State Medicaid Agency Cannot Enforce Settlement Agreement

The Court of Appeals of Ohio holds that the state cannot enforce a wrongful death settlement agreement to recover Medicaid reimbursement because the state is not an intended beneficiary of the agreement.  In Estate of Goode (Ohio Ct. App. NO. 9-23-12, November 27, 2023).  

After Judith Goode, an Ohio Medicaid beneficiary, died, the state of Ohio sought $198,128.51 in reimbursement plus statutory interest.

The estate and surviving family members received a wrongful death and survival settlement, and the state sought reimbursement from the settlement.

The trial court found that the terms of the settlement agreement only allowed Ohio partial reimbursement. Of the $400,000 settlement, it allocated $42,000 to the estate for the survival claim and the rest to the wrongful death claim.

Arguing that the trial court erred by misinterpreting the settlement agreement, the state appealed. Ohio interpreted the agreement as requiring total state reimbursement.

The appellate court first considers whether the state may enforce the settlement agreement. Since the settlement is a contract, Ohio may enforce it if it is a third-party beneficiary.

In Hill v. Sonitrol of Southwestern Ohio, Inc., the Ohio Supreme Court clarified that someone is an intended beneficiary of a contract when the promisee intends for them to benefit from the agreement. Courts determine intent from the contract’s language. Only when the contract is ambiguous can courts look to extrinsic evidence of intent.

In addition to the intent requirement, the contract’s primary purpose must concern the third-party beneficiary.

While the contract does say that the estate will pay any subrogated claims or liens brought, the language does not show an intent to benefit the state. Instead, the intention was to shield the released parties from liability.

As an incidental beneficiary at most, the state cannot enforce the settlement agreement. Because Ohio lacks enforceable contractual rights, the trial court did not err. The appellate court affirms the lower court’s judgment.

Read the full opinion.