15-003764MTR Gerardo Quesada vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Thursday, January 28, 2016.

Summary: AHCA's recovery of medical assistance expenditures limited to full value ratio (settlement divided by full value of case) times already-expended medical assistance expenditures. Result reduced by prorata share of actual atty's fees and taxable costs.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GERARDO QUESADA,

Petitioner,

vs. Case No. 15 - 3764MTR

AGENCY FOR HEALTH CARE

ADMINISTRATION ,

Respondent .

_______________________________/

FINAL ORDER

On September 30 , 2015 , Robert E. Meale, Administrative Law

Judge of the Division of Administrative Hearings (DOAH),

conducted the final hearing by videoconference in Tallahassee and

Miami , Florida.

APPEARANCES

Petitioner: Douglas J. McCarron, Esquire

The Haggard Law Firm, P.A.

330 Alhambra Circle , First Floor

Coral Gables, Florida 33134

Respondent: David N. Perry , Esquire

Alexander R. Boler, Esquire

Xerox Recovery Services

2073 Summit Lake Drive, Suite 300

Tallahassee, Florida 32317

STATEMENT OF THE ISSUE

The issue is whether, pursuant to section 409.91 0(17)(b),

Florida Statutes (2015 ), Respondent's recovery of medical

assistance expenditures from Petitioner's settlement proceeds of

$305,000 must be reduced from the amount calculated by the

statutory formula contained in section 409.910 (11)(f) (Statutory

Formula).

PRE LIMINARY STATEMENT

On June 30, 2015 , Petitioner filed a Petition to Determine

Amount Payable to Agency for Health Care Administration in

Satisfaction of Medicaid Lien (Petition). The Petition alleges

that Respondent has asserted a Medicaid l ien for medical

assistance expenditures in the amount of $ 144,651 1 and is seeking ,

under the Statutory Formula, to recover $114,375 from settlement

proceeds of $305 ,000 .

The Petition alleges that Petition er was the victim of a

shooting in his home. The two perpetrators were allegedly

sentenced to prison. Petitioner allegedly pursued a personal

injury claim against the owner of his apartment building. The

Petition alleges that liability issues prompted P etitioner , in

settlement, to take a substantial discount on a case worth

conservatively $1.5 million , including past medical expenses of

$144,651 .

The Petition requests the Administrative Law Judge to issue

a final order limiting Respondent's recovery from these

settlement proceeds to no more than $29,412. This number is

derived by determining the ratio of the settlement proceeds

($305,000) to the full value of the case ($1.5 million) and

multiplying this ratio by $144,651, which represents the medical

ass istance that Respondent has expend ed, as well as the portion

of the full value of the case allocable to past medical expenses.

On July 24, 2015, the parties f iled a Joint Pre - Hearing

Stipula tion. At t he hearing, Petitioner called two witness es and

offered into evidence four ex hibits: Petitioner Exhibits 1 - 4 .

Respondent called no witnes ses and offered into evidence no

exhibits. All exhibits were admitted.

The court reporter filed the transcript on October 28 ,

2015. The parties filed proposed final orders on December 7 ,

2015.

FINDINGS OF FACT

1. On the evening of May 22, 2012, Petitioner was angrily

confronted in his South Florida apartment by his former

girlfriend and another man. Petitioner did not call the police .

T he couple returned to his apartment later in the evening, and

one of them shot Petitioner in the chest .

2. Petitioner was transported to the Ryder Trauma Center at

Jackson Memorial Hospital where he underwent an abdominal

washout, colonic anastamosis, and an abdominal wall clos ure. An

exploratory laparotomy revealed lacerations of the spleen, liver,

stomach, intestine, diaphragm, and pancreas. A surgeon removed

the spleen and a portion of the colon, repaire d the diaphragm ,

liver, stomach and intestine, and inserted a tube in the thorax

to allow fluids to drain.

3. After the se surgical procedures had been completed,

Petitioner was transferred to the intensive care unit, where he

remained intubated on a ventilator for several weeks . During

this time, Petitioner required a tr acheostomy after suffering

respiratory failure secondary to a MRSA pneumonia.

4 . Fifty days after admission, Petitioner was discharged

from the h ospital. Following discharge, Petitioner has

experienced fatigue, loss of appetite, weight loss, and fever,

and he is in constant pain from his original injuries, an

abscess , and a large post - surgical ventral hernia that emerged

one week after discharge and now protrudes visibly from his

chest . The pain from the hernia intensifies after eating because

the herni a interferes with digesti on. The hernia also requires

Petitioner to apply pressure to his chest area when he moves his

bowels. Three years post - incident, the quality of Petitioner 's

life is undermined by anxiety, hyper - vigilance, nightmares,

irritability, fear, worry, nervousness, inattentiveness,

flashbacks, and bouts of crying with little or no justification.

