13-004785MTR Michael Mobley, By And Through His Father And Natural Guardian, David Mobley vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Friday, January 4, 2019.

Summary: AHCA was entitled to Medicaid lien on full settlement amount allocated for past medical expenses, not just amount allocated to Medicaid lien.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MICHAEL MOBLEY, BY AND THROUGH

HIS FATHER AND NATURAL GUARDIAN,

DAVID MOBLEY,

Petitioners,

vs. Case No. 13 - 4785MTR

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent.

/

FINAL ORDER

On March 17 and 24, 2014, a duly - noticed hearing was held

in Pensacola and Tallahassee, Florida, via video teleconference,

before F. Scott Boyd, an A dministrative L aw J udge assigned by

the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Floyd B. Faglie , Esquire

Staunton and Faglie, P.L.

189 East Walnut Street

Monticello , F lorida 32344

For Respondent: Adam James Stallard , Esquire

Xerox Recovery Services Group

2316 Killearn Center Boulevard

Tallahassee, Florida 323 0 9

STATEMENT OF THE ISSUE

The issue to be decided is the amount payable to Respondent

in satisfaction of the AgencyÓs Medicaid lien from a settlement,

judgment, or award received by Petitioner from a third - party

under section 409.910(17), Florida Statutes .

PRELIMINARY STATEMENT

On December 13, 2013 , Petitioner filed a Petition to

Determine Amount Payable to the Agency for Health Care

Administration in Satisfaction of Medicaid Lien.

A h earing was held on March 17 and 24, 2014 . Petitioner

presented the testimony of one expert and fact witness, Mr. Matt

Schultz . T en exhibits were admitted into evidence, Exhibit s P - 9

through P - 12, P - 15, P - 2 0, P - 21 , P - 23C, P - 23D, and P - 23F.

Respondent offered no witnesses or exhibits. The parties filed

a Joint Pre - hearing Stipulation, and facts stipulated there were

accepted and made a part of the Findings of Fact below.

O fficial recognition was granted as to numerous Florida

Statutes , state and federal judicial cases , and administrative

o rders , including materials submitted for recognition after the

final hearing . A j oint m otion at hearing for additional time to

submit Proposed Final Orders was granted. The Transcript of the

final hearing was filed April 29, 2014 , and the parties timely

filed proposed orders that have been carefully considered.

FINDINGS OF FACT

1 . On June 7, 2005, 14 - year - old Michael Mobley attended a

beach party. The party occurred on, near, or about the beach

premises of a hotel. Michael became intoxicated through

consumption of alcohol, and drowned in the Gulf of Mexico. He

was revived but suffered brain damage, leaving him unable to

communicate, ambulate, eat, toilet, or care for himself in any

manner. Michael is now dependent on his father for all aspects

of hi s daily life.

2 . As a result of th is incident, M ichael suffered both

economic and non economic damages. These damages include d , at

least , physical and mental pain and suffering, past and future

medical expenses, disability, impairment in earning capacity ,

and loss of quality and enjoyment of life. MichaelÓs parents

also suffered damages.

3 . MichaelÓs fatherÓs employer maintained a self - funded

Employee Benefit Plan governed by the Employee Retirement Income

Security Act (ERISA Plan).

4 . The Florida Statutes provide that Respondent, Agency

for Health Care Administration (AHCA), is the Florida state

agency authorized to administer FloridaÓs Medicaid program.

§ 409.902 , Fla. Stat. 1/

5 . MichaelÓs past medical care related to his injury w as

provided through health benefits from the ERISA Plan

administered through CIGNA HealthCare and Horizon Blue Cross

Blue Shield of New Jersey, and the Florida Medicaid program.

The health benefits extended to Michael through h is fatherÓs

employer totaled $515,860.29. The Florida Medicaid program

provided $111,943.89 in benefits. The combined amount of

medical benefits Michael received as a result of his injury is

$627,804.18.

6 . The ERISA P lan provided the employer (through its

administrator s CIGNA and Horizon Blue Cross Blue Shield), with

subrogation and reimbursement rights which provided entitlement

to reimburse ment from any settlement of 100 percent of what the

plan had paid. ACS Recovery Services represented CIGNA and

Horizon Blue Cross Blue Shield , the administrators of the

Employee Benefit Plan, and on behalf of these clients ACS

Recovery Services asserted a $515,860.29 claim against any

settlement Michael received.

7 . The Florida Statutes provide that Medicaid shall also

be reimbursed for medical assistance that it has provided if

resources of a liable third party become available.

