OPINION OF THE COURT
Chief Judge KAYE.
In Cricchio v Pennisi (90 N.Y.2d 296), this Court held that the Department of Social Services is entitled to satisfy a Medicaid lien placed on the proceeds of a personal injury settlement pursuant to Social Services Law § 104-b before a plaintiff may transfer those funds to a supplemental needs trust.
The relevant facts of these cases may be stated briefly. Appellants received Medicaid benefits for injuries they suffered allegedly due to the negligence of third parties. They commenced personal injury actions against the third parties, which eventually settled. Even though a Medicaid lien was placed on both settlements, neither provided for any payment to satisfy the liens. Instead, the net settlement proceeds were allocated to appellants' pain and suffering, and Supreme Court approved the transfer of those funds to supplemental needs trusts for appellants' benefit.
In both cases, the Appellate Division reversed the Supreme Court orders establishing the supplemental needs trusts. Reasoning that "[n]one of the assignment, subrogation, and recoupment provisions * * * limit the right of recovery by DSS to that portion of the settlement proceeds intended to compensate the plaintiff for past medical expenses," the Appellate Division held that all settlement proceeds are available to satisfy a Medicaid lien, and that appellants could transfer settlement funds to a supplemental needs trust only after the liens were paid (Calvanese v Calvanese, 250 A.D.2d 564, 565; see also, Matter of Callahan, 254 A.D.2d 415). We agree, and accordingly affirm in both cases.
Medicaid is a jointly funded Federal and State program that pays for necessary medical care of qualifying indigent persons (see, 42 USC § 1396 et seq.; Social Services Law § 363 et seq.). In order to contain program costs and ensure that Medicaid remains the "payor of last resort" (S Rep No. 146, 99th Cong, 2d Sess 1, 312, reprinted in 1986 US Code Cong & Admin News 42, 279), States must "take all reasonable measures to ascertain the legal liability of third parties * * * to pay for care and services available under the plan," and seek reimbursement from them (42 USC § 1396a [a]  [A], [B]). Federal law also requires Medicaid recipients to "cooperate with the State in identifying, and providing information to assist the State in pursuing, any third party who may be liable to pay for care and services available under the plan," unless good cause exists for the refusal to cooperate (42 USC § 1396k [a]  [C]; see also, 42 CFR 433.145 [a] ).
As an alternative to suing the responsible third party directly, the Department may pursue reimbursement indirectly by placing a lien on personal injury suits brought by a Medicaid recipient against the responsible party (see, Social Services Law § 104-b). A Medicaid lien "shall attach to any verdict, decision, decree, judgment, award or final order in any suit, action or proceeding in any court or administrative tribunal of this state respecting such injuries, as well as the proceeds of any settlement thereof," and continues until discharged by the public welfare official (Social Services Law § 104-b , ). Because section 104-b "is purely procedural," it does not alter the agency's substantive right to recover the amount it has expended on behalf of a Medicaid recipient, and the agency's right to recover is the same whether it sues directly or uses a lien (Baker v Sterling, 39 N.Y.2d 397, 405).
Pitted against the Department's right to reimbursement in these appeals is appellants' desire to place all of their settlement proceeds into supplemental needs trusts. This Court addressed the relationship between supplemental needs trusts and Medicaid liens in Cricchio v Pennisi (90 N.Y.2d 296, supra). The question before us was whether a Medicaid lien placed on the proceeds of a personal injury settlement must be satisfied before those funds could be transferred to a supplemental needs trust. After reviewing the Federal and State assignment and subrogation scheme, we answered in the affirmative. In so doing, the Court left open the issue of what portion of the settlement was available to satisfy the lien:
That open question is now before us.
Appellants argue that only the settlement proceeds specifically allocated to past medical expenses should be available to satisfy the Medicaid lien. Nowhere in the elaborate statutory scheme governing this area of the law, however, is the agency's right of recovery restricted in this manner. A State that has furnished Medicaid acquires the rights of recipients "to payment by any other party for such health care items or services," and must "retain[ ]" from the recovery an amount "as is necessary to reimburse it for medical assistance payments made on behalf of an individual" (42 USC § 1396a [a]  [H]; § 1396k [b]).
New York's assignment, subrogation and lien provisions effectuate these Federal mandates by imbuing the Department with broad authority to pursue any amount of third-party reimbursement to which appellants are entitled. As a condition of eligibility for Medicaid, all applicants and recipients must "assign to the appropriate social services official or the department * * * any benefits which are available to him or her individually from any third party for care or other medical benefits available under this title" (Social Services Law § 366  [h]  [emphasis added]; see also, 18 NYCRR 360-7.4 [a] ). Once the Department has furnished Medicaid assistance to an applicant or recipient, it is subrogated to the extent of the expenditures it has made "to any rights such person may have to * * * third party reimbursement" (Social Services Law § 367-a  [b] [emphasis added]; see also, 18 NYCRR 360-7.4 [a] ).