5. P etitioner has been unable to return to fulltime work.

P rior to the incident , five days p er week, Petitioner drove a

truck, purchasing fruit from farms and wholesalers, loading the

fruit in his truck, and selling the fruit at retail. Now,

Petitioner is unable to spend as much time behind the wheel and

is unable lift as much weight. A ble to w ork only two or three

days per week, Petitioner has suffered loss of income.

6. Petitioner desires the hernia repair, but is unable to

pay for cost of the surgery, which is unlikely to exceed $25,000.

Respondent expended medical assistance for all of Pet itioner's

medical expenses while he was hospitalized, but declined to

expend medical assistance to repair the hernia and Petitioner is

no longer covered by Medicaid. Facing the prospect of

nonpayment, p hysicians have declined to repair the hernia , in its

current condition, but have advised Respondent to return to the

hospital if the her nia becomes strangulated. In t he meantime,

pursuant to the recommendation of a physician, Petitioner wears a

hernia belt , which provides only limited relief .

7 . In 2013, Petitioner commenced a legal action for

economic and noneconomic damages on the basis of negligent

security against the owner of his apartment complex. Due to

liability problems with the case, o n August 22, 2014, Petitioner

accepted $305,000 in s ettlement of his claim . The settlement

agreement does not allocate the settlement pro ceeds among items

of damages. However, a t the time of the settlement, Respondent's

medical assistance expenditures totaled $14 4,651 .

8 . At the time of the settlement, Respondent was liable for

attorney's fees of 40% of the settlement ($122,000) and taxable

costs of about $8088. As set forth in the Conclusions of Law,

u nder the Statutory Formula, Respondent's recovery is calculated

by redu cing the settlement by the statutory allowance of 25% for

attorney's fees. The net settlement of $228,750 is then reduced

by the taxable costs of $8088, for a final figure of $220,662.

Respondent's recovery would be half of this amount, or $110,331 .

9 . Without regard to liability issues, t he full value of

Petitioner's damages wa s $2 million. Past medical expenses

totaled the medical assistance expenditures, or $144,651. The

remaining $1.856 million of full value was for other economic

damages, such as lost wages and the loss of future earning

capacity, and noneconomic damages in the form of pain and

suffering.

1 0 . The sole potential item of future medical expenses at

the time of the settlement wa s a procedure to repair the

post - surgical hernia. A s noted above, the cost of the procedure

is relatively modest, and, unless the hernia strangulates, it is

possible that the procedure will never be performed. For these

reasons, as well, perhaps, as the large difference between the

settlement amount and the full value of the claim, the parties to

the settlement do not appear to have considered future medical

expenses in arriving at the settlement amount. Further, o n the

basis of the present record, Respondent will not expend medical

assistance for any futur e hernia - repair procedure.

1 1 . The ratio of the settlement to the full value of the

case is $305,000 to $2 million, or 0.1525 (Full Value Ratio) .

Pursuant to the authority discussed in the Conclusions of Law,

Respondent's recovery may not exceed the prod uct of multiplying

the Full Value Ratio by $144,651, or $22,059, and is also subject

to its prorata share of actual attorney's fees and taxable costs.

Respondent's prorata share of the settlement is 7.2%

($22,059/$305,000), so Respondent must bear 7.2% of the actual

attorney's fees of $122,000 and taxable costs of $8088, which

reduces Respondent's recovery by about $9366, leaving a net

recovery of $12,693.

CONCLUSIONS OF LAW

12 . DOAH has jurisdiction over a Medicaid recipient's

request to reduce Respondent's recovery amount for medical

assistance expenditures from settlement or judgment proceeds from

the amount determined under the Statutory Formula . §§ 120.569,

120.57(1), and 40 9.910(17)(b), Fla. Stat. (2013); Suarez v. Port

Charlotte HMA, LL C , 171 So. 3d 740 ( Fla. 2d DCA 2015) (per

curiam) . 2 In general, circuit courts have jurisdiction to approve

a settlement and distribute settlement or judgment proceeds among

various claimants. See, e.g. , Auerbach v. McKinney , 549 So. 2d

1022 (Fla. 3d DCA 1989 ). The administrative proceeding under

section 409.910(17)(b) (17b proceeding) is subordinate to this

jurisdiction of the circuit courts.

13 . As set forth in section 40 9.910(11)(f), t he Statutory

Formula is calculated as follows :

Notwithstanding any provision in this

section to the contrary, 3 in the event of an

action in tort against a third party in

which the recipient or his or her legal

representative is a party whic h results in a

judgment, award, or settlement from a third

party, the amount recovered shall be

distributed as follows:

1. After attorneyÓs fees and taxable costs

as defined by the Florida Rules of Civil

Procedure, one - half of the remaining

recovery shall be paid to the agency up to

the total amount of medical assistance

provided by Medicaid.

2. The remaining amount of the recovery

shall be paid to the recipient.

3. For purposes of calculating the agencyÓs

recovery of medical assistance benefits

paid, the fee for services of an attorney

retained by the recipient or his or her

legal representative shall be calculated at

25 percent of the judgment, award, or

settlement.