§ 409.910(1) , Fla. Stat.

8 . In 2006, MichaelÓs parents , D avid Mobley and B renda

Allerheiligen , brought a lawsuit in Okaloosa County Circuit

Court to recover all of M ichaelÓs damages.

9. By letter dated May 24, 2011, PetitionerÓs attorney

sent AHCA a Letter of Representation requesting the amount of

any Medicaid lien and the itemization of charges. The letter

also invited AHCA to participate in litiga tion of the claim or

in settlement negotiations.

10 . AHCA through ACS Recovery Services by letter of

June 9, 2011, asserted a Medicaid lien against any settlement in

the amount of $111,943.89.

11 . Testimony at hearing established that a conservative

Ðpure valueÑ of Michae lÓs economic damage claims in the case,

before consideration of such factors as comparative fault,

application of the alcohol statute, a defendantÓs bankruptcy,

and the novel theories of legal liability , was $15 million.

12 . A Joint Petition for Approval of Settlement was filed

in the Circuit Court in and for Okaloosa County, Florida , on or

about June 14, 2012. It stated that although the damages

Michael received far exceeded the sum of $500,000, the parties

had agreed to fully resolve the action for that amount in light

of the partiesÓ respective assessments of the strengths and

weaknesses of their cases. The Petition specifically alluded to

pending bankruptcy proceedings, summary judgment dismissal of

claims premised upon a duty to provide lifeguarding services,

PlaintiffÓs remaining theories of liability, available defenses,

specifically including the statuto ry Ðalcohol defenseÑ as

interpreted by the Florida courts, and anticipated costs of

trial and appeal.

13 . The Petition also stated : ÐPlaintiffÓs claim for past

medical expenses related to the incident total $627,804.18.

This claim consists of $515,860. 29 paid by a self - funded ERISA

plan and $111,943.89 paid by Medicaid.Ñ

14 . As an attached exhibit, the Petition incorporated a

Distribution S heet/Closing Statement which allocated the

$500,000 total recovery among the categories of attorneysÓ fees,

cost s, outside attorneysÓ fees, lien/subrogation/medical

expenses, and net proceeds to client. The Distribution Sheet

allocated $ 140,717.54 to Ðlien/subrogation/medical expenses,Ñ

subdivided into $ 120,000.00 to Blue Cross Blue Shield of

Florida/CIGNA and $20, 717.54 to Medicaid Lien. The proposed

settlement did not further describe the $331,365.65 amount

identified as Ð net proceeds to client , Ñ or allocate th at amount

among distinct claims or categories of damages , such as physical

or mental pain and suffering, future medical costs discounted to

present value, disability, impairment in earning capacity, or

loss of quality and enjoyment of life. Under the Joint Petition

for Approval of Settlement, most of the total recovery thus

remains uncategorized as to the type of damages it represents.

15 . The Joint Petition for Approval of Settlement was

submitted on behalf of the Defendants and Plaintiffs in the

lawsuit, including Michael Mobley, Petitioner here. Respondent

did not p articipate in settlement negotiations or join in the

R elease, and no one represented its interests in the

negotiations. The Agency has not otherwise executed a release

of the lien.

16 . A Release was signed by the Plaintiffs contingent upon

court approval of the Petition for Approval of Settlement.

17 . The court approved the settlement, with the exception

of the Medicaid lien, pending an administrative determination of

th e amount of the lien to be paid .

18 . This $500,000 settlement is the only settlement

received and is the subject of AHCAÓs claim lien.

19 . In regard to the $500,000 settlement:

A. MichaelÓs parents, Brenda Allerheiligen and David

Mobley waived any claim to the settlement funds in

compensation for their individual claims associated

with their sonÓs injuries;

B. The law firm of Levin, Papantonio, Mitchell,

Rafferty & Proctor, P.A., agreed to waive its fees

associated with its representation of M ichael and

his parents;

C. The law firm of Levin, Papantonio, Mitchell,

Rafferty & Proctor, P.A., agreed to reduce its

reimbursement of the $60,541.22 in costs it

advanced in the litigation of the case by 75% and

accept $15,135.31 in full payment of its advanced

costs; and

D. ACS Recovery Services on behalf of CIGNA and

Horizon Blue Cross Blue Shield agreed to reduce its

$515,860.29 ERISA reimbursement claim asserted

against the settlement and accept $120,000 in

satisfaction of its $515,860.29 claim.

