Medicaid, nationwide, has been considered to have a “lien” on any personal injury recovery such as motor vehicle accidents and “slip and falls” since its inception.  That all changed with the United States Supreme Court decision in ADHHS v Ahlborn, 547 US 268 (2006).  From that point forward, it should have been recognized that the Medicaid claim is actually one of subrogation.  Unfortunately, to the totally unnecessary financial loss of injured plaintiffs, the full impact of this decision has not been understood by personal injury attorneys.         This is an evolving field in the law with decisions going to various extremes.  In a Federal District Court in Western Pennsylvania, the Judge held that the anti-lien provision in the statute was so specific that there could be no assessment by the State in that personal injury action quoting the statute “no lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan.” 42 USC 1396p(a)(1); Tristani v Richman (W.D.Pa. 3-25-2009).      At the other extreme, the Fourth Department, Appellate Division in New York recently held that pleadings alleging pain and suffering only would not permit a plaintiff to avoid a Medicaid lien.  That court required a hearing to determine the proportionate share of the settlement proceeds to which the State was entitled.

At the other extreme, the Fourth Department, Appellate Division in New York recently held that pleadings alleging pain and suffering only would not permit a plaintiff to avoid a Medicaid lien.  That court required a hearing to determine the proportionate share of the settlement proceeds to which the State was entitled. Homan v County of Cattaraugus DSS,    AD3d    , June 11, 2010.  In this particular jurisdiction, the remedy would seem to be to interplead the particular County as an additional defendant who has an interest in the action pursuant to CPLR 1001(a).  That County would then have the opportunity and responsibility to prove its own damages and proximate cause.  Certainly, having it involved in the primary action is more efficient than resolving the case then commencing another proceeding involving more discovery so that the County can prepare for the upcoming hearing.
Against this backdrop, the pratictioner must evaluate each case in his jurisdiction.  Arguments and governmental special interests to the contrary, Medicaid has only a right of subrogation as against a wrongdoer in a personal injury action.  That is the fact.  The statute [42 USC 1396(a)25] does not give the State a “lien”.  Why, therefore, do plaintiffs’ attorneys across the nation continue to remit part of their client’s settlement for their injuries back to the State?  Why do they tell the injured client that there is a lien that must be repaid?  Why, when they are possibly committing legal malpractice, should the attorneys be pleased that they have been able to get the State to reduce their claim to 50% from the standard two-thirds they normally claim?  Perhaps the answer is that attorneys take their full one-third off the top and then negotiations begin with the State.  The attorneys are being fully compensated.  Perhaps the injured client should have the same privilege.

The legal rationale of the Bar generally and the flaw in the legal analysis is found in the form of the pleadings and in the scope of the General Release tendered at the conclusion of the personal injury law suit.  The simple version is that if a claim by the injured plaintiff is made for medical expenses paid by another (Medicaid) and there is a release given by that injured plaintiff for all damages of any kind, including medical expenses, then the injured plaintiff has collected money that belongs to Medicaid.  If Medicaid has paid an expense and that expense is to being reimbursed, the recovery must go to the one who actually incurred the loss, the payor, Medicaid.   If an injured plaintiff recovers another’s medical expenditures, then he has created an “equitable lien”.  Since he has money that does not belong to him, he must pay it back to the State.  In a subrogation action, Medicaid is the “real party in interest” relative to recovery of medical expenses.

