Doe v. Vermont Office of Health Access ( 2010 )

Doe v. Vt. Office of Health Access, No. S0355-07 CnC (Toor, J., May 17, 2010)
[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
accompanying data included in the Vermont trial court opinion database is not guaranteed.]
STATE OF VERMONT
CHITTENDEN COUNTY
│
JOHN DOE │
Plaintiff │
│ SUPERIOR COURT
v. │ Docket No. S0355-07 CnC
│
VERMONT OFFICE OF HEALTH │
ACCESS │
Defendant │
│
RULING ON CROSS MOTIONS FOR SUMMARY JUDGMENT
Plaintiff John Doe1 sues the State of Vermont, Office of Vermont Health Access
(the State). He seeks a declaration that he has satisfied in full any and all rights of the
State to recover its lien for the reimbursement of sums paid by the State under the
Medicaid program for his medical care as a result of injuries he sustained in an
automobile accident and for which he received settlement funds from lawsuits. Plaintiff
further alleges that the State has recovered $72,859.70 above the amount of its legally
permissible lien, and requests that the State be directed to pay him that amount. The
State has filed a counterclaim, seeking, among other things, declaration that the State is
entitled to recover $506,810 in satisfaction of a lien it says it acquired in 2006 at the time
Plaintiff reached a settlement. The State has moved for summary judgment in that
amount. Plaintiff opposes the State’s motion, and has filed a cross-motion for summary
judgment seeking judgment in his favor in the amount of $72,859.70.
Where, as here, both parties move for summary judgment, both are entitled to the
benefit of all reasonable doubts and inferences when the opposing party’s motion is being
1
On October 16, 2007, this court (Katz, J.) granted permission to amend the complaint and change the case
name to John Doe v. State.
judged. Bixler v. Bullard, 172 Vt. 53, 57 (2001) (citing Toys, Inc. v. F.M. Burlington
Co., 155 Vt. 44, 48 (1990)). The court must rule on each party’s motion “on an
individual and separate basis, determining, for each side, whether a judgment may be
entered in accordance with the Rule 56 standard.” 10A Wright, Miller & Kane, Federal
Practice and Procedure: Civil 3d § 2720. “Both motions must be denied if the court finds
that there is a genuine issue of material fact.” Id.
I. Factual Background
Both parties’ motions rest on the same basically undisputed core of facts, set forth
in this background statement. The parties have each filed statements of fact in support of
their motions; responses in opposition; and—due to a continuance granted pursuant to
V.R.C.P. 56(f)—the State has filed “additional material facts,” to which Plaintiff has filed
a response. The following facts are derived from the parties’ statements and from their
pleadings. Disputes are noted where appropriate.
In 1992, at the age of nine, Plaintiff John Doe was injured and paralyzed in an
automobile accident, when the family car in which he was a back seat passenger left the
traveled portion of the New York State Thruway and went down an embankment. The
accident occurred on a portion of the Thruway that was designed to have guide rails to
prevent cars from going down the embankment in the event that they veered off the
traveled portion of the highway. The New York State Thruway Authority (NYSTA) had
contracted for that guide rail to be installed, but the guide rails were never installed on the
portion of the road where the accident occurred.
Plaintiff had medical needs as a result of his injuries. On or about November 17,
1994, Plaintiff’s mother formally applied for Medicaid coverage for Plaintiff, and signed
an agreement with the State. The State says that under the agreement, Plaintiff’s mother
2
agreed to assign to the State, through subrogation, Plaintiff’s rights to recover against
liable third parties. Plaintiff says this right of subrogation was only a limited right.
Plaintiff qualified for and began receiving Medicaid benefits from the State to assist in
paying for the medical care he required. The State has paid some but not all of John
Doe’s medical bills for items and services related to the injuries he sustained.
As a result of the injuries he sustained in the 1992 accident, Plaintiff brought suit
in two New York state courts. He brought suit in New York Supreme Court against
various alleged third-party tortfeasors, not including NYSTA. He also brought suit in the
New York Court of Claims against NYSTA. On or about January 29, 2001, the State
informed Plaintiff that it had a legal claim against any award, judgment, or settlement
stemming from the 1992 accident. The State said that it would use the methodology in
42 C.F.R. § 411.37(c) to determine the net amount of its lien.
On or about July 3, 2001, Plaintiff’s suit against third parties in the New York
Supreme Court settled for $8,750,000 (the 2001 settlement). As of that date, the State
had incurred approximately $894,893.11 in medical expenses on Plaintiff’s behalf.