20 . AHCA is seeking reimbursement of $111,943.89 from the

$500,000 settlement in satisfaction of its $111,943.89 Medicaid

lien.

21 . AHCA correctly computed the lien amount pursuant to

statutory formula. Deducting 25 per cent for attor ney Ó s fees and

$60,541.22 taxa ble costs from the $500,000 .00 recovery leaves a

sum of $ 314,458.78 , half of which is $ 157,229.39 . In this case,

application of the formula therefore result s in a statutory lien

amount of $111.943.89, the amount actually paid. § 409.910(17) ,

Fla. Stat .

22 . The settlement a gree ment allocat ed $120,000.00 to be

paid to the ERISA plan in partial reimbursement of the

$515,860.29 it had paid for medical expenses. This amount must

be added to the amount of $20,717.54 allocated f or other medical

expenses paid by Medicaid , to reflect a total amount of

$140,717.54 allocated for past medical expenses in the

settlement .

23 . The $500,000 tot al recovery repr esents approximately

3.3 per cent of the $15 million total economic damages . The

$20,717.54 allocated to ÐMedicaid LienÑ in the distribution

sheet of the settlement represents approximately 3.3 percent of

the $627,804.18 of total past medic al expenses. The sum of

$3,694.15 represents approximately 3.3 percent of the

$111,943.89 in medical costs paid by Medicaid.

24 . The Petitioner ha s deposited the full Medicaid lien

amount in an interest - bearing account for the benefit of AHCA

pending an administrative determination of AHCAÓS rights. The

parties have stipulated that this constitutes Ðfinal agency

actionÑ for purposes of chapter 120, pursuant to s ecti on

409.910(17) .

25 . Petitioner filed h is Petition on December 13, 2013,

within 21 days after the Medicaid lien amount was deposited in

an interest - bearing account for the benefit of AHCA .

26 . While the evidence presented as to the settlement

agreement was not sufficient to show the full amount allocated

to medical expenses, the evidence does show that the total

recovery includes at least $ 140 ,717.54 allocated as

reimbursement for past medical expenses, which was to be divided

unevenly between the ERISA plan and Medicaid.

27 . Petitioner failed to prove by clear and convincing

evidence that the statutory lien amount of $111,943.89 exceeds

the amount actually recovered in the settlement for medical

expenses .

C ONCLUSIONS OF LAW

28 . The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties in this

case pursuant to sections 120.569 , 120.57(1), and 409.910(17) ,

Florida Statutes.

2 9. T he parties stipulated that PetitionerÓs deposit of

the asserted Medicaid lien amount into an interest - bearing

account co nstituted Ðfinal agency action Ñ for purposes of

chapter 120, pursuant to s ection 409.910(17). Petitioner filed

his Petition on December 13, 2013, within 21 days after th at

deposit. 2 /

30 . As a condition for receipt of federal Medicaid funds,

s tates are required to seek reimbursement for medical expenses

incurred on behalf of beneficiaries who later recover from

third - party tortfeasors. See Ark. Dep't of H ea lth & Hum. Servs.

v. Ahlborn , 547 U.S. 268 (2006).

31 . Consistent with this federal requirement, the Florida

Legislature has enacted section 409.910. This statute

authorizes and requires the State to be reimbursed for Medicaid

funds paid for a plaintiff's medical care when that plaintiff

later receives a personal injury judgment or settlement from a

third party. Smith v. Ag . for Health Care Admin . , 24 So. 3d

590, 590 (Fla. 5th DCA 2009). The statute create s a n automatic

lien on any such judgment or settlement for the medical

assistance provided by Medicaid . § 409.910(6)(c) , Fla. Stat .

32 . A formula is set forth in section 409.910(11)(f) to

determine the amount the State is to be reimbursed . Th e s tatute

sets th at amount at half the amount of the total recovery , after

deducting taxable costs and 25 percent attorney Ós fees , not to

exceed the amount actually pai d by Medicaid on the beneficiaryÓs

behalf. Ag. f or Health Care Admin. v. Riley , 119 So. 3d 514,

515 n . 3 (Fla. 2d DCA 2013). Here, application of th e statutory

formula yields $111,943.89 , the amount actually paid .

