W.D.Mo.: Qualified immunity in Medicaid lien suit

A Missouri federal district court held that a state agency and its director had qualified immunity from a claim that they placed a Medicaid lien on workers compensation funds in violation of the Medicaid Act. Doran v. Missouri Department of Social Services, 2008 WL 111290 (W.D.Mo. Jan. 8, 2008) (No. 07-4158-CV-C-NKL).

The court said that the illegality of such liens was not clear until a 2005 decision by the Eighth Circuit (affirmed by the Supreme Court). The court permitted the plaintiff to seek restitution of the funds, however, characterizing this as equitable relief unaffected by qualified immunity. 

 

            Doran’s state workers compensation settlement was subjected to a lien by MDSS as reimbursement for medical expenses. Doran sued under 42 U.S.C. § 1983, alleging that because the settlement moneys were not provided to compensate her for medical expenses, the lien violated § 1396p(a)(1) of the Medicaid Act. She argued that the defendants should have known the lien was illegal because most awards of permanent workers compensation benefits are not made to reimburse medical costs. She also argued that the lien was an improper taking under the Missouri Constitution.

 

            The court agreed that under Ahlborn v. Ark. Dept. of Human Servs., 397 F.3d 620 (8th Cir. 2005), aff’d 547 U.S. 268 (2006) (summary here), the lien was illegal inasmuch as it covered payments to Doran that were not made to reimburse medical expenses. The court held, however, that the defendants had qualified immunity for their actions up to the February 2005 date of Ahlborn, because, “[d]espite the Defendants’ statutory violation…the law of the Eighth Circuit was not clearly established [until that time.” The court noted that prior to February 2005, only one decision (from a state supreme court) had held such liens illegal, while three other courts (two state supreme courts and the district court in Ahlborn), as well as two decisions by the Appeals Board of the federal Department of Health and Human Services, had accepted their legality. In light of these “divergent opinions on States’ ability to recover the full amount of Medicaid benefits,” the court held that the defendants’ action was not “objectively unreasonable under the circumstances.”

 

            The court continued:

However, to the extent that Plaintiffs are simply asking for a return of their allegedly improperly-taken money or an order removing any improper lien against their property, qualified immunity is not available. Basically, Plaintiffs are requesting equitable relief, which is not precluded by qualified immunity.

Characterizing this requested relief as “restitution,” the court permitted Doran to go forward with her § 1983 claim.

 

            The court dismissed Doran’s state constitutional claim, holding that the Medicaid lien is not a “taking” protected by the state’s Takings Clause. “Takings,” the courts said, are state claims on property arising from “the State’s inherent power of eminent domain,” while Medicaid liens arise from federal statutory law.