16-007379MTR Liset Museguez, As The Court Appointed Guardian Of Sergio Museguez vs. Agency For Health Care Administration Status: Closed DOAH Final Order on Tuesday, September 19, 2017.

Summary: Petitioner proved that 20% of its settlement was allocated for past medical expenses, and that is the amount that should be paid to satisfy the Medicaid lien at issue.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LISET MUSEGUEZ, AS THE COURT

APPOINTED GUARDIAN OF SERGIO

MUSEGUEZ,

Petitioner,

vs. Case No. 16 - 7379MTR

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent.

_______________________________/

FINAL ORDER

The final hearing in this case was conducted on March 14,

2017, before Administrative Law Judge Lisa Shearer Nelson of the

Florida Division of Administrative Hearings (Division or DOAH) ,

by means of video teleconferencing with site s in Tallahassee and

Miami, Florida .

APPEARANCES

For Petitioner: Anthony Dax Bello, Esquire

Stewart, Tilghman, Fox, Bianchi

& Cain, P.A.

Suite 3000

One Southeast Third Avenue

Miami, Florida 33131

For Respondent: Alexa nder R. Boler, Esquire

2073 Summit Lake Drive , Suite 300

Tallahassee, Florida 32317

STATEMENT OF THE ISSUE

T he issue to be decided in this proceeding is the amount to

be paid to Respondent, the Agency for Health Care Administration

(Agency or AHCA ) , from the proceeds of a personal injury

settlement received by Sergio M u seguez to reimburse Medicaid for

expenditures made on his behalf.

PRELIMINARY STATEMENT

On December 14, 2016, Petitioner, Liset Museguez, as the

court - appointed guardian for Sergio Museguez (Muse g uez), filed a

Petition to Contest the Amount Designated as Recovered Medical

Expense Damages Payable to the Agency for Health Care

Administration . An Amended Petition was filed the following day.

On December 28, 2016, the case was schedule d for hearing to take

place on March 14, 2017, and the case proceeded as scheduled. On

March 3, 2017, the parties filed a Joint Pre - hearing Stipulation

that contained a statement of admitted and stipulated facts that

have been incorporated into the Findin gs of Fact below.

At hearing, PetitionerÓs Exhibits numbered 1 through 16

and 19 were admitted. PetitionerÓs Exhibits 21, 22, and 23 were

depositions of Todd Michaels, Esquire, Lawrence S. Forman, and

Frederick A. Raffa, Ph.D., respectively, that the p arties agreed

would be filed after the conclusion of the hearing and were , in

fact , filed with the Division on April 18, 2017. The partiesÓ

stipulated facts were also offered and accepted as PetitionerÓs

Exhibit 20. The Agency presented no witnesses or e xhibits.

The Transcript of the hearing was filed with the Division on

April 18, 2017 . The parties had agreed at hearing that the

proposed final orders would be due ten days from the filing of

the last transcript. However, on April 21, 2017, the Agency

f iled a Notice of Federal Court Order and Motion for Stay. The

motion provided a copy of an Order dated April 18, 2017, by the

Honorable Mark E. Walker in the case of Gallardo v. Dudek ,

4:16 - cv - 116 - MW - CAS , 2017 U.S. Dist. LEXIS 59848 (N.D. Fla.

Apr. 2017) , and advised that Judge Walker ha d enjoined the Agency

from enforcing section 409.910, Florida Statutes. The Agency

advised that it was seeking clarification and/or stay of the

federal court O rder, and requested that the instant case be

stayed while that clarification was sought. As a result, on

April 24, 2017, an Order was issued placing the case in abeyance

and requiring a joint status report no later than May 27, 2017,

notifying the Division of the status of the federal court

proceedings and the parti esÓ positions with respect to the

continued viability of this proceeding.

On May 25, 2017, a Joint Status Report was filed. The

Agency contended that the stay should be extended because both

the federal proceeding in Gallardo and conflicting state court

proceedings in the Supreme Court of Florida on petitions for

review prevented it from going forward. Petitioner, on the other

hand, contended that the federal court decision needed no

clarification, and that there has been conflict both at DOAH and

in the state appellate courts for years. A status conference was

held on May 31, 2017 , to address the unique procedural posture

presented, and on that same day, an Order was issued keeping the

case in abeyance and requiring a status report on July 7, 2017.

The Joint Status Report , filed on July 10, 2017, updated the

procedural posture of both the state and federal proceedings, but

provided no change in either part yÓs position regarding moving

forward in the instant case.

On July 13, 2017, an Order on Joint Sta tus Report was filed,

acknowledging both partiesÓ position . The Order stated , in

pertinent part:

The undersigned is mindful of and sympathetic

to the motives underlying each part yÓ s

position. No doubt counsel for Petitioner

seeks to reach a resolution th at frees up

funds for the care of Petitioner, while the

Agency feels constrained by the conflicting

directives regarding the lien statute voiced

by the state and federal courts. The

undersignedÓs dilemma is that, should the

case proceed forward at this po int, the

injunction entered by Judge Walker removes

the structure by which these cases are

handled, and the standards by which a

decision can be reached. For example,

without using the process outlined in section

409.910, who bears the burden of proof and

what burden controls? Does the statutory

formula remain the standard by which the

appropriate lien amount is measured, or is

some other tool to be used? Given the

federal injunction, would any decision made

if the case goes forward have any validity?

W ithout some clarity on these issues, it is

difficult if not impossible to move forward.

Further complicating the issue is that, while

the undersigned is aware that the Agency has

sought relief from the decision in Gallardo ,

she does not know what relief t he Agency is

seeking and whether, if successful, the

AgencyÓs efforts would address the quandaries

outlined above.

The Order directed the Agency to file copies of its post - judgment

motions and supplemental briefing in the Gallardo case and

deferred a dete rmination as to whether the case should remain in

abeyance. On July 20, 2017, the Agency filed the requested

documents, as well as copies of an Order Granting in Part and

Denying in Part Motion to Alter or Amend Judgment, 2017 U.S. Dist.

