Latham v. Recovery Services , 2019 UT 51 ( 2019 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2019 UT 51IN THE
SUPREME COURT OF THE STATE OF UTAH
JOHN R. LATHAM,
Appellant,
v.
OFFICE OF RECOVERY SERVICES,
Appellee.
No. 20170556
Filed August 22, 2019
On Direct Appeal
Third District, Salt Lake
The Honorable Richard D. McKelvie
No. 160904935
Attorneys:
Paul R. Smith, Jeffrey D. Gooch, C. Michael Judd, Salt Lake City,
for appellant
Sean D. Reyes, Att’y Gen., Brent A. Burnett, Asst. Solic. Gen.,
Tony S. LeBlanc, Asst. Att’y Gen., Salt Lake City,
for appellee
JUSTICE PETERSEN authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
JUSTICE HIMONAS, and JUSTICE PEARCE joined.
JUSTICE PETERSEN, opinion of the Court:
INTRODUCTION
¶1 John R. Latham suffered a stroke and his injuries were
exacerbated by a hospital’s failure to properly diagnose it. Latham
sought compensation from the hospital for past and future medical
expenses as well as other damages. He ultimately settled his claim
for an amount much less than what he believed it was worth.
LATHAM v. OFFICE OF RECOVERY SERVICES
Opinion of the Court
¶2 At the time of his injury, Latham was receiving Medicaid,
which paid for his treatment. When a third party is legally liable for
medical expenses paid by Medicaid—like the hospital here—federal
law requires that state Medicaid plans seek reimbursement from the
third-party tortfeasor.
¶3 The parties dispute how much of Latham’s settlement
award the Office of Recovery Services (ORS)1 is permitted to collect.
Latham argues ORS may place a lien on only the part of his award
allocable to past medical expenses. And according to Latham’s
calculations, the State’s expenditures far exceed that portion of his
award. He argues that if the State is fully reimbursed, it would
violate a federal Medicaid statute that prohibits states from imposing
a lien on recipient’s property because ORS would be taking
settlement proceeds intended to compensate him for damages other
than past medical expenses.
¶4 The district court disagreed with this argument and ruled
against Latham on a motion for judgment on the pleadings. The
court held that ORS was entitled to recover from the portion of
Latham’s settlement award representing all medical expenses, both
past and future.
¶5 Latham appeals. The question before us is whether ORS
may place a lien on and collect from the portion of Latham’s tort
recovery allocable to all medical expenses, both past and future, or
only past medical expenses. Based on the language of the relevant
federal statutes and United States Supreme Court precedent, we
conclude that ORS may recover from only that portion of an award
representing past medical expenses. Accordingly, we reverse and
remand.
BACKGROUND
¶6 Latham suffered a stroke in early 2014. When he began to
experience symptoms, he went to the hospital. Without conducting a
_____________________________________________________________
1 ORS is the Utah Department of Human Services agency tasked
with, among other things, “[c]ollection of medical reimbursement
from responsible third parties to both reimburse and avoid state
Medicaid costs.” Recovery Services, ORS Mission Statement, UTAH
DEP’T OF HUMAN SERVS., http://ors.utah.gov/ors_mission.htm (last
visited Aug. 13, 2019). ORS is charged with enforcing statutory
claims pursuant to Utah Code section 26-19-401.
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neurological exam, doctors there examined Latham, provided him
with some pain and anti-nausea medication, and then discharged
him.
¶7 Throughout the day, Latham’s condition worsened. In the
evening, he went by ambulance to a different hospital. There,
doctors performed a brain scan, which revealed that he had suffered
a stroke.
¶8 Latham brought malpractice and negligence claims against
the first hospital. He alleged that the hospital’s failure to diagnose
his stroke caused severe and permanent injuries.
¶9 At the time of his injuries, Latham received Medicaid
through the State of Utah. The parties agree that Medicaid paid a
total of $104,065.32 in medical expenses related to Latham’s stroke.