Plaintiff and the State then exchanged a series of communications regarding Plaintiff’s
obligation to reimburse the State. On or about July 11, 2001, Plaintiff offered to settle
the State’s lien on the 2001 settlement for $500,000. On or about July 19, 2001, the State
rejected Plaintiff’s offer to settle the lien for $500,000. The State had calculated—using
the methodology in 42 C.F.R. § 411.37(c)—that the amount of its adjusted or net lien
with respect to the 2001 settlement was $572,699.59.
On or about August 2, 2001, counsel for Plaintiff wrote to counsel for the State,
acknowledging the State’s July 19 letter, and noting that “[i]t is again disappointing that
the State refuses to make any compromise whatsoever . . . .”. Ex. 9 to State’s Mot. for
3
Summ. J. at 1 (filed July 17, 2008). Using “final figures for expenses in connection with
the litigation to date” ($286,273.98), and incorporating the fact that counsel for Plaintiff
would not be receiving an attorney’s fee for the first $500,000 of the settlement proceeds,
Plaintiff used the “Medicaid TPL Worksheet” to calculate that the State’s net lien was
$594,209.03. Id.2 The letter concluded as follows: “If this calculation is acceptable,
please provide me with written confirmation that the state will accept that amount from
the total settlement proceeds, and will not seek further sums from the settling
defendants . . . or their insurers.” Id. at 2.
On or about August 9, 2001, counsel for the State wrote to Plaintiff, stating: “At
this time my client agrees that the sum due to the State of Vermont for Medicaid
reimbursements is $594,209.03.” Ex. 11 to State’s Mot. for Summ. J. at 1 (filed July 17,
2008). The letter continued:
Since the $594,209.03 was based on Medicaid claims paid out on behalf of
[Plaintiff] as of June 22, 2001 and since the Department continues to pay
out claims, it will seek reimbursement from defendants other than [the
defendants in the New York Supreme Court action], to the extent that
[Plaintiff] prevails in his actions against the remaining defendants,
[NYSTA] and the San Juan Construction and Sales Company.
Id.
On or about October 4, 2001, Plaintiff paid the State $594,209.03 from the
proceeds of the 2001 settlement. By a letter dated October 12, 2001, the State
acknowledged receipt of Plaintiff’s payment of $594,209.03 and stated that the payment
satisfied the State’s liens against certain defendants (presumably the defendants in the
2
Plaintiff’s calculation resulted in a figure that was higher than $572,699.59 primarily because the State’s
calculation yielding the $572,699.59 figure assumed attorney’s fees were one-third of the total $8.75
million settlement. Incorporating into Plaintiff’s calculation the fact that counsel for Plaintiff would not be
receiving an attorney’s fee for the first $500,000 of the settlement proceeds results in lower “procurement
costs” and ultimately a larger recovery for the State.
4
New York Supreme Court action), but not others (presumably NYSTA). Plaintiff
continued to receive Medicaid benefits after the 2001 settlement.
Plaintiff’s suit against NYSTA went to trial on the merits before the New York
Court of Claims. After trial, the court issued a decision dated September 20, 2004. The
court concluded that NYSTA was negligent, and that its negligence was a proximate
cause of Plaintiff’s injuries. Ex. 12 to State’s Mot. for Summ. J. at 3 (filed July 17,
2008). The Court of Claims concluded that Plaintiff’s damages were as follows:
Past pain and suffering $1,000,000.00
Past medical and care $2,903,636.00
Total past damages: $3,903,636.00
Future pain and suffering $4,000,000.00
Future medical and care $33,831,103.00
Future loss of earnings $621,283.00
Total future damages $38,452,386.00
Total award to [Plaintiff] $42,356,022.00
Id. at 58–59. The court noted that “[s]ince the amount of future damages awarded to
[Plaintiff] exceeds $250,000.00, a structured judgment is required.” Id. at 59. The court
ordered that “judgment will be held in abeyance pending a hearing pursuant to CPLR
Article 50-B at which time the offset of the $8,000,000.00 previously received in
settlement in Supreme Court will be applied.” Id. at 59–60. On or about October 19,
2005, the New York Court of Claims issued a “50-B judgment” which provided for
annuitization of the damages and annual increases in payments to address inflation. The
judgment allocated the sum of $2,903,636 for all of Plaintiff’s past medical expenses
from the date of injury forward to the date of trial.
