What Gives Hospitals and Government Health Benefit Plans the Right to Recover

By Guest Author Teresa Kenyon, Esq. – Director of Lien Resolution for Synergy Settlement Services

Introduction

Navigating the complex world of healthcare liens can be overwhelming, especially for cases involving military personnel, Veterans, Medicaid recipients and the uninsured who need hospital care. However, understanding the intricacies of programs like the Federal Medical Care Recovery Act (FMCRA), Medicaid, and hospital lien laws is crucial to ensure that those who are injured pay back as little as possible. This article explores the FMCRA, Medicaid, and hospital liens, and highlights important laws and applicable court cases that have shaped how these programs recover. By understanding the nuances of these programs, a trial lawyer can be better prepared to decide whether to partner with lien resolution experts to get the best results.

Military

The Federal Medical Care Recovery Act (FMCRA) [1]  is designed to ensure that the person or entity responsible for a Veteran’s injury pays for their medical care, rather than the taxpayers. The Act grants the United States the right to recover the reasonable value of medical care and treatment from the party responsible for the injury. This applies to TRICARE beneficiaries and covers care provided by Uniformed Services facilities, care paid for by TRICARE, or both. The funds recovered by the program are used to supplement the budget allocated by Congress, enabling each VA medical facility to provide exceptional care and services to Veterans.

The FMCRA empowers the federal government to recover the costs of medical care in cases where the United States is authorized or required to provide or pay for medical care for someone suffering from a disease or injury caused by the intentional conduct or negligence of a third party. To recover the cost, the government relies on 10 U.S.C. § 1095 and expects beneficiaries to pursue the case to protect the government’s interests. Many military branches require the attorney hired by the injured party to sign an Attorney Protection Agreement, acknowledging their responsibility to protect those interests. However, the government does not provide attorneys representing injured parties with fees or reductions for their interests, specifically for attorney fees and costs associated with effectuating the settlement. [2]

The government has a lien on any proceeds of recovery for medical and hospital care provided by Veterans’ Administration hospitals or private health care providers. The government has three ways to recover medical and hospital care costs in cases of tort liability by a third party: subrogation, intervening or joining in any action brought by the injured person, or initiating such an action in conjunction with the injured or deceased person. None of these procedures is mandatory, and the head of the department or agency furnishing care has the discretion to choose the method.

Medicaid

Medicaid is a public benefit program that provides essential healthcare coverage to individuals who meet financial eligibility criteria. The program is funded by both the federal and state governments, with administration at the state level.

In the landmark case of Ahlborn[3], the US Supreme Court limited the amount of funds that Medicaid can recover when a beneficiary receives a settlement in a third-party liability situation. Under federal law, Medicaid is only entitled to recover funds that are attributable to medical expenses, rather than the entire settlement or judgment. State statutes that mandate full reimbursement of Medicaid expenditures are unenforceable, as far as they do not exempt from recovery the non-medical portions of the settlement, such as damages for pain and suffering or lost wages.

In Wos v. E.M.A. [4], the US Supreme Court held that North Carolina’s statute, which allocated up to one-third of personal injury awards to medical expenses, was preempted by the anti-lien provision of the Medicaid Act. This decision rendered arbitrary allocations in state statutes unenforceable, and the Medicaid anti-lien rule from Ahlborn prevented North Carolina’s statue from being enforced as written.

However, the recent case of Gallardo v. Marstiller[5] potentially changes the analysis set forth in Ahlborn. The US Supreme Court ruled that Florida can seek reimbursement from settlement amounts that represent “payment for medical care,” whether past or future. This decision may have implications for certain cases, and the circumstances of each case will need to be considered to determine whether the Ahlborn analysis applies or is modified now by Gallardo’s inclusion of future care.

Hospital Liens

Hospital lien laws are established by state statutes, and their interpretation through case law varies significantly from state to state. Consequently, there is no single pivotal case or statute that forms the legal basis for a hospital lien.

The key to reducing the amount owed under a hospital lien is to focus on the actual reasonable value of the services provided. Rather than attempting to negotiate down from the full billed charges presented by the hospital, it is essential to assess the fair cost of care and negotiate accordingly. Hospital bills are often inflated, bearing little relation to what should be paid for the services provided.

Those familiar with health insurance may have noticed the vast difference between billed charges and the amount paid to a provider based on contractual agreements between facilities and insurance carriers. For example, a bill could be presented for $45,000, while a health insurance carrier may have a contract to pay only $16,000. Facilities also offer uninsured discounts. It is unfair to require an injured party who receives a settlement to pay the full amount. Moreover, if there are insufficient funds to cover the bill, it is inequitable to attach a lien to the whole settlement and then assert a debt for the remaining amount, which is often significantly more than what would have been paid by Medicare, Medicaid, or a private insurer.

So, what is the reasonable cost for services? It varies depending on the location, facility, and procedure. Obtaining this information is not easy. Hospitals that receive payments from Medicare are required to submit a Hospital Cost Report (CMS Form 2552-110), which provides detailed information about the costs incurred in each department.

Conclusion

In conclusion, even though military medical care, Medicaid and hospital liens third party liability recovery all involve the reimbursement of the cost of medical treatment, how they are handled in the legal system varies. The Federal Medical Care Recovery Act ensures that those responsible for a veteran’s injury pay for their medical care, and the funds recovered supplement the budget allocated by Congress to provide exceptional care and services to veterans. Medicaid provides essential healthcare coverage to financially eligible individuals, with a recent Supreme Court decision potentially changing how reimbursement from settlements is handled. Hospital liens, which vary by state, can be reduced by focusing on the actual reasonable value of services and negotiating accordingly. It is essential to consider the fair cost of care rather than the inflated billed charges presented by hospitals, and obtain detailed information about costs incurred in each department. Ultimately, these topics highlight the importance of ensuring that those in need of medical care receive fair and just treatment in the legal system.

[1] 42 USC 2651-2653

[2] 5 USC 3106

[3] Arkansas Dept. of Health and Human Servs. V Ahlborn, 547 U.S. 268 (2006)

[4] Wos v E.M.A., 568 U.S. 627 (2013)

[5] 596 US ___(2022)