The error occurs in collecting the State’s money in the first instance.  Since the recovery of medical expenses is the State’s right, let it bring about the collection.  Since there is case law being generated that supports the concept of a lien despite specificity of pleadings, the State should be made a party to the action through interplseder [FRCP 20].  If the injured plaintiff in a fall down accident does not claim, prove nor release the State’s rights, then all the money recovered in the personal injury action goes to the injured plaintiff.  The methodology is straight forward:  Do not claim medical expenses in the lawsuit.  Specifically, advise opposing counsel that Medicaid may have a right of subrogation for medical expenditures and that the client is not making a claim for any of those damages.  This pleading should also be sent to the State representative in charge of Medicaid.  If your jurisdiction disagrees, make them a party defendant via interpleader.  That way, everyone is on notice that no claim is being made for medical expenses arising out of this accident.  Finally, when the Release is exchanged, make certain that it is for “bodily injury, pain and suffering only” and that “any and all rights of subrogation by insurance companies and Medicaid are preserved and survive this settlement”.  Those statements, along with other specific language, make it crystal clear that the claim and resolution were for the bodily injuries, pain and suffering only.  Ahlborn held generally that were there was a “global” release for pain and suffering and medical expenses and a stipulated recovery was for less that full value, then the recovery had to be allocated on a pro rata basis with the same percentage values going to the claimant and the State.  Here, the recommendation is not to issue a “global” release but only a Release for “pain and suffering”.  Upstate New York in Homan is attempting to expand Ahlbornto argue that all settlements, regardless of pleadings, must have included medical expense recovery.  This is a noble attempt but one that is flawed analytically.  The law of subrogation going back to the 17th Century is that where no “equitable lien”  is created, there is no obligation to share any of the proceeds with the State.  Attorneys will argue that insurance companies will not take such a release in a typical motor vehicle or “slip and fall” action.  They must argue this because none have ever tired it.  The fact is that carriers must accept such a release if the pleadings are proper and there is notice to all sides and parties that this is only a claim for injuries, pain and suffering.  If the carrier refuses, then the injured plaintiff may need take his case to verdict.  There he will obtain a judgment which can be enforced against the insurance company.  The insurance company now must pay.  And since the injured party did not claim nor prove medical expenses, those items still remain the property of the State to initiate a lawsuit or claim aganist the wrongdoer, not the plaintiff or the plaintiff’s attorney.  This form of practice works.  This practice directs more of the recovery to the party injured in the automobile accident or in the “slip and fall”.  It also avoids any conflicts of interest as the attorneys are only working for one claimant, the injured party.  The attorney is not obligated to represent the injured party and the State for two separate, competing claims arising out of the same personal injury accident and being paid from a single source of money.  It is better for the injured plaintiff.  It is ultimately better for the attorney as there can be no claim of conflict of interests.









                                                                                                Index No.:





            The Plaintiff, PLAINTIFF., by his attorneys, J. MICHAEL HAYES, for his complaint against the Defendants, DEFENDANT and COUNTY OF ERIE herein alleges:

            1.            Presently and at all times hereinafter mentioned, Plaintiff, PLAINTIFF., was a resident of the City of Buffalo, County of Erie and State of New York.

            2.            Upon information and belief, presently and at all times hereinafter mentioned, the DEFENDANT, was a resident of the City of Buffalo, County of Erie and State of New York.

3.  Upon information and belief, on or about DATE, DEFENDANT was the owner of a certain  Chevrolet motor vehicle bearing New York State license plate number.

4.            Upon information and belief, the County of Erie is a municipal corporation existing by virtue of the Laws of the State of New York with offices for the transaction of business located in the County of Erie, State of New York.

5.            Upon information and belief, it will be claimed that on DATE, at approximately p.m. on NAME Street at or near it’s intersection with NAME Street in the City of Buffalo, County of Erie and State of New York, a motor vehicle owned and operated by the Defendant, came into contact with the Plaintiff, a pedestrian riding a bicycle.

6.            Upon information and belief, it will be claimed that the aforesaid incident was caused and contributed to due to the negligence of the Defendant.

7.  Upon information and belief, this action falls within one or more of the exceptions enumerated in Article 16 of the CPLR and/or said article is inapplicable to the within action.

8.  Upon information and belief, Plaintiff, is and/or has received Medicaid provided by the County of Erie under Case Number

            9.  Upon information and belief, the County of Erie claims a recovery right/“lien” out of any resolution in the above matter by virtue of medical expenses they claim to have incurred.

10.  Upon information and belief, the Defendant, County of Erie, is a necessary party to this action in that for and before complete relief may be accorded, the County of Erie’s claim must be considered, finalized, allocated and determined by way of compromise, settlement or Court determination and said Defendant has refused to join as a party plaintiff.

11.  As a result of the foregoing, the Plaintiff sustained severe and serious personal injuries including a “serious injury” and economic loss in excess of “basic economic loss” as defined by Article 51 of the New York Insurance Reparations Law all to his damage in a sum in excess of the jurisdictional limits of the lower Courts of this State.

WHEREFORE, Plaintiff, demands judgment against the Defendant for a sum in excess of the jurisdictional limits of the lower courts of this state together with costs and disbursements in this action and further demands that an allocation of the proceeds/recovery, if any, between Plaintiff and the COUNTY OF ERIE and for such other and further relief as to this Court may be just, proper and equitable.

DATED:            Buffalo, New York

Yours Respectfully,


                                                                        J. Michael Hayes, Esq.

                                                                        Law Office of J. MICHAEL HAYES

                                                                        69 Delaware Avenue, Suite 1111

                                                                        Buffalo, New York 14202

                                                                        (716) 852-1111