Petitioner notes that in Wos v. E.M.A. , 133 S. Ct. 1391 (2013),

the Court invalidated a similar North Carolina statute as being

in conflict with federal law . That statute created an

irrebuttable presumption that would permit the State to assert

its lien against a portion of a Medicaid beneficiaryÓs tort

judgment or settlement not allocated as payment for medical

care. 3 /

33 . Sect ion 409.910 (17) (b) provide s that a Medicaid

recipient ha s the right to rebut this presumptively valid

allocation created under Florida law in an administrative

hearing by establishing , through clear and convincing evidence ,

that either: 1) a lesser portion of the total recovery should

be allocated as medical expense reimbursement th an has been

calculated by the statutory formula ; or 2) Medicaid actually

provided a l esser amount of medical assistance than has been

asserted by AHCA .

34. Sec t ion 409.910(17) (b) thus makes clear that the

formula set forth in subsection (11) constitutes a default

allocat ion of the amount of a settlement that is attributable to

medical costs, consistent with Ahlborn , and sets forth an

administrative procedure for adversarial testing of that

allocation, consistent with Wos . Florida courts had s imilarly

interpreted FloridaÓs statutory scheme in light of federal law

even prior to the statuteÓs amendment in 2013. See D avis v.

Roberts , 130 So. 3d 264, 268 (Fla. 5th DCA 2013); Ag . for Health

Care Admin. v. Riley , 119 So. 3d 514, 516 (Fla. 2d DCA 2013) ;

Roberts v. Albertson's Inc . , 119 So. 3d 457, 465 - 466 (Fla. 4th

DCA 2012), reh'g and reh'g en banc denied sub nom . Giorgione v.

AlbertsonÓs, Inc. , 2013 Fla. App. LEXIS 10067 (Fla. 4th DCA

June 26, 2013).

35 . Petitioner did not dispute the amount of medical

assistance provided by Medicaid , but attempt ed to show th at a

lesser portion of the total recovery should be allocated as

medical expense reimbursement th an that calculated by the

statutory formula, principally in the form of evidence as to the

terms of the settlement .

36 . Petitioner argues that the Medicaid lien should be

reduced to the same percentage of the amount paid by Medicaid as

the total recovery bears to the amount of economic damages

incurred . Thus, Petitioner maintains that because the $500,000

total recovery represents just 3.3 percent of the $15,000,000

total economic damages, the Medicaid lien should be limited to

that same 3.3 per cent of the $111,943.89 paid by Medicaid, that

is, to the sum of $3,694.15. Putting aside for the m oment

discussion of the use of pro rata calculation s general ly ,

Petitioner Ós important argument that the appropriate

ÐmultiplicandÑ is the amount of medical expense paid by

Medicaid , as opposed to the total amount of medical expense

paid, is addressed first.

37 . PetitionerÓs contention is not supported by the terms

of the Social Security Act . 4 / Title 42 U.S.C. § 1396a(a)(25)(A)

provides that States will ascertain legal liability of third

parties to pay for Ðcare and services available under the plan.Ñ

(Emphasis added.) The statute thus limits state assignment to a

category of liability, that is, medical assistance as defined by

Medicaid, but does not limit it only to the care and services

actually provided by the plan.

38 . A second pertinent provision, § 1396a(a)(25)(H) , is

ambiguous. It requires a State to have Ðin effect laws under

which, to the extent that payment has been made under the State

plan for medical assistance for health care items or services

furnished to an individu al, the State is considered to have

acquired the rights of such individual to payment by any other

party for such health care items or services." 42 U.S.C. §

1396a(a)(25)(H).

3 9. While an argument can certainly be made that the final

ÐsuchÑ in th e sentence quoted above refers back to health care

items or services for which payment has been made under

Medicaid, another reasonable construction is that the sentenceÓs

earlier reference to payment made by Medicaid is instead

included only for the purpo se of establishing a cap or maximum

amount that may be recovered (Ðto the extent that payment has

been made under the State plan Ñ) , and so the word ÐsuchÑ refers

back only to health care items or services furnished to the

individual.

40 . A third relevant provision specifically require s that,

as a condition for eligibility for Medicaid, a recipient must

assign to the State Ð any rights such person has to payment for

medical care from any third party . Ñ (Emphasis added.) 42 U.S.C.

§§ 1396k(a)(1)(A) .

