"Free Ride" Over for PA DPW in Personal Injury Recoveries?

On March 25, 2009, a U.S. District Court in Pennsylvania issued a Memorandum Opinion in Tristani v. Richman, 2009 WL 799747 (W.D.Pa. Mar. 25, 2009; No. 06-694).

The decision held that that Pennsylvania's Medicaid recoupment, anti-lien, and anti-recovery statutory provisions create enforceable rights under Section 1983; and that such provisions bar recovery by the Commonwealth directly from a Medicaid beneficiary of all personal injury settlement proceeds received in privately-conducted litigation, including that portion attributable to medical care already paid by Medicaid.

The court ruled that if a state wishes to recoup such funds, then it must join the litigation against third-party tortfeasors, along with the other plaintiffs.

Nora E. Gieg, Esq., of Tucker Arensberg, P.C. in Pittsburgh, PA, wrote a brief analysis of this important holding and considered its longer-term effects. I am pleased to post it, with gratitude for her contribution.

Tristani’s Blow
to State Medicaid Agency’s
Third Party Liability Collection Practices

by Nora E. Gieg, Esq.
Tucker Arensberg, P.C.

In a potentially striking blow to the Pennsylvania Medicaid (medical assistance) third-party liability (“TPL”) collection practices, the Honorable Joy Flowers Conti, Judge for the United States District Court for the Western District of Pennsylvania, issued a Memorandum Opinion dated March 25, 2009 in Tristani v. Richman et al. (PAWD Civil Action No. 06-694), a pending class action lawsuit against the Pennsylvania Department of Public Welfare.

The Tristani ruling fills a gap left by the United States Supreme Court’s decision in Ark. Dep’t of Health and Hum. Servs. v. Ahlborn, 547 U.S. 268 (2006) regarding a presumed “exception” in federal law permitting state medicaid agencies to effectuate mandatory TPL recovery through the imposition of liens on Medicaid recipients’ personal injury proceeds.

The United States Supreme Court’s Ahlborn ruling "assumed" that Federal Law created an exception to the Anti-Lien and Anti-Recovery provisions because the parties therein had stipulated as much. Now, the Tristani opinion squarely addresses validity of such an assumed exception, which the United State Supreme Court was forced to “leave for another day”. 547 U.S. 268, 284 n. 13 (2006).

In an opinion as dense as any law school hypothetical wrought with interpretations on due process, civil procedure, qualified immunity, takings, and interpretations of Congressional intent, in her Tristani opinion, Judge Conti reasons that the Federal Anti-Lien and Anti-Recovery provisions, 42 U.S.C. §§1396p(a)(1) and 1396p(b)(1), preempt Pennsylvania state law at 62 Pa. C.S. §§ 1409, et seq. under the Supremacy Clause of the United States Constitution, inasmuch as Pennsylvania’s TPL statute permits liens on the personal injury actions/proceeds of Medicaid recipients.

Finding the Federal Anti-Lien and Anti-Recovery provisions to be unambiguous, the District Court gave no deference to the interpretations of the U.S. Department of Health and Human Services on which the the State Medicaid Agency and Pennsylvania General Assembly ostensibly relied in passing the Pennsylvania TPL statute.

Instead, the District Court found that federal law requires State Medicaid Agencies, like Pennsylvania's Department of Public Welfare, to commence direct actions against liable third parties for the cost of Medicaid to recipients, stating in no uncertain terms that the DPW’s “free ride” was over.

The District Court noted, however, that federal law did not leave State Medicaid Agencies without recourse. The Court reasoned that the Pennsylvania TPL statutory scheme permits DPW to assert its own interests in personal injury actions against third party tortfeasors without violating the Federal Anti-lien and Anti-Recovery Provisions

The Court found that DPW's intervention in -- rather than “liening” of -- settlement actions, was the proper method of recovery. It also held that Pennsylvania’s statutory default calculation of 50% for “unallocated” settlements was a valid amount of recovery.

Plaintiffs in the Tristani action had also asked the District Court to determine whether Pa. C.S. § 1409(b)(7)(iii) contravenes Section 1396k(b). Finding neither named plaintiff able to establish a cause of action in this regard, the Court left open for another day the efficacy of Pennsylvania’s statutory authorization for the collection of managed care organization expenditures, as opposed to capitation payments.

The Tristani ruling, if not altered on appeal, would shake to its core the traditional method of TPL recovery in Pennsylvania. This ruling likely would create long-reaching effects for TPL recovery nationwide, too.

However, review of the docket reveals that steps are already in place to appeal the trial court's ruling. Thus, some uncertainly exists as to the current force of the Opinion, inasmuch as it lacks the force of an "order".

Pending further appellate review of the Tristani opinion, both State Medicaid Agencies (seeking recoupment of funds expended for the fiscally-strained Medicaid programs) and Plaintiffs’ counsel (seeking maintenance funds for their injured clients), may find themselves in a precarious position with unpredictable options in situations which demand action.