14 . The 17b proceeding and the Statutory Formula are part s

of the Medicaid Third - Party Liability Act , which is secti o n

409.910 . § 409.910(2). Numerous provisions 4 of t he Medicaid

Third - Party Liability Act reveal the legislature's intent to

maximize Respondent's recoveries and reimbursements of medical

assistance expenditures to reduce the net cost of Medicaid to the

state of Florida. See generally Ag. for Health Care Admin. v.

Associated Indus. of Fl a . , In c. , 678 So. 2d 1239 (Fla. 1996),

cert. denied , 520 U.S. 1115 (1997) (courts must defer to these

legislative efforts to control Medicaid costs ) .

15 . However, federal law limits the amount of a state

Medicaid agency's reimbursement. I n Arkansas Department of Health

& Human Services v. Ahlborn , 547 U.S. 268 (2006) , a 19 - year - old in

a car accident suffered severe and permanent injuries, including

b rain damage . The recipient filed a personal injury action,

claiming damages for past and future medical expenses, lost

earnings, the loss of earning capacity, and pain and suffering.

The parties settled for $550,000 and did not allocate the

settlement among the var ious items of damages. The state Medicaid

agency asserted a lien against the settlement in the amount of its

medical assistance expenditures of $216,000. An Arkansas statute

provided that the state Medicaid agency was entitled to a portion

of any settlem ent or judgment proceeds equal to its medical

assistance expenditures.

16 . The recipient filed an action in federal court for a

declaration that the agency's statutory right to her settlement

proceeds violated the federal Anti - Lien Statute , which is set

forth below . In the Court's phrasing, the issue was whether the

agency's recovery amount could extend to "proceeds meant to

compensate the recipient for damages distinct f rom medical

costs -- like pain and suffering, lost wages, and loss of future

earnings ." 547 U.S. at 272. T he Court framed the issue as :

"whether [the state Medicaid agency] can lay claim to more than

the portion of Ahlborn's settlement that represents medical

expenses." Id. at 281.

17 . The parties stipulated that the full value of the

recipient's case was about $3 million, the settlement

approximated one - sixth of the damages, and, if the recipient's

interpretation of the law were correct, the state Medicaid agency

"would be entitled to only the portion of the settlement

($35,581.47) that constituted reimbursement for me dical payments

made" -- i.e., the same one - sixth of the agency's medical

assistance expenditures. 5 Id. at 274. This stipulation , which

multiplies the Full Value Ratio by already - expended medical

assistance, limits the s cope of the Ahlborn holding , which

neither endorses the formula nor attempts to identify another

acceptable means of identifying the portion of proceeds that may

be used to calculate an agency's recovery amount .

18 . The district c ourt ruled that the state Medicaid agency

was entitled to the full $215 ,000 because the Arkansas recovery

and reimbursement statute did not conflict with federal law. The

Eighth Circuit reversed, ruling that the state Medicaid agency

was entitled only to the portion of the settle ment proceeds

allocable t o "medical care," and t he Supreme Court affirmed.

19 . T he Ahlborn decision turns on several federal statutory

provisions that address medical assistance expenditures , not

medical expenses . As required by 42 U.S.C. § 1396a(a)(25) (B), a

state plan must contain a provision that:

. . . in any case where such a legal

liability 6 is found to exist after medical

assistance has been made available on behalf

of the individual . . ., the State . . .

will seek reimbursement for such assistan ce

to the extent of such legal liability[.]

Also, 42 U.S.C. § 1396a(a)(25)(H) requires that a state plan

contain a provision that:

to the extent that payment has been made

. . . for medical assistance where a third

party has legal liability to make paymen t

for such assistance, the State has in 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 individual, 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[.]

Lastly, 42 U.S.C. section 1396k(a)(1)(A) is for "t he purpose of

assisting in the collection of medical support payments and other

payments for medical care owed to recipients of medical

assistance " and requires that a state plan direct a recipient to

assign to the state Medicaid agency "any rights to support . . .

and to payments for me dical care from any third party. " Section

1396k(b) adds that any amounts collected by the agency pursuant to

the assignment "shall be retained by the [agency] as is necessary

to reimburse it for medical assistance payments made on behalf of"

the recipient.

20 . The Court discussed in detail these three statutory

provisions ( Med icaid Recovery and Reimbursement Statutes) . It

noted that Section 1396a(a)(25)(B) provides for reimbursement for

medical as sistance to the extent of the " legal liability of third

parties . . . to pay for care and services available under the

[state Medicaid] plan ." 547 U. S. at 280. Also, t he language of

section 1396a(a)(25)(H) limits the right of the state Medicaid

agency to third - party obligations to the recipient to the extent

of medical assistance expended for the recipient and to the

portion of the obligation pertaining to "such health care items or

services . " This language limits the right of the state Medicaid

agency, not merely to the portion of the liability pertaining to

medical expenses, but specifically to the portion of the liability

pe rtaining to those medical expenses for which the state Medicaid

agency expended medical assistance. Id. at 281. Lastly, s ection

1396k(b) provides that proceeds first reimburse the state Medicaid

agency for its medical assistance expenditures before they are

applied to pay for the recipient's costs of medical care. Id. at

282. The Court appeared to be responding to a party's arguments,

so it omitted section 1396k(a), but the introductory language of

section 1396k states that its purpose is to facilitate the

recovery of medical assistance expenditures.

