Under SB 85, Medicaid liens would not get recovered or Medicaid would not pay its fair share in the cost of recovery.

Currently, if a person covered by Medicaid is injured by a third party, the person’s medical bills are paid by Medicaid and Medicaid has a lien against any recovery made against the third party. Typically, such a case would be taken on a contingency fee basis by a personal injury attorney. (Medicaid recipients almost by definition would not have money to pay an hourly fee to an attorney.) A typical contingency fee is 1/3 of the recovery. That may seem steep until one considers that, if the case is unsuccessful, the attorney gets nothing — has worked for free. In effect, the successful cases subsidize the unsuccessful ones.

If the case against the third party is successful, typically money has to go toward satisfying the Medicaid lien before any money goes to the injured party. (There is a lien reduction statute that applies to regular insurance payments in some circumstances, I am not certain off hand of its applicability to Medicaid payments.) Medicaid has received a benefit from the attorney’s work, it is only fair that Medicaid pay its fair share of the attorney’s fees. Under current law, Medicaid is required to pay an attorney’s fee of 25% of the recovery prior to suit and 1/3 after suit is filed. SB 85 proposes to limit those amounts to 7.5% and 10% respectively.

So, let’s say you have a typical 1/3 contingency fee case. The injured party has $50,000 in medical bills paid by Medicaid and the third party has $100,000 auto insurance and not much in the way of assets beyond that. There is a $100,000 recovery after suit is filed. The total attorney’s fee is $33,333. Medicaid has recovered $50,000 and, therefore, pays $5,000 of the attorney’s fee. That leaves the injured party to pay the remaining $28,333. The injured party has paid 5 times the legal fees for the same gross $50,000 recovery and nets $21,667 to compensate him or her for lost wages, pain and suffering, and future out of pocket medical expenses.

I don’t do much in the way of personal injury work, but this still seems like a bad bill to me.