statute the State’s assigned rights extend only to recovery
of payments for medical care. Accordingly, what §1396k(b) requires
is that the State be paid first out of any damages representing
payments for medical care before the recipient can recover any of
her own costs for medical care.[
Footnote 10]
At the very least, then, the federal
third-party liability provisions
require an assignment of
no more than the right to recover that portion of a settlement that
represents payments for medical care.[
Footnote 11] They did not mandate the enactment of the
Arkansas scheme that we have described.
IV
If there were no other relevant
provisions in the federal statute, the State might plausibly argue
that federal law supplied a recovery “floor” upon which States were
free to build. In fact, though, the federal statute places express
limits on the State’s powers to pursue recovery of funds it paid on
the recipient’s behalf. These limitations are contained in 42 U.
S. C. §§1396a(a)(18) and 1396p. Section 1396a(a)(18) requires
that a State Medicaid plan comply with §1396p, which in turn
prohibits States (except in circumstances not relevant here) from
placing liens against, or seeking recovery of benefits paid from, a
Medicaid recipient:
“(a) Imposition of lien against
property of an individual on account of medical assistance rendered
to him under a State plan
“(1) No lien may be imposed against the
property of any individual prior to his death on account of medical
assistance paid or to be paid on his behalf under the State plan,
except—
“(A) pursuant to the judgment of a court on
account of benefits incorrectly paid on behalf of such individual,
or
“(B) [in certain circumstances not relevant
here] … .
“(b) Adjustment or recovery of medical
assistance correctly paid under a State plan
“(1) No adjustment or recovery of any medical
assistance correctly paid on behalf of an individual under the
State plan may be made, except [in circumstances not relevant
here].” §1396p.
Read literally and in isolation, the anti-lien
prohibition contained in §1396p(a) would appear to ban even a lien
on that portion of the settlement proceeds that represents payments
for medical care.[
Footnote
12] Ahlborn does not ask us to go so far, though; she assumes
that the State’s lien is consistent with federal law insofar as it
encumbers proceeds designated as payments for medical care. Her
argument, rather, is that the anti-lien provision precludes
attachment or encumbrance of the remainder of the settlement.
We agree. There is no question that the State
can require an assignment of the right, or chose in action, to
receive payments for medical care. So much is expressly provided
for by §§1396a(a)(25) and 1396k(a). And we assume, as do the
parties, that the State can also demand as a condition of Medicaid
eligibility that the recipient “assign” in advance any payments
that may constitute reimbursement for medical costs. To the extent
that the forced assignment is expressly authorized by the terms of
§§1396a(a)(25) and 1396k(a), it is an exception to the anti-lien
provision. See
Washington State Dept. of Social and Health
Servs. v.
Guardianship Estate of Keffeler, 537 U. S. 371, 383–385,
and n. 7 (2003). But that does not mean that the State can force an
assignment of, or place a lien on, any other portion of Ahlborn’s
property. As explained above, the exception carved out by
§§1396a(a)(25) and 1396k(a) is limited to payments for medical
care. Beyond that, the anti-lien provision applies.
ADHS tries to avoid the anti-lien provision by
characterizing the settlement proceeds as not Ahlborn’s
“property.”[
Footnote 13] Its
argument appears to be that the automatic assignment effected by
the Arkansas statute rendered the proceeds the property of the
State.[
Footnote 14] See
Brief for Petitioners 31 (“[U]nder Arkansas law, the lien does not
attach to the recipient’s ‘property’ because it attaches only to
those proceeds already assigned to the Department as a condition of
Medicaid eligibility”). That argument fails for two reasons.
First, ADHS insists that Ahlborn at all times
until judgment retained her entire chose in action—a right that
included her claim for medical damages. The statutory lien, then,
cannot have attached until the proceeds materialized. That much is
clear from the text of the Arkansas statute, which says that the
“assignment shall be considered a statutory lien on any settlement
. . .
received by the recipient from a third party.” Ark.
Code Ann. §20–77–307(c) (2001) (emphasis added). The settlement is
not “received” until the chose in action has been reduced to
proceeds in Ahlborn’s possession. Accordingly, the assertion that
any of the proceeds belonged to the State all along lacks
merit.
Second, the State’s argument that Ahlborn lost
her property rights in the proceeds the instant she applied for
medical assistance is inconsistent with the creation of a statutory
lien on those proceeds. Why, after all, would ADHS need a lien on
its own property? A lien typically is imposed on the property of
another for payment of a debt owed by that other. See
Black’s Law Dictionary 922 (6th ed. 1990). Nothing in the Arkansas
statute defines the term otherwise.
