Medicare and Medicaid Liens on an Arkansas Injury Settlement

By the FigureMyTax Editorial Team · How we calculate

Arkansas Medicaid can recover the full amount of benefits it paid from what remains after attorney fees and litigation expenses, but federal law caps recovery at the part of the settlement that represents medical costs. Medicare follows federal rules.

Arkansas Medicaid's right to recover

Ark. Code 20-77-301 lets the Department of Human Services recover from the person the cost of benefits provided because of an injury for which a third party is or may be liable, and to sue the third party. An action by the department does not bar the recipient's own claim or deny recovery for damages not covered. Under section 20-77-307, applying for Medicaid assigns the recipient's right to any settlement, judgment or award to the department up to what Medicaid paid, and the assignment is a statutory lien.

How the money is divided

Under Ark. Code 20-77-302, when the recipient prosecutes the claim alone, the court first orders reasonable litigation expenses and attorney's fees paid, then orders the department reimbursed the full amount of benefits it paid, and the remainder goes to the recipient. The statute we read sets no separate pro rata reduction of the department's share beyond that sequence.

Notice and penalties

Under section 20-77-304, whoever brings the action must give the other written notice within 30 days of filing, and the recipient's side must give the Secretary of Human Services notice of the lawsuit and of any settlement. Section 20-77-305 bars satisfying a judgment or settlement without first giving the department notice and a reasonable opportunity to establish its interest. A recipient, guardian or attorney who disposes of the funds without written approval is liable for any amount the department cannot recover, and, if done knowingly, also a 10% penalty plus costs and attorney fees.

The federal limit comes from an Arkansas case

In Arkansas Department of Health and Human Services v. Ahlborn (2006), the U.S. Supreme Court held that federal Medicaid law did not authorize the department to assert a lien on the settlement in an amount exceeding the portion that represented medical costs, and that Arkansas's third-party liability provisions were unenforceable insofar as they compelled a different result. So how your settlement is allocated can matter.

Medicare

Under the Medicare Secondary Payer statute, 42 U.S.C. 1395y(b)(2), the United States may bring an action to recover conditional payments and may collect double damages from responsible entities; 42 CFR 411.24 governs recovery. When Medicare's payments are less than the settlement, 42 CFR 411.37(c) reduces its recovery by its share of the procurement costs. On a $100,000 settlement with $36,333 of fees and costs, $15,000 of Medicare payments would shrink to about $9,550.

Other claims

Compare provider liens and health insurer claims and read how strongly Arkansas applies the made-whole doctrine. Then enter every claim in the Arkansas medical lien calculator.

This is general information, not legal advice, and the state comparisons above are illustrative, not an exhaustive survey. Confirm how Arkansas's rules apply to your specific case with a licensed Arkansas attorney.