¶10 Generally, Medicaid does not seek reimbursement from
Medicaid recipients when it pays for their medical treatment. But if a
third party is liable for any or all of a recipient’s injuries, then federal
law requires state Medicaid programs to seek reimbursement from
those third-party tortfeasors. See 42 U.S.C. § 1396a(a)(25)(A)–(B);
UTAH CODE § 26-19-401.2 And it requires recipients to assign to the
State any proceeds they receive from the third party. See 42 U.S.C.
§ 1396k(a)(1)(A).
¶11 To that end, ORS entered into a collection agreement with
Latham that permitted Latham to “include medical costs paid by the
State of Utah when making a claim against” the hospital and allowed
ORS to recover from funds Latham was able to recover from the
hospital. The collection agreement provided that “ORS’ recovery
shall be the statutory claim, as reduced by the attorney’s fee of 33.3%
of ORS’ recovery.” Both parties agree that ORS’ potential recovery of
$104,065.32 must be reduced by at least $34,688.44 in attorney fees.
Thus, the most ORS could recover from the settlement is $69,376.88.
¶12 Latham ultimately settled his claim for $800,000—an
amount not nearly what he believed his claim was worth. ORS
participated in the settlement negotiations and approved the
agreement. Latham and ORS agree that the full value of Latham’s
_____________________________________________________________
2 During the course of this litigation, Utah Code section 26-19-5
was renumbered as section 26-19-401. Because the renumbering did
not materially affect the text of the statute, we cite to the current
version for the readers’ convenience.
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LATHAM v. OFFICE OF RECOVERY SERVICES
Opinion of the Court
claim was $7,257,972.52. This amount includes, among other
damages, $104,065.32 in past medical expenses paid by Medicaid
and $6,430,614 in future medical expenses that Medicaid is not
currently obligated to pay.
¶13 Latham filed a complaint for declaratory relief in the district
court, seeking a determination of how much ORS was entitled to
collect from his settlement award. Citing federal Medicaid law,
Latham argued that ORS was permitted to place a lien on only that
portion of the settlement amount attributable to past medical
expenses. He argued that the district court should divide the
settlement amount ($800,000) by the total value of the claim
($7,257,972.52) and then multiple the resulting ratio (11 percent) by
the total past medical expenses ($104,065.32). According to Latham’s
calculations, that meant ORS’ recovery was capped at $7,631.46 after
attorney fees.
¶14 ORS countered that it was entitled to collect from the
portion of the award representing all medical expenses—be it for
past or future expenses. Under ORS’ calculation, this meant it could
collect from up to 90 percent of the settlement amount (or $720,000),
permitting a full recovery for ORS.
¶15 Latham filed a motion for judgment on the pleadings, which
the district court denied. Instead, the court entered judgment in
favor of ORS, ruling that ORS could place a lien on the portion of
Latham’s settlement amount representing all medical expenses. And
because $720,000 was greater than the State’s lien amount, the State
could recoup its entire claim of $69,376.88 ($104,065.32 minus
attorney fees of $34,688.44).
¶16 Latham appeals. We exercise jurisdiction pursuant to Utah
Code section 78A-3-102(3)(j).
STANDARD OF REVIEW
¶17 This court reviews a decision on a motion for judgment on
the pleadings de novo, giving no deference to the district court’s
analysis. See DIRECTV v. Utah State Tax Comm’n, 2015 UT 93, ¶ 11,
364 P.3d 1036.
ANALYSIS
¶18 The parties dispute how much ORS is entitled to collect
from Latham’s settlement award. The answer lies in whether federal
Medicaid law permits ORS to attach its lien to settlement funds
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allocable to all medical expenses—both past and future—or to only
the portion of the settlement representing past medical expenses.
¶19 We first analyze applicable federal law and conclude that
ORS may place its lien only on settlement funds allocable to past
medical expenses. We then address how a district court should make
such a calculation.
I. APPLICABLE FEDERAL LAW
¶20 Medicaid is a federal-state program that provides medical
assistance to residents of participating states who cannot afford
medical care. See 42 U.S.C. § 1396a(a). In a state’s implementation of
its Medicaid plan, federal law broadly prohibits states from seeking
reimbursement from individual Medicaid recipients for benefits they
have received (except in some circumstances not relevant here).
Specifically, the law prohibits a state from imposing a lien “against
property of an individual on account of medical assistance rendered
to him [or her] under a State plan” before his or her death. Id.
