Medicaid Catch-22: It’s time for the asbestos trusts to do what's right
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In May, President Trump released a budget that shaves $800 billion from Medicaid over a decade. Even if only some of these cuts are enacted, state Medicaid programs will be looking for replacement funds.

Medicaid secondary payer laws provide states potential funds. For example, if a Medicaid enrollee is sickened by asbestos, and Medicaid pays the healthcare bills, Medicaid is entitled to a share of any future personal injury settlement. Medicaid is theoretically required to recover part of the settlement.

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But there’s a Medicaid Catch-22. Congress prevented state Medicaid agencies from learning what they need to know to enforce those recovery rights. Not “doing business” in a state? No reporting required. Federal guidelines concede that “[s]tate law cannot reach beyond the entities…‘doing business’ in their states.” Congress ordered states to mandate third-party reporting, which they can’t effectively do because they’re states: Medicaid Catch-22.

In practice, this means that unless a lawyer, a defendant or another party to a personal injury claim is located in the same state as a Medicaid beneficiary, and thus required by state law to report payments, the state Medicaid agency will likely never learn about the money. Of course, the enrollee is supposed to report the windfall. If you think that usually happens … please get in touch, because I have an investment opportunity for you.

Asbestos litigation, the longest-running mass tort in U.S. history, is well into its fourth decade, and shows no signs of abating soon. Initially, plaintiffs’ attorneys typically sued the main producers and manufacturers of the “magic mineral.” Eventually, these players almost all went belly-up. More than 60 subsequently reorganized under a bankruptcy code provision that allows them to set up special trusts to pay people injured by their products. From 2006 through 2012 alone, these asbestos trusts paid more than $15 billion in settlements. According to the GAO, the trusts still held approximately $37 billion in 2011 to pay future asbestos claimants.

But while asbestos victims and their lawyers reside in 53 states and territories, the trusts themselves do not. They don’t report to state Medicaid agencies, not even in the states where they’re found. In fact, thanks to a loophole in Centers for Medicare and Medicaid Services regulations, asbestos trusts funded before 2011 don’t even have to report settlements to Medicare.

In March, Utah’s Attorney General sued four of the largest trusts, seeking to force them to provide information about settlements. Utah says it wants to discover whether the trusts are wasting money and failing to reimburse the state for Medicare and Medicaid expenditures.

Utah alleges the trusts may have perpetrated “fraud on the State’s Medicaid program” because of paying bogus claims submitted by dishonest attorneys. But if phony claims were paid to Medicaid beneficiaries outside Utah, it would be nigh impossible to calculate how much these payouts lowered the righteous recoveries of Utah enrollees. And if Utah enrollees (or their lawyers) submitted fraudulent claims, it seems dubious that Utah is entitled to a cut of stolen loot. 

Again, it’s Medicaid Catch-22. Utah says it has a claim because plaintiffs’ attorneys are committing fraud. But if they’re committing fraud, Utah probably can’t collect. 

Predictably, the trusts say that while they’ve paid claims to Utah residents, they aren’t “doing business” in the state. As for Medicaid reporting, they say it’s unfair to ask them to obey 53 disparate laws. They have a point.

The most efficient solution would be centralized, national Medicaid reporting. States are still at the “nascent stages” of enacting effective Medicaid reporting schemes, let alone sharing data, according to Silvius von Saucken, General Counsel for the Garretson Recovery Group, a health care lien consulting firm.  “Unless someone in Congress wants to enact some sort of nationwide Medicaid Secondary Payer reporting law,” von Sauken says, “we’re still one or two decades away from creating those efficiencies.”

A bill now before the Senate could help. In March, the House passed H.R. 906, the Furthering Asbestos Claim Transparency (FACT) Act of 2017.  H.R. 906 would require asbestos trusts to file quarterly reports with the bankruptcy court(s), setting forth claimants’ names and exposure histories.

The FACT Act is currently languishing before the Senate Judiciary Committee and its prospects don’t look bright. Which is a shame. Because, when it comes to revealing claims information, it’s time for the asbestos trusts to do what's right.

Christine Biederman is a lawyer in private practice and an award-winning investigative reporter, who has written extensively about asbestos litigation.  Formerly, she was an Assistant U.S. Attorney who dealt with Medicare, Medicaid and False Claims Act issues.


The views expressed by this author are their own and are not the views of The Hill.