Know How: W.Va. Supreme Court Limits DHHR Recovery from Tort Settlements for Medicaid Payments

June 28, 2012

Authored by:
W. Randolph Fife, Member

In a decision released late last week, the West Virginia Supreme Court construed state and federal law to limit the State's Department of Health and Human Resources (DHHR) in its recovery for medical benefits paid to claimants who settle tort claims. The Court relied on federal case law to rule that DHHR may recover the medical expenses it paid only from the portion of the settlement (or judgment) that constitutes damages for past medical expenses. Insurers should take note that the decision's dictates could lessen the Medicaid lien which can be asserted and lengthen the time it takes to finally resolve a case, should litigation over the lien result.

In the case, In Re: E.B., A Minor, a child's mother had sued various medical providers for malpractice after the child was born with severe brain damage. She ultimately settled the case and sought court approval. DHHR had paid significant sums for the child's medical care and intervened in the proceeding in order to assert its right to recovery. The circuit (trial) court determined that a federal case construing federal Medicaid statutes, Arkansas Department of Health and Human Services v. Ahlborn (U.S. Supreme Court), controlled, such that DHHR was limited to recovering funds from the past medical expenses portion of the settlement. Given that the parties had made no allocation as to how much of the settlement constituted payment for past medical expenses, the court calculated an amount based on evidence of the child's damages submitted to it, then determined the amount which DHHR was allowed to recover. DHHR appealed to the West Virginia Supreme Court.

The Supreme Court agreed that the Ahlborn case controlled, and that DHHR maintained a priority right to recover only from damages representing payments for past medical expenses. In doing so, the Court ruled that, in the situation before it, federal statutes as interpreted through the Ahlborn case, conflicted with and took priority over West Virginia statutes and case law. Nevertheless, the Court required the parties to notify DHHR and give it an opportunity to agree with or challenge the parties' allocation of amounts deemed payments for past medical expenses. Where the parties and DHHR could not agree, the Court dictated that an evidentiary hearing be conducted and an allocation be made by the trial court.

Click here to read the full decision.