Medicaid Liens Under Missouri Law
by Glenn E. Bradford1 |
R. Denise Henning2 |
This short article is the fifth in a series on the topic of liens, claims and charges applicable in a personal injury settlement. In this article, we review the operation of a lien arising from payments provided under Medicaid, a federal program which is administered by each individual state, and briefly discuss how recovery of such payments impacts any recovery pursuant to an attorneys' lien.
Attorneys representing claimants are generally aware that a settlement or judgment from a personal injury suit is usually subject to various claims by third parties. Hospitals, insurance companies, and governmental agencies often expend money or services on behalf of the injured party. These parties most likely will seek satisfaction of those debts at the time of settlement or judgment. Consequently, a claimant's attorney must be aware of who holds claims against the proceeds of the settlement or judgment and provide for their satisfaction accordingly. Failure to do so could result in the attorney being held personally liable for payment if the claim in fact rises to the legal status of a true lien. With that concern in mind, it is important for attorneys dealing in personal injury practice to be familiar with the various state and federal laws and regulations relating to claims and liens against settlement or judgment proceeds.
A careful lawyer will take precautionary measures to ensure every possible lien is known at the outset so that all parties involved are aware of who is to be paid upon settlement or judgment. Typically, the client knows who provided or paid for their care and has information concerning the identity of those providers. However, it is often confusing to determine who has made payments and the amounts provided when more than one insurance company is involved or if the government and the insurance companies are entangled together. Furthermore, Medicare liens, for example, require no notice and thus the attorney could be left to discover these claims after paying out the settlement proceeds. Interviewing the parties regarding all of the policies the client holds and then following up with letters to those companies concerning the benefits they provided is one way to help ensure that all liens and claims are uncovered. This article explores the subject of Medicaid liens and how they are administered under Missouri law.
I. Definition of "Lien"
When exploring the subject of liens in personal injury cases, it is important to understand the precise meaning of the terms lien, subrogation, and assignment. These three terms convey similar ideas, but are not identical. "Lien" has been defined as "[a] claim, encumbrance, or charge on property for payment of some debt, obligation or duty," and a "[t]ie that binds property to a debt or claim for its satisfaction."3 A lien is a charge imposed upon specific property, whereas an "assignment" is "[t]he act of transferring to another all or part of one's property, interest, or rights."4 "Subrogation" has been defined as "[t]he substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies, or securities."5 A number of third parties may have claims against the proceeds of a personal injury recovery; however, very few of these claims actually rise to the level of a lien.6 The term "lien" implies an enforceability against a fund of money. An appropriate analogy might be to the rights of a mortgage holder in real property as opposed to a general creditor of the property owner. A lienholder normally has rights of recovery against the property itself.
II. Missouri Statutory Attorneys' Lien
An issue that will arise in virtually every case involving a lien, claim or charge against the proceeds of a recovery is the relationship between the particular lien, claim or charge and the statutory lien that an attorney has for legal fees and expenses. In order to better understand this relationship, let us first take a brief look at the Missouri statutory attorneys' lien. Two separate types of attorneys' liens are created by statute.7 Section 484.130 provides that an attorneys' lien attaches to a "client's cause of action or counterclaim, which attaches to a verdict, report, decision or judgment in his client's favor, and the proceeds thereof in whosoever hands they may come. . . ." The statute provides that the lien "cannot be affected by any settlement between the parties before or after judgment."8
Section 484.140 provides for an attorneys' lien based on a contract between the attorney and the client, regardless of whether a claim or counterclaim is actually filed in court. However, the attorney must perfect the lien by mailing a notice of the lien to the proposed defendant or defendants. The written notice must contain the contingent fee percentage agreed upon between the attorney and the claimant. The lien operates from the date of service of notice as a lien upon the proceeds of any settlement. Experienced claimants' attorneys recommend that written notice of the attorneys' lien be provided to the tortfeasor, the tortfeasor's attorney, and the tortfeasor's insurance carrier, if known.