LEXIS 112448 (Sec ond Order), filed in the Gallardo case on July

18, 2017 , and the AgencyÓs Amended Brief on Jurisdiction in

Giraldo v. Agency for Health Care Administration , SC17 - 297.

After review of the documents received , a Scheduling Order

was issued, directing the p arties to file their proposed final

orders no later than August 18, 2017. Proposed Final Orders were

timely filed by both parties. On September 5, 2017, AHCA filed a

Motion for Leave to File Amended Proposed Final Order, stating

that Ðsubsequent to the f iling of the proposed final orders,

additional consultation between the undersigned and the agency

clarified the relief sought by the agency in this proceeding.Ñ

The AgencyÓs motion is denied: the time for discussion regarding

the relief to be sought is before, not two and a half weeks after,

a proposed final order is filed.

All references to the Florida Statutes are to the 2017

codification. All emphasis is in the original unless otherwise

indicated.

FINDING S OF FACT

1. Sergio Museguez was catastrophi cally injured as a result

of being struck by lightning on June 15, 2012.

2. Mr. Museguez has been diagnosed with a traumatic brain

injury and suffers from cognitive dysfunction, including , but not

limited to , s ignificant problems with memory, orientation,

initiating and executive functions. Mr. Museguez is also

incontinent as to bowel and bladder. The above - described

conditions are permanent and will never resolve.

3. Mr. MuseguezÓs employer, MG 3 Developer Group (MG3) ,

failed to carry workersÓ compensat ion insurance or any other

effective insurance coverage that would cover the injuries he

sustained on June 2012, or that would cover his wife Leidi

HernandezÓs loss of consortium suffered as a result of the

accident.

4. An action was filed in Miami - Dade C ounty Circuit Court,

Case No. 14 - 025861 CA 06 , against MG3 for damages related to

Mr. MuseguezÓs injuries and for Ms. HernandezÓs loss of

consortium . MG3Ós insurance carrier denied coverage and refused

to defend the company because its insurance p olicy ex cluded

coverage for employees.

5. The Museguezes and MG3 entered into a settlement

agreement in which they agreed to a judgment against MG3 in the

amount of $5,000,000 , but which included a payment schedule

through which $1,000,000 would actually be paid to Petitioner by

MG3 . Only that $1,000,000 of the judgment has been or will be

recovered by Mr. Museguez against MG3 , because of MG3Ós lack of

available insurance coverage, and the lack of anticipated avenues

of recovery pursuant to the terms of the sett lement, dated

June 16, 2016.

6. The settlement agreement provided that the parties

Ðacknowledge and agree that the One Million ($1,000,000) Dollar

payment set forth above only represents twenty percent of the

total injury/damage value of MuseguezÓs claim, and this fails to

fully compensate Museguez for the injuries sustained in the

incident at issue. Therefore, Museguez is specifically

recovering only twenty percent ( 20%) of their damages for past

medical expenses. Ñ

7 . Ms. Hernandez waived her right to a n apportionment of

the recovery for her consortium claim in light of her husbandÓs

condition and his need for extensive medical care and treatment

for the rest of his life. She opted for any amount that would

have been apportioned to her claim instead be apportioned

directly to her husband.

8 . Mr. MuseguezÓs condition and need for continuing care is

not in dispute. A life care plan identifying the goods and

services necessary for Mr. Museguez was prepared by Lawrence S.

Forman, an expert in rehabilitatio n life care planning.

Mr. Forman has concluded that Mr. Museguez will require 24 - hour

attendant medical care for the rest of his life, in addition to a

significant amount of future costs associated with his medical

condition as a result of his injury. Mr . FormanÓs opinions are

outlined in his report dated April 8, 2016.

9 . Frederick A. Raffa, an economist, reviewed the life care

plan for Mr. Museguez and determined that the present value of

the anticipated medical expenses for Mr. Museguez is $7,943,963.

He testified, unrebutted, that Mr. MuseguezÓs total losses were

$8,424,028. In short, Mr. MuseguezÓs needs far outweigh the

recovery received in this case.

10 . According to the United States Life Tables, 2012,

Mr. Museguez is expected to live another 2 4.8 years.

1 1 . Todd Michaels is an attorney who was appointed as

guardian ad litem for Mr. Museguez in the personal injury case.

Mr. Michaels testified that he was appointed for the purpose of

determining whether the settlement of Mr. MuseguezÓs claim wa s

fair to him. Mr. Michaels concluded that the settlement was the

product of an arm Ó s - length transaction and was a fair settlement

of the claim.

1 2 . Mr. Michaels also was asked to provide an opinion

regarding the value of Mr. MuseguezÓs claim. Mr. Micha els has

practiced personal injury law for 15 years, and is generally

familiar with the awards related to claims involving catastrophic

injuries and, specifically, traumatic brain injuries.

1 3 . With respect to Mr. MuseguezÓs claim, Mr. Michaels

described i t as conservative but necessary given the lack of

insurance coverage and significant possibility of insolvency

should the case go to verdict. He noted that Ðwithout a

settlement there was almost zero likelihood of recovery in that

the issues of both the f act and law were hotly contested.Ñ He

acknowledged that the settlement was less than Mr. MuseguezÓs

future medical needs, and ignored any claim for pain and

suffering, as well as the consortium claim. He stated, ÐI

understand what the situation was and t hey could have pushed

forward and gotten a verdict of 30 million dollars and it would

have been worth the paper it was printed on because of the

circumstances.Ñ

1 4 . Without the very real limitations provided in this

case, where there was no insurance co verage, Mr. Michaels

believed that the fair settlement value would be about $13 to $15

million. However, his explanation as to how he reached that

range was conclusory at best . Mr. Michaels testified that he did

not Ðphysically parse it out.Ñ He started with the number

$8,424,00 0 and went from there. He did not consult other

attorneys, or do specific jury verdict research, but simply

relied on his knowledge from practicing in this area and

reviewing jury verdicts on a regular basis.