21 . The fourth federal statute that the Court analyzed was

the Anti - Lien Statute, 42 U.S.C. § 1 396p(a)(1) , which is a

self - executing prohibition against state s placing liens against

the property of recipien ts , during their lives, to recover medical

assistance expenditures. The Anti - Lien Statute provides:

No lien may be imposed against the property

of any individual prior to his death on

account of medical assistance paid or to be

paid on his behalf under th e State plan

[subject to exceptions for benefits

incorrectly paid and for real property owned

by the recipient]. 7

22 . The Court noted that, in isolation, the Anti - Lien

Statute would appear to ban a lien on the portion of settlement

proceeds represe nting p ayments for medical care. But, i n another

important limitation on the scope of Ahlborn , the recipient

conceded that the portion of her settlement proceeds for past

medical expenses was subject to the recovery claim of the state

Medicaid agency . The reci pient argued only that the other

portions of her settlement proceeds were not subject to the

agency's recovery claim. Id. at 284. The Court agreed and

limited the agency's recovery to payments for "medical care." Id.

at 284 - 85. Although the recipient's concession explains the

Supreme Court's application of the Full Value Ratio to past

medical expenses, rather than already - expended medical assistance,

there would seem to be no other method of determining the portion

of the settlement proceeds for past me dical expenses than by

multiplying the Full Value Ratio by the medical assistance

expenditures or the portion of the settlement or judgment proceeds

representing medical expenses (Full Value Formula) .

23 . The Ahlborn Court offered a simple hypothetical to

illustrate the broader nature of its c oncerns with the Arkansas

recovery and reimbursement statute. If a state Medicaid agency

had expended $20,000 in medical assistance, the recipient had

obtained only $20,000 in s ettlement of her personal injury action

that included damages for lost wages, and the state Medicaid

agency recovered all of its medical assistance expenditures, thus

exhausting the settlement proceeds, the state recovery and

reimbursement statute "squarel y conflicts" with the Anti - Lien

Statute because the state statute authorize s the state Medicaid

agency to "lay claim to more than the portion of Ahlborn's

settlement that represents medical expenses." Id. at 280. On

these facts, i n the language of the th ree Medicaid Recovery and

Reimbursement Statutes, the agency could lay claim to a greater

portion of t he settlement proceeds than correspond s to the

agency's medical assistance expenditures , which are necessarily

related to medical expenses .

2 4 . Two major issues remained to be resolved after Ahlborn .

The first issue was whether a recipient was entitled to an

evidentiary hearing on whether a state Medicaid agency's

reimbursement should be less than the amount provided in a state

recovery and reimb ursement statute. The Supreme Court answered

this question in the affirmative in Wos v. E. M. A. , 133 S. Ct.

1391 (2013) , when it invalidated the North Carolina statutory

formula for dividing settlement or judgment proceeds between the

state Medicaid agen cy and a recipient .

25 . The second issue, which has not been resolved, is the

proper means of determining the portion of a recipient's

settlement or judgment proceeds that is subject to a state

Medicaid agency's reimbursement claim. The best approach is

found in t wo opinions that calculate the state Medicaid agency 's

recovery based on its medical assistance expenditures

corresponding to past and future medical expenses in relation to

the medical assistance expenditures .

26 . In Doe v. Vermont Office of Health Access , 54 A.3d 474,

480 - 82 (Vt. 2012), the court limited the calculation of the state

Medicaid agency's recovery to its already - expended medical

assistance when the medical assistance did not extend to all of

the past medical expenses. T he Doe recipient argued that the

agency's recovery could be based on the portion of past medical

expenses for which the agency had expended medical assistance.

Id. at 480 - 81. By way of example, the recipient argued that, if

he paid for two nursing shifts daily and the agency expended

medical assistance for one nursing shift daily, the agency's

recovery claim could not be calculated based on the past medical

expenses for the two shifts for which the recipient was paying.

To resolve this issue, the Doe court exa mined the Medicaid

Recovery and Reimbursement Statutes. Noting that Ahlborn did not

involve a case in which the past medical expenses exceeded the

medical assistance expenditures for the same period, the Doe court

agreed with the recipient, but did not en dorse a formula to

calculate the agency's recovery amount. 8

27 . In Aguilera v. Loma Linda University Medical Center ,

185 Ca l . Rptr. 3d 699, 705 - 08 (Ct . App. 2015), the court extended

the calculation of the state Medicaid agency's recovery to

medical assis tance not yet expended. In Aguilera , t he recipient

settled her medical malpractice claims for $950,000, out of which

she was liable for attorney's fees and costs of about $253,000.

