New Budget Revives Limitation of Medicaid Recovery Rights

In January of 2014, we advised that Ahlborn was no longer good law, but now it appears to have been given new life. On February 9, 2018, the Bipartisan Budget Act of 2018 (“2018 BBA”) was signed into law. The 2018 BBA revives a limitation regarding states’ ability to seek reimbursement of Medicaid costs from a third-party liability settlement.

Previously, under the 2006 decision in Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268 (2006), the U.S. Supreme Court limited states’ recovery rights for Medicaid costs to the portion of settlement or award designated for medical expenses. Seven years later, the Bipartisan Budget Act of 2013 (“2013 BBA”) legislatively overturned Ahlborn by permitting states to recover Medicaid costs from the entire third-party liability settlement amount.

Currently, the 2018 BBA specifically and retroactively repeals the expanded recovery right granted to the states by the 2013 BBA. See H.R. 1892 Title XII Section 53102(b)(1). As such, the 2018 BBA effectively reinstates the Ahlborn limitation. Thus, when seeking reimbursement for Medicaid costs from a third-party liability settlement, states are limited to the portion of the settlement or award designated for medical expenses.

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