In Arkansas Department of Human Services v. Ahlborn, 547 U.S. 268, 126 S. Ct. 1752,  it was "held that from a $550,000 negotiated settlement in a case arising from a car accident, the Arkansas Medicaid authority could recover only $35,581.47 (about one-sixth) of the $215,645.30 it had paid for treatment of Heidi Ahlborn’s injuries, because the $550,000 settlement represented only about one-sixth of the reasonable value of the claim. "
 

Author Howard S. Davis, [disclosure:  HSD was a mentor of NYAMB} writes in today’s New York Law Journal on this issue:  how does Ahorn affect plaintiff’s settlement proceeds, what must an attorney do after settling or winning a case, and how does a retainer agreement’s construction affect the attorney’s fees and obligations?

HSD writes: "The Ahlborn decision answered many questions concerning Medicaid liens in personal injury litigation. In the process, by implication, it overturned well-established New York law allowing local Medicaid authorities to collect Medicaid liens in full from settlements in personal injury lawsuits. (See Cricchio v. Pennisi, 90 N.Y.2d 296 [1997]; Gold v. United Health Services, 95 N.Y.2d 683 [2001]; see also Lugo v. Beth Israel Medical Center, 13 Misc. 3d 681, 819 N.Y.S.2d 892 [July 21, 2006]; Harris v. City of New York, 16 Misc. 3d 674, 837 N.Y.S.2d 486 [March 29, 2007]; Chambers v. Jain, 15 Misc. 3d 1120, 839 N.Y.S.2d 432 [April 13, 2007].)2 But Ahlborn did not answer the question whether plaintiffs in tort cases can compel their attorneys, for no additional fee, to negotiate the allocation of the recovery – and even, if necessary, compel them to initiate court proceedings to fix the allocation.

In other words, in New York, after Ahlborn, the question remained whether attorneys, either plaintiffs’ personal injury attorneys or outside counsel, were entitled to a fee, in addition to the fee permitted by the Appellate Division rules for prosecuting and settling personal injury cases, for negotiating an Ahlborn allocation or getting a court to set one."