1 5 . It seems t hat the Ðfair valueÑ of a claim must by

necessity consider not only the level of a plaintiffÓs damages,

but the likelihood of success and any issues of liability,

comparative fault, collectability, and the like. Here, while

PetitionerÓs damages are unfortuna tely much higher than the

settlement amount, PetitionerÓs witness testified that under the

circumstances of this case, the settlement was fair.

1 6 . The undersigned finds that the fair settlement value of

this case, given all of the circumstances, is the amount

reflected in the settlement, i.e., $ 5 ,000,000. The undersigned

also finds, consistent with the language in the settlement

agreement, that Petitioner recovered only 20 percent of his past

medical expenses .

1 7 . The taxable costs associated with the action at law

were $27, 812.46. While the parties in this proceeding stipulated

to the amount of these costs, they did not stipulate to the

amount of the attorneyÓs fees related to the claim, and it does

not appear that any evidence to substantiate the am ount of

attorneyÓs fees actually paid was included in this record .

1 8 . Mr. Museguez received medical services from Medica id.

On December 1, 2016, the Agency notified counsel for Mr. Museguez

that MedicaidÓs lien for medical expenses paid on his behalf wa s

$116,032.84.

1 9 . There was no evidence presented to indicate that the

Agency was a party to the settlement negotiations between

Petitioner and MG 3 , or whether the Agency was notified of the

litigation prior to the execution of the settlement .

20 . Petit ioner deposited the amount of the Medicaid lien

into an interest - bearing account for the benefit of the Agency in

accordance with the requirements of se ction 409.910 , and in

compliance with the requirements of bringing an action to contest

the amount of th e lien before the Division of Administrative

Hearings. PetitionerÓs actions constitute Ðfinal agency actionÑ

for purposes of chapter 120, Florida Statutes, pursuant to

section 409.910(17) (b) .

2 1 . Application of the formula contained in section

409.910(11 )(f) to PetitionerÓs $1,000,000 settlement would

require payment to the Agency in the amount of $116,032.84, the

actual amount of the funds expended by Medicaid.

CONCLUSIONS OF LAW

2 2 . The Division of Administrative Hearings has

jurisdiction over the sub ject matter and the parties in this

proceeding pursuant to sections 120.569, 120.57(1), and

409 .910 (17) (b) , Florida Statutes.

2 3 . AHCA is the agency authorized to administer FloridaÓs

Medicaid program. § 409.902, Fla. Stat.

2 4 . The Medicaid program prov ides federal financial

assistance to states choosing to reimburse certain costs of

medical treatment for needy persons. Harris v. McRae , 448 U.S.

297, 301 (1980). While participation in the Medicaid program is

optional, once a state elects to participate , it must comply with

the federal requirements of the program. Id.

2 5 . A condition for receipt of federal Medicaid funds is

that states will seek reimbursement for medical expenses incurred

on behalf of Medicaid recipients who later recover from third

pa rties. Ark. DepÓt of Health & Hum . Servs. v. Ahlborn , 547 U.S.

268, 276 (2006).

2 6 . In an effort to comply with this federal requirement,

the Florida Legislature enacted section 409.910, which requires

the state to be reimbursed for Medicaid funds paid f or a

recipientÓs medical care when the recipient receives a personal

injury judgment, award, or settlement from a third party. The

statute creates an automatic lien against any such judgment,

award, or settlement to reimburse the state for the medical

ass istance provided. § 409.910(6)(c), Fla. Stat.; Smith v. Ag.

f or Health Care Admin. , 24 So. 3d 590 (Fla. 5 th DCA 2009).

2 7 . Section 409.910(11)(f) provides the formula for

distribution of any recovery as a result of a judgment, award, or

settlement when t here is an outstanding Medicaid lien. It

provides:

(f) Notwithstanding any provision in this

section to the contrary, 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 which resul ts in a

judgement, award, or settlement from a third

party, the amount recovered shall be

distributed as follows:

1. After attorneyÓs fees and taxable costs

as defined in the Florida Rules of Civil

Procedure, one - half of the 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 servic es 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.

4. Notwithstanding any provision of this

section to the contrary, the agency shall be

entitled to all m edical coverage benefits up

to the total amount of medical assistance

provided by Medicaid. For purposes of this

paragraph, Ðmedical coverageÑ means any

benefits under health insurance, a health

maintenance organization, a preferred

provider agreement, or a prepaid health

clinic, and the portion of benefits

designated for medical payments under

coverage for workersÓ compensation , personal

injury protection, and casualty.

2 8 . In this case, if payment was made u nder this formula,

$250,000 representing att orneyÓs fees and $27,812.46 representing

taxable costs would be subtracted from the $1,000,000 settlement,

leaving a balance of $722,187.54. Half of that amount,

$361,093.77 , would be available to satisfy the lien. Because the

amount of the lien is subst antially less than the amount allowed

under the formula, the presumptive recover y by the Agency is the

amount the Agency actually expended on PetitionerÓs behalf. The

issue then becomes whether a lesser amount than the amount

actually expended, i.e., $116 , 032.84 , should be recovered by the

Agency .

2 9 . Petitioner contends that a pro rata share of attorneyÓs

fees should be subtracted from the lien amount, based upon

40 percent of the settlement , as opposed to subtracting 25 percent

at the beginning as cont emplated in the statutory formula in

section 409.910(11)(f). There are two problems with this

approach. First, as noted in the findings of fact, no evidence

was presented and no stipulation reached regarding the amount of

attorneyÓs fees actually paid in this case. Without any evidence

as to the amount of attorneyÓs fees actually paid, no deduction

for that amount, or any percentage of it, can be established.