§ 1396p(a) (anti-lien provision).
¶21 But the third-party liability provisions of the federal
Medicaid law create an exception to this general rule. If a third party
is liable for medical costs paid by Medicaid on behalf of a recipient,
federal law requires states to first “take all reasonable measures to
ascertain the legal liability of third parties . . . to pay for care and
services available under the plan.” Id. § 1396a(a)(25)(A). If the State
determines such legal liability exists and Medicaid has paid for
medical costs for which the third party is liable, then the state plan
must “seek reimbursement for such assistance to the extent of such
legal liability.” Id. § 1396a(a)(25)(B). Finally, federal law requires
participating states to have in place laws under which the state plan
is considered to have acquired the right of the recipient to payment
by the third party, to the extent that Medicaid payments have been
made. Id. § 1396a(a)(25)(H).
¶22 The third-party liability provisions may be in tension with
the anti-lien provision when a Medicaid recipient receives a tort
recovery that is insufficient to both cover Medicaid’s expenditures
and fully compensate the recipient for his or her other damages. The
United States Supreme Court provided some clarification on the
interaction of these provisions in Arkansas Department of Health &
Human Services v. Ahlborn, 547 U.S. 268 (2006).
¶23 In that case, Arkansas resident Heidi Ahlborn suffered
injuries in a car accident and the Arkansas Department of Health
and Human Services (ADHS) paid medical providers $215,645.30 on
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LATHAM v. OFFICE OF RECOVERY SERVICES
Opinion of the Court
her behalf under the state’s Medicaid plan. Id. at 272–75. Although
the parties agreed that Ahlborn’s total claim was reasonably valued
at $3,040,708.12, the settlement she received from the tortfeasor was
only $550,000. Id. at 274. At the time, “Arkansas law automatically
impose[d] a lien on the settlement in an amount equal to Medicaid’s
costs.” Id. at 272. Pursuant to that law, ADHS asserted a lien on
Ahlborn’s settlement for the full amount of its expenditures related
to her injury. Id. at 274.
¶24 Ahlborn filed an action seeking a declaration that ADHS’
lien violated the anti-lien provision because the lien’s satisfaction
would “require depletion of compensation for injuries other than
past medical expenses.” Id. She argued that federal law permitted
ADHS to place a lien on only the portion of the settlement allocable
to past medical expenses. The parties stipulated that “if Ahlborn’s
construction of federal law was correct, ADHS would be entitled to
only the portion of the settlement ($35,581.47) that constituted
reimbursement for medical payments made.” Id. This was far less
than the $215,645.30 necessary to fully reimburse ADHS.
¶25 The district court sided with ADHS, ruling that Ahlborn had
assigned ADHS her right to any recovery from the third-party
tortfeasors to the full extent of Medicaid’s payments on her behalf.
Id. But the Eighth Circuit reversed, holding that ADHS was entitled
to only that portion of the judgment that represented payments for
medical care. Id. at 275.
¶26 The Supreme Court affirmed the Eighth Circuit, construing
United States Code section 1396a to allow ADHS to collect from only
that portion of Ahlborn’s settlement that represented medical
expenses. Id. at 282 (“[T]he federal third-party liability provisions
require an assignment of no more than the right to recover that
portion of a settlement that represents payments for medical care.”).
The court concluded that “[f]ederal Medicaid law does not authorize
ADHS to assert a lien on Ahlborn’s settlement in an amount
exceeding $35,581.47, and the anti-lien provision affirmatively
prohibits it from doing so.” Id. at 292.
¶27 Here, the district court interpreted Ahlborn to allow ORS to
recover from any of Latham’s settlement award representing
compensation for medical expenses in general—be it for past or
future costs. The district court reasoned that throughout the Ahlborn
opinion, the Supreme Court referred to the state’s recoverable
interest as that portion representing “medical expenses” without
further limiting the state’s interest to past medical expenses.
