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In Southwest Fiduciary v. Willingham, an Indiana state court of appeals was asked to decide how Medicaid’s lien should be measured.  Medicaid wanted the lien measured by the total medical expenses claimed by the injury victims.  The injury victims argued it should be measured by what was actually paid on their behalf by Medicaid.  In the trial court, Medicaid lost and the court ruled that the lien would be reduced by the ration that the settlement amount bore to the victim’s total claimed damages.  Medicaid appealed.

On appeal, the Indiana Court of Appeals affirmed the trial court.  It held that Mediciad can’t enforce its lien against any portion of the settlement that isn’t attributable to the state’s actual payments.  The holding relied upon the US Supreme Court’s decision in Ahlborn.  According to the court of appeals, Medicaid’s "share of a settlement should be calculated based on amounts it has paid for the victim's medical care, not based on larger amounts reflected in bills issued by medical providers that later agree to accept less than the billed amounts as full payment."