41 . Yet a nother provision even expressly allow s a state to

collect more than the amount paid by Medicaid, stating that Ðthe

remainder of such amount collected shall be paid to such

individual.Ñ 42 U.S.C. § 1396k(b). If initial assignment of

rights to the State was limited to recovery amounts allocated to

medical expense paid by Medicaid, there could never be such a

Ðremainder.Ñ In fact, Arkansas had argued in Ahlborn that this

ÐremainderÑ provision was evidence tha t the lien could extend to

recoveries for damages other than medical expenses. The Supreme

Court rejected that interpretation, noting: ÐThat view in turn

seems to rest on an assumption either that Medicaid will have

paid all the recipientÓs medical expen ses or that MedicaidÓs

expenses will always exceed the portion of any third - party

recovery earmarked for medical expenses. Neither assumption

holds up.Ñ (Emphasis added.) Ark. Dep't of Health & Hum.

Servs. v. Ahlborn , 547 U.S. 268, 282, n. 11 (2006). In so

explaining the existence of the ÐremainderÑ provision, t he Court

concluded that the assignment authorized by federal law could

extend to medical expenses not paid by Medicaid .

42 . However, there is no need to become mired too deeply

in parsing th ese provisions of the federal Medicaid statute . 5 /

As will be discussed, Petitioner has not shown that any federal

or Florida court has actually adopted the construction he

advocates. 6 /

43 . In arguing that federal law preempts the Florida

Statute, Petit ioner cites to two cases . First, Price v.

Wolford , 608 F.3d 698, 706 (10th Cir. 2010), state s that

Ð Oklahoma amended its Medicaid - recovery statute in 2007 after

the United States Supreme Court held that a state's recovery of

Medicaid payments out of a tort settlement is limited to the

portion of the settlement that represents medical costs paid by

Medica id . Ñ (Emphasis added.) Wolfor dÓs citation to Ahlborn for

this proposition is not supported . The Supreme Court in Ahlborn

never state d that a recipientÓs assignment to a State was

limited to those portions of settlements representing recovery

of medical expenses paid for by Medicaid. Rather , Ahlborn in

numerous places does limit such assignments to settlement

amounts for medical expenses, and frequently contrasts these

with settlement amounts allocated for damages distinct from

medical expenses . Ahlborn , 547 U.S. 268 , at 272, 280, 281, 282,

284, 285, 287 , 290, 291.

44 . Further, i t is clear from the facts set forth in the

Wolford opinion t hat the trial courtÓs award to the Oklahoma

Health Care Authority (OHCA) comprised not only a percentage of

the total amount of medical assistance that had been provided by

Medicaid, but also th at same percentage of medical expenses that

had not been paid by Medicaid, but had been paid by the

plaintiff Ós father . Yet the appeal to the 10th Circuit was not

to contest th e inclusion of these other medical expenses : it

was instead filed by OHCA to contest the propriety of using a

pro rata analysis . The holding in Wolford was , in fact , that

the district court below had recognized the correct legal

standard to apply, but had erred because there was no evidence

at trial either as to the total amount of damages or the reasons

supporting p roportional reduction. Wolford 608 F.3d at 700.

45 . The second case cited by Petitioner , E.M.A. v.

Cansler , 674 F. 3d 290 (4th Cir. 2012) , similarly state s at page

300 that federal law only permit s assignment of settlement

proceeds allocated to Ð past medical bills paid by Medicaid.Ñ

Again, however, all other discussion in the case refer s simply

to medical expenses. Cansler , 674 F.3d 290, at 296, 298, 299,

307 , 309, 310 , and 312. There were no facts before the court in

Cansler to suggest that medical expenses had been paid by any

entity other than Medicaid . W hether or not a lien could be

asserted against only those settlement amounts allocated for

expenses Ðpaid by MedicaidÑ was not an issue before the court.

As noted earlier, t he Supreme CourtÓs affirmance of the case in

Wos v. E.M.A. invalidated the North Carolina statute becau se it

created an irrebuttable presumption allowing a l ien against a

portion of a settlement not allocated as payment for medical

care.

46 . Given the facts and legal issues actually addressed in

these two cases, it is clear that it was not the holding of

either that under the Social Security Act a State is permitted

to assert its Medicaid lien against only settlement amounts

allocated to that portion of medical expenses paid by Medicaid.

In the absence of judicial determination t hat federal law trumps

a contrary Florida statute, it is the language of the Florida

Statutes, not federal law, that must govern. 7 /

47 . S ection 409 .910 (11)(f)4. p rovides that the A gency is

entitled to all medical coverage benefits , defined there as Ðany

benefits under health insurance, a health maintenance

organization, a preferred provider arrangement, or a prepa id

health clinic, and the portion of benefits designated for

medical payments under coverage for workersÓ compensation,

personal injury protecti on, and casualty.Ñ

48 . Section 409 .910(12) goes on to provide in part:

Only the following benefits are not subject

to the rights of the agency: benefits not

related in any way to a covered injury or

illness; proceeds of life insurance coverage

on the recipient; proceeds of insurance

coverage, such as coverage for property

damage, which by its terms and provisions

cannot be construed to cover personal

injury, death, or a covered injury or

illness; proceeds of disability coverage for

lost income; and rec overy in excess of the

amount of medical benefits provided by

Medicaid after repayment in full to the

agency.