That the lien is also called an “assignment”
does not alter the analysis. The terms that Arkansas employs to
describe the mechanism by which it lays claim to the settlement
proceeds do not, by themselves, tell us whether the statute
violates the anti-lien provision. See
United States v.
Craft, 535
U. S. 274, 279 (2002);
Drye v.
United States,
528 U. S. 49,
58–61 (1999). Although denominated an “assignment,” the effect of
the statute here was not to divest Ahlborn of all her property
interest; instead, Ahlborn retained the right to sue for medical
care payments, and the State asserted a right to the fruits of that
suit once they materialized. In effect, and as at least some of the
statutory language recognizes, Arkansas has imposed a lien on
Ahlborn’s property.[
Footnote
15] Since none of the federal third-party
liability provisions excepts that lien from operation of the
anti-lien provision, its imposition violates federal law.
V
ADHS and its
amici urge,
however, that even if a lien on more than medical damages would
violate federal law in some cases, a rule permitting such a lien
ought to apply here either because Ahlborn breached her duty to
“cooperate” with ADHS or because there is an inherent danger of
manipulation in cases where the parties to a tort case settle
without judicial oversight or input from the State. Neither
argument is persuasive.
The United States proposes a
default rule of full reimbursement whenever the recipient breaches
her duty to “cooperate,” and asserts that Ahlborn in fact breached
that duty.[
Footnote 16] But,
even if the Government’s allegations of obstruction were supported
by the record, its conception of the duty to cooperate strays far
beyond the text of the statute and the relevant regulations. The
duty to cooperate arises principally, if not exclusively, in
proceedings initiated
by the State to recover from third
parties. See 42 U. S. C. §1396k(a)(1)(C) (recipients must
“cooperate with the State in identifying . . . and providing
information to assist the State in pursuing” third parties). Most
of the accompanying federal regulations simply echo this basic
duty; all they add is that the recipient must “[p]ay to the agency
any support or medical care funds received that are covered by the
assignment of rights.” 42 CFR §433.147(b)(4) (2005).
In any event, the aspersions the United States casts upon
Ahlborn are entirely unsupported; all the record reveals is that
ADHS, despite having intervened in the lawsuit and asked to be
apprised of any hearings, neither asked to be nor was involved in
the settlement negotiations. Whatever the bounds of the duty to
cooperate, there is no evidence that it was breached here.
ADHS’ and the United States’ alternative
argument that a rule of full reimbursement is needed generally to
avoid the risk of settlement manipulation is more colorable, but
ultimately also unpersuasive. The issue is not, of course, squarely
presented here; ADHS has stipulated that only $35,581.47 of
Ahlborn’s settlement proceeds properly are designated as payments
for medical costs. Even in the absence of such a post-settlement
agreement, though, the risk that parties to a tort suit will
allocate away the State’s interest can be avoided either by
obtaining the State’s advance agreement to an allocation or, if
necessary, by submitting the matter to a court for
decision.[
Footnote 17] For
just as there are risks in underestimating the value of readily
calculable damages in settlement negotiations, so also is there a
countervailing concern that a rule of absolute priority might
preclude settlement in a large number of cases, and be unfair to
the recipient in others.[
Footnote 18]
VI
Finally, ADHS contends that the
Court of Appeals’ decision below accords insufficient weight to two
decisions by the Departmental Appeals Board of HHS (Board)
rejecting appeals by the States of California and Washington from
denial of reimbursement for costs those States paid on behalf of
Medicaid recipients who had settled tort claims. See App. to Pet.
for Cert. 45–67 (reproducing
In re Washington State Dept.
of Social & Health Servs., Dec. No. 1561, 1996 WL 157123
(HHS Dept. App. Bd., Feb. 7, 1996)); App. to Pet. for Cert. 68–86
(reproducing
In re California Dept. of Health Servs.,
Dec. No. 1504, 1995 WL 66334 (HHS Dept. App. Bd., Jan. 5, 1995)).
Because the opinions in those cases address a different question
from the one posed here, make no mention of the anti-lien
provision, and, in any event, rest on a questionable construction
of the federal third-party liability provisions, we conclude that
they do not control our analysis.
Normally, if a State recovers
from a third party the cost of Medicaid benefits paid on behalf of
a recipient, the Federal Government owes the State no
reimbursement, and any funds already paid by the Federal Government
must be returned. See 42 CFR §433.140(a)(2) (2005) (federal
financial participation “is not available in Medicaid payments if .
