Oklahoma Bar Journal

Extraordinary Medicaid Lien Reductions

By Tracy Speck Neisent 


Can you reduce a Medicaid lien beyond the customary 50% reduction? What about seeking an 80% or 90% reduction? Federal law requires state Medicaid programs to seek recovery for the amounts Medicaid has paid for medical treatment from any money recovered from a tort claim.1 The claim that a state Medicaid program has against a tort recovery is known as a “Medicaid lien.”

Typically, negotiations with the Oklahoma Health Care Authority (OHCA) will result in a 50% reduction in the Medicaid lien to account for the plaintiff’s attorney’s fees and costs, which are often around 50%. However, should it end there? What about where the settlement is only a small fraction of the lifetime care estimate?

Cases often settle for significantly less than the actual value of the claim for a variety of reasons, including questionable liability, comparative negligence, difficulty in proving liability, underinsured defendants, etc. Let’s say the settlement is $500,000, with the net to the plaintiff of $250,000, and the Medicaid lien is $120,000 (negotiated at 50% to $60,000), and the lifetime care estimate is $25,000,000. Is it fair the plaintiff pays half, or even a quarter, of their net amount for a Medicaid lien when they have significant injuries and have settled for a small fraction of their actual damages? In our example, the plaintiff might be left with $190,000 after paying the negotiated Medicaid lien. Is that fair? The U.S. Supreme Court doesn’t think it’s fair.



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In a unanimous decision, the Supreme Court issued the seminal decision on the reduction of Medicaid liens for tort recoveries in Ark. Dept. of Human Svs. v. Ahlborn.2 Ms. Ahlborn was severely injured in a car crash, and Medicaid paid $215,645 for treatment of her injuries. Her case was settled out of court for $550,0000. The settlement did not specify how much was for past medicals, future medicals, loss of earnings, pain and suffering or mental anguish.3

Arkansas law allowed the Arkansas Department of Human Services (ADHS) to recover its entire lien from the settlement.[iv] The ADHS thus asserted a lien against the entire amount of settlement proceeds for the $215,645 Medicaid had paid for past medical expenses.5 Ms. Ahlborn filed an action in the United States District Court, seeking a declaration that the lien violated the federal Medicaid laws insofar as its satisfaction would require depletion of compensation for injuries other than past medical expenses. The parties stipulated that Ms. Ahlborn's entire claim was reasonably valued at around $3,000,000, the settlement amounted to approximately one-sixth of that sum and that, if Ms. Ahlborn's construction of federal law was correct, ADHS would be entitled to only the portion of the settlement ($35,581.47) that constituted reimbursement for medical payments made.6 Ms. Ahlborn thus asserted the “proportional reduction” method of allocating the amount of recovery to a Medicaid lien was the correct method to use. Under this method, the Medicaid lien is reduced in proportion to the settlement amount compared to the value of the case.

The Ahlborn court stated that the issue before it was:

We must decide whether ADHS can lay claim to more than the portion of Ahlborn's settlement that represents medical expenses. The text of the federal third-party liability provisions suggests not; it focuses on recovery of payments for medical care. Medicaid recipients must, as a condition of eligibility, “assign the State any rights ... to payment for medical care from any third party,” 42 U. S. C. § 1396k(a)(1)(A) (emphasis added), not rights to payment for, for example, lost wages.

Here, the tortfeasor has accepted liability for only one-sixth of the recipient's overall damages, and ADHS has stipulated that only $35,581.47 of that sum represents compensation for medical expenses. Under the circumstances, the relevant “liability” extends no further than that amount.7

The Supreme Court thus endorsed a calculation in which the Medicaid lien was reduced in proportion to the fraction of the value of the case represented by the settlement amount.8 By upholding Ms. Ahlborn’s calculation, the Supreme Court found the “proportional reduction method” of valuing a Medicaid lien is correct.

In the wake of Ahlborn, in 2007, the Oklahoma Legislature amended our state law regarding Medicaid liens. Section 63 O.S. §5051.1 is titled “Payment for Medical Services by Oklahoma Health Care Authority.” It grants OHCA a lien against the proceeds of a tort case if Oklahoma Medicaid has paid for treatment of injuries resulting from the tort. Section 63 O.S. §5051.1(D)(1) provides:

... The lien authorized by this subsection shall: ... (d) be applied and considered valid as to the entire settlement, after the claim of the attorney or attorneys for fees and costs, unless a more limited allocation of damages to medical expenses is shown by clear and convincing evidence ...

