Arkansas Department Of Human Services v. Ahlborn Revives The Made Whole Doctrine In Texas Medicaid Subrogation

The United States Supreme Court’s decision in Arkansas Department Of Human Services v. Ahlborn, 547 U.S. 268 (2006), has open the door for the made whole doctrine to be applied to Texas Medicaid subrogation. Historically, prior to the Ahlborn, Texas Medicaid largely refused to reduce their subrogation interest even if the interest absorbed most or all of the victim’s recovery.

In Alhborn, Heidi Alhborn was severely and permanently injured in an automobile accident and received $215,000.00 in medical care which was paid for by the Arkansas Department Of Human Services. The case settled for $550,000.00, an amount which all involved agreed was vastly less than the full value of the case. The Arkansas Department Of Human Services asserted a right to be reimbursed the full amount of their subrogation interest in spite of the fact that doing so would clearly result in Alhborn being inadequately compensated for her injuries. The parties stipulated that Alhborn’s claim was worth $3,040,000.00. The Trial Court held that ADHS was entitled to their full subrogation interest. The Eighth Circuit reversed the District Court holding that the ADHS could only recover that portion of the settlement that represented the recovery of medical expenses. The United States Supreme Court affirmed.

The Social Security Act, 42 U.S.C. 1396 et. seq., which create the Medicaid program, includes an anti-lien provision which prohibits a State Medicaid program from filing a lien for medical payments against the property of an individual prior to his death. The Supreme Court held that the anti-lien provision prohibited the State from attaching a lien to the non-medical portion of the recovery. The Ahlborn decision was based upon stipulated amounts. The appropriate procedure is a little less clear in situations where a case is settled without any stipulations or judicial findings as to how the settlement funds are allocated between the various elements of Texas personal injury damages. Many times Texas cases are settled for the amount of the available insurance policy limits even though all involved agree that the case is worth considerably more than the policy limits. Ahlborn gives rise to a persuasive argument that the Texas Medicaid subrogation interest should be limited to a proportional share of the recovery in a limited recovery situation.

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