ElderLawAnswers Attorney Wins Landmark Settlement in Medicaid Case

[This article was originally published on August 19, 2010.  The links were updated on August 23, 2018.]

The settlement of a class action lawsuit in Maryland clarifies when nursing home residents do not have to contribute to the cost of their care, and the case could be a "road map for other states," according to the Baltimore Sun.

The lawsuit, which was pursued by ElderLawAnswers member attorney Ron M. Landsman, among others, addressed how nursing home residents would pay for medical bills that they incurred before they became eligible for Medicaid. The typical situation involves a nursing home resident trying to get Medicaid coverage who does not quite qualify for benefits because her assets are slightly over the limit. But at the same time, she has too few assets to pay the full cost of her care in the nursing home before she becomes eligible for Medicaid. After the resident qualifies for Medicaid, she will owe the nursing home money often thousands of dollars -- and could be discharged for the unpaid bill.

Federal law requires that Medicaid recipients in such situations be allowed to deduct these health care costs from the amount of their income that they would normally contribute to their care. The resident's available income would instead go to pay the medical debt until the debt had been paid. During this time, the Medicaid program covers the entire cost of nursing home care.

Maryland was among a handful of states that refused to follow federal law in this area, and instead was requiring Medicaid beneficiaries to contribute all their available income to their cost of care, regardless of their old medical debts. In some cases, families of nursing home residents were repaying the outstanding medical debts out of pocket, and in others the nursing homes simply weren't being paid. In 2005, Landsman and two other elder law attorneys sued to force Maryland to follow federal law.

According to the recent settlement in the case, Smith v. Colmers (Md. Cir. Ct. Balt. City, No. 24-C-05-007421, May 12, 2010), Maryland agrees to allow nursing home residents to use their available income to pay three months' worth of old medical debts. The state has also agreed to contribute $16 million to a fund that will reimburse nursing home residents or their families for medical expenses that they were forced to pay directly to a nursing home after they became eligible for Medicaid. The fund will also help to reimburse nursing homes for unpaid resident bills. In return, up to $64 million in nursing home bills will be forgiven.

Said Landsman, "It is unfortunate that it took almost five years of aggressive litigation to get Maryland to comply with federal law, but this ends three decades in which Maryland shirked its obligations under the Medicaid statute."

The class of plaintiffs was comprised of more than 12,000 current and former nursing home residents, and more than 300 homes were owed money. A companion case against the District of Columbia has resulted in modifications to the way the District calculates Medicaid recipients' co-payments.

For more on the Maryland settlement in the Baltimore Sun, click here. For a similar article in the Washington Post, click here.