Although MCL 400.106(5) permits the state to recover the full amount of its Medicaid lien from the total amount of a settlement or judgment in a medical-related tort action, federal law limits recovery to the amount that is designated specifically for medical expenses, according to the Michigan Court of Appeals in Neal v. Meridian Health Plan of Michigan, No. 329733
MCL 400.106(5) contains no language limiting lien recovery to particular categories of damages; however, under the superseding federal law, the state is entitled to receive from a third party only the amount of a recipient’s medical care, not the amounts that a recipient may have received for other categories of losses. The Court rejected the trial court’s holding that the state could recover more than the amount designated in a settlement for medical expenses because the lien existed prior to the lawsuit, finding that only the proceeds recovered for the recipient’s medical expenses were subject to the lien.
The Court addressed the potential for manipulation of allocations by parties attempting to settle without the approval of the medical lienholder by determining that either a judicial finding or approval of the allocation between medical and nonmedical expenses is required to determine the amount the lienholder will receive. Approval may arise from a jury verdict, a court decree, or a binding stipulation by the involved parties. The Court noted that a lienholder is not bound by a stipulated amount if it is not involved in the negotiations and does not agree to the stipulation. If a stipulated amount cannot be agreed to, then a judicial proceeding is required to determine the appropriate amount to be designated for medical expenses.
Ultimately, based on the court’s decision, states may not preempt the federal Medicaid anti-lien statute and may only recover up to the amount designated specifically as medical expenses from the settlement or judgment in a tort action.