Still Going... Medicaid, Part III

Alright, let's learn. Medicaid is riveting!

Remember last Friday, when we talked about Medicaid's subrogation interest in your personal injury recovery?  You'll recall that under the "Presumptive Approach," Medicaid's interest is limited to one third of your gross recovery, and Medicaid doesn't have to share in your attorney's fees and costs (Medicare, for instance, does share in attorney's fees, which we'll discuss in the near future).

But the Presumptive Approach isn't the end-all-be-all that it might appear to be; you don't just cut Medicaid a check for a third of your settlement and go about your day.  You still have to know how to determine what the ultimate lien amount is, which often gets highly complicated. Then you have to ask whether Medicaid's subrogation interest might interact with that of another health insurance carrier, which can get extremely complicated. I'm going to reassert my general disclaimer that you need to talk with an attorney if you get confused, but with that being said, let's jump in.

How does Medicaid interact with other liens?

The two most common interactions you'll see involving the Program are Medicaid-Medicare and Medicaid-Medical Provider.  We haven't gone over Medicare or Medical Provider (§44-49) liens yet, but for purposes of what we're talking about here, we should be fine.  Let's start with Medicare-Medicaid.

Medicare-Medicaid Interaction. When Medicare and Medicaid face off in a subrogation setting, Medicare is going to win out.  Medicaid's going to be left with whatever's left over after Medicare gets paid; furthermore, if Medicare's recovery exceeds the one-third of the gross recovery that Medicaid is entitled to under the Presumptive Approach, then Medicare gets nothing.  Let's look at some examples, shall we?

Example 1. Jerry's gross settlement is $30,000. Medicare's subrogation interest is $12,000, while Medicaid's is $8,000. In this example, Medicare's $12,000 is going to exceed one-third of the statutory cap on Medicaid's recovery.  So Medicare gets paid its $12,000 and Medicaid isn't able to get anything from the settlement. Note that even though Medicaid gets hung out to dry by Medicare, that doesn't mean that they can come after Jerry later for what they paid.  Medicaid is either going to take from the settlement/judgment proceeds, or it isn't going to take anything at all.

Example 2. Jerry's gross settlement is $30,000 again.  Medicare's subrogation interest is $5,000, and Medicaid's is $20,000. In this scenario, Medicare gets paid in full, and there's still $5,000 left over before the one-third Medicaid cap is hit. So Medicare gets the $5,000 that it's owed, and then Medicaid gets another $5,000.  That $5,000 is all that Medicaid is going to get; the other $15,000 gets discharged and Jerry never becomes personally liable for paying it back to the Program.

Example 3. Jerry's gross settlement is - you guessed it - $30,000.  Medicare's subrogation interest is $2,000, and Medicaid's is $4,000. Now, Medicare is still going to get paid first, because Medicare trumps Medicaid, right? However, even after Medicare gets paid in full, there's still plenty of dough left for Medicaid to also get paid in full without hitting the one-third statutory cap.  So Medicare and Medicaid both get paid in full, and then the rest is left to compensate Jerry and his attorney, if one has been retained.

Medicaid-Medical Provider Interaction. Quick crash-course here; medical providers who haven't been paid by health insurance can assert a statutory lien against a personal injury recovery. Like Medicaid, these liens are limited to one-third of the gross recovery. HOWEVER, unlike with Medicaid, anything still outstanding after that cap is hit remains the responsibility of the claimant to pay. The general rule is that you're going to pro-rate Medicaid's interest with that of the medical providers. This can and does get a little bit more complicated, but with some diligence you can untangle the knot. Examples? Yes, please!

Example 1. Jerry's gross settlement is $30,000. Medicaid's subrogation interest is $6,000, and Dr. Bob's lien is $1,000. In this scenario, both Medicaid and Dr. Bob can be paid in full without disturbing the one-third cap. So both lienholders are going to get paid, then the rest will be left to Jerry.