5
On or about July 7, 2006, while NYSTA’s appeal was pending, Plaintiff reached a
settlement with NYSTA in the amount of $12,000,000 (the 2006 settlement).3 On or
about May 10, 2007, the parties entered a “Stipulation of Final Settlement” for that
amount.4 Between approximately July 3, 2001, when the first case was settled, and July
7, 2006, when the second case was settled, the State paid approximately $771,111 in
medical expenses for care extended to Plaintiff. The State claims a lien on the 2006
settlement in the amount of $506,810, reflecting the $771,111 minus the State’s share of
litigation expenses.5 It does not appear that either the 2001 settlement or the 2006
settlement allocated—as had the Court of Claims—what portions of the total damages
were for past medical care.
II. The Medicaid Program and the State’s Right to Reimbursement
To understand the dispute between the parties, it is necessary to briefly
summarize the legal mechanisms governing Medicaid payments made by states on behalf
of individuals who qualify for those payments, and the states’ right to be reimbursed for
those payments when the individual recovers against third parties. The Medicaid
program “provides joint federal and state funding of medical care for individuals who
cannot afford to pay their own medical costs . . . .” Ark. Dep’t of Health and Human
3
The parties’ statements of fact do not mention the appeal from the Court of Claims’ judgment, but both
parties have acknowledged in their memoranda that an appeal was pending. See Pl.’s Opp’n at 5 (filed Oct.
23, 2008); Def.’s Reply at 2 (filed May 22, 2009).
4
The court is not certain why, if the parties to the Court of Claims action settled in July 2006, they did not
enter into the stipulation until May 2007. The parties to this case do not dispute those dates, however, and
the court takes them as true for present purposes.
5
The parties do not quite agree on how to perform the calculation of the State’s share of litigation
expenses, but their basic methodology appears to be the same. Plaintiff says the State’s share is 35.7% of
$711,000: $253,827. Pl.’s Reply at 9 (filed Aug. 12, 2009). The State says its share is $264,301 (or about
37.17% of $771,111.37). State’s Reply at 28 (filed May 22, 2009). Some of the difference comes from the
fact that Plaintiff apparently transposed a “1” for the “7” in the ten-thousands place, and also rounded to the
nearest thousand. In any case, as is clear from the discussion below, this difference is perhaps the least of
the parties’ legal or mathematical disputes.
6
Services v. Ahlborn, 547 U.S. 268, 275 (2006). “[T]he Federal Government pays
between 50% and 83% of the costs the State incurs for patient care, and, in return, the
State pays its portion of the costs and complies with certain statutory requirements . . . .”
Id. (footnote omitted).
“One such requirement is that the state agency in charge of Medicaid . . . ‘take all
reasonable measures to ascertain the legal liability of third parties . . . to pay for care and
services available under the plan.’” Id. (quoting 42 U.S.C. § 1396a(a)(25)(A)). A state
participating in the Medicaid program is obligated to seek reimbursement from liable
third parties, and must have laws in effect:
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.
Id. at 276 (quoting 42 U.S.C. § 1396a(a)(25)(H)).
Like every other state, Vermont participates in the Medicaid program. See id. at
275 (all states participate); 33 V.S.A. § 1901–1910 (Medicaid). The pertinent statute as it
applies to this case6 reads as follows:
(a) The agency [of human services] shall have a lien against a third party,
to the extent of the amount paid by the agency, on any recovery for that
claim, whether by judgment, compromise or settlement, whenever:
(1) the agency pays medical expenses for or on behalf of a recipient who
has been injured or has suffered an illness or disease as a result of
negligence; and
(2) the person asserts a claim against a third party for damages resulting
from the injury, illness or disease.
