How much of your personal injury settlement can Medicaid take?

Posted By Jorgensen, Brownell & Pepin, P.C.

8 Feb. 2016

If you receive financial assistance for medical treatment through Medicaid and are injured by a third party, then the State Department has a subrogation right to also be compensated from recovery you obtain from that third party for any medical payments made on your behalf. In fact, the State Department is entitled to an automatic lien against a liable third party. C.R.S. § 25.5-4-301(4), (5). However, the question arises of what amount should be reimbursed.

Colorado’s third-party liability statute provides that the lien “shall be in an amount that shall be the fullest extent allowed by federal law as applicable in this state, but not to exceed the amount of the medical assistance provided.” C.R.S. § 25.5-4-301(5)(a). The problem is when the settlement or jury verdict does not specify how much of the total award was allocated to medical expenses, as opposed to other damages, such as lost wages, impairment of quality of life, and pain and suffering.

If the settlement or verdict fails to adequately apportion the medical damages, the task is left to the courts. See State Dep’t of Health Care Policy & Fin. v. S.P., 356 P.3d 1033, 1036 (Colo. Ct. App. 2015). Up until June 2015, the courts used several different analyses based upon any reasonable means to determine such allocations. This changed with the Colorado Court of Appeals’ decision in State Dep’t of Health Care Policy & Fin. v. S.P., 356 P.3d 1033 (Colo. Ct. App. 2015).

In S.P., the plaintiff reached a global settlement in her personal injury case that did not allocate the amount of the settlement for medical expenses. Id. at 1037. The parties agreed upon the total value of the case, but a dispute then arose regarding the amount that the State Department was entitled to as its Medicaid lien. Id. The Denver District Court then created the following formula, which the Colorado Court of Appeals affirmed:

Amount paid by Medicaid ÷total value of case × 100 = X % of medical expenses to total value

X % × gross settlement amount = gross repayment lien amount

Lien amount – attorneys’ fees reduction* = net repayment amount

*Per C.R.S. § 25.5-4-301(5)(d), up to 25% of the lien may be reduced as contribution to attorneys’ fees. Attorneys’ fees reduction = lien amount – (25% × lien amount).

Id. at 1038-1039.

In other words, the Court first determined the percentage of the total value of the case that can be allocated to medical expenses. That percentage times the gross settlement amount determines the gross repayment lien amount that the State Department is entitled to. Reducing the lien amount by the State Department’s contribution to attorneys’ fees gives the total net amount that the State Department is entitled to recover.

Following this formula will enable you to use a reasonable means to calculate a proportional allocation of the amount that Medicaid will be entitled to collect from your settlement proceeds. Such calculations are complex, and if you have questions, give us a call to speak with an experienced attorney to ensure that you are not giving away more of your subrogation rights than you should be.

Categories: Personal Injury
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