49 . Section 409.910 is therefore quite clear in its intent

that Medicaid is to be the Ðpayer of last resort.Ñ 8 / Logically,

th e statute expressl y maintains this same priority when funds

are recovered from a third - party tortfeasor.

50 . S ection 409.910(17 ) (b) , as amended after Wos , provides

a recipient of Medicaid benefits an opportunity to demonstrate

that a lesser portion of the total recovery should be allocated

to reimbursement for past and future 9 / medical expenses than th e

amount calculated pursuant to the statutory formula. Dillard v.

Ag. for Health Care Admin. , 127 So. 3d 820, 821 (Fla. 2d D CA

2013) . Nothing in this section limits the referenced medical

expenses to only those paid by Medicaid.

51 . Section 409.910(1) provides :

It is the intent of the Legislature that

Medicaid be the payor of last resort for

medically necessary goods and serv ices

furnished to Medicaid recipients . All other

sources of payment for medical care are

primary to medical assistance provided by

Medicaid. If benefits of a liable third

party are discovered or become available

after medical assistance has been provided

by Medicaid, it is the intent of the

Legislature that Medicaid be repaid in full

and prior to any other person, program, or

entity . Medicaid is to be repaid in full

from, and to the extent of, any third - party

benefits, regardless of whether a recipient

i s made whole or other creditors paid .

Principles of common law and equity as to

assignment, lien, and subrogation are

abrogated to the extent necessary to ensure

full recovery by Medicaid from third - party

resources. It is intended that if the

resources o f a liable third party become

available at any time, the public treasury

should not bear the burden of medical

assistance to the extent of such resources .

(Emphasis added.)

52 . Read together, these statutes leave little doubt that

under Florida law, all portions of a recovery pertaining to

medical expenses, whether provided by Medicare or not, are

subject to the Medicare lien, and that with respect to such

settlement amounts, Medicaid is to be reimbursed before any

other person, program, or entity.

5 3. PetitionerÓs contention that the appropriate

ÐmultiplicandÑ is the amount of medical expense paid by Medicaid

is therefore rejected. If a pro rata calculation is to be

applied, it should be applied to the full amount of $627,804.18 ,

the total amount of medical expense s paid .

54 . Turning next to the more general question of whether a

pro rata calculation should be utilized in this case at all ,

Petitioner again cites to Ahlborn . However, t he United States

Supreme Court did not hold there that federal Medicaid law in

any way requires S tates to a pply such a calculation , but only

affirmed that it could be used in some circumstances. Use of

the pro rata calculation in that case was predicated upon the

parties Ó stipulat ions as to the reasonable value of the total

claim, the amount of medical damages in the total claim, the

amount of the total recovery, and the amount of the recovery

that represented compensation for medical payments made .

Ahlborn , 547 U.S. 268, at 27 4 , 28 1, n. 10 (2006 ).

55 . The Agency correctly argue s that the portion of the

total recovery allocated to medical expense by the settlement is

not dispositive of its interests , as it was not a party to the

settlement and did not approve it. § § 409. 910(6)(c)7. , (13)

Fla. Stat .

56 . However, AHCAÓs lack of participation in a settlement

does not necessarily ensure that the statutory formulaÓs default

calculation of the medical expense portion of the total recovery

will prevail. FloridaÓs new statute authorizes an

administrative determination that a lesser portion of a total

recovery has been allocated as reimbursement for medical

expenses. A settlement agreement does not dictate, but may

inform, that administrative determination. A settlementÓs

allocation to m edical expenses may be adopted, even when AHCA

did not participate in the settlement, provided it is supported

by clear and convincing evidence. 10 / § 409.910(17 ) (b) , Fla .

Stat.

57 . While a pplication of a pro rata calculation is

undoubtedly justified in some Medicaid lien cases, it is not

appropriate here . This settlement did not actually use a 3.3

percent pro rata calculation to determin e the amount allocated

for past medical expenses.

