Saturday, June 14, 2008

Wal-Mart Subrogation

A while back, a lot of people criticized Wal-Mart for this story:
A collision with a semi-trailer truck seven years ago left 52-year-old Deborah Shank permanently brain-damaged and in a wheelchair. Her husband, Jim, and three sons found a small source of solace: a $700,000 accident settlement from the trucking company involved. After legal fees and other expenses, the remaining $417,000 was put in a special trust. It was to be used for Mrs. Shank's care.

Instead, all of it is now slated to go to Mrs. Shank's former employer, Wal-Mart Stores Inc.

Two years ago, the retail giant's health plan sued the Shanks for the $470,000 it had spent on her medical care. A federal judge ruled last year in Wal-Mart's favor, backed by an appeals-court decision in August. Now, her family has to rely on Medicaid and Mrs. Shank's social-security payments to keep up her round-the-clock care.
Wal-Mart eventually had a change of heart.

I didn't follow all of the commentary on that story too closely, but in all of the denunciations of Wal-Mart, I don't recall seeing anyone acknowledge that our own federal government does the exact same thing. Under federal regulations, Medicare is "subrogated" -- meaning it has a right of reimbursement -- when it makes medical payments for services and the person then gets a damages award in a lawsuit for the same services. Medicare can also file its own lawsuit against the injured person if he or she refuses to reimburse Medicare. Here is one plaintiff's lawyer's perspective, for example.

The same is true for Medicaid; a federal law specifically requires that state Medicaid plans be designed so that "in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery, the State or local agency will seek reimbursement for such assistance to the extent of such legal liability."


Blogger Arnie S said...

both medicare and medicaid subrogation are subject to 'made whole-like' protections that are not extended to ERISA plans.

Medicare has the statutory authority and ability to waive subrogation if it "determines that the waiver is in the best interests of the program." 42 U.S.C. ยง 1395y(b)(2) (B)(iv).

Medicaid subrogation where the subrogation amount exceeds 50% of net proceeds to the clien is limited under the Supreme Court decision Arkansas v Ahlborn

3:10 PM  

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