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¶28 It is correct that the Ahlborn Court did not expressly
differentiate between past and future medical expenses in its
holding. This has resulted in litigation of the question presented here
in lower courts throughout the nation. There has been some variance
in courts’ conclusions, but the majority of courts have held that states
may collect from only the portion of a recipient’s settlement award
representing past medical expenses.3
¶29 We conclude that federal law supports the majority position
that the State may place a lien on and collect from only that portion
of a tort recovery fairly allocable to past medical expenses. As the
Supreme Court made clear in Ahlborn, the general rule is that a state
cannot seek reimbursement from a recipient for medical expenses
Medicaid has paid on the recipient’s behalf. The third-party liability
provisions carve out an exception to this rule. So, a state’s authority
_____________________________________________________________
3 See, e.g., McKinney ex rel. Gage v. Phila. Hous. Auth., No. 07–4432,
2010 WL 3364400, at *9 (E.D. Pa. Aug. 24, 2010) (concluding that
Ahlborn does not permit states to encumber settlement money
attributable to future medical expenses to reimburse itself for past
medical expenditures); Price v. Wolford, No. CIV–07–1076–M, 2008
WL 4722977, at *2 (W.D. Okla. Oct. 23, 2008) (same); Giraldo v. Agency
for Health Care Admin., 248 So. 3d 53, 56 (Fla. 2018) (interpreting the
plain language of the Medicaid Act to allow the state to place a lien
on only those settlement funds allocable to past medical expenses);
Lugo ex rel. Lugo v. Beth Israel Med. Ctr., 819 N.Y.S.2d 892, 895–96
(Sup. Ct. 2006) (same); In re E.B., 729 S.E.2d 270, 288 (W. Va. 2012)
(“After a thorough examination of the Ahlborn decision and the
language contained in [the West Virginia statute], . . . we find that
[the statute] directly conflicts with Ahlborn, insofar as it permits [the
state] to assert a claim to more than the portion of a recipient’s
settlement that represents past medical expenses.”); but see I.P. ex rel.
Cardenas v. Henneberry, 795 F. Supp. 2d 1189, 1197 (D. Colo. 2011)
(concluding that the state agency “may seek reimbursement for its
past medical expenses from funds allocated to ‘medical expenses,’
regardless of whether those funds are allocated for past or future
medical expenses”); In re Matey, 213 P.3d 389, 394 (Idaho 2009) (“The
[Ahlborn] [C]ourt made no distinction between damages for past
medical care and those for future medical care. Nothing in 42 U.S.C.
§ 1396p indicates that the [s]tate may not seek recovery of its
payments from a Medicaid recipient’s total award of damages for
medical care whether for past, present, or future care.”).
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LATHAM v. OFFICE OF RECOVERY SERVICES
Opinion of the Court
to place a lien on a recipient’s tort recovery is restricted by what the
third-party liability provisions authorize.
¶30 The Supreme Court explained the following:
There is no question that the State can require an
assignment of the right . . . to receive payments for
medical care. So much is expressly provided for by
§§ 1396a(a)(25) and 1396k(a). And we assume . . . that
the State can also demand as a condition of Medicaid
eligibility that the recipient “assign” in advance any
payments that may constitute reimbursement for
medical costs. To the extent that the forced assignment
is expressly authorized by the terms of §§ 1396a(a)(25)
and 1396k(a), it is an exception to the anti-lien
provision. But that does not mean that the State can
force an assignment of, or place a lien on, any other
portion of Ahlborn’s property. As explained above, the
exception carved out by §§ 1396a(a)(25) and 1396k(a) is
limited to payments for medical care. Beyond that, the
anti-lien provision applies.
Ahlborn, 547 U.S. at 284–85 (citation omitted).
¶31 And the third-party liability provisions authorize the State
to seek reimbursement only for payments it has already made: in
other words, past medical expenses. United States Code
section 1396a(a)(25)(B) states that “in any case where such a legal
liability is found to exist after medical assistance has been made available
on behalf of the individual . . . [,] the State . . . will seek
reimbursement for such assistance to the extent of such legal
liability.”4 (Emphases added.) This language speaks to what
_____________________________________________________________
4 With regard to this provision, the Supreme Court rejected
ADHS’ argument that “to the extent of such legal liability” meant the
entirety of a recipient’s settlement was “fair game.” Ark. Dep’t of
Health & Human Servs. v. Ahlborn, 547 U.S. 268, 280 (2006). The
Supreme Court explained this language referred to “the legal
liability of third parties . . . to pay for care and services available under
the plan.” Id. (alteration in original) (quoting 42 U.S.C.
