Crash Medical Payments Decision

The Nebraska Supreme Court rules in case originating in Cass County. The decision released Friday said Edward Smalley must reimburse state Medicaid for payments the program made on his behalf in the amputation of both legs above the knees. The ruling reverses a Cass County District Court decision that Smalley only had to reimburse a percentage.

The Cassgram reports that In December of 2007, Smalley was standing behind a car on East Wiles Road southeast of Plattsmouth when he was hit by a pickup truck equipped with a snow blade. (Archives 12/24/07) The pickup driver was convicted of DUI and Smalley filed a civil case against the pickup driver and the construction company that owned the pickup. The suit originally asked for $6 million.

The Nebraska Department of Health and Human Services first took the position that it would not pay Smalley’s outstanding medical bills prior to the disposition of his third-party liability claims. However, in order to facilitate a settlement of those claims (likely a smaller amount than dealing with the hospital direct) Smalley’s attorney agreed that if DHHS paid the medical bills at the discounted Medicaid rate, Smalley would reimburse DHHS dollar-for-dollar out of the settlement proceeds. The attorney later revealed he had reservations that the state could legally insist on reimbursement, said the Supreme Court recap.

DHHS paid out $131,000. (That was the discounted amount for DHHS to pay the hospital; the actual costs were over $400,000.)

But then Smalley’s attorney added DHHS as a defendant and asserted that fully reimbursing DHHS out of the proceeds of the settlement would be contrary to federal law. The $131,000 was placed in escrow after an $805,000 settlement was made in the civil lawsuit.

The district court conducted a bench trial at which Smalley was represented by new counsel. The court recap said Smalley’s original attorney testified that in his professional opinion, Smalley’s personal injury claim was worth at least $6 million. He admitted that he never intended to honor his agreement to fully reimburse DHHS and that he entered into the agreement in order to induce DHHS to pay Smalley’s medical expenses at the discounted Medicaid rate. The DHHS representative testified he expected the state “to be fully reimbursed for the Medicaid payments it made on Smalley’s behalf. He further testified that in the absence of the agreement, DHHS would have continued its ‘cost avoidance approach,’ leaving Smalley to negotiate with the hospital regarding the outstanding bill,” said the recap.

Cass County District Court ruled in favor of Smalley and ordered a pro-rated amount—$17,420 (13.4% of the state’s payment, the same ratio of $805,000 to $6 million)—to be paid back to Medicaid.

The case went to the Nebraska Supreme Court.

The Supreme Court ruling: “Based on the unique facts of this case, the district court should have looked no further than the agreement between the parties. …DHHS is entitled to the full $131,000 held in escrow.”


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