Example 2. Gross settlement of $30,000, Medicaid lien of $9,000 and Dr. Bob's lien of $5,000.  This is where it starts to get tricky. You've got a total amount owed of $14,000, up against a statutory cap of $10,000. So what you're going to do is prorate each party's interest to the amount available. First, you'll divide the cap ($10,000) by the amount owed ($14,000), which in this case gives you 0.71428571. Then, you'll multiply each party's lien amount by 0.71428571 to arrive at the amount that each party is able to recover. That will give you $6,428.57 for Medicaid, and $3,571.43 for Dr. Bob. This totals $10,000, which of course is the one-third cap for both Medicaid and Dr. Bob. Keep in mind that Dr. Bob is still allowed to seek the balance of $1,428.57 that he's still owed; but the time, expense and general inconvenience of trying to recover it can be a powerful incentive to get him to agree to accept the pro-rated amount before accepting settlement in that amount.

Example 3. Gross settlement of $30,000. Medicaid lien of $6,500, Dr. Bob's lien of $3,000, Dr. Jill's lien of $12,000, and an ER lien of $4,000. Okay, so the same formula we applied above is going to apply here. You've got a total amount owed of $25,500 and a total amount available of $10,000. So we divide the amount available ($10,000) by the amount owed ($25,500) to arrive at 0.39215686. Using that figure, Medicaid gets $2,549.01, Dr. Bob gets $1,176.48, Dr. Jill gets $4,705.88, and the ER gets $1,568.63. Remember again that everyone but Medicaid is still allowed to come after their balance, which is why Jerry should get them all to agree to their prorated amounts in full and final satisfaction of the bill before he accepts the settlement offer in the first place.

Phew. So how do I figure out what the lien amount is, anyway?

Yeah, maybe this should have gone first. But I get excited about doing the proration calculations because they make me feel like a mathematical wizard. Don't judge me.

There are several steps that you'll need to take in order to make sure the Medicaid's lien amount is correct; I'm sure you can appreciate that this is something you need to be really diligent about. You really don't want to fork over more money that you absolutely have to, right? Here we go.

Step 1: Send your claim request to the recovery contractor. Medicaid provides a claim request form that you can use, and we've got one, too. If you want to take a look at ours, give me a shout and I'll be happy to provide you with a copy. These days, Medicaid uses a third-party contractor to process its subrogation claims. That contractor is Health Management Systems, Inc., or HMS. You'll need to mail or fax your complete request form to HMS, and you can typically expect an answer by fax within 30 days.

Step 2: Scrutinize Medicaid's response. The HMS response won't include a line-item-by-line-item list of every treatment that Medicaid is claiming to be related to your injuries, but it will include a total amount paid to each medical provider. Look at those amounts closely and compare them to your medical bills to make sure that Medicaid isn't claiming any unrelated treatments. I like to stay organized by plugging all of a client's bills into a spreadsheet, which allows me to calculate totals and compare those totals to Medicaid's claimed lien amount. If you do suspect that unrelated treatment is being included in Medicaid's lien amount, you can request that HMS send you a more specific account of the treatments and expenses that are being included.

Step 3: Resolve any discrepancies. If you identify any unrelated treatments that Medicaid is claiming in its lien amount, send a letter to HMS explaining why those treatments shouldn't be included. Make sure to include a copy of the itemization statement with the questionable treatments lined through. Keep in mind that Medicaid/HMS won't always agree with your contentions, so you'll need to be ready to argue your case. After a review of your position, HMS will either respond in writing or call you to discuss the matter.

Step 4: Call HMS to confirm your lien amount before proceeding. If you have a settlement in place, you absolutely must call HMS and let them know before you go forward. It's a really good idea to request a final update from HMS, even if you've finished with your treatment. Once you get a final pay letter from Medicaid, the amount contemplated by that letter is considered to be binding on Medicaid for 30 days from the date of the letter.

Step 5: Pay Medicaid. One you get the final pay letter, be expeditious about disbursing that amount while the 30-day effective period is still in effect. Write a letter to HMS including (i) the final settlement amount, (ii) any other liens competing with Medicaid, and (iii) the final amount being paid to Medicaid in accordance with the formula(s) described above. Include a copy of the final pay letter from HMS. 

This seems really complicated!

Well, I told you it would be! Again, if you get in over your head, get an attorney to help you. Seriously. If you mess up, Medicaid can come back and make your life a living H-E-Double-Hockey-Sticks, even years later.

With that cheery conclusion, best of luck to you! Part IV, the final episode in the Medicaid Subrogation saga, is coming on Tuesday!