The state Medicaid agency had expended about $211,000 in medical

assistance .

28. The recipient commenced a proceeding to determine the

amount of the agency's recovery from the proceeds. The recipient

presented evidence, including as to her life expectancy and the

cost of future care, to support a full va lue of $14.8 million,

including $13.2 million of future medical expenses in future

medical care and, mostly, future attendant care . The state

Medicaid agency countered with an agency program analyst who

opined that the agency would cover all future medica l expenses

under the conditions of the Medicaid program in California.

29 . The parties could not agree on a formula to determine

the agency's recovery amount. Using the Full Value Formula ,

evidently by applying the Full Value Ratio to the

already - expe nded medical assistance , the recipient determined

that the agency's recovery amount was about $10,000 after

deducting the recipient's attorney's fees and costs in the tort

case from the settlement . 9 The agency demanded a much higher

recovery amount , but offered no method to support its demand.

Accused by the recipient of having "plucked" a number "from the

air," the state Medicaid agency lowered its demand by a small

amount by using the recipient's Full Value Formula -- with a

significant modificatio n. Arguing that it would be expending

additional medical assistance for future attendant care expenses,

the agency reduced the denominator by $11.5 million , which

represented the additional medical assistance expenditures for

future medical expenses, incl uding future attendant care.

30 . The Aguilera court agreed to this modification of the

Full Value Formula that reduces the denominator in the Full Value

Ratio by any future medical expenses that the agency will pay

through additional medical assistance expendi tures. This

adjustment produces a much larger recovery amount than is

typically produced by the Full Value Formula when it is applied

in a high - dollar case only to past medical expenses or

already - expende d medical assistance. But t his part of Aguilera

is unpersuasive. T he court did not explain why it did not also

remove from the denominator the past medical expenses that the

agency had effectively paid through already expended medical

assistance, or whet her the court would apply the ratio if the

settlement proceeds exceed what is left of the full value after

netting out the medical assistance expenditures , in which case

the numerator would exceed the denominator. Adjustments to the

denominator are simple and powerful, but problematic.

31 . T he Aguilera opinion's discussion of the proof of

additional medical assistance is much more useful. The trial

court found that the agency would expend medical assistance for

future medical care, but not future attendant care . The Aguilera

court noted that, u nder California common law, 10 the recipient

bears the burden of proving that the agency's recovery amount is

excessive. The court held, though, that once the recipient

satisfies her burden by applying the Ahlborn formula to the

already - expended medical assistance , the agency has the burden of

proving as an affirmative defense that it will expend additional

medical assistance, so as to achieve the above - described

reduction of the denominator. Id. at 829 - 30.

32 . T he Aguilera court was dissatisfied with the trial

court's crediting of the testimony of the agency's program

analyst that the agency would expend medical assistance for the

costs of future medical care, but rejecting of the testimony of

the same program analyst that the agency would expend medical

assistance for the much - larger costs of future attendant care.

Id. at 831. I n ruling that the agency would not cover future

attendant care, the trial court relied on a concession by the

agency's lawyer, who relied on a representation to this effect by

the recipient's lawyer. Id. at 829.

33 . On the other hand, the recipient ack nowledged that she

was receiving medical assistance, at present, for both components

of these future medical expenses, and there was no other

foreseeable source to pay these expenses, presumably after the

exhaustion of the net settlement proceeds, which we re much less

than the future medical expenses. The court rejected the

recipient's argument that assurances of Medicaid eligibility

criteria 40 years out were inherently unreliable, noting that it

could not justly impose on the agency the requirement of sh owing

with "absolute certainty" eligibility criteria and funding

40 years into the future , especially when the only evidence in

the record, however slight, showed that the agency would pay

these expenses . Id. at 832.

34 . The Aguilera court remanded th e case to the trial

court, so each party could present additional evidence on past

and cu rrent program coverage for the above - described services.

After receiving the evidence, the trial court could redetermine

if it wa s "reasonably probable" that the agen cy would expend

medical assistance for these expenses in the future, and, to the

extent that the trial court found coverage, it wa s to exclude

these additional medical assistance expenditures from the

denominator and rerun the Full Value Formula to determine the

agency's recovery amount. Id. at 832 - 33.

35 . For the present, relatively simple case, the teaching

of Ahlborn , Doe , and Aguilera is that the Anti - Lien Statute

limits Respondent's rec overy to the portion of Petitioner's

$305,000 settlement that is allocable to past medical expenses --

to the extent that Respondent has expended medical assistance

and -- to future medical assistance -- to the extent that Respondent

will expend additional medic al assistance. As is often the case,

Respondent has already expended medical assistance equal to the

past medical expenses, so the Anti - Lien Statute does not bar

RespondentÓs recovery based on the portion of the settlement

alloca ble to pa s t medical expens es. But Respondent will not be

expending additional medical assistance, so the Anti - Lien Statute

bars RespondentÓs recovery based on the portion of the settlement

allocable to future medical expenses -- or, of course, lost wages ,

t he loss of future earning capacity, or pain and suffering.

