NEW IOWA STATUTE GIVES MEDICAID “SUPERLIEN” STATUS

A new Iowa statute went into effect on July 1, 2023, granting recovery rights to Iowa Medicaid that are similar to those of Medicare.  See Iowa Code § 249A.54 (2023).  Many refer to this recovery priority status as a “superlien.”  This new superlien statute provokes questions regarding how to address Medicaid liens in claim settlements.

What do we mean by the term “superlien”?

In the workers’ compensation context, a “lien” typically refers to a party’s right to recover money paid for healthcare services against an insured worker’s recovery for benefits paid.  See Lien, Black’s Law Dictionary (11th ed. 2019).  A “superlien,” on the other hand, relates specifically to a government’s right of recovery, created by statute, granting the government’s lien a superior right to recovery above all other liens, allowing recovery of public funds spent towards an insured worker’s recovery.  See Superlien, Black’s Law Dictionary (11th ed. 2019).

Practically speaking, a superlien requires parties to report to the Centers for Medicare & Medicaid Services (CMS) the existence of a claim involving a beneficiary and causes the insurer to preclear any payments to ensure that the government’s interests are protected.  See Eric Helland & Fred Kipperman, Recovery Under the Medicare Secondary Payer Act: Impact of Reporting Threshold, Rand Corp., 2011, at 2, File No. OP-332-ICJ.

What does Iowa Code § 249A.54 change?

Before the revised Iowa Code § 249A.54 went into effect on July 1, 2023, a Medicaid lien was not effective unless Medicaid filed a notice of lien with the clerk of the district court in the county where the recipient resided.  See Iowa Code § 249A.54(2) (2014) (amended 2022).  The lien was not valid if such steps were not taken before the third party had concluded a final settlement with the recipient.  See id.  In other words, before this change to the statute, a Medicaid lien enjoyed no further rights than a hospital’s lien, practically speaking.

Effective July 1, 2023, however, a Medicaid lien now attaches automatically when a recipient first receives medical services; i.e., a Medicaid lien is effected even if the department fails to file a notice of lien with the district court before settlement.  See Iowa Code § 249A.54(8)(c)(1) (2023).  A settlement is not effective as against a Medicaid lien unless Medicaid joins in the release or executes a release of the lien, and acceptance of a settlement without a release of lien from Medicaid may entitle the department to recover damages against the third-party insurer for impairment of the lien.  See Iowa Code § 249A.54(8)(c)(5) (2023).

How does this change the settlement process?

In light of these recent changes, there is now a heightened importance to ensure that a Medicaid lien is properly addressed, not unlike the process employed to address a Medicare lien.  A best practice is always to obtain a lien release letter from CMS to protect the third-party insurer from owing for damages related to the impairment of Medicaid’s lien.

In addition to a release of the Medicaid lien, or perhaps in cases where this is not feasible, the terms of settlement should include express release language to the effect that the claimant releases, assumes liability, and holds the claimant harmless for addressing the Medicaid lien, and that claimant’s counsel has taken into account Medicaid’s interest regarding disputed medical expenses paid by Medicaid.

This post was drafted by Adam Barrett, a law clerk at Baylor Evnen Wolfe & Tannehill, LLP.  If you have questions regarding Iowa Medicaid liens, please call Paul Barta or Micah Hawker-Boehnke at 402-475-1075.