Another Interpretation of the Ahlborn Decision Limiting the Medicaid Liability Lien

The Arizona Court of Appeals has ruled that the state Medicaid agency can recover no more than the portion of the Plaintiff’s settlement that represents recovery of Medicaid payment made less costs of litigation. Southwest Fiduciary v. Willingham. The case consolidated two case.

Rhonda Lundy was injured in a car accident and her conservator filed suit. Damages were estimated between three and four million and past medical bills totalled $920,000.00. The health care agency had paid $268,000.00 toward her medical bills and filed a lien. Case was settled for $842,696.00. Administrative proceedings were held to determine whether the lien should be limited to the actual amount paid or, the amount billed to the Plaintiff for medical expenses. Arizona law allows a Plaintiff to recover the full amount of the billed medical expenses. The hearing officer held that the liens would be reduced by the ratio that the settlement amount bore to the claim for damages.

The appellate court focused on the anti-lien law analysis in the Ahlborn decision to limit the health care agency’s recovery to actual payments the plan made on the victim’s behalf and not, the amount of medical expenses billed. It agreed with the administrative court’s application that Lundy’s recovery was 24% of the value of her case and therefore the health care agency should recover 24% of what it paid toward her medical expenses.

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