36 . The purpose of the 17b proceeding is to determine

whether, under the above - discussed authority, Respondent's

recovery must be reduced from the amount calculated under the

Statutory Formula. Wit h the emphasis supplied, section

409.910( 17)(b) states:

A recipient may contest the amount

designated as recovered medical expense

damages payable to the agency pursuant to

the formula specified in paragraph (11)(f)

by filing a petition under chapter 120

. . .. The petition shal l be filed with the

Division of Administrative Hearings. . . .

Final order authority for the proceedings

specified in this subsection rests with the

Division of Administrative Hearings. This

procedure is the exclusive method for

challenging the amount of third - party

benefits payable to the agency. In order to

successfully challenge the amount payable to

the agency, the recipient must prove, by

clear and convincing evidence, that a lesser

portion of the total recovery should be

allocated as reimbursement for past and

future medical expenses than the amount

calculated by the agency pursuant to the

formula set forth in paragraph (11)(f) or

that Medicaid provided a lesser amount of

medical assistance than that asserted by the

agency.

37 . Petitioner does not contest the amount of medical

assistance expended, so the issue in this 17b proceeding is

whether Petitioner has proved, by clear and convincing evidence,

that "a lesser portion of the total recovery should be allocated

as reimbursem ent for past and future medical expenses" than the

amount calculated using the Statutory Formula.

38 . A "lesser portion of the total recovery" refers to the

portion of the proceeds obtained from the tortfeasors that is

determined under the Statutory Formula to constitute Respondent's

recovery amount. T his language refers to the recipient 's claim

that Respondent's recovery from the settlement or judgment

proceeds must be reduced from the amount calculated under the

Statutory Formula.

39 . "Reimburse ment for past and future medical expenses"

refers to the sums obtained by Respondent. "Reimbursement"

clearly signifies that the payee at this point is Respondent, not

the recipient. 11 The reference to "past and future medical

expenses" refers to Responde nt 's expenditures of medical

assistance. Reinforcing this interpretation , t he first sentence

of section 409.910(17)(b) refers to "recovered medical expense

damages" payable to Respondent .

40 . In this manner , section 409.910(17)(b) provides a

recipient an administrative hearing on the recipient's claim that

the recovery amount in the Statutory Formula is too high.

Obviously missing from section 409.910(17)(b) is an explicit

standard , formula, or method for determining if the recovery

amount in the Statutory Formula is too high. However, the

Medicaid Third - Party Liability Act supplies adequate standards

for the 17b proceeding . The act clearly provides that

Respondent's recovery is to be the m aximum allowable under the

law, subject to the limit imposed by the Statutory Formula. The

17b proceeding shields the Statutory Formula from judicial

invalidation , as occurred with a similar recovery and

reimbursement statutory formula in Wos , 12 by establi shing the 17b

proceeding as the means for determining whether Respondent's

recovery must be reduced and, if so, by how much.

41 . The Full Value Formula is the means by which to

determine Respondent's maximum allowable recovery. The Full

Value Formula requires the multiplication of the Full Value

Ratio -- as noted above, 0.1525 -- by the total of the medical

assist ance expenditures, not in excess of the portion of the

settlement proceeds allocable to medical expenses. As noted

above, in this case, Responde nt is limited to its

already - expended medical assistance -- i.e., $144,651 . A s

explained above, Respondent's recovery may thus not exceed

$22,059 .

42. However, a final reduction to Respondent's recovery is

necessary. Respondent's recovery in a 17b proc eeding must bear

its prorata share of the attorney's fees and taxable costs

incurred by the recipient in collecting the settlement or

judgment proceeds. This requirement finds support in the case

law, 13 as well as the Statutory Formula , which nets out taxable

costs and a fixed percentage representing attorney's fees before

determining Respondent's recovery amount. These litigation

expenses have an above - the - li ne quality because they produce the

settlement or judgment proceeds, so it is necess ary to reduce

Respondent's recovery by its prorata share of these litigation

expenses.

ORDER

It is

ORDERED that Respondent's recovery under section

409.910(17)(b) is limited to $12,693.

DONE AND ORDERED this 28th day of January , 2016 , in

Tallahassee, Leon County, Florida.

S

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of January , 2016 .

ENDNOTES

1 Many dollar amounts in this final o rder are rounded off.

2 This case is pending in the Florida Supreme Court under Case

No. SC15 - 1848.

3 This clause does not apply to the 17b proceeding.

4 Providing the backbone of the Medicaid Third - Party Liability

Act, section 409.910(6)(a), (b), and (c) describes the extent of

Respondent's subrogation rights to third - party benefits,

assignment of third - party benefits, and lien. The subrogation

rights an d lien are "for the full amount of medical assistance

provided by Medicaid." Id. at 409.910(6)(a) and (c).