6
After this suit was filed in 2007, § 1910 was amended by 2007, No. 192 (Adj. Sess.), § 6.014. Because
the act did not specify a different effective date for § 6.014, that section became effective on July 1, 2008—
after this case began. 1 V.S.A. § 212. Thus the amendments to 33 V.S.A. § 1910 do not affect this case.
1 V.S.A. § 213. Subsequent citations to § 1910 are to its provisions before the 2008 amendments.
7
33 V.S.A. § 1910(a).7 Section 1910 further provides that “[w]henever the agency
recovers under the lien and that recovery is the result of an action initiated by a recipient,
the attorney for the recipient may withhold the agency’s pro rata share of reasonably
necessary costs and expenses incurred in asserting the claim” and that “[t]he attorney for
the recipient may negotiate an attorney fee with the agency.” Id. § 1910(i), (j). The final
two provisions of § 1910 are as follows:
(k) In cases in which the agency’s lien equals or exceeds the amount of
judgment or settlement, the agency shall reduce its claim by recognizing
reasonable attorney fees and other reasonable costs of procurement of
settlement. Additionally, the agency shall compromise its claim taking
into consideration the nonmedical claims of the recipient.
(l) In cases in which the court has determined the amount of recovery
allocated for past medical expenses, the agency’s lien shall be limited to
that amount.
III. Discussion
The parties agree that, under Ahlborn, the State is entitled only to recover from
amounts Plaintiff has recovered that are attributable to his past medical expenses. Their
views diverge, however, in several respects. First, they disagree over whether the court
should consider the 2001 settlement in calculating the past medicals. Second, they
disagree over whether the court can determine the allocation from the record before it, or
must hold a hearing to take evidence to determine the allocation. Third, they disagree
over the formula the court should use in doing its calculations.
Here, there are two settlements with two sets of defendants in the underlying tort
actions—one reached before Ahlborn was decided and one after—neither of which
allocate or break out what portion of the total settlement amount represents medical
7
Plaintiff does not argue that the Office of Vermont Health Access may not assert the agency’s lien, and
the court does not conclude otherwise.
8
expenses and what portion represents other damages like pain and suffering or lost
wages. Unlike Ahlborn, the parties in this case have not stipulated what portion of either
settlement constitutes reimbursement for medical expenses. However, the New York
Court of Claims issued an opinion prior to the second settlement which broke out
Plaintiff’s damages in detail. The court considers these circumstances below, addressing
the three disagreements identified above in the process.
A. The 2001 Settlement
According to the State, Plaintiff cannot “reopen” his 2001 payment of
$594,209.03. That payment, says the State, settled its lien on the 2001 settlement, and
plays no role in this case.
According to Plaintiff, the State’s recovery in 2001 reached beyond his medical
expenses in violation of Ahlborn. Basically, Plaintiff would treat both the 2001 and 2006
settlements together for the purposes of his calculation—summing the Medicaid
payments, settlements, and procurement costs—and then use the New York Court of
Claims’ 2004 opinion to arrive at an allocation for the portion of the sum of both
settlements that constitutes reimbursement for medical payments. Under Plaintiff’s
calculation, the State is entitled to recover a total of $521,349.33, but has already
recovered $72,859.70 more than that.8
8
Plaintiff details his calculation as follows:
1. Divide the amount awarded for past medical expenses under the 2005 Order,
$2,903,636, by the total award, $42,356,022 to determine the percentage of the total
award (6.855%) that was for past medical expenses.
2. Apply that percentage to the amount recovered through settlement, $20,750,000
($8,750,000 (2001) + $12,000,000 (2006)), to determine the amount of the
settlement attributable to past medical expenses, or $1,422,469.
3. Determine the percentage of past medical expenses paid for by the State’s Medicaid
program. The total amount paid by the State is $1,666,604 or 57% of the past
medical expenses. (footnote continued on next page)
9
The first issue is whether Ahlborn requires this court to reopen and recompute the
value of the State’s lien after the 2001 settlement. The court concludes the answer is no.
As to that particular lien, Plaintiff and the State reached an agreement analogous to an
accord and satisfaction. An accord and satisfaction consists of three elements: “(1) the
claim is disputed; (2) the party offered to pay less than the amount allegedly due; and (3)
in full settlement of the claim, the other party accepted and retained the lesser amount
offered.” Roy v. Mugford, 161 Vt. 501, 513 (1994).
