California Appellate Court Remands For Proper Calculation Of Medicaid Lien On Medical Malpractice Settlement Proceeds

162017_132140396847214_292624_nIn its published written opinion filed on April 2, 2015, the Court of Appeal, Fourth Appellate District Division One State of California (“Appellate Court”) held that the methodology employed by the trial court in determining a claim for reimbursement made by California’s State Department of Health Care Services (“Department”) for funds expended on behalf of an injured party by the state’s Medi-Cal program was correct, but the trial court erred in its calculation and was wrong when it refused to reduce the Department’s lien to account for the attorney fees and expenses the injured party paid.

The Underlying Medical Malpractice Settlement

A two-month-old infant suffered serious and permanent injuries as a result of the medical negligence of a physician – she had a hemispherectomy and had to have a shunt implanted to relieve pressure inside her skull caused by excess cerebrospinal fluid. The infant suffers from global developmental delay, mental retardation, behavioral disorders, and is dependent on a gastronomy tube.

The infant’s parents filed a California medical malpractice claim on her behalf that was settled for $950,000 (which sum was close to the defendant’s medical malpractice insurance policy limit). The settlement was approved by the trial court, which included approval of the plaintiff’s medical malpractice attorney fee and costs in the amount of $253,006 (the infant’s parents received $85,000 of the settlement as a resolution of their prospective wrongful death action against the defendant). The balance of the settlement was placed in a special needs trust.

The Department asserted a lien on the infant’s recovery based on the $211,191 that it spent on her behalf. The Department claimed its lien was not limited to the past medical care expenses it paid but also extended to the child’s future care. The Department also claimed its lien should not be reduced by the amount of attorney fees and costs expended by the plaintiff in order to obtain the settlement.

Medicaid Reimbursement

The Appellate Court noted that Medicaid is a cooperative federal and state program that pays for medical services to individuals who cannot afford to pay their own medical costs. Under the Medicaid program, the federal government provides financial assistance to states that voluntarily participate to assist in providing health care to needy persons (if a state agrees to establish a Medicaid plan, the federal government agrees to pay a specific percentage of expenses). Participating states must comply with federal Medicaid law, which includes the requirement that the state Medicaid agency must seek reimbursement for medical expenses it paid from liable third parties. California participates in the Medicaid program through the California Medical Assistance Program (“Medi-Cal”).

In 2006, the U.S. Supreme Court held that in seeking reimbursement, the State’s assigned rights extend only to recovery of payments for medical care: the reimbursement due is the total settlement divided by the full value of the claim, which is then multiplied by the value of benefits provided. In the case the Appellate Court was deciding, the issue was how to calculate the full value of plaintiff’s claim – specifically, whether future attendant care and medical care should be included in the value of the claim.

The Department argued that the full value of the plaintiff’s claim should not include the amount of her future expenses for attendant care because the Department will be paying those future expenses for the plaintiff through the Medi-Cal program. The plaintiff argued that the Department failed to show that the Department will or can pay all of her future attendant care and medical expenses for the rest of her life and thus these future expenses should be included in determining the full value of her claim.

The Appellate Court held that excluding such expenses is contingent on the Department presenting sufficient evidence that it will in fact pay the plaintiff’s expenses as long as she qualifies for the benefits that she is presently receiving. The Appellate Court noted that the plaintiff’s future health care needs are uncertain and necessarily based on reasoned assumptions and estimates from health care professionals, and that the benefits the Department will offer in the future and its future funding for these benefits is uncertain and can be based on reasonable assumptions and estimates – it is impossible for either party to predict the future.

The Appellate Court held that it is unjust to require absolute certainty from the Department regarding how Medi-Cal eligibility will be determined in the future, whether the plaintiff will remain Medi-Cal eligible, what benefits it will provide in the future, and whether funding will exist for these future benefits. However, in the present case, the Department’s evidentiary showing was lacking, including no citation to statutes or regulations requiring that Medi-Cal pay for all of the plaintiff’s health care needs and no showing that Medi-Cal paid for these expenses in the past or that it is reasonably probable Medi-Cal will pay all of these expenses in the future.

The Appellate Court therefore remanded the case to the trial court for further proceedings, including the presentation of additional evidence by either party with citations to applicable statutes or regulations regarding current Medi-Cal eligibility, the type of health care currently available under Medi-Cal, past funding to pay for such health care, and estimated future funding to pay for the type of health care at issue. Then, based on the evidence provided, the trial court must make a determination whether it is reasonably probable the Department will pay the plaintiff’s future health care expenses: if the trial court makes such a finding, then it must exclude those expenses from its calculation of the full value of the claim.

Reduction For Attorney Fees

The Appellate Court held that where the Department files a lien, section 14124.72(d) sets forth the method for determining the Department’s share of the beneficiary’s attorney fees and costs. Therefore, the Appellate Court held that the trial court erred when it refused to reduce the Department’s lien to account for the attorney fees and costs the plaintiff incurred.

[Section 14124.72(d) states, “Where the action or claim is brought by the beneficiary alone and the beneficiary incurs a personal liability to pay attorney’s fees and costs of litigation, the director’s claim for reimbursement of the benefits provided to the beneficiary shall be limited to the reasonable value of benefits provided to the beneficiary under the Medi-Cal program less 25 percent which represents the director’s reasonable share of attorney’s fees paid by the beneficiary and that portion of the cost of litigation expenses determined by multiplying by the ratio of the full amount of the reasonable value of benefits so provided to the full amount of the judgment, award, or settlement.”]

Source Aguilera v. Loma Linda University Medical Center, et al., D066701.

If you or a family member suffered serious injury in California that may be due to medical negligence, you should promptly find a California medical malpractice lawyer who may investigate your medical malpractice claim for you and represent you in a California medical malpractice case, if appropriate.

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This entry was posted on Thursday, April 9th, 2015 at 5:15 am. Both comments and pings are currently closed.

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