Maryland Medicaid Agency Settles Multi-Million Dollar Lawsuit

MARCH 22, 2010  VOLUME 17, NUMBER 10

This week’s Elder Law Issues was written by our friend and Maryland colleague Ron M. Landsman. He describes the resolution of a class lawsuit he initiated in Maryland, challenging that state’s practice of setting Medicaid patients’ co-payment amount too high to allow them to pay nursing home bills incurred while they were waiting for Medicaid eligibility.

Preliminary approval of settlement of a class action suit in Maryland implements protection for nursing home residents who mess up their Medicaid eligibility and run out of money to pay for their care before they actually qualify for Medicaid benefits.

This is a common problem. The nursing home resident who is spending down misunderstands the rules or is careless, and finds himself with too much to qualify for Medicaid but not enough to pay the current nursing home bill.

The way Maryland was calculating residents’ co-payments, he would not have money to pay the old bill. Federal law requires – and the settlement implements – co-payment calculations that allow the resident to pay the old bill.

The resident is relieved of the risk of discharge for non-payment, and the nursing home gets paid for providing services. Legal Aid Bureau lawyers said they were using the new rules, which have been partly in effect while the suit was pending, to protect their clients from involuntary discharge because it gave them a way to pay the old bills once on Medicaid.

The Maryland class action, Eunice Smith, et al. v. John Colmers, et al., is believed to be the largest settlement ever paid by the Maryland Medicaid agency – up to $16 million in 2010-2012 to nursing homes that were underpaid because of the co-payment miscalculation. The nursing homes will then apply the previous resident co-payments to the old nursing home bills. If there is a shortfall and not enough to pay the old bills, the nursing homes receiving payment will have to forgive those old debts. That may amount to up to $64 million in claims against residents forgiven.

The settlement also requires the Maryland Medicaid agency to make comprehensive changes in the way it calculates co-payments so that it does it correctly in the future.

Cy Smith and Bill Meyer of Zuckerman Spaeder LLP in Baltimore, and Ron Landsman of Rockville, represented the plaintiff class. Landsman obtained the federal agency ruling that Maryland’s old rules for co-payments violated federal law, which then triggered the private lawsuit. Smith and Meyer led the negotiations resulting in a complicated 16-page “protocol” for making claims and payments to nursing homes.

The order signed on March 11 gives the settlement preliminary approval as “fair, reasonable, and adequate.” Notice will be sent to all class members, and they can “opt out” of the class action, if they want, to pursue their own claims for corrected co-payment calculations. But those doing so will be subject to a limit of three months for most old bills, which does not apply to the settlement, and they will not automatically have any unpaid portion of their old bills forgiven by the nursing home.

The settlement is scheduled for final approval on May 12, 2010.

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