§ 1396a(a)(25)(A)). “[In Ahlborn], the tortfeasor has accepted liability
for only one-sixth of the recipient’s overall damages, and ADHS has
stipulated that only $35,581.47 of that sum represents compensation
(continued)
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expenses a state can recover. And it makes clear that a state is
entitled to recover only those expenses it has already paid—i.e., past
medical expenses. But section 1396a(a)(25)(B) does not directly speak
to the question presented here—whether a state’s lien may extend to
the portion of a settlement award that is for future medical expenses.
But section 1396a(a)(25)(H) does.
¶32 Section 1396a(a)(25)(H) states that when a state acquires a
recipient’s right to payment from a third party, that state acquires
only the right to reimbursement for payments that it has already
made:
[T]o the extent that payment has been made under the
State plan for medical assistance in any case where a
third party has a legal liability to make payment 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 . . . .
(Emphases added.) The phrase “‘[s]uch health care items or services’
is most naturally and reasonably read as referring to those ‘health
care items or services’ already ‘furnished’ and for which ‘payment
has been made under the state plan.’” Giraldo v. Agency for Health
Care Admin., 248 So. 3d 53, 56 (Fla. 2018) (citation omitted). These are
past medical expenses. This section, however, could simply be
establishing a floor for recovery rather than constructing a ceiling.
After all, section 1396a(a)(25)(H) speaks in terms of what a state must
do, not in terms of what a state is limited to doing. It mandates that a
state “ha[ve] in effect laws under which . . . the State is considered to
have acquired the rights of [an] individual to payment by any other
party for” past medical expenses. It does not affirmatively foreclose a
state from having in effect laws under which that state is entitled to
acquire the rights of an individual to payment by any other party for
other costs such as future medical expenses, pain and suffering, and
lost wages.
for medical expenses. Under the circumstances, the relevant
‘liability’ extends no further than that amount.” Id. at 280–81.
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Opinion of the Court
¶33 The Ahlborn decision helps resolve this issue. There, the
Supreme Court interpreted section 1396a(a)(25)(H) as limiting the
scope of an assignment of rights. The Court stated in clear terms that
“the statute does not sanction an assignment of rights to payment for
anything other than medical expenses—not lost wages, not pain and
suffering, not an inheritance.” Ahlborn, 547 U.S. at 281 (emphasis
added). Reading this language from Ahlborn in conjunction with the
language of section 1396a(a)(25)(H), we conclude that section
establishes a ceiling on the portions of a settlement to which a lien
may extend. And that ceiling limits the lien to the portion of a
settlement representing past medical expenses.
¶34 We note that this conclusion seems to conflict with the
language of section 1396k. That section appears to authorize states to
acquire the rights to other portions of the settlement, not just the past
medical expenses portion of the settlement. Section 1396k(a)(1)(A)
requires an individual receiving Medicaid to “assign the State any
rights . . . to support (specified as support for the purpose of medical
care by a court or administrative order) and to payment for medical
care from any third party.” This provision makes no distinction
between past and future payments for medical care. Section 1396k(b)
further states:
Such part of any amount collected by the State under
an assignment made under the provisions of this
section shall be retained by the State as is necessary to
reimburse it for medical assistance payments made on
behalf of an individual with respect to whom such
assignment was executed . . . , and the remainder of
such amount collected shall be paid to such individual.
This provision first makes clear that a state’s right to reimbursement
is only for past medical expenses. This point is undisputed. But
section 1396k(b) then suggests that an assignment of an individual’s
right to payment may extend to more than that portion of the
settlement representing past medical expenses. Section 1396k(b)
contemplates situations where a “remainder” of the amount
collected under an assignment or lien will be paid to the individual
who received medical assistance. Yet if a state’s assignment of rights
was limited to the portion of the settlement allocated for past
medical expenses, such a situation would never occur. There would
never be a “remainder” to pay the individual because the state
would collect the entire amount available under the assignment—an
amount presumptively equivalent to past medical expenses, which
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the state is entitled to recover. A remainder would exist only if the
state could draw from the entire portion of the settlement allocated
to “support” or “payment for medical care.”