. . [t]he agency received reimbursement from a liable third
party”); §433.140(c). Washington and California both had adopted
schemes according to which the State refrained from claiming full
reimbursement from tort settlements and instead took only a portion
of each settlement. (In California, the recipient typically could
keep at least 50% of her settlement, see App. to Pet. for Cert. 72;
in Washington, the proportion varied from case to case, see
id., at 48–51.) Each scheme resulted in the State’s having
to pay a portion of the recipient’s medical costs—a portion for
which the State sought partial reimbursement from the Federal
Government. CMS (then called HCFA) denied this partial
reimbursement on the ground that the States had an absolute duty to
seek full payment of medical expenses from third-party
tortfeasors.
The Board upheld CMS’ determinations. In
California’s appeal, which came first, the Board concluded that the
State’s duty to seek recovery of benefits “from available third
party sources to the fullest extent possible” included demanding
full reimbursement from the entire proceeds of a Medicaid
recipient’s tort settlement.
Id., at 76. The Board
acknowledged that §1396k(a) “refers to assignment only of ‘payment
for medical care,’ ” but thought that “the statutory scheme as
a whole contemplates that the actual recovery might be greater and,
if it is, that Medicaid should be paid first.”
Ibid. The
Board gave two other reasons for siding with CMS: First, the
legislative history of the third-party liability evinced a
congressional intent that “the Medicaid program . . . be reimbursed
from available third party sources to the fullest extent possible,”
ibid.; and, second, California had long been on notice
that it would not be reimbursed for any shortfall resulting from
failure to fully recoup Medicaid’s costs from tort settlements, see
id., at 77. The Board also opined that the State could not
escape its duty to seek full reimbursement by relying on the
Medicaid recipient’s efforts in litigating her claims. See
id., at 79–80.
Finally, responding to the State’s argument
that its scheme gave Medicaid recipients incentives to sue
third-party tortfeasors and thus resulted in both greater recovery
and lower costs for the State, the Board observed that “a state is
free to allow recipients to retain the state’s share” of any
recovery, so long as it does not compromise the Federal
Government’s share.
Id., at 85.
The Board reached the same conclusion, by the
same means, in the Washington case. See
id., at 53–64.
Neither of these adjudications compels us to
conclude that Arkansas’ statutory lien comports with federal law.
First, the Board’s rulings address a different question from the
one presented here. The Board was concerned with the Federal
Government’s obligation to reimburse States that had, in its view,
failed to seek full recovery of Medicaid’s costs and had instead
relied on recipients to act as private attorneys general. The Board
neither discussed nor even so much as cited the federal anti-lien
provision.
Second, the Board’s acknowledgment that the
assignment of rights required by §1396k(a) is limited to payments
for medical care only reinforces the clarity of the statutory
language. Moreover, its resort to “the statutory scheme as a whole”
as justification for muddying that clarity is nowhere explained.
Given that the only statutory provisions CMS relied on are
§§1396a(a)(25), 1396k(a), and 1396k(b), see
id., at 75–76;
id., at 54–55, and given the Board’s concession that the
first two of these limit the State’s assignment to payments for
medical care, the “statutory scheme” must mean §1396k(b). But that
provision does not authorize the State to demand reimbursement from
portions of the settlement allocated or allocable to nonmedical
damages; instead, it gives the State a priority disbursement from
the medical expenses portion alone. See
supra, at 12. In
fact, in its adjudication in the Washington case, the Board
conceded as much: “[CMS] may require a state to assert a collection
priority over funds obtained by Medicaid recipients in [third-party
liability] suits
even though the distribution methodology set
forth in section [1396k(b)] refers only to payments collected
pursuant to assignments for medical care.” App. to Pet. for
Cert. 54 (emphasis added). The Board’s reasoning therefore is
internally inconsistent.
Third, the Board’s reliance on legislative
history is misplaced. The Board properly observed that Congress, in
crafting the Medicaid legislation, intended that Medicaid be a
“payer of last resort.” S. Rep. No. 99–146, p. 313 (1985).
That does not mean, however, that Congress meant to authorize
States to seek reimbursement from Medicaid recipients themselves;
in fact, with the possible exception of a lien on payments for
medical care, the statute expressly prohibits liens against the
property of Medicaid beneficiaries. See 42 U. S. C. §1396p(a).
