Wednesday, September 8, 2010

Does IHS Have A Lien Against Settlement Proceeds?

I represent an Indian person in a personal injury claim. The Indian Health Service paid the medical expenses. The amount paid by IHS is 88% of the auto insurance policy limits, which the insurance carrier is paying to my client and my firm. Is IHS entitled to 100% of what it paid for its subrogation claim?

Indian Health Services can recover the reasonable value of care provided from a liable third party tortfeasor. Thus if an injury is related to the tortious conduct of a third party, IHS will assert its rights under the Federal Medical Care Recovery Act (FMCRA), to assert reimbursement rights for injury-related medical care. Under the FMCRA, IHS has three years from the date that the action accrues to file a cause of action. However, it should be noted that under the FMCRA the statute of limitations is effectively tolled under 28 U.S.C. § 2416(c) until IHS knows or reasonably could have known that the injury was caused by a tortious third party as determined under state law. Thus the key is when the United States had knowledge of a potential claim which could then extend the statute of limitations period.

Presuming that the statute of limitations is still open, the next question becomes what recovery tools does IHS have to implement. IHS possesses both a subrogee/intervention right and an independent right of recovery to payments when a third party is responsible for payment for all or part of the same medical treatment for which IHS made payment. Any amount paid by IHS for medical care and services shall constitute a claim in favor of the U.S. against any third party for medical care or services provided to a veteran. Both HIS' independent right and its separate right in subrogation (as well the corresponding statute of limitations) are governed by Federal law, but the determination of the underlying tort liability will still be governed by the applicable state law, which creates the property rights (liability) in the first place.

Does IHS have a lien against settlement proceeds? While there is no specific statutory authority providing for such a lien, there is no denying that IHS has an interest in third party scenarios through its right to intervene or to seek individual action against a third party. In situations where the IHS' interest is not protected, the government may intervene in the third party action resulting in the settling parties, especially plaintiff's counsel, losing control over the proceeding. This is especially so if the case is removed to Federal court. Even more threatening is the scenario where the government brings an independent cause of action against the third party (post-settlement) and the releasing parties, including their counsel, are pulled back into the fray as a result of the original release and applicable indemnification provisions. The releasing parties may not release a claim of the United States. By affirmatively notifying IHS and resolving any asserted interest, an attorney is assuring him/herself of a controlled outcome while at the same time avoiding any potential future issues for both themselves and their clients.

Michael D. Russell, Esq.