The Department's ability to enforce its right to reimbursement with a lien is correspondingly broad. If any Medicaid recipient has a right of action "on account of any personal injuries suffered by such recipient," the Department has a lien "for such amount as may be fixed by the public welfare official" up to the amount it has expended (Social Services Law § 104-b ). Appellants' proposal that courts—or Medicaid recipients acting in conjunction with responsible third parties—be allowed to compromise Medicaid liens by allocating settlements to specific categories of damages is contrary to statutory
In light of the Department's broad statutory obligation to seek reimbursement from responsible third parties, appellants present no justification for circumscribing the Department's recovery from settlement funds. The allocation of funds in the manner that appellants urge would divert available third-party resources from the Department to a Medicaid recipient's supplemental needs trust. This would weaken the assignment and subrogation provisions as well as the priority assigned to Medicaid liens, results that would jeopardize the ultimate goal of Medicaid—that the program be the payor of last resort (Matter of Costello [Stark] v Geiser, 85 N.Y.2d 103, 106). It would also create an anomalous situation in which Medicaid applicants could be disqualified from eligibility for financial resources that include prior personal injury settlements allocated to pain and suffering, but Medicaid recipients could shield such funds from recoupment by the Department after having received significant public assistance.
Appellants argue that, notwithstanding these concerns, the Appellate Division erred in not applying the "equity standard" of Matter of Costello (Stark) v Geiser (85 N.Y.2d 103, supra). Appellants' reliance on Geiser is misplaced. At issue in that case was the amount of reimbursement that the Department could seek from a responsible third party, not the source of the funds available for the reimbursement. In Geiser, the Court concluded that the Department is entitled to reimbursement only for the actual costs of the medical services provided, and not for "such statutory Medicaid subsidies characterized as bad debt and charity surcharges" (id., at 105). This determination was based on the statutory foundation for the Department's subrogation, as well as the nature of subrogation. Because "subrogation is wholly dependent on the subrogor's claim against the third party," the Department could not recover an amount greater than the Medicaid recipient could have recouped had she paid for the medical services herself. That amount would not have included the Medicaid surcharges (id., at 109). Furthermore, the Department's subrogation rights were limited by statute to the "medical care furnished," an amount that does not include the bad debt and charity allowances (Social Services Law § 367-a  [b]).
Appellants' reliance on Baker v Sterling (39 N.Y.2d 397, supra) is similarly misplaced. In Baker, the Department placed a lien on a personal injury suit brought by a plaintiff who received Medicaid assistance when she was under the age of 21. The Department's right of recovery in such a situation is governed by Social Services Law § 104 (2), which provides:
The Court concluded that an award for personal injuries cannot be "in excess" of the recipient's requirements, since it merely compensates the recipient for a loss. In contrast, the medical expenses paid by the State involved no loss to the recipient, so recovery of them would be "excess." Thus, relying on Social Services Law § 104 (2), the Court held that when a Medicaid recipient is younger than 21, only the portion of a settlement allocated to medical expenses is subject to recovery by the Department.
Finally, appellants contend that allowing the Department to satisfy a Medicaid lien from all settlement proceeds will, in the long run, actually decrease recovery on Medicaid liens. They envision a scenario in which Medicaid recipients will have no incentive to settle weak claims for an amount less than or equal to the amount of the Medicaid lien, forcing such cases to trial, where there may well be no recovery for either plaintiffs or the Department. That argument ignores the public welfare official's powers both to fix the amount of the lien and to release and discharge it (see, Social Services Law § 104-b , ). In order to facilitate settlement, the agency may agree to reduce the amount it will accept in satisfaction of its lien—whether to ensure that the value of the lien is not greater than defendants are willing to settle for, or simply to ensure that a settlement will yield a plaintiff additional compensation beyond having medical expenses paid by the State. This ability to settle, however, does not affect the agency's entitlement to full recovery when sufficient funds are made available by a responsible third party. To conclude otherwise would be to jeopardize Medicaid's status as a "payor of last resort," and to ignore limits on public resources available to fund the program.
Appellants' remaining arguments are without merit.
Accordingly, in both cases, the order of the Appellate Division should be affirmed, without costs.
In each case: Order affirmed, without costs.