We recognize that Congress has delegated “broad regulatory
authority to the Secretary [of HHS] in the Medicaid area,”
Wisconsin Dept. of Health and Family Servs. v.
Blumer, 534
U. S. 473, 496, n. 13 (2002), and that agency adjudications
typically warrant deference. Here, however, the Board’s reasoning
couples internal inconsistency with a conscious disregard for the
statutory text. Under these circumstances, we decline to treat the
agency’s reasoning as controlling.
VII
Federal Medicaid law does not
authorize ADHS to assert a lien on Ahlborn’s settlement in an
amount exceeding $35,581.47, and the federal anti-lien provision
affirmatively prohibits it from doing so. Arkansas’ third-party
liability provisions are unenforceable insofar as they compel a
different conclusion. The judgment of the Court of Appeals is
affirmed.
It is so ordered.
Footnote 1
Affidavit of Wayne E. Olive, Exhs. 5 and 6
(Mar. 6, 2003).
Footnote 2
Until 2001, CMS was known as the Health Care
Financing Administration or HCFA. See 66 Fed. Reg. 35437.
Footnote 3
The exact percentage of the federal
contribution is calculated pursuant to a formula keyed to each
State’s per capita income. See 42 U. S. C. §1396d(b).
Footnote 4
A “third party” is defined by regulation as
“any individual, entity or program that is or may be liable to pay
all or part of the expenditures for medical assistance furnished
under a State plan.” 42 CFR §433.136 (2005).
Footnote 5
Under the Arkansas statute, ADHS’ right to
recover medical costs appears to be broader than that of the
recipient. When ADHS sues, “no contributory or comparative fault of
a recipient shall be attributed to the state, nor shall any
restitution awarded to the state be denied or reduced by any amount
or percentage of fault attributed to a recipient.” §20–77–301(d)(1)
(2001).
Footnote 6
The Arkansas Supreme Court has held that ADHS
has an independent, nonderivative right to recover the cost of
benefits from a third-party tortfeasor under §20–77–301 even when
the Medicaid recipient also sues for recovery of medical expenses.
See
National Bank of Commerce v.
Quirk, 323 Ark.
769, 792–794, 918 S. W. 2d 138, 151–152 (1996).
Footnote 7
ADHS denies that it would actually demand the
full $20,000 in such a case, see Brief for Petitioners 49,
n. 13, but points to no provision of the Arkansas statute that
would prevent it from doing so.
Footnote 8
The parties here assume, as do we, that a
State can fulfill its obligations under the federal third-party
liability provisions by requiring an “assignment” of part of, or
placing a lien on, the settlement that a Medicaid recipient
procures on her own. Cf. §§1396k(a)(B)–(C) (the recipient has a
duty to identify liable third parties and to “provid[e] information
to
assist the State in pursuing” those parties (emphasis
added)).
Footnote 9
The effect of the stipulation is the same as
if a trial judge had found that Ahlborn’s damages amounted to
$3,040,708.12 (of which $215,645.30 were for medical expenses), but
because of her contributory negligence, she could only recover
one-sixth of those damages.
Footnote 10
Implicit in ADHS’ interpretation of this
provision is the assumption that there can be no “remainder” to
remit to the Medicaid recipient if all the State has been assigned
is the right to damages for medical expenses. That view in turn
seems to rest on an assumption either that Medicaid will have paid
all the recipient’s medical expenses or that Medicaid’s expenses
will always exceed the portion of any third-party recovery
earmarked for medical expenses. Neither assumption holds up. First,
as both the Solicitor General and CMS acknowledge, the recipient
often will have paid medical expenses out of her own pocket. See
Brief for United States as
Amicus Curiae 12 (under
§1396k(b), “the beneficiary retains the right to payment for any
additional medical expenses personally incurred either before or
subsequent to Medicaid eligibility and for other damages”); CMS,
State Medicaid Manual §3907 (last modified Sept. 16, 2005)
(envisioning that “medical insurance payments,” for example, will
be remitted to the recipient if possible). Second, even if
Medicaid’s outlays often exceed the portion of the recovery
earmarked for medical expenses in tort cases, the third-party
liability provisions were not drafted exclusively with tort
settlements in mind. In the case of health insurance, for example,
the funds available under the policy may be enough to cover both
Medicaid’s costs and the recipient’s own medical expenses.
Footnote 11
ADHS concedes that, had a jury or judge
allocated a sum for medical payments out of a larger award in this
case, the agency would be entitled to reimburse itself only from
the portion so allocated. See Brief for Petitioners 49, n. 13;
see also Brief for United States as
Amicus Curiae 22, n.
