On May 1, in the case of Arkansas Dept. of Human Services v. Ahlborn, the U.S. Supreme Court held a State’s Medicaid department will be limited to reimbursement from only that portion of a judgment or settlement that represents payment for medical expenses. States are now prohibited from being reimbursed for Medicaid costs from settlement proceeds that were intended to cover items other medical expenses such as pain and suffering and wage loss. The US Supreme Court held that the federal anti-lien statute prevents States from attaching or encumbering the non-medical portion of the settlement or judgment.
In the slip opinion released May 1st, the Court stated,
“[t]here 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.”
So what does this mean? In the U.S. Supreme Court’s own words, States may not demand reimbursement from portions of the settlement allocated or allocable to non-medical damages; instead, States are given only a priority disbursement from the medical expenses portion alone.
One obvious question is the potential for the settling parties to allocate the recovery in a way that cuts out the Medicaid interest. The Court discussed this, stating that “the risk that parties to a tort suit will allocate away the State’s interest can be avoided by either obtaining the State’s advance agreement to an allocation or, if necessary, by submitting the matter to a court for decision.” We have had experience hammering out settlements in which the settling parties submitted orders for the trial court to enter on stipulated facts approving an allocation that severely cut the Medicaid recovery basically along the lines approved by the Supreme Court on Monday.
Some folks are pushing the use of Qualified Settlement Funds (QSF) to create a breathing space between execution of a settlement with the defendant and possible purchase of a structured settlement annuity and/or creation of a special needs trust.
I also wonder whether this ruling might in any way foreshadow a future ruling on ERISA reimbursment claims. Stay tuned.

The Shigley Law Firm represents plaintiffs in wrongful death and catastrophic injury cases statewide in Georgia, and in other states subject to the multijurisdictional practice and pro hac vice rules in each state. Ken Shigley was designated as a “SuperLawyer” in Atlanta Magazine and one of the “Legal Elite” in Georgia Trend Magazine. He is a Certified Civil Trial Advocate of the National Board of Trial Advocacy, Chair of the Southeastern Motor Carrier Liability Institute and former chair of the Georgia Insurance Law Institute. He particularly focuses on cases arising from truck wrecks and accidents (tractor trailers truck wrecks, semi truck wrecks,18 wheeler truck wrecks, big rig truck wrecks, log truck wrecks, dump truck wrecks).