Here, judging by the parties’ negotiations, there was a dispute over how much
Plaintiff should pay the State from the 2001 settlement proceeds. Plaintiff offered to pay
the State $594,209.03. Technically, that amount was not less than the amount allegedly
due, but equal to the amount due, since the State agreed that that represented the sum due
for Medicaid reimbursements. The State accepted the $594,209.03, settling its lien with
respect to the New York Supreme Court defendants. In short, in exchange for the State’s
agreement not to seek further sums from the settling defendants in the New York
Supreme Court action, Plaintiff paid the State $594,209.03.
The court concludes this set of facts sufficiently establishes the elements of
accord and satisfaction. See Paopao v. Wash. Dep’t of Social and Health Services, 185
P.3d 640, 643–44 (Wash. Ct. App. 2008) (parties who settled a claim for reimbursement
4. Multiply the percentage of past medical expense paid by the State by the amount of
settlement attributable to past medical expenses, 57% x $1,422,469 to determine the
portion of recovered past medical expenses attributable to expenses paid by
Medicaid, and, consequently, against which the State can lien, or $810,807.33.
5. Determine the State’s proportionate share of fees and expenses. Total costs and
expenses were $7,401,367 or 35.7% of the total recovery. The State’s share is 35.7%
of the $810,807.33 against which it can assert its lien or $289,458.
6. The State of Vermont is, therefore, entitled to recover a total of $521,349.33
($810,807.33 - $289,458), but already recovered $72,859.70 in excess of that amount
in 2001.
Pl.’s Opp’n at 16 (filed Oct. 23, 2008).
10
of medical expenses from the amount plaintiff received from a third-party tortfeasor
arrived at an accord and satisfaction). Doran v. Missouri Department of Social Services
does not require a contrary result because the plaintiffs in that case did not negotiate with
the lienholder, and did not arrive at any agreement. No. 07-CV-04158-NKL, 2008 WL
4151617 at *5 (W.D. Mo. 2008). Doran did not involve the elements of dispute, offer,
and acceptance necessary for an accord and satisfaction.
Having arrived at an agreement with the State in 2001, Plaintiff cannot now
invoke Ahlborn to retroactively undo that agreement. “Generally, only when a matter is
still pending, is case law given retroactive effect.” Paopao, 185 P.3d at 644 (citing
Reynoldsville Casket Co. v. Hyde, 514 U.S. 749, 752 (1995)). The matter of the 2001
settlement and lien was closed long before Ahlborn was decided. The rule announced in
Ahlborn does not apply to a dispute that was no longer pending by the time Ahlborn was
decided in 2006. See id. at 644–45.
B. The 2006 Settlement
The next issue is how to compute the State’s lien on the proceeds of the 2006
settlement, which—like the 2001 settlement—does not allocate damages. Both parties
have cited Bolanos v. Superior Court, 87 Cal. Rptr. 3d 174 (Cal. Ct. App. 2008). The
court agrees with the Bolanos court’s observation that “a settlement that does not
distinguish between past medical expenses and other damages must be allocated between
these two classes of recoveries. Without such an allocation, the principle set forth in
Ahlborn, that the state cannot recover for anything other than past medical expenses,
cannot be carried into effect.” Bolanos, 87 Cal. Rptr. 3d at 180; see also Espericuenta v.
Shewry, 79 Cal. Rptr. 3d 517, 527 (Cal. Ct. App. 2008) (“[T]he Supreme Court’s
conclusion in Ahlborn that a state Medicaid agency can only lay claim to that portion of
11
the settlement that represents payments for medical care has the practical effect of
requiring a record that distinguishes between the different categories of damages.”).
Thus the court turns to the issues of where to get the necessary allocation, and what to do
with it.