It has been held that an attorneys' lien includes proper and legitimate out-of-pocket advances for the costs of litigation. The Missouri Court of Appeals for the Western District, in Ganaway v. Department of Social Services,9 stated that "[a]n attorney is entitled to a lien for any legitimate expense[s] incurred by [the attorney] in the prosecution of an action, . . . not necessarily limited to taxable items of costs and disbursements, but include[ing] any expenditure[s] which may properly be made in furtherance of the . . . action."10 The court distinguished the case of Koch-Laumand Contracting, Inc. v. May Dep't Stores Co.,11 which had been thought by some to provide precedent that out-of-pocket expenses are not lienable. The Ganaway court distinguished the Koch-Laumand Contracting case on the grounds the case dealt with the definition of "legal fees" in a contract action and not with the construction of § 484.130, the attorneys' lien statute.12 The Ganaway court held that the law firm representing the plaintiff in a personal injury suit arising from an automobile collision was entitled to an attorneys' lien for expenses necessarily incurred on plaintiff's behalf and that the attorneys' lien statute made such lien superior to the Department of Social Services' right of recovery based on the department's payment of public assistance to the claimant.
As a rule, attorneys' liens generally take precedence over other statutory liens against a recovery by way of settlement or judgment. Section 208.215.14, which gives the state a lien for all payments made from medical assistance provided pursuant to Chapter 208, expressly states that the debt owed to the state is "subordinate to the lien provided by section 484.130, RSMo or section 484.140, RSMo, relating to an attorney's lien and to the recipient's expenses of the claim against the third party."13 Furthermore, the Missouri Medicaid lien statute contains a specific provision preventing satisfaction of any charge it may have for providing medical assistance "until the attorney's claim for fees is satisfied."14
III. The Missouri Medicaid Program
Medicaid is a government program set up to provide medical care to persons eligible due to financial need. Medicaid, enacted in 1965 as Title XIX of the Social Security Act, is a publicly-funded program to ensure medical care to certain individuals deemed to lack the resources to cover the costs of essential medical care.15 The Medicaid program is administered by the individual states under applicable provisions of federal law. Medicaid was intended by Congress to be the payor of last resort.16 On the federal level, Medicaid is administered by HCFA, the Health Care Financing Administration. Medicaid is jointly funded by the state and federal governments.17
Under Missouri law, Medicaid is administered by the Division of Medical Services of the Department of Social Services. Section 208.151 sets forth the persons who are eligible to receive medical assistance under Medicaid in Missouri.18 If a Medicaid recipient recovers from a third party tortfeasor on any liability claim for an injury for which Medicaid has paid benefits, the Department of Social Services can assert a lien for moneys expended.19 Under § 208.215.8, "[t]he department of social services shall have a lien upon any moneys to be paid by any insurance company or similar business enterprise, person, corporation, institution, public agency or private agency in settlement or satisfaction of a judgment on any claim for injuries . . . ."20 This right exists to prevent a double recovery by a Medicaid recipient who receives payment from both Medicaid and a third party. The Department of Social Services has statutory authority to bring an action to recover funds due a Medicaid recipient from a third party.21 Medicaid includes a number of different programs.
The Medical Assistance Program provides Medicaid coverage to individuals who are blind, 65 years of age or older, or who have a disability meeting the criteria set out in 42 C.F.R. § 435.540. The Managed Care Plus Program was established as part of the Children's Health Initiative Program (CHIPS).22 CHIPS is designed to provide insurance to low-income children and their parents. The program also includes the former Medicaid for Children and Medicaid for Pregnant Women programs. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 created the Medicaid Assistance for Families program.23 This program is administered under the auspices of the Aid to Families with Dependent Children program.
Medical Assistance Vendor benefits under the Title XIX program are provided to individuals residing in long-term care facilities, including nursing homes, state mental hospitals, and hospitals for the mentally retarded. Medicaid Catastrophic Coverage is available to a married, institutionalized individual whose spouse continues to live in the couple's home.24 The In-Home Personal Care Service Program provides services in the home, such as nurse visits or assistance with daily living activities.25 An individual must need an institutional level of care on a 24-hour basis.26
The Home and Community Based Program is a variation of Medicaid Catastrophic Coverage providing benefits to people who remain in their homes in spite of needing an institutional level of care. The Supplemental Nursing Care Program provides financial assistance to residents of nursing facilities not otherwise eligible for nursing care under the Title XIX program. The General Relief Program provides a cash allotment and partial Medicaid coverage to people who are disabled, physically or mentally, and are unemployable for 90 days or longer.27 The Temporary Assistance Program provides a cash stipend to households in which there are children who are without parental financial support as defined in 13 C.S.R. § 40-2.310(5). There is a five-year limit on participation in the Temporary Assistance Program.