Second, Petitioner presented no authority related to section

409.910 that would authorize a ded uction related to the AgencyÓs

Ðpro rata shareÑ of the attorneyÓs fees instead of using the

deduction identified in section 409.910 . 1/ Where, as here, no

evidence or stipulation was presented regarding the actual payment

of attorneyÓs fees, Petitioner is well served by the 25 percent

statutory allocation.

30 . Section 409.910(1) also establishes that repayment to

Medicaid is paramount, providing in pertinent part:

It is the intent of the Legislature that

Medicaid be t he payor of last resort for

medically necessary goods and services

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 assi stance 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 repaid in full from, and to

the extent of, any third - party benefits,

regardless of whether a recipient is made

whole or other creditors are paid. . . . 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

reso urces.

3 1 . As a condition for providing Medicaid funds, AHCA also

is placed in a priority position for recovery of all funds

expended , as mandated by section 409.910(6) (ÐEquities of a

recipient, his or her legal creditors, or health care providers

s hall not defeat, reduce, or prorate recovery by the agency as to

its subrogation rights under this paragraph.Ñ).

3 2 . The Agency also is not bound by any allocation of

damages included in a settlement between a Medicaid recipient and

a third party where A HCA did not participate in the settlement .

§ 409.910 (13) , Fla. Stat. S ee also § 409.910 ( 6 ) (c) 7., F la. Stat.

(ÐNo release or satisfaction of any . . . settlement agreement

shall be valid or effectual as against a lien created under this

paragraph, unless the agency joins in the release or satisfaction

or executes a release of the lien.Ñ). While perhaps not binding,

the Agency has not contested the percentage named in the

settlement agreement for past medical expenses , and it is accepted

as reasonable.

3 3 . The re are restrictions on the AgencyÓs ability to recoup

its expenditures on PetitionerÓs behalf. The Agency cannot

receive settlement proceeds which are not designated as payments

for medical care, because those proceeds qualify as a recipientÓs

prope rty. Ahlborn , 547 U.S. at 283 - 86; Goheagan v. Perkins , 197

So. 3d 112, 116 (Fla. 4 th DCA 2016). In Davis v. Roberts , 130

So. 3d 264, 268 (Fla. 5 th DCA 2013), the Fifth District reasoned,

consistent with its decision in Smith , that absent proof of an

allo cation in a settlement agreement, the formula in section

409.910(11)(f) must be used to calculate the amount owed to the

Agency. The purpose of a hearing is to establish, with evidence,

that the lien amount exceeds the amount recovered for medical

expense s. The court stated :

Ahlborn and Wos [v. E.M.A. ex rel. Johnson ,

clear that section 409.910(11)(f) is

preempted by the federal Medicaid statuteÓs

anti - lien provision to the extent it creates

an irrebuttable p resumption and permits

recovery beyond that portion of the Medicaid

recipientÓs third - party recovery representing

compensation for past medical expenses.

Accordingly, we agree with the fourth

district in Roberts [ v. AlbertsonÓs, Inc. ,

119 So. 3d 457 (Fla. 4 th

section 409.910(11)(f) is a Ðdefault

allocationÑ . . . [and] we reiterate our

prior directive and hold that a Medicaid

recip ient Ðshould be afforded the opportunity

to seek the reduction of a Medicaid lien

amount by demonstrating, with evidence, that

the lien amount [established by section

recovered

for medical expenses. Smith , 24 So. 3d at

592; see also Agency for Health Care Admin.

v. Riley , 119 So. 3d 514, 516 (Fla. 2d DCA

2013)(expressly adopting the fourth

districtÓs holding in Roberts that a

plaintiff should be afforded an opportunity

to seek the reduction of a Medicaid lien

amount established by the statutory default

allocation by demonstrating, with evidence,

that the lien amount exceeds the am ount

recovered for medical expenses).

(Emphasis supplied); see also Harrell v. State , 143 So. 478 , 480

(Fla. 1 st DCA 2014) ( Ðwe now hold that a plaintiff must be given

the opportunity to seek reduction of the amount of a Medicaid lien

established by the s tatutory formula . . . by demonstrating, with

evidence, that the lien amount exceeds the amount recovered for

medical expenses. When such evidence is introduced, a trial court

must consider it in making a determination on whether AHCAÓs lien

amount should be adjusted to be consistent with federal law.Ñ) ;

Mobley v. State , 181 So. 3d 1233 (Fla. 1 st DCA 2015) . The need

for a hearing to rebut the statutory formula was recognized in the

Florida Supreme CourtÓs decision in Garcon v. Agency for Health

Care Admin istration , 150 So. 3d 1101 (Fla. 2014) . The Florida

Supreme Court noted that it had accepted jurisdiction in Garcon on

the issue of whether a plaintiff should be afforded the

opportunity to demonstrate that a Medicaid lien exceeds the amount

recovered by the plaintiff for medical expenses, but agreed that

the United States Supreme CourtÓs decision in Wos was

determinative of the issue.

3 4 . As noted by the First District in Harrell , section

409.910 was amended in 2013 to provide a mechanism for the

hearin gs envisioned in Wos to challenge the presumptive amount.

In those cases where the Agency has not participated in or

approved the settlement, the Legislature created a procedure in

section 409.910(17) (b) as a means for determining whether a lesser

portion of a total recovery should be allocated as reimbursement

for medical expenses , instead of the amount of expended by

Medicaid , or the amount calculated pursuant to the formula in

section 409.910(11)(f).

3 5 . Section 409.910(17)(b) provides:

(b) If fed eral law limits the agency to

reimbursement from the recovered medical

expense damages, a recipient, or his or her

legal representative, may contest the amount

designated as recovered medical expense

damages payable to the agency pursuant to the

formula sp ecified in paragraph (11)(f) by

filing a petition under chapter 120 within

21 days after the date of payment of funds to

the agency or after the date of placing the

full amount of the third - party benefits in

the trust account for the benefit of the

agency pursuant to paragraph (a). The

petition shall be filed with the Division of

Administrative Hearings. For purposes of

chapter 120, the payment of funds to the

agency or the placement of the full amount of

the third - party benefits in the trust account

for the benefit of the agency constitutes

final agency action and notice thereof.