58 . In this case, t here is clear and convincing evidence

that the parties to the settlement themselves actually allocated

$140,717.54 as reimbursement for past medical expenses. In

addition to the Ð pro rata Ñ amount of $20,717.54 ( calculated as

described earlier ) that was earmarked for Medicaid in the Joint

Petition for Approval of Settlement, the parties also allocated

an additional $120,000 for past medical expenses paid by the

ERISA plan. 1 1 /

59. Th is $120,000 of the settlement agreement was not

"meant to compensate the recipien t for damages distinct from

medical costs Ï like pain and suffering, lost wages, and loss of

future earnings . " It clearly is not subject to the anti - lien

provisions of federal law. Ahlborn 547 U.S. at 284 . Florida

law indisputably provides that it is subject to Medicaid lien.

60 . Petitioner failed to prove by clear and convincing

evidence that l ess than $111,943.89 of the total recovery should

be allocated as reimbursement for medical expenses.

CONCLUSION S OF LAW

Upon consideration of the above F indings of F act and

C onclusions of L aw, it is hereby ORDERED that t he Agency for

Health Care Administration is entitled to $111,943.89 in

sat isfaction of its Medicaid lien.

DONE AND ORDERED this 21st day of May , 2014 , in

Tallahassee, Leon County, Florida.

S

F. SCOTT BOYD

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (85 0) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 21st day of May , 2014 .

ENDNOT ES

1/ All c itation s are to the 2013 Florida Statutes except as

otherwise indicated .

2 / In light of the stipulation, t he curious language of section

409.910(17)(b) is not considered here.

3 / The federal Medicaid statutes which formed the basis of the

CourtÓs opinion have evidently been amended effective October 1,

2014, to allow State Medicaid liens to extend to any payments by

a third party that has a legal liability to pay for care and

services available under the plan. See P.L. 113 - 67, Section

202(b) .

4 / Petitioner notes that c onsideration of fede ral Medicaid law

is required because t he United States Supreme Court has

determined that a State statute allowing a Medicaid lien to be

asserted against any portion of a settlement allocated to other

than medical care is contrary to, and preempted by, t he Ðanti -

lienÑ provision of federal law found at 42 U.S.C. 1396p(a)(1) .

Considered in isolation, th at provision appears to prohibit

l ien s of any kind : ÐNo lien may be imposed against the property

of an individual on account of medical assistance rendered to

him under a State plan.Ñ However, the Court interpreted this

provision in conjunction with language in section

1396a(a)(25)(H) requiring a State to acquire the rights of

Medicaid recipients to Ðpayment by any other party for such

health care items or servicesÑ and in conjunction with language

in section 1396k(a)(1)(A) requiring Medicaid recipients to

assign to the State their rights to Ðpayment for me dical care

from any third party.Ñ The conclusion was that Ð[T] he exception

carved out by §§ 1396a(a)(25) and 1396k(a) is limited to

payments for medical care. Beyond that, the anti - lien provision

applies. Ñ Ark. Dep't of Health & Hum. Servs. v. Ahlborn , 547

U.S. 268, 284 - 285 (U.S. 2006) . The Florida courts have

recognized Ahlborn , and Petitioner argues that this law is

controlling, but as discussed below, he is actually arguing for

an extension of th at opinion to an issue not addressed there.

5 / See Schweiker v. Gray Panthers , 453 U.S. 34, 43 n.14 (1981)

(quoting Friedman v. Berger , 409 F. Supp. 1225 , 1226 ( S . D . N . Y .

1976) in its colorful description of the Medicaid statute as "an

aggravated assault on the English language, resistant to

attempts to und erstand it").

6 / In fact, a t least one Florida appellate court has evidently

concluded otherwise in two cases. In Smith v. Agency for Health

Care Admin istration , 24 So. 3d 590, 591 (Fla. 5th DCA 2009), the

court stated, Ð Moreover, the formula used by the Ahlborn parties

is problematic in that it assumes the Medicaid lien amount to be

the only medical expense included by the plaintiff as part of

his or her overall damage claim, which is not a reasonable

assumption. Stated another way, without knowing how much of a

plaintiff's total damage claim is comprised of medical expenses,

there is no way to calculate the medical expense portion of a

settlement by simply comparing the damage claim to the ultimate

settlement amount. Ñ T hen, i n Davis v. R oberts , 130 So. 3d 264

(Fla. 5th DCA 2013), a more recent case arising under former

section 409.910 , the court , in recognition of federal

limitations, affirmed that trial courts ha d discretion to lower

the lien calculated by the statutory formula. The court there

added together the medical benefits provided by Medicaid with

other medical benefits provided by the Department of Health to

determine the entire amount of past medical exp enses before

remanding the case for reconsideration of possible proportional

reduction.