For subrogation rights, the section 409.910(6)(a) states:

"Recovery pursuant to the[se] subrogation rights . . . shall not

be reduced, prorated, or applied to only a portion of a judgment

. . . or settlement, but is to provide a full recovery by the

agency from any and all third - party benefits." "Third - party

benefits" are defined broadly enough to include the settlement or

judgment proceeds in co nnection with a personal injury action

against a tortfeasor. § 409.901(28), Fla. Stat. Section

409.910(6)(a) concludes: "Equities of a recipient . . . shall

not defeat, reduce, or prorate recovery [i.e., reimbursement] by

[Respondent] . . .."

For liens , section 409.910(6)(c)6. provides that one claim of

lien shall provide sufficient notice of "an additional or

after - paid amount of medical assistance provided by Medicaid."

For assignments, section 409.910(6)(b) provides that it is for

"any right . . . [a recipient] has to any third - party benefit."

§ 409.910(6)(b). However, section 409.910(6)(b)1. limits the

assignment to "the amount of medical assistance provided by the

agency." Section 409.910(6)(b)2. provides: "Equities of a

recipient . . . shall not defeat or reduce recovery [i.e.,

reimbursement] by [Respondent] . . .."

Section 409.910(7) requires Respondent to recover the full amount

of "all medical assistance . . . to the full extent of

third - party benefits." In connection with a settlement o r

judgment of a claim against a third party, section 409.910(11)(c)

directs a court to segregate an amount sufficient to repay the

medical assistance expenditures.

Section 409.910(11)(e) provides that, except as otherwise

provided in section 409.910, "t he entire amount of any settlement

of the recipient's action or claim involving third - party

benefits, with o r without suit, is subject to [Respondent's]

claims for reimbursement of the amount of medical assistan ce

provided and any lien pursuant thereto." As noted below, section

409.910(11)(f) is carved out of section 409.910(11)(e), as

section 409.910(11)(f) applies only to settlement or judgment

proceeds obtained after the recipient has commenced a tort

action.

Section 409.910(12) limits Respondent's sha re of settlement or

judgment proceeds only to the extent that the proceeds are

unrelated to the covered injury or represent benefits for life

insurance, property insurance, or disability insurance, as well

as proceeds "in excess of the amount of medical be nefits provided

by Medicaid after repayment in full to the agency."

Lastly, all provisions of the Medicaid Third - Party Liability Act

must be construed in light of section 409.910(1), which provides

that Medicaid is "the payor of last resort." Section 409 .910(1)

continues: "Medicaid is to be repaid in full from, and to the

extent of, any third - party benefits, regardless of whether a

recipient is made whole or other creditors paid." And section

409.910(1) concludes: "It is intended that if the resources of 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."

5 The stipulation ignored the attorney's fees and costs incurred

by the recipient in prosecutin g the tort action, so the Court was

not presented with the question of whether the agency must bear

its prorata share of these litigation expenses.

6 "Such a legal liability" refers to the legal liability

identified in 42 U.S.C. § 1396a(a)(25)(A), which requires each

state Medicaid plan to provide that the state "will take all

reasonable measures to ascertain the legal liability of third

parties . . . to pay for care and services available under the

plan."

7 Congress has amended these federal statutes. Originally, the

amendments were to take effect October 1, 2014, according to

Public Law No. 113 - 67, section 202(b), 127 Stat. 1165 (2013).

However, the effective date of these amendments was postponed to

October 1, 2016, in Public Law No. 113 - 93, secti on 211, 128 Stat.

1040 (2014) and to October 1, 2017, in Public Law No. 114 - 10,

section 220, 129 Stat. 87 (2015 ).

As applicable to the cited statutes, the deletion from section

1396a(a)(25)(B) is indicated by the stricken - through language:

that in any case where such a legal

liability [of third parties] is found to

exist after medical assistance has been made

available on behalf of an individual . . .,

the State . . . will seek reimbursement for

such assistance to the extent of such legal

li ability ;

The addition to the Anti - Lien Statute is indicated by the

underlined language, and the deletion is indicated by the

stricken - through language:

(1) No lien may be imposed against the

property of any individual prior to his

death on account of me dical assistance paid

or to be paid on his behalf under the State

plan, except --

(A) pursuant to : . . .

(ii) rights acquired by or assigned

to the State in accordance with

§ 1396(a)(25)[.]

The meaning of these changes is clear. According to Dir ector

Cindy Mann of the Centers for Medicare & Medicaid Services, the

effect of these changes is to "give states the ability to recover

costs from the full amount of a beneficiary's liability

settlement, instead of only the portion of the settlement

design ated for medical expenses . . .." CMS Informational

Bulletin dated December 27, 2013, found on January 16, 2015, at

http://www.medicaid.gov/federal - policy - guidance/downloads/cib - 12 -

27 - 13.pdf.