Final order authority for the proceedings

specified in this subsection rests with the

Division of Administrative Hearings. This

procedure is the exclusive method for

challengin g the amount of third - party

benefits payable to the agency. In order to

successfully challenge the amount designated

as recovered medical expenses, the recipient

must prove, by clear and convincing evidence,

that the portion of the total recovery which

sh ould be allocated as past and future

medical expenses is less than the amount

calculated by the agency pursuant to the

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

Alternatively, the recipient must prove by

clear and convincing evidence that Medicaid

provided a lesser amount of medical

assistance than that asserted by the agency.

3 6 . While section 409.910(17)(b) provides a burden of proof

and the ultimate conclusion to be reached when challenging the

amount of the AgencyÓs lien, it does not provide the metho d by

which a Petitioner may establish that a lesser amount is more

reasonable. Case law predating the hearing process in section

409.910(17)(b) provides the best guidance of what is required.

The focus is not on a comparison of the percentage allocated f or

past medical expenses with a hypothetical Ðfair valueÑ of the

case, but rather on whether the lien amount exceeds the amount

actually recovered for past medical expenses. 2/

3 7 . In recent years, there has been a lively debate in both

state and federa l courts , as well as at DOAH, regarding whether

the federal ant i - lien provisions allow for a Medicaid agency to

recover funds designated for future medical expenses. In Florida,

for example, Giraldo v. Agency for Health Care Administration , 208

So. 3d 244 , 252 (Fla. 1st DCA 2016), held that a Medicaid lien

could reach those sums contained in a settlement that were

recovered for future medical expenses, as well as past medical

expenses. The Second District disagreed in Willoughby v. Agency

for Health Care Administration , 212 So. 3d 516 , 523 (Fla. 2d DCA

2017), and held that Ahlborn and its progeny Ðare best read as

limiting the recovery of the Medicaid lien to that portion of a

settlement allocable to past medical expenses,Ñ and certified

conflict with Gira ldo . The Willoughby court noted that there was

a split on this issue , but aligned itself with what it believed to

be the better view. On September 6, 2017 , the Florida Supreme

Court accepted jurisdiction of Giraldo and dispensed with oral

argument. Gira ldo v. Ag . for Health Care Admin. , Case

No. SC17 - 297.

3 8 . Of more concern is the decision in Gallardo v. Dudek ,

Case No. 4:16 - cv - 116 - MW - CAS , 2017 U.S. Dist. LEXIS 59848, *31

(N.D. Fla. Apr. 18, 2017) . 3/ In that case , Judge Walker of the

Northern Distri ct of Florida issued a J udgment that states , in

part:

It is declared that the federal Medicaid Act

prohibits the State of Florida Agency for

Health Care Administration from seeking

reimbursement of past Medicaid payments from

portions of a recipient Ó s reco very that

represents future medical expenses.

It is also declared that the federal Medicaid

Act prohibits the State of Florida Agency for

Health Care Administration from requiring a

Medicaid recipient to affirmatively disprove

Florida Statutes § 409.190(1 7)(b)Ós formula -

based allocation with clear and convincing

evidence to successfully challenge it where,

as here, that allocation is arbitrary and

there is no evidence that it is likely to

yield reasonable results in the mine run of

cases.

3 9 . The reason ing for Judge WalkerÓs decision can be found

in his Order on Summary Judgment Motions, also issued April 18,

2017. After discussion of the anti - lien provisions in the federal

law, as well as the decisions in Ahlborn and Wos , Judge Walker

concluded that Ðf ederal law prohibits state agencies from seeking

reimbursement of past Medicaid payments from portions of a

recipientÓs recovery that represent s future medical expenses.

FloridaÓs statute is therefore preempted if and to the extent that

it operates that w ay.Ñ Gallardo , at 17 - 18 . The court also

addressed GallardoÓs argument that FloridaÓs entire reimbursement

statute conflicts with and is preempted by federal law, and

stated, Ð[t]o the extent that Medicaid recipients must

affirmatively disprove the arbitr ary formula - based allocation with

clear and convincing evidence to successfully overcome it, this

Court agrees.Ñ Id. a t 2 1 . The c ourt noted that in Wos , the

United States Supreme Court determined that North CarolinaÓs

reimbursement statute created an irr ebuttable, Ðone - size - fits - all

statutory presumption Ñ that a predetermined percentage of the

recipientÓs recovery constitutes payment for medical care,

particularly where the state has not provided evidence that such

an allocation was reasonable in the mine run of cases and has no

process for Ðdetermining whether [such an allocation] is a

reasonable approximation in any case.Ñ 133 S.Ct. at 1398 - 99

(emphasis supplied) . 4/

40 . Judge Walker found FloridaÓs statutory scheme to be

Ðquasi - ir rebuttable,Ñ in part because of what he viewed as the

arbitrary nature of the formula, but also because the burden of

proof placed on the recipient is that of clear and convincing

evidence. He stated in part:

In so ruling, this Court wants to make itself

absolutely clear. T his Court is not saying

that Florida may not enact a rebuttable,

formula - based allocation to determine what

portion of a judgment represents past medical

expenses; in fact, the Supreme Court has

suggested, witho ut holding, just the

opposite. . . . Nor is it saying that

Florida may not shift the burden to Medicaid

recipients to disprove that allocation; that

issue is not before this Court, but it

probably can. . . .

An d although this Court doesnÓt get to

rewrite FloridaÓs statute Î and it doesnÓt

endeavor to do so Î it can say when a Florida

statute runs afoul of federal law. . . . It

does here. The reimbursement statuteÓs clear

and convincing burden Î when coupled with a

formula - based baseline wholly divorced from

reality and a requirement that the recip ient

affirmatively disprove th at baseline to

successfully rebut it Î is in direct conflict

with the Medicaid statuteÓs anti - lien and

anti - recovery provisions. Thus, in this

specific scenario, FloridaÓs clear and

convincing burden is preempted by federal

l aw.