7 / In light of the Florida StatuteÓs provisions that a Medicaid

lien ta ke s precedence over all third - party claims, PetitionerÓs

argument that the Medicaid lien can only be asserted against

settlement funds allocated to th at portion of medical expenses

paid by Medicaid could prevail only if the Florida Statute is

unconstitutional because federal law limits liens to expenses

paid by Medicaid . As noted above, t hat construction of federal

Medicaid law is not persuasive, and even if it were, it is well

established that only a court could make such a finding. Gulf

Pines Mem. Park, Inc. v. Oaklawn Mem. Park, Inc. , 361 So. 2d

695, 699 (Fla. 1978).

8 / This priority is , in fact , dictated to a large extent by

federal law. Ahlborn , 5 47 U.S. 268 , at 282, ( Ðwhat £ 1396k(b)

requires is that the State be paid first out of any damages

representing payments for medical careÑ ); United States ex rel.

Digital Healthcare, Inc. v. Affiliated Computer Serv ices , 778 F.

Supp. 2d 37, 41 (D.D.C. 2011) ( " i f a Medicaid beneficiary also

has another source of payment for health services, that source

is to pay instead of Medicaid" ).

9 / Petitioner also argues that both federal and Florida cas es

have determined that federal law limits State assignments to

those portions of recoveries allocated to past medical expenses

as opposed to future medical expenses. Given the finding that

the settlement agreement here allocated an amount for past

medica l expenses greater than the amount paid by Medicaid, it is

unnecessary to consider that issue.

10 / The Supreme Court acknowledged a risk that parties to a tort

suit might allocate away the StateÓs interest. Ark. Dep't of

Health & Hum. Servs. v. Ahlborn , 547 U.S. 268, 272 (2006).

1 1 / Inclusion of the settlement amount allocated to the ERISA

plan for past medical expenses in order to calculate the amount

of the settlement subject to the Medicaid lien does not call

into question the ERISA settlement it self. Petitioner

understandably would prefer to consider that the $140,717.54

allocated to medical expenses by the settlement represents the

entire amount available to Medicaid and the ERISA plan. If so,

the n the provisions of the Florida Statutes assigning priority

to the Medicaid lien and the conflict preemption provisions of

the federal ERISA law might need to be considered together . S ee

Caremark, Inc. v. Goetz , 480 F.3d 779, 790 (6th Cir. 2007) ( ERISA

provides that its preemption provision does not apply to

recoupment of Medicaid payments by the states) (superseded in

part by statute on other grounds as stated in United States ex

rel Ramadoss v. Caremark, Inc. , 586 F. Supp. 2d 668, 674 (W.D.

Tex. 2008). On the other hand, accepting PetitionerÓs

representation at hearing that the ERISA planÓs subrogation

rights extend to the entire settlement, the Medicaid exclusion

at 29 U.S.C. § 1144(b)(8)(B) m ight not even be implicated . See

Schwade v. Total Plastics, Inc. , 837 F. Supp. 2d 1255, 1267

(M.D. Fla . 2011), affÓd , Fla. Health Sci . Ctr. v. Total

Plastics, Inc. , 496 F. App'x 6, 12 (11th Cir. 2012) . In any

event, such issues lie beyond the jurisdiction and expertise of

this administrative tribunal.

COPIES FURNISHED :

John Cofield

Affiliated Computer Services, Inc.

2308 Killearn Center Boulevard

Tallahassee, Florida 32309

Floyd B. Faglie, Esquire

Staunton and Faglie, P.L.

189 East Walnut Street

Monticello, Florida 32344

Adam James Stallard, Esquire

Xerox Recovery Services Group

2316 Killea rn Center Boulevard

Tallahassee, Florida 32309

Frank Dichio

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 19

Tallahassee, Florida 32308

Stuart F. Williams, General Counsel

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Elizabeth Dudek, Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail St op 1

Tallahassee, Florida 32308

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by filing

one copy of a Notice of Appeal with the agency clerk of the

Division of Administrative Hearings and a second copy,

accompanied by filing fees prescribed by law, with the District

Court of App eal, First District, or with the District Court of

Appeal in the appellate district where the party resides. The

Notice of Appeal must be filed within 30 days of rendition of

the order to be reviewed.