Pursuant to §5051.1(D)(1), it is common practice for OHCA to provide a proportionate reduction of one-half of the Medicaid lien amount because the plaintiff typically has attorney’s fees and costs of approximately one-half of their gross settlement amount. However, §5051.1(D) provides for a plaintiff to present evidence to receive a larger reduction, utilizing the proportional reduction method, by establishing what portion of the tort recovery applies to medical expenses. Case law establishes that the determination of medical expenses can be made by the court if the parties cannot agree on the amount of the reduction for the Medicaid lien. As a side note, whether or not Oklahoma’s “clear and convincing evidence” standard is constitutional may be an issue to be addressed in a future case. As of now, OHCA has been reasonable about negotiating Medicaid liens, even if it is after the filing of a motion for apportionment and providing evidence of damages through a life care plan, economic damages report and non-economic damages estimate.



In Price v. Wolford and Oklahoma Health Care Authority,9 the 10th Circuit addressed the application of 63 O.S. §5051.1 to a $1.1 million settlement with a Medicaid lien of approximately $544,000 and a case value of $12 million. The district court applied the proportional allocation method, resulting in a Medicaid lien amount of about $67,000. However, the case was reversed and remanded because there was no evidence in the record regarding the $12 million case value. The Price court endorsed the district court’s use of the proportional allocation method to determine the proper amount of the Medicaid lien and provided additional direction on evidence and facts to meet Oklahoma’s burden of proof:

Aside from a reduction necessary to compensate counsel, a reduction in a Medicaid lien can be justified only by showing a reason why the plaintiff would agree to allow the defendant to pay less than the full amount of the Medicaid lien. The usual reasons would be that the liability of the settling defendant is uncertain or that the defendant lacks the money to pay for his full liability (or both); so the plaintiff would be willing to take a proportionate reduction in each component of the damages that she would expect the jury to award if the defendant were found liable. For example, if the settlement is for 50% of what the jury is likely to award because there is only a 50% chance that the jury will find liability, the Medicaid lien could properly be cut in half. Or if liability is clear and the expected verdict would be $2 million, but the defendant can pay only $1 million, a 50% reduction would also be in order. A further reduction might also be appropriate if there are doubts about whether the jury would award as damages all the medical expenses paid by Medicaid because, for example, one could question whether the expenses were caused by the negligent acts of the defendant although generally one can be more confident of recovering those expenses in full than in recovering, say, the full claim for pain and suffering.10



There is one reported Oklahoma appellate case from 2010, but it was before the Price 10th Circuit case, so the Oklahoma Court of Appeals did not have the guidance provided by the 10th Circuit when it ruled in Edwards v. Ardent Health Services, L.L.C.11 The Edwards case addressed a personal injury settlement of $1,500,000 that did not have allocation for different categories of damages, and OHCA asserted a $381,917.20 lien. Although plaintiffs sought a proportional reduction to reduce the OHCA lien to $119,526.35, the court determined that although there was a “hearing of sorts,” there was no showing by clear and convincing evidence that OHCA's lien should be reduced.12 Since the 10th Circuit in Price issued additional guidance after the Edwards decision, Oklahoma district courts should now follow Price to review the evidence and determine the proportional reduction of the Medicaid lien.

In an ideal world, before negotiating the settlement, the plaintiff’s counsel should discuss the Medicaid lien with counsel for OHCA. Then, before agreeing to a settlement amount, the plaintiff’s counsel should seek OHCA’s agreement on the amount of the Medicaid lien, so this is not an issue to be litigated later. If it is impractical to obtain OHCA’s agreement before settling, then the plaintiff’s counsel should include an agreement with the defendants to establish the apportionment of damages as to the settlement amount, particularly as to the amount of settlement attributable to medical expenses and hopefully a stipulation as to the value of the plaintiff’s claim, similar to the stipulations by the parties in Ahlborn.



In 2013, in Wos v. E.M.A.,13 the U.S. Supreme Court was faced with determining a proportionate reduction of a $1.9 million Medicaid lien, with a $2.8 million settlement and a total case value of $42 million. The settlement did not allocate the amount among the various medical and non-medical claims. The court held that the North Carolina statute’s irrebuttable statutory Medicaid lien up to one-third of the value of settlement violated federal Medicaid anti-lien statute because it could have granted Medicaid more than the portion of the settlement attributed to medical expenses.14

The North Carolina statute’s irrebuttable statutory one-third presumption is unlike Oklahoma’s statute that provides for a lien on the settlement proceeds after reduction for attorney’s fees and costs (in most cases, one-half) “unless a more limited allocation of damages to medical expenses is shown by clear and convincing evidence.”15 “The Wos court emphasized that courts are called upon to separate lump sum settlements or jury awards into categories to satisfy different claims to a part of the moneys recovered.”16 Thus, in cases where a settlement or judgment is not categorized in amounts for each type of damages, the plaintiff’s counsel should seek to have a court make such a determination of apportionment of damages in order to determine the proper fraction to apply to the Medicaid lien reduction and, of course, give notice to OHCA. Keep in mind that ideally, the plaintiff’s counsel discusses the lien and settlement with OHCA before the settlement is finalized, or if OHCA has not been part of the settlement negotiation, the plaintiff’s counsel should obtain an agreement from the defendants as to the apportionment of damages, particularly as to the number of damages attributed to medical expenses.