IV. 1996 Amendments to Missouri Medicaid Statute
In 1996, the Missouri General Assembly passed legislation amending the procedure used by the Department of Social Services to enforce its rights against a recovery due to a Medicaid lien.28 The new statute provides for the negotiation of Medicaid liens.29 Prior to this enactment, the Department of Social Services had been unwilling to take a reduced amount to satisfy its lien and there was no statutory right to a reduction hearing.30
Due to this rigidity and the possibility that Medicaid liens might account for every last penny of judgment, many injured parties opted not to pursue the long road of recovery against the third party. This uncompromising attitude, presumably thought to aid in full Medicaid recovery, actually hindered potential claimants and has likely cut down on the level of recovery attained through Medicaid liens.
The new legislation also provides for the Department of Social Services' responsibility for their pro rata share of attorneys' fees.31 Under the new law, attorneys' fees have priority over the Medicaid lien.32
Any Medicaid recipient who pursues a claim against a third party for expenses that have been paid by the Medicaid program is required to notify the Department of Social Services that he or she is pursuing legal action.33 Anyone acting on the Medicaid recipients' behalf in the capacity of "guardian, conservator, personal representative" or lawyer is bound by the same requirement to notify the Department of Social Services.34 If a recovery is obtained, the recipient, or the recipient's agent, is required to promptly notify the Department of Social Services of any recovery and immediately reimburse the department from the proceeds of the settlement, judgment or other recovery.35 The Department of Social Services has a lien on any money paid by a third party to a Medicaid recipient "in settlement or satisfaction of a judgment" involving medical expenses that have been paid by Medicaid.36
Although there is no case directly addressing the extent of the liability of a person acting on the Medicaid recipient's behalf - such as a guardian, conservator, personal representative or lawyer - for failing to notify the Department of Social Services that money has been paid to a Medicaid recipient, the logical interpretation of the statute would be that such a person would be liable to the Department of Social Services to the full extent of the lien for failing to provide notice. Neither the statute nor the case law addresses the obligation of a defense attorney to notify Medicaid of any settlement payment to a Medicaid recipient.
Another competing interest arises when a Medicaid recipient has received payment from a third party, but only in an amount that partially compensates the recipient for his or her injury. In the event that the Department of Social Services and the plaintiff cannot come to an agreement, § 208.215.9 allows any party to petition the court to decide whether or not the Medicaid lien should be reduced based on the factors set out in § 208.215.9. After the petition has been filed, the opposing party served, and the opposing party has filed an answer, the court conducts an evidentiary hearing to determine whether the Medicaid lien should be reduced.37 A reduction of the lien to zero is within the court's discretion.
Section 208.215.9 lists six factors the court should consider with regard to whether the lien should be reduced:
(1) The amount of the charge sought to be enforced against the recovery when expressed as a percentage of the gross amount of the recovery; the amount of the charge sought to be enforced against the recovery when expressed as a percentage of the amount obtained by subtracting from the gross amount of the recovery the total attorney's fees and other costs incurred by the recipient incident to the recovery; and whether the department should, as a matter of fairness and equity, bear its proportionate share of the fees and costs incurred to generate the recovery from which the charge is sought to be satisfied;
(2) The amount, if any, of the attorney's fees and other costs incurred by the recipient incident to the recovery and paid by the recipient up to the time of recovery, and the amount of such fees and costs remaining unpaid at the time of the recovery;
(3) The total hospital, doctor and other medical expenses incurred for care and treatment of the injury to the date of recovery therefor, the portion of such expenses theretofore paid by the recipient, by insurance provided by the recipient, and by the department, and the amount of such previously incurred expenses which remain unpaid at the time of recovery and by whom such incurred, unpaid expenses are to be paid;
(4) Whether the recovery represents less than substantially full recompense for the injury and the hospital, doctor and other medical expenses incurred to the date of recovery for the care and treatment of the injury, so that reduction of the charge sought to be enforced against the recovery would not likely result in a double recovery or unjust enrichment to the recipient;
(5) The age of the recipient and of persons dependent for support upon the recipient, the nature and permanency of the recipient's injuries as they affect not only the future employability and education of the recipient but also the reasonably necessary and foreseeable future material, maintenance, medical rehabilitative and training needs of the recipient, the cost of such reasonable necessary and foreseeable future needs, and the resources available to meet such needs and pay such costs;
(6) The realistic ability of the recipient to repay in whole or in part the charge sought to be enforced against the recovery when judged in light of the factors enumerated above.38
The burden of producing evidence to convince the court to reduce the lien lies with the party seeking the reduction.
39 The Medicaid recipient requesting reduction of the lien under § 208.215.9 is not required to prove each statutory factor, nor does the trial court have to enter findings on each statutory factor.