2017 U.S. Dist. LEXIS 59848 , at * 29 - 30 .

4 1 . AHCA filed a Motion to Alter or Am end the Judgment,

which resulted in a lengthy Order Granting in Part and Denying in

Part Motion to Alter or Amend Judgment, along with a Second

Amended Judgment. Galla rdo v. Senior , 2017 U.S. Dist. LEXIS

112448 (N.D. Fla. July 18, 2017) (the Second Order). The Second

Order rejects the majority of AHCAÓs arguments because they should

have been raised earlier. AHCA raised a standing argument which

Judge Walker acknowled ged was properly before him , but found it

unconvincing.

4 2 . AHCA challenged GallardoÓs standing because AHCA does

not enforce the challenge d portions of section 409.910 , as that

task is reserved for DOAH. Judge Walker agreed that AHCA does not

apply t he clear and convincing burden, but determined that this

fact was not determinative of GallardoÓs standing. He stated:

By no means did [the court] intend to enjoin

AHCA from requiring a recipient to overcome

the formula - based allocation with clear and

[ co nvincing ] evidence for that recipient to

be successful Î that would be an exercise in

futility. Rather, it simply meant to enjoin

AHCA from seeking reimbursement for past

medical expenses through portions of a

recipientÓs recovery that represents future

m edical expenses either directly from the

recipient or through DOAH. By extension,

that also means AHCA cannot seek

reimbursement based on the formula - based

allocation when doing so would allow it to

obtain more than that which it is entitled

to. Those ar e both tasks that AHCA Î which

is responsible for administering Medicaid and

asserting Medicaid liens Î Ðha[s] some

connection with . . . .Ñ Socialist Workers

Party [v. Leahy , 145 F.3d 1240, 1248 (11 Cir.

from Ðseeking reimbursement of past Medicaid

payments from portions of a recipientÓs

recovery that represents future medical

expenses.Ñ Gallardo , 2017 WL 1405166, at

*11. (footnotes omitted)

2017 U.S. Dist. LEXIS 112448 * at * 16 - 17.

4 3 . The court acknowle dged that, with regards to the

injunctionÓs scope, the prior judgment was Ðnot a model of

clarityÑ and amend ed it to clarify that the injunction does not

extend to the portion referencing the reimbursement statuteÓs

clear and convincing burden. However, t he next paragraph states

that it was nonetheless proper to declare that section 409.910Ós

clear and convincing burden is preempted by the federal Medicaid

statute even though DOAH Î not AHCA Î applies that standard. 5/

The court determined that standing is appropriate where the

redress is effectuated by an unnamed third party and the steps

necessary to effectuate that redress are Ðpurely mechanical,Ñ and

it is substantially likely that the third party would abide by an

authoritative interpretation, citing U tah v. Evans , 536 U.S. 452,

463 - 64 (2002). Judge Walker further stated :

Similar to Evans , a declaration that the

reimbursement statuteÓs clear and convincing

burden is preempted by federal law would also

significantly increase the likelihood that

Gallard o would obtain the redress she seeks.

Of course, unlike the reimbursement portion

of the prior judgment, this CourtÓs

declaration that the clear and convincing

burden is preempted in this type of scenario

would require additional steps to redress

Gallardo Ós injury; namely, DOAH not requiring

Gallardo to disprove the reimbursement

statuteÓs formula - based allocation with clear

and convincing evidence in GallardoÓs

administrative proceeding. But that step is

Ðpurely mechanical.Ñ Id. a t 463. What is

more, t hough, is that DOAH Î which is, in

effect, a quasi - judicial body Î is

substantially likely to Ðabide by an

authoritative interpretation[,] id. , at 464,

from this Court (and through AHCA) that it

cannot apply such a burden. (footnote

omitted). [ 6/ ]

Id. at 20 .

4 4 . The court stated that, even where the additional steps

were not Ðpurely mechanical,Ñ it would assume that DOAH will give

full credence to its ruling. It then entered a Second Amended

Judgment , which states in pertinent part :

It is declared th at the federal Medicaid Act

prohibits the State of Florida Agency for

Health Care Administration from seeking

reimbursement of past Medicaid payments from

portions of a recipient Ó s recovery that

represents future medical expenses. The

S tate of Florida Age ncy for Health Care

Administration is therefore enjoined from

doing just that: seeking reimbursement of

past Medicaid payments from portions of a

recipientÓs recovery that represents future

medical expenses.

It is also declared that the federal Medicai d

Act prohibits the State of Florida from

requiring a Medicaid recipient to

affirmatively disprove § 409.910(17 ) (b)Ós

formula - based allocation with clear and

convincing evidence to successfully challenge

it where, as here, that allocation is

arbitrary and there is no evidence that it is

likely to yield reasonable results in the

mine run of cases.

Id. at 24.

4 5 . Turning to the present case, the question becomes, where

do we go from here? While the process and DOAHÓs role in light of

the injunction is de scribed as Ð purely mechanical Ñ in the Second

Order , the perspective of how the injunction affects the fact -

finding function in these cases is a little different here on the

garage floor. Indeed, one administrative law judge has determined

that the injunct ion in Gallardo so eviscerates the formula in

section 409.910(11)(f) that it deprives DOAH of jurisdiction to go

forward. See Smathers v. Ag. f or Health Care Admin. , Case No. 16 -

359 0 ( Fla. DOAH Sept. 13, 2017), a view the undersigned respects ,

but does no t share.