¶35 There is, however, a way to resolve this apparent
inconsistency in the statutory scheme. Section 1396a(a)(25)(H) speaks
more specifically to the issue presented here. And where there is an
inconsistency between related statutory provisions, the specific
provision controls over the general. See Dairyland Ins. Co. v. State
Farm Mut. Auto. Ins. Co., 882 P.2d 1143, 1146 (Utah 1994).
Section 1396k(b) speaks about the assignment of rights generally.
And the conclusion we derive from that section requires some
inductive reasoning based on the “remainder” language. The
language of section 1396a(a)(25)(H), meanwhile, speaks directly to
the issue presented here. And when “there is a conflict between a
general provision and specific provision, the specific provision
prevails.” ANTONIN SCALIA & BRYAN A. GARNER, READING LAW: THE
INTERPRETATION OF LEGAL TEXTS 183 (2012). We accordingly conclude
that the State may place a lien on and recover from only that portion
of an individual’s settlement representing past medical expenses.
¶36 We understand that ORS seeks reimbursement for only past
payments made on Latham’s behalf. ORS is not attempting to collect
future medical expenses that Medicaid may or may not pay on
behalf of Latham. But, under the Supreme Court’s logic in Ahlborn,
this is precisely why ORS may not place a lien on any of Latham’s
settlement allocable to future medical expenses. The Court made
clear that the state may require an assignment of, or place a lien on,
only settlement funds representing what the state is authorized to
collect. Ahlborn, 547 U.S. at 284. As the Supreme Court explained,
“Again, the statute does not sanction an assignment of rights to
payment for anything other than medical expenses—not lost wages,
not pain and suffering, not an inheritance.” Id. at 281. While the
Court did not include “future medical expenses” in that list, it would
have fit. As we have established, a state is authorized to collect only
payments it has already made—past medical costs. And while the
Ahlborn Court did not expressly differentiate between past and
future medical expenses, it appears that the Court may have
considered future medical expenses to be distinct from past medical
expenses—with future medical expenses treated like other
compensation belonging to the recipient. Id. at 273 (“[Ahlborn]
claimed damages not only for past medical costs, but also for
permanent physical injury; future medical expenses; past and future
pain, suffering, and mental anguish; past loss of earnings and
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working time; and permanent impairment of the ability to earn in
the future.” (emphasis added)). And the Court was clear that state
Medicaid plans cannot collect from the portion of a settlement
representing those categories of damages, as they represent property
of the recipient protected by the anti-lien provision and outside the
reach of the third-party liability provisions. Id. at 284–85.
¶37 Accordingly, we reverse the district court and conclude that
ORS cannot collect from Latham’s settlement award beyond the
portion that can be fairly apportioned to past medical expenses. As
discussed below, we leave this apportionment to the district court on
remand.
II. REIMBURSEMENT CALCULATION
¶38 Here, the parties to the settlement agreement assented to a
final lump sum, but they did not itemize or quantify the various
damages that amount was intended to cover. This is not unusual.
And it raises a question numerous courts have confronted since
Ahlborn: how should a court determine what portion of a tort
recovery represents compensation for past medical expenses in the
absence of an explicit designation by the parties or the factfinder?
¶39 Latham argues that the Supreme Court answered this
question in Ahlborn by endorsing the following formula: divide the
settlement amount by the total value of the Medicaid recipient’s
claim against the third-party tortfeasor then multiply the resulting
ratio by the amount Medicaid has paid on the recipient’s behalf.
Latham argues the district court erred when it did not apply this
formula.
¶40 Latham is incorrect. The Ahlborn Court did not endorse any
such formula. It did not have to. The parties in that case stipulated to
all relevant numbers, so the question we face here was not before the
Court. See id. at 274. While the Ahlborn parties apparently agreed that
this ratio accurately reflected the amount of the recovery
representing compensation for past medical expenses in that case,
the Court’s acceptance of those stipulated facts did not amount to an
endorsement of the parties’ method for arriving at those figures.