40 The party seeking the reduction must provide sufficient evidence to support the exercise of the trial court's discretion.
41 "The need for competent evidence on the enumerated factors is especially important when it appears any recovery may be insufficient to adequately compensate all parties."
42
V. Conclusion
As presently constituted, the Missouri statutory scheme provides a workable mechanism that will encourage private claimants and their attorneys to pursue third party tort claims in circumstances where the existence of a substantial Medicaid lien might previously have chilled enthusiasm for pursuit of the claim. The present statutory scheme also offers a reasonable protection for the financial interests of the attorney representing a Medicaid recipient in a third party tort action.
Footnotes
1 Glenn E. Bradford is a 1972 graduate of the Tulane University School of Law, where he was a member of the board of editors of the Tulane Law Review. He practices as a trial lawyer in the firm of Bradford & Walsh, P.C., in Kansas City, with emphasis on plaintiff's personal injury and criminal defense in state and federal court. Mr. Bradford has served as an adjunct professor of law at the University of Missouri-Kansas City School of Law.
2 R. Denise Henning is a trial lawyer who has dedicated her practice to representing injured individuals. Denise practices at Henning & Bough, P.C. Ms. Henning graduated magna cum laude from the University of Illinois College of Law in 1992. She is the president of the Association for Women Lawyers and is active in the Missouri Association of Trial Attorneys, serving on its board of governors and as the chair of the CLE Committee. The Missouri Bar Foundation in 2002 awarded Denise the Lon O. Hocker Award, which is given in recognition of outstanding trial skills.
3 Black's Law Dictionary 922 (6th ed. 1990).
4 Id. at 119.
5 Id. at 1427.
6 Glenn E. Bradford & Amy Kiefer Hansen, Liens, Assignments, Subrogation and Other Traps for the Claimant's Lawyer, 53 J. Mo. Bar 248 (1997).
7 Section 484.130, RSMo 2000; § 484.140, RSMo 2000.
8 Id.
9 753 S.W.2d 12 (Mo. App. W.D. 1988).
10 Id. at 14.
11 623 S.W.2d 52 (Mo. App. E.D. 1981).
12 Ganaway, 753 S.W.2d at 15.
13 Section 208.215.14, RSMo 2000.
14 Section 208.215.12, RSMo 2000.
15 42 C.F.R. § 430.0 (2003), Northwest Bank of North Dakota, N.D. v. Doth, 159 F.3d 328, 331 (8th Cir. 1998).
16 H.R. Conf. Report No. 99-453 at 542 (1985).
17 42 C.F.R. § 430 (2003).
18 Section 208.151, RSMo Supp. 2003.
19 Id.
20 Section 208.215.8, RSMo Supp. 2000.
21 Id.
22 See §§ 208.631, et seq., RSMo Supp. 2003. 13 C.S.R. § 70-4.080 (1998), 42 U.S.C. § 1397aa (2000).
23 Pub.L. No. 104-193, 110 Stat. 2105.
24 42 U.S.C. § 1396r-5 (2000). 13 C.S.R. § 40-2.030(13).
25 Section 208.152.1(18), RSMo 2000; 13 C.S.R. § 70-91.010 (1998).
26 13 C.S.R. § 70-91.010(1)(A)1 (1998).
27 Section 208.015, RSMo 2000; 13 C.S.R. § 40-2.070, 40-2.030 and 40-2.120 (1998).
28 S. B. 869, 88th Gen. Assem., 2nd Reg. Sess. (Mo. 1996), revised § 208.215.11, RSMo 1996 (effective August 28, 1996).
29 See Gary Witt & James P. Holloran, Reduction and Compromise of Medicaid Liens, New Legislation and Its Impact, 14 The Missouri Trial Attorney 8 (1996).
30 Section 208.215.11, RSMo 2000; § 208.215.14, RSMo 2000.
31 Id.
32 Section 208.215.6, RSMo 2000.
33 Id.
34 Id.
35 Section 208.215.8, RSMo 2000.
36 Section 208.215.9, RSMo 2000.
37 Section 208.215.9, RSMo 2000.
38 Id.
39 Section 208.215.10, RSMo 2000.
40 Gravier v. Missouri Dept. of Social Services, 968 S.W.2d 149, 154 (Mo. App. E.D. 1998); American Family Mutual Insurance Co. v. Fehling, 970 S.W.2d 844, 852, 855 (Mo. App. W.D. 1998).
41 Gravier, 968 S.W.2d at 154.
42 Id.