4 6 . First, Judge WalkerÓs Second Order does not contemplate

that it is depriving DOAH of jurisdiction. As noted above, the

Second Order states in part, Ðthis CourtÓs declaration that the

clear and convincing burden is preempted in this type o f scenario

would require additional steps to redress GallardoÓs injury;

namely, DOAH not requiring Gallardo to disprove the reimbursement

statuteÓs formula - based allocation with clear and convincing

evidence in GallardoÓs administrative proce eding. But th at step

is Òpurely mechanical.ÓÑ Moreover, in the c ourtÓs discussion of

AHCAÓs standing argument, the c ourt noted that declaratory relief,

which it granted, was appropriate when a favorable rul ing may

result in a change in a partyÓs legal status , and the practical

consequence of that change would significantly increase the

likelihood that the plaintiff would obtain relief from the injury

suffered. To hold that there is no longer jurisdiction at DOAH

does the opposite , and deprives a petitioner of any reme dy at all .

4 7 . Section 409.910( 17)(b) provides that the hearing

afforded to petitioners at DOAH is the Ðexclusive method for

challenging the amount of third - party benefits payable to the

agency.Ñ Until the Legislature revisits this issue, unless a

petit ioner can proceed at DOAH, he or she would have no

opportunity to protest the amount of the lien. To nullify the

hearing opportunity afforded under section 409.910(17)( b ) would

run afoul of the holding in Wos , as well as the Florida

decisions in Garcon , Smith , and Harrell . So while what remains of

the process in light of Gallardo may be problematic, it is a

puzzle that must be addressed.

4 8 . First , the clear and convincing burden of proof can no

longer be applied in this proceeding. Fortunately, secti on

120. 57(1)(j) has a default provision regarding the burden of

proof, and provides that Ðfindings of fact shall be based on a

preponderance of the evidence, except in penal or licensure

disciplinary proceedings or except as otherwise provided by

statute.Ñ The Agency acknowledges the appropriateness of the

preponderance of the evidence standard in its Proposed Final

Order. A preponderance of the evidence is defined as Ðthe greater

weight of the evidence,Ñ or evidence that Ðmore likely than not

tends to pr ove a certain proposition.Ñ S . Fla. Water Mgmt. v. RLI

Live Oak, LLC , 139 So. 3d 869, 871 (Fla. 2014).

4 9 . Second, the impact of the injunction on this case

depends on how closely aligned the facts of this case are to those

presented in Gallardo . A com parison of the two cases shows some

marked differences. First, in Gallardo , AHCA was clearly seeking

to satisfy the lien amount from funds designated for both past and

future medical expenses. In this case, AHCA acknowledges in its

Proposed Final Order t hat only the amount of proceeds allocable to

past medical expenses is at issue here , and the settlement

agreement only segregates the portion allocated for past medical

expenses .

50 . Third, in Gallardo , the funds expended by Medicaid

exceeded the actual settlement amount, and the amount sought by

AHCA to satisfy the lien was based on the percentage in the

statutory formula. Here, the lien amount sought to be recovered

is based upon the actual expenditure by Medicaid, not an

artificial number created by s ection 409.910. While the

percentage calculated under the formula may be considered

arbitrary, the actual funds expended cannot be viewed in the same

light. Moreover, while the Gallardo Order on Summary Judgment

indicates that the settlement was approved by the court, it does

not indicate that the settlement specifically identified what

portion of the recovery represented past or future medical

expenses. In this case, the settlement expressly states Ð Museguez

is specifically recovering only twenty percen t (20%) of their

damages for past medical expenses.Ñ As noted in Smith , the

formula need only come into play where there is no allocation in

the settlement agreement.

5 1 . Fourth, and perhaps most important, the court in

Gallardo appears to take at face value GallardoÓ s estimation of

the value of GallardoÓs claim, while in this case, the parties did

not stipulate to the value of the underlying lawsuit, and

Mr. Michaels Ó testimony that the fair value of the claim is more

than the amount reflected in the se ttlement itself is rejected as

not supported by competent, substantial evidence.

5 2 . The settlement indicates that the parties to the

original litigation agreed that Ðthe One Million ($1,000,000)

Dollar payment set forth above only represents twenty per cent

(20%) of the total injury/damage value of MuseguezÓs claim.Ñ

Mr. MichaelsÓ testimony regarding the value of the claim, setting

it at $13 - 15 million, was general in nature and by his own

admission, he did not Ðparse outÑ the damages assumed to reach

t hat amount. He did no jury research, but instead relied solely

o n his own past experience. He also recognized that in this case,

there were significant questions regarding not only insurance

coverage , but liability, and had informed the trial court that the

settlement was fair to Mr. Museguez . 7 / The undersigned notes

that, given that Mr. Museguez Ós injuries resulted from a lightning

strike , bringing the case to completion may have been risky at

best. Mr. Michaels Ó testimony regarding the value of the cl aim

does not carry the same weight as the agreement of the parties

reached in what he described as an arm Ó s - length negotiation.

5 3 . To be clear, while some administrative law judges have

accepted the premise that the amount to be paid should be measured

b y a percentage of the Ðfair valueÑ of the claim, this one does

not. In Willoughby , the court acknowledged the Ðtotal valueÑ

methodology method and stated :

W e do not condemn this approach; we recognize

that ALJÓs frequently resort to this

methodology in ca lculating amounts available

to satisfy Medicaid liens. But we also

acknowledge that the U.S. Supreme Court has

not explicitly endorsed th is method. The

Supreme Court Ð in no way adopted the formula

as a required or sanctioned method to

determine the medic al expense portion of an

overall settlement amount.Ñ Smith v. Agency

for Health Care Admin. , 24 So. 3d 590 So.

590, 591 (Fla. 5 th DCA 2009).

212 So. 3d at 522 - 23. To the contrary, Smith , Riley , and Harrell

all hold that the purpose of a hearing is to es tablish, with

evidence, that the lien amount exceeds the amount recovered for

past medical expenses .

5 4 . Here, Petitioner has demonstrated by a preponderance of

the evidence that he r ecovered $1,000,000 pursuant to a settlement

with his employer , well b elow what it will cost to care for him.