14 (noting that the Secretary of HHS “ordinarily accepts” a jury
allocation of medical damages in satisfaction of the Medicaid debt,
even where smaller than the amount of Medicaid’s expenses). Given
the stipulation between ADHS and Ahlborn, there is no textual basis
for treating the settlement here differently from a judge-allocated
settlement or even a jury award; all such awards typically
establish a third party’s “liability” for both “payment for medical
care” and other heads of damages.
Footnote 12
Likewise, subsection (b) would appear to
forestall any attempt by the State to recover benefits paid, at
least from the “individual.” See,
e.g.,
Martin ex rel.
Hoff v.
Rochester, 642 N. W. 2d 1, 8, n. 6
(Minn. 2002);
Wallace v.
Estate of Jackson, 972
P. 2d 446, 450 (Utah 1998) (Durham, J., dissenting) (reading
§1396p to “prohibi[t] not only liens against Medicaid recipients
but also any recovery for medical assistance correctly paid”). The
parties here, however, neither cite nor discuss the anti-recovery
provision of §1396p(b). Accordingly, we leave for another day the
question of its impact on the analysis.
Footnote 13
“Property” is defined by regulation as “the
homestead and all other personal and real property in which the
recipient has a legal interest.” 42 CFR §433.36(b) (2005).
Footnote 14
The United States as
amicus curiae
makes the different argument that the proceeds never became
Ahlborn’s “property” because “to the extent the third party’s
payment passes through the recipient’s hands en route to the State,
it comes with the State’s lien already attached.” Brief as
Amicus Curiae 18. Even if that reading were consistent
with the Arkansas statute (and it is not, see
infra, at
16), the United States’ characterization of the “assignment” simply
reinforces Ahlborn’s point: This is a lien that attaches
to the
property of the recipient.
Footnote 15
Because ADHS insists that “Arkansas law did
not require Ahlborn to assign her claim or her right to
sue,” Brief for Petitioners 33 (emphasis in original), we need not
reach the question whether a State may force a recipient to assign
a chose in action to receive as much of the settlement as is
necessary to pay Medicaid’s costs. The Eighth Circuit thought this
would be impermissible because the State cannot “circumvent the
restrictions of the federal anti-lien statute simply by requiring
an applicant for Medicaid benefits to assign property rights to the
State before the applicant liquidates the property to a sum
certain.” App. to Pet. for Cert. 6. Indeed, ADHS acknowledges that
Arkansas cannot, for example, require a Medicaid applicant to
assign in advance any right she may have to recover an inheritance
or an award in a civil case not related to her injuries or medical
care. This arguably is no different; as with assignment of those
other choses in action, assignment of the right to compensation for
lost wages and other nonmedical damages is nowhere authorized by
the federal third-party liability provisions.
Footnote 16
See,
e.g., Brief for United States
as
Amicus Curiae 14 (alleging that Ahlborn “omitt[ed] or
understat[ed] the medical damages claim from her lawsuit and
attempt[ed] to horde for herself the third-party liability
payments”);
id., at 15 (“[H]aving forsaken her federal and
state statutory duties of candid and forthcoming cooperation . . .
[,] respondent, rather than the taxpayers, must bear the financial
consequences of her actions”);
id., at 21, 24 (referring
to Ahlborn’s “backdoor settlement” and “obstruction and attrition,”
as well as her “calculated evasion of her legal obligations”).
Footnote 17
As one
amicus observes, some States
have adopted special rules and procedures for allocating tort
settlements in circumstances where, for example, private insurers’
rights to recovery are at issue. See Brief for Association of Trial
Lawyers of America 20–21. Although we express no view on the
matter, we leave open the possibility that such rules and
procedures might be employed to meet concerns about settlement
manipulation.
Footnote 18
The point is illustrated by state cases
involving the recovery of workers’ compensation benefits paid to an
employee (or the family of an employee) whose injuries were caused
by a third-party tortfeasor. In
Flanigan v.
Department
of Labor and Industry, 123 Wash. 2d 418, 869 P. 2d 14
(1994), for example, the court concluded that the state agency
could not satisfy its lien out of damages the injured worker’s
spouse recovered as compensation for loss of consortium. The court
explained that the department could not “share in damages for which
it has provided no compensation” because such a result would be
“absurd and fundamentally unjust.”
Id., at 426, 869
P. 2d, at 17.
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