M.D.Pa.: § 1983 rights in Medicaid anti-lien/recoupment provisions; qualified immunity

A Pennsylvania federal district court held that Medicaid’s recoupment, anti-lien and anti-recovery provisions create enforceable rights under Section 1983.

The court further held that the latter two provisions bar any recovery of injury settlements directly from recipients. Defendants were entitled to qualified immunity, however, because the reach of the anti-lien and –recovery provisions was not clear prior to Ark. Dep’t of Health and Hum. Servs. v. Ahlborn, 547 U.S. 268 (2006) (summary). The case is Tristani v. Richman, 2009 WL 799747 (M.D.Pa. Mar. 25, 2009) (No. 06-694).

 

Ms. Tristani and Mr. Valenta obtained personal injury settlements. Although the state agency chose not to join their injury lawsuits, it subjected them to liens on their settlements. After wrangling with the agency and ultimately paying them the amounts demanded, they brought this challenge to the state’s Medicaid recovery policies. Among other things, they alleged violations of 42 U.S.C. §§ 1396k(b) (providing for assignment of injury claims to the agency, and payment of any amount not collected by the agency to the recipient), 1396p(a)(1) (generally barring liens on property of living recipients) and 1396p(b)(1) (generally barring recovery of payments from living recipients).

 

Section 1983

 

In Ahlborn, the Court held that the anti-lien and anti-recovery provisions prohibited recovery from recipients at least to the extent that personal-injury proceeds were not for medical care covered by Medicaid. Ahlborn was a preemption case involving solely declaratory relief, so that court had no occasion to consider the availability of § 1983 remedies. The district court here held that these provisions create enforceable rights under § 1983.

 

With regard to § 1396k(b), the court said that “the statute’s use of the word ‘individual’ clearly evinces a congressional intent to confer a ‘right’ on a medical assistance recipient to receive a payment for any excess amounts recovered by a participating state entity from a liable third party.”  The court said this right was similar to the right of providers to cost reimbursement recognized in Wilder v. Va. Hosp. Ass’n, 496 U.S. 498 (1990).

 

The court said that the anti-lien and -recovery provisions “contemplate the protection of an ‘individual,’ making it clear that Congress intended to benefit individual medical assistance recipients.” The court also said the provisions met the other prongs of the Blessing v. Freestone test for § 1983 rights, 520 U.S. 329 (1997), and specifically noted that the “may not” language in these provisions is sufficiently mandatory language because it is the functional equivalent of “shall not.”

 

The court rejected arguments that broader structural features of the Medicaid statute preclude a finding of § 1983 rights, saying these arguments have already been rejected by the Third Circuit. See Sabree v. Richman, 367 F.3d 180, 193 (3d Cir. 2004); Newark Parents Ass'n v. Newark Pub. Sch., 547 F.3d 199, 212 (3d Cir. 2008) (summary).

 

Merits and qualified immunity

 

Although the Supreme Court recently held that the Saucier v. Katz qualified-immunity framework is not constitutionally required, Pearson v. Callahan, 129 S.Ct. 808, 818-22 (2009) (summary), it also said that Saucier is often useful and may be used at courts’ discretion. The district court chose to use Saucier, deciding the merits of the claims first and the defendant officials’ assertion of qualified immunity second.

 

On the merits, the court found that plaintiffs stated claims for violations of the anti-lien and –recovery provisions. After a lengthy analysis, the court concluded that those provisions bar recovery directly from a Medicaid beneficiary of all settlement proceeds, including that portion attributable to medical care paid for by Medicaid. If the state wishes to recoup this money, the court said, it must join actions against third-party tortfeasors. But see Martin v. City of Rochester, 642 N.W.2d 1, 12 (Minn.2002); Connecticut v. Peters, 946 A.2d 1231, 1239 n. 19 (Conn.2008). The court rejected plaintiffs’ claims under § 1396k(b), Due Process, and state law.

 

The court held, however, that defendants were entitled to qualified immunity because the events in the case took place before Ahlborn was decided, and because the full reach of the federal provisions was not clear even after Ahlborn. The court also said that the state’s decision to seek recovery from plaintiffs rather than joining their malpractice suit was a discretionary decision. The court further said that qualified immunity does not depend on whether the relief sought may be characterized as “legal” or “equitable,” so long as the defendants would have to pay money. Furthermore, the court said that the relief sought here could not be considered an equitable return of the recovery sought from plaintiffs, because that money went to the state and a judgment against defendants would come from their own pockets.

 

The court said it would address plaintiffs’ putative class claims for injunctive relief at a later time.