The settlement expressly states that it represented only

20 percent of his total past medical expenses. Twenty percent of

the Medicaid lien is $23,206.57. This amount equals, consistent

with the holdings in Smith , Riley , and Harrell , the amount

actually recovered for past medical expenses.

ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, it is ORDERED that the Agency is entitled to payment of

$23,206.57 in satisfaction of its Medicaid lien.

D ONE AND ORDERED this 19th day of September , 2017 , in

Tallahassee, Leon County, Florida.

S

LISA SHEARER NELSON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallaha ssee, 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 19th day of September , 2017 .

ENDNOTE S

1/ Petitioner cited the following cases in support of th e claim

that a pro rata share of the attorneyÓs fees award should be

borne by the Agency: Arex Indemnity Co. v. Radin , 72 So. 2d 393,

396 (Fla. 1954); Lewis v. W. Va. DepÓt of Health & Hum . Res. , 729

S.E. 2d 270, 304 (2012); and McKinney v. Phil. Hous. Au th. , 2010

U.S. Dis. LEXIS 86773, p. 34 (E.D. Pa. 2010). Radin clearly

predates section 409.910 and deals with the allocation of a

workersÓ compensation award, and interprets a provision in

section 440.39(3), Florida Statutes (1951 ). The provision in

sect ion 409.910 clearly contemplates a different resolution

regarding attorneyÓs fees than that contemplated in section

440.39(3). Lewis and McKinney are also tied to statutory

provisions in their respective jurisdictions. FloridaÓs

statutory scheme addresse s attorneyÓs fees differently . Even if

the full 40 percent were deducted instead of 25 percent , the

formula would still result in an amount higher than the actual

amount paid by Medicaid as available to satisfy the lien. Either

way, the formula essential ly falls away , and the issue remains

what part of the settlement was allocated for past medical

expenses.

2/ I n McKinney v. Philadelphia Housing Authority , 2010 U.S. Dist.

LEXIS 86773 (E.D. Pa. 2010), the court noted that the parties had

stipulated to a method of calculating the percentage of the

settlement constituting payment by the tortfeasor for past

medical expenses. There is no such stipulation here, and as

stated by the court in McKinney , Ðit does not follow that all

other parties are bound to ap ply this calculation merely because

the parties in one case agreed to use it. The Ahlborn court did

not entrench the partiesÓ method of calculation.Ñ The court went

on to state:

The second problem with PlaintiffÓs ratio

theory is that it requires a judi cial

ascertainment of the platonic Ðtrue valueÑ

of PlaintiffÓs claims. At best, this would

convert Ahlborn hearings into mini - trials,

replete with competing damages experts and

witnesses testifying as to issues like

humiliation, pain and suffering, and lo ss of

enjoyment of life. This would seriously

undermine the economy of settlement. At

worst, this would send judges on a quixotic

intellectual journey in search of an

illusory number.

Aside from the logistical difficulties that

PlaintiffÓs theory woul d produce, it also

suffers from a logical failing. Why should

one assume that simply because Plaintiff

settled for a fraction of the supposed Ðtrue

valueÑ of their claim, that this fractional

reduction app lies uniformly across the

various heads of damage? For example, a

plaintiffÓs past medical expenses can more

easily be proven to a jury than can a

plaintiffÓs non - economic damages.

Therefore, plaintiffs face less uncertainty

regarding recovery of medical expenses and

thus will be less willing during set tlement

talks to reduce their request for past

medical expenses than for other, more

uncertain heads of damage.

3/ During the pendency of the federal court litigation, Ms. Dudek

stepped down as agency head for AHCA , and the current agency head

was substi tuted in her place, changing the style of the case to

Gallardo v. Senior . Curiously , despite the fact that the

decisions in Giraldo , Willoughby , and Gallardo all resulted in a

delay in the resolution of this case, and all three interpret

section 409.910, Petitioner never mentions any of them in his

Proposed Final Order. However, they cannot in good conscience be

ignored.

4/ Florida has the process that North Carolina did not. However,

Judge W alker found the process outlined in section 409.910 to

create Ða rebuttable presumption that is nearly impossible to

rebut.Ñ

5/ DOAH was not a party to the Gallardo litigation.

6/ The c ourt cites in its footnote to Florida State University v.

Hattan , 672 So. 2d 576, 579 (Fla. 1 st DCA 1996), for the premise

that DOAH hearing officers are quasi - judicial officers of a

quasi - judicial forum. While the Second Order consistently refers

to DOAH hearing officers, the designation was changed to

administrative law judges over 20 years ago. § 31, Ch. 96 - 150,

Laws of Fla.

7/ Curiously, while Mr. Michaels testified that he had reviewed

the settlement agreement as guardian ad litem to determine

whether it was fair to Mr. Museguez, he was not asked and the

Petitioner did not present any other evidence to demonstrate that

the settlement was approved by the court. However, AHCA has not

raised this issue, so it is inferred from Mr. MichaelsÓ testimony

that the settlement was , in fact , approved.

COPIES FURNISHED:

Kim Annette Kellum, Esquire

Agency for Health Care Administratio n

2727 Mahan Drive , Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Alexander R. Boler, Esquire

2073 Summit Lake Drive , Suite 300

Tallahassee, Florida 32317

(eServed)

Anthony Dax Bello, Esquire

Stewart, Tilghman, Fox, Bianchi & Cain, P.A.

One Southe ast Third Avenue , Suite 3000

Miami, Florida 33131

(eServed)

Ashley E. Davis, Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Tallahassee, Florida 32399

(eServed)

Elizabeth A. Teegen, Esquire

Office of the Attorney General

The Capitol , Plaza Level 01

Tallahassee, Florida 32308

(eServed)

Justin Senior, Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308

(eServed)

William Roberts, Acting General Counsel

Agency for Health Care Admin istration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Shena L. Grantham, Esquire

Agency for H ealth Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Thomas M. Hoeler, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

NOTICE OF RIGHT TO JUDICIA L 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 fi ling the original

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.