44 Trial Lawyer • Winter 2023 eligibility. Can the Oregon Department of Human Services take all of Linda’s settlement? If Medicare had made conditional payments for Linda’s hospital and brief rehabilitation care, Medicare’s conditional payment recovery would be superior toMedicaid lien recovery. Medicare made no payments for Linda’s care because she was not 65-years-old at the time of her injury or during her brief rehabilitation care. ORS 416.540(2) and OAR 461-195305(3) provide that the Medicaid lien does not attach to attorney fees, costs and medical, surgical and hospital costs incurred by Linda. Unlike Medicare, which reduces conditional payment recovery for attorney fees and costs in every case, OregonMedicaid recovery is reduced for attorney fees and costs only when the Medicaid lien is greater than the gross settlement. Incalculable loses Prior to the June 2022 SCOTUS Gallardo v. Marstiller, 596 U.S. __ (2022), two previous SCOTUS opinions in Ahlborn and Wos provided that Medicaid lien recovery could only be made from settlement, judgement or award allocations for past medicals. Gallardo clarified Ahlborn and Wos, permitting Medicaid lien recovery from settlement, judgment or award allocations for both past and future medicals. In spite of these three SCOTUS opinions limiting Medicaid lien recovery from Linda’s settlement allocations for medicals, ORS 416.540(1) and OAR 461-193-0305(1) provide no such limitation. Citing Ahlborn, the Court in Gallardo stated, “Accordingly, a state may seek reimbursement from the portion of a settlement designated for the ‘medical care’ described in those provisions; otherwise, the anti-lien provision prohibits reimbursement.” At the time of her injury, Linda was an analyst at a successful small tech company, earning over $175,000 annually. Her health was excellent, she was a competitive runner and planned on working 10 more years. Her damages for lost wages alone exceeded the policy limits. Her damages for pain and suffering were incalculable. As if three SCOTUS opinions directly on point weren’t entitled to preemption, Oregon DHS demanded $200,000 to satisfy the Medicaid lien. Our firm’s experience litigating Medicaid recovery issues against DHS resulted in two Oregon Court of Appeals cases and one Oregon Supreme Court appeal. We advised Vern and their injury litigator that even with the three favorable SCOTUS cases, DHS would litigate to the bitter end, delaying resolution of their case for many years, without an award of attorney fees if we prevailed. Linda’s settlement of $375,000 was reduced to $225,000 after attorney fees and costs. The $125,00 ERISA lien would further reduce her recovery. Any net settlement proceeds would put her countable assets above $2,000, disqualifying her from Medicaid. Having gone through the difficult initial Medicaid application, Vern decided not to fight DHS, in spite of their clearly illegal position. Unfortunately, this is what happens in most cases. Medicaid was fully reimbursed and the ERISA plan took the remainder. Linda received nothing. Her Medicaid benefits were uninterrupted. A plan for recovery We advised Vern to establish a revocable living trust in his name alone, providing that if he predeceased Linda, their house, Vern’s settlement proceeds and other wealth would be funded into a testamentary third party special needs trust for Linda’s benefit, maintaining her Medicaid eligibility. Vern died unexpectedly one year later. As a result of the trust planning, Linda maintained her Medicaid eligibility. Linda died three years after Vern. Based upon an unfavorable 2021 Oregon Court of Appeals case ignoring 39 years of precedent and prior Oregon Court of Appeals and Oregon Supreme Court opinions limiting Medicaid Estate Recovery to assets owned by Linda at the time of her death, DHS sued Linda and Vern’s children to recover their reimbursement for Linda’s post settlement long term care costs. Their children were averse to litigating and paid the claim from the house sale proceeds. The remaining annuity payments went to DHS. These Medicare and Medicaid issues might not be present in every senior’s injury case, but if long term care costs result from your client’s injury, even mid six figure settlements may reduce or eliminate a recovery for your client. Effective Medicaid planning may protect your client’s net settlement. Although there’s no such thing as a Medicaid Set Aside, first party special needs trusts are very effective tools for clients under the age of 65 when funded. Tim Nay specializes in injury settlement planning, special needs law, conservatorships and guardianships, wrongful death and other probate matters, estate planning and elder law. Nay contributes to OTLA Guardians at the Sustaining Member level. He is a partner at Nay & Friedenberg LLC, 6500 Macadam Ave., Ste. 300, Portland 97239. He can be reached at tim@naylaw.com and 503-2450894. Medicare and Medicaid Continued from p 43
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