8 But see In re Matey , 213 P.3d 389, 394 (Idaho 2009) , wher e the

past medical expenses exceeded the medical assistance

expenditures du e to payments by other parties. The court held

that the state Medicaid agency 's recovery extended to the entire

portion of proceeds all ocable to past medical expenses .

9 The net settlement, after fees and costs, divided by the full

value multiplied by the already - expended medical assistance is

$9937, which is within $100 of the amount calculated by the

recipient.

10 185 Cal. Rptr. 3d at 706. The Aguilera opinion cites

McMillian v. Stroud , 83 Cal. Rptr. 3d 261, 269 - 70 (Cal. App.

2008), which states that, under California common law, a party

has the burden of proof "as to each fact the existence or

nonexistence of which is essential to the claim for relief or to

the defense that he is asserting" (citation omitted), and the

burden of proof is imposed on the party that has "sole or primary

control over the dispositive evidence." Absent statutory

authority to the contrary, Florida generally imposes the burden

of proof on the party wit h the affirmative of the issue. Young

v. Dep't of Comm. Affairs , 625 So. 2d 831, 833 - 34 (Fla. 1993);

Golfcrest Nursing Home v. Agency for Health Care Admin. , 662 So.

2d 1330, 1334 (Fla. 1st DCA 1995); Dep't of Transp. v. J. W. C.

Co. , 396 So. 2d 778, 787 - 88 (Fla. 1st DCA 1981); Balino v. Dep't

of Health & Rehab. Servs. 348 So. 2d 349, (Fla. 1st DCA 1977).

Florida likewise imposes the burden on the party better able to

produce the necessary evidence. Golfcrest , supra at 1334.

11 "R eimbursement" refers to the process by which Respondent is

repaid from responsible parties for medical assistance that it

has expended. The definition of "reimburse" in the online

Merriam Webster dictionary is "to pay someone an amount of money

equal to an amount that person has spent." http://www.merriam -

webster.com/dictionary/reimburse.

"Reimbursement" is a term of art in Medicaid. Consistent with

its dictionary meaning, "reimburse" and "reimbursement" are

reserved for a payment to offset a party's paying or incurring of

a specific cost. Thus, Respondent reimburses providers for

covered goods and services that they have supplied to recipients.

§§ 409.908 and 409.913(1)(a)1. and (d), (8), (15)(k), (21),

(27)(a) and (b), (31), and (34). Likewise, an over - reimbursed

pro vider must reimburse Respondent the amount of the overpayment.

§ 409.913(30).

The Medicaid Third - Party Liability Act consistently uses

"reimburse" or "reimbursement" in this manner. In section

409.910, "reimburse" or "reimbursement" occurs nine other times,

and each time it means a payment to offset a party's paying or

incurring of a specific cost. Seven times, the party is

Respondent, and the cost is its medical assistance expenditures --

precisely the meaning assigned by the adopted interpretation of

the phrase within section 409.910(17)(f) . Never does "reimburse"

or "reimbursement" refer to the amount recovered by a recipient

from a tortfeasor. As indicated in the first sentence of section

409.910(17)(b), the statute uses "recovery," not "reimburse ment,"

to describe what a recipient obtains from a tortfeasor.

12 See Florida House of Representatives Final Bill Analysis,

CS/CS/HB 939, June 10, 2013, pp. 6 - 8,

http://www.myfloridahouse.gov/Sections/Documents/loaddoc.aspx?Fil

eName=h0939z1.HIS.DOCX& DocumentType=Analysis&BillNumber=0939&Sess

ion=2013.

13 See, e.g. , Arex Indemnity Co. v. Radin , 72 So. 2d 393, 396

(Fla. 1954) ; Lewis v. W. Va. Dep't of Health & Human Res. , 729

S.E. 2d 270, 304 (2012) (as required by state statute) ; McKinney

v. Phil. Hous. Auth. , 2010 U.S. Dist. LEXIS 86773, p. 34

(E.D. Pa. 2010).

COPIES FURNISHED:

Douglas J. McCarron, Esquire

The Haggard Law Firm, P.A

First Floor

330 Alhambra Circle

Coral Gables, Florida 33134

(eServed)

Richard J. Shoop, Agency Clerk

Agency for H ealth C are Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Stuart Williams, Gen eral Co unsel

Agency for Health C are Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Elizabeth Dudek, Secretary

Agency for Health C are Administration

2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308

(eServed)

David N. Perry, Esquire

Alexander R. Boler, Esquire

Xerox Recovery Services

2073 Summit Lake Drive, Suite 300

Tallahassee, Florida 32317

( eServed)

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 the o riginal

notice of administrative appeal with the agency clerk of the

Division of Administrative Hearings within 30 days of rendition

of the order to be reviewed, and a copy of the notice,

accompanied by any filing fees prescribed by law, with the clerk

of the District Court of Appeal in the appellate district where

the agency maintains its headquarters or where a party resides or

as otherwise provided by law.