If there is already a settlement and OHCA was not involved, negotiating a Medicaid lien begins with completing the “OHCA TPL Lien Reduction Request Form,” easily located by typing it into your web browser. Include either the agreement between the parties apportioning the settlement or, if that was not done, include a letter showing the proportional reduction methodology with calculations for your case along with an explanation of the reasons for a disproportionate settlement per the reasoning addressed in the Price case. Also, enclose a copy of the life care plan along with the estimated value of all aspects of the case, including economic damages and non-economic damages, to provide the basis for how you arrived at the total value of the case. The proportional reduction method calculation is the settlement amount divided by the total value of the case times the OHCA lien. For example, revisiting the original example presented: $500,000 settlement divided by $25,000,000 case value times the $120,000 Medicaid lien equals $2,400 for the proportional Medicaid lien amount. Begin your negotiations with OHCA but be realistic because, in all reality, OHCA is probably not going to be willing to drop the lien to where it should be using the proportional reduction method. If you cannot get OHCA to agree to a reasonable amount, file a motion for apportionment with the court, give notice to OHCA and be ready to present your evidence as to the value of the case and ask the court to apportion the settlement amount and reduce the Medicaid lien. Keep in mind that a qualified settlement fund trust under 26 U.S.C. §468B can be utilized to fully settle and release the defendants while still holding the settlement funds pending negotiating the Medicaid lien, as well as providing time to work out other post-settlement issues.

Not addressed by any of the cases reviewed in this article is 63 O.S. §5051.1(G) that requires OHCA to be paid in full when a plaintiff needs continued Medicaid eligibility and plans to establish a Medicaid-exempt trust under 42 U.S.C. §1396p(d)(4)(A). It seems fairness and reasonableness are applied by the current legal team at OHCA when this statute has an obvious inequitable result, given the economics of a case involving both a Medicaid lien and the need for a special needs trust.

Additionally, now that Oklahoma has Medicaid expansion, disabled plaintiffs with low incomes may not need a first-party special needs trust (SNT) to exempt their assets to maintain Medicaid eligibility. However, asset limits for Supplemental Security Income (SSI) may require an SNT to preserve the settlement proceeds and maintain SSI eligibility for a disabled plaintiff. Fortunately, if the plaintiff is eligible for Social Security Disability (SSD), this is not an asset-tested program, so an SNT would not be necessary unless the plaintiff on SSD also needs a Medicaid program with asset limits like advantage waiver or long-term care in a nursing home.



Currently pending in the U.S. Supreme Court is an appeal from the 11th Circuit Gallardo v. Dudek17 to determine whether or not federal Medicaid law preempts Florida law and requires that the state only seek reimbursement from settlement amounts attributable to past medical expenses. In Gallardo, the case settled for $800,000, of which $35,367 was allocated to past medical expenses. The Medicaid agency claimed entitlement to $323,508, which equates to almost the plaintiff’s full net recovery after deduction for attorney’s fees. The Medicaid agency argues it is entitled to recovery from allocation for both past and future medical expenses. Depending on the outcome of the decision in Gallardo, the methodology for calculating reductions in Medicaid liens may change.



As with all issues with Medicaid law, whether it is Medicaid eligibility for medical coverage or nursing home care or special needs trust policy and regulations, Medicaid laws and policy are constantly changing. So, always check for current developments before advising clients on any Medicaid issue.



Tracy Speck Neisent is a partner with Holmes, Holmes & Neisent PLLC in Oklahoma City. She received her J.D. from the OU College of Law in 1993, graduating with honors and Order of the Coif. She is certified as an Elder Law Attorney (CELA) by the National Elder Law Foundation, and her practice is focused on the areas of special needs trusts, Medicaid planning and Medicaid appeals.



  1. 42 U.S.C. 1396a(a)(25).
  2. 547 U.S. 268 (2006).
  3. Id. at 272-274.
  4. Id. at 277-278.
  5. Id. at 274.
  6. Id. at 274.
  7. Id. at 280-281.
  8. Id. at 274.
  9. 608 F.3d 698 (10th Cir. 2010).
  10. Id. at 18. (emphasis added). See also, Moss v. Wittmer, 228 P.3d 542, 2009 OK CIV APP 102 (2009) (trial court erred in determining the Medicaid “lien is statutory and therefore not subject to pro rata reduction,” remanded for determination of what portion of the settlement represented medical expenses).
  11. 2010 OK CIV APP 113, 243 P.3d 25.
  12. Id. at ¶10.
  13. 568 U.S. 627 (2013).
  14. Id. at 644.
  15. 63 O.S. §5051.1(D)(1)(d).
  16. Id. at 642.
  17. 11th Cir., No. 17-13693, June 26, 2020.

Originally published in the Oklahoma Bar Journal – OBJ 92 Vol 10 (December 2021)