¶41 Despite lacking occasion to address this issue, the Ahlborn
Court nonetheless anticipated the likelihood that a tort recovery
might not include an itemized allocation of compensation. See id.
at 288. The Court noted that these problems could “be avoided either
by obtaining the State’s advance agreement to an allocation or, if
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necessary, by submitting the matter to a court for decision.” Id. But
beyond this statement, the Court did not provide specific guidance.
¶42 The Supreme Court provided a bit more direction in Wos v.
E.M.A. ex rel. Johnson, 568 U.S. 627, 638 (2013). Wos involved a North
Carolina statute requiring that up to one-third of any damages
recovered by a Medicaid recipient be paid to the state to reimburse it
for injury-related payments. Id. at 630. The Court rejected this
approach, holding that it violated the anti-lien provision because it
allowed the state to claim a portion of a recipient’s award that was
not attributable to medical expenses. Id. at 636. The Court criticized,
The defect in [the statute] is that it sets forth no process
for determining what portion of a beneficiary’s tort
recovery is attributable to medical expenses. Instead,
North Carolina has picked an arbitrary number—
one-third—and by statutory command labeled that
portion of a beneficiary’s tort recovery as representing
payment for medical care.
Id.¶43 Wos makes clear that if parties do not stipulate to the
portion of an award attributable to past medical expenses, a court
must make a case-specific factual finding. Arbitrary presumptions
will not do. Beyond that, the Court did not mandate any particular
method of accomplishing this task.
¶44 Ultimately, ORS may place a lien on only that portion of a
settlement or judgment that is fairly allocable to past medical
expenses. When this fact-intensive issue is presented to a district
court, we will not mandate that the court use any particular method
to make this determination. We leave it to the discretion of the
district court to determine the appropriate methodology, based on
the information at the court’s disposal. The court might decide that
an evidentiary hearing is necessary, that the ratio formula is a fair
allocation in the case at hand, or that the court is sufficiently familiar
with the facts of the case to make a determination based solely on
oral argument. See, e.g., McKinney ex rel. Gage v. Phila. Hous. Auth.,
No. 07–4432, 2010 WL 3364400, at *9 (E.D. Pa. Aug. 24, 2010)
(“Having presided over this hotly contested case for nearly three
years, this [c]ourt is in the best position to assess the factors that
would have influenced the [p]arties’ settlement positions and to
make an ultimate determination of what portion of the settlement
represents compensation for past medical expenses.”).
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Opinion of the Court
¶45 Here, the district court found the following undisputed
facts: Latham settled his claim against the hospital for $800,000. The
total value of his claim was $7,257,972.52. This amount includes,
among other damages, $104,065.32 in past medical expenses and
$6,430,614 in future medical expenses.
¶46 To determine the portion of Latham’s settlement from which
ORS could collect, the district court’s methodology resembled the
ratio formula used by the Ahlborn parties. The court determined
what portion of Latham’s total claim value resulted from all medical
expenses—both past and future. Then, the court “appl[ied] that
percentage to the settlement to determine what amount of the
settlement represent[ed] compensation for medical expenses.”
Because 90 percent (or $6,534,679.32) of Latham’s total claim (of
$7,257,972.52) represented medical expenses, the district court
reasoned that approximately 90 percent (or $720,000) of Latham’s
$800,000 settlement was allocable to medical expenses. Because the
court had ruled that ORS could recover its claim ($69,376.88) from
the portion of the settlement representing all medical expenses
($720,000), the court allowed ORS to be fully reimbursed.
¶47 The district court is free to use a ratio methodology if the
court concludes that it results in a fair allocation under the case at
hand. However, it was error to allow ORS to collect from the portion
of the tort recovery representing future medical expenses.
¶48 Accordingly, we reverse the district court and remand for a
determination of the portion of Latham’s settlement that is fairly
allocable to past medical expenses.
CONCLUSION
¶49 We reverse the district court’s conclusion that the State can
recover from settlement proceeds representing both past and future
medical costs. ORS may place a lien on and recover from only that
portion of Latham’s settlement representing past medical expenses.
Accordingly, we reverse and remand to the district court to proceed
in accordance with this decision.
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