1. Whether the Allocation Should Come from a Hearing or Instead from the Court of
Claims’ Findings
Plaintiff argues the requisite allocation can come from the New York Court of
Claims’ 2004 opinion. Both Plaintiff’s original calculation, Opp’n at 16, and his
alternative calculation, Reply at 9 (filed Aug 12, 2009), use the Court of Claims’ figures
to arrive at an allocation. The State maintains that the Court of Claims’ ruling should not
be used to establish an allocation, and that instead a hearing is necessary to resolve the
allocation issue. State’s Reply at 13 (filed May 22, 2009). The State proffers the
affidavit of an attorney, Peter Joslin, to support its argument that the proper valuation of
the case is actually the settlement amount of $12 million rather than the $42,356,022
awarded by the Court of Claims. Ex. E to State’s Supplemental Opp’n, Aff. of Peter B.
Joslin at 13 (filed Oct. 29, 2009).
The court recognizes that Plaintiff entered into a “Stipulation of Final Settlement”
with NYSTA after the Court of Claims entered its damages ruling, and that Plaintiff
recovered $12,000,000 based on that stipulation rather than the $42,356,022.00 in total
damages found by the Court of Claims. The State’s position is basically that the
stipulation washed away all of the findings and allocations made by the Court of Claims,
and that what is left is an unallocated settlement of $12,000,000. Although the State
concedes that Ahlborn requires an allocation, the State’s position is that, because there is
no other way to arrive at such an allocation, the court must hold a hearing. See Lugo v.
12
Beth Israel Med. Ctr., 819 N.Y.S.2d 892, 897–98 (N.Y. Sup. Ct. 2006) (“A court
determination is necessary to confirm the full value of the case and the value of the
various items of damages, including plaintiff’s injuries and how they compare to verdicts
awarded in other cases. The parties are also entitled to be heard on the fair allocation of
the settlement proceeds.”).
The court concludes that, even though Plaintiff ultimately recovered based upon
the terms of his settlement, the Court of Claims’ ruling on damages can and should be
used in this case to arrive at the allocation that Ahlborn requires. By settling without the
State’s “advance agreement to an allocation,” Ahlborn, 547 U.S. at 288, Plaintiff
essentially adopted the Court of Claims’ allocation proportions. Furthermore, although a
hearing might not be an improper way to arrive at an allocation, it makes little sense to
duplicate the evidence presented and judicial effort expended in the Court of Claims
action. To hold an entirely new hearing at which this court would have to redo the same
analysis that was done in the Court of Claims would be a hugely wasteful allocation of
both judicial resources and those of the parties. There is no reason for this court to reject
the considered findings of a sister court that, as the State acknowledges, rendered its
decision after a trial on the merits.
For these reasons, the court concludes that Attorney Joslin’s affidavit is not
relevant to the task at hand, nor does it raise a genuine issue of material fact. The
affidavit challenges the Court of Claims’ factual findings on various issues, and seeks to
convince this court of different conclusions. This court is, however, unwilling to retry
the merits of the case.
To the extent the State contends that Lugo stands for the proposition that an
allocation hearing must be held in every case of this type, the court disagrees. In this
13
case, unlike in Lugo, there is a court opinion that specifically allocated past medical
expenses as a portion of total damages. Ahlborn does not require a specific method for
determining the portion of a settlement that represents recovery of medical expenses.
Andrews v. Haygood, 669 S.E.2d 310, 313 (N.C. 2008); see also Lima v. Vouis, 94
Cal. Rptr. 3d 183, 197 (Cal. Ct. App. 2009) (noting that trial court must make allocation
using a “fair and equitable methodology,” and that there may be more than one way to
make an appropriate allocation); Bolanos, 87 Cal. Rptr. 3d at 181 (“What matters is that
past medical expenses are distinguished in the settlement from other damages on the
basis of a rational approach . . . .”). The court concludes it is both efficient and proper to
utilize the Court of Claims figures to arrive at the allocation Ahlborn requires.
The court finds unpersuasive the State’s arguments that the particular
circumstances of this case require ignoring the Court of Claims’ opinion. First, the State
argues that the Court of Claims’ finding as to total damages is unreliable because that
figure is comprised largely of future damages, which, in turn, is anomalous because
NYSTA was precluded from offering its damages experts at trial. See State’s Reply at 20
(filed May 22, 2009). Plaintiff and NYSTA settled that case before any opinion was
issued on appeal, however, and this court has already concluded that by doing so Plaintiff
essentially adopted the Court of Claims’ allocation proportions. Second, it is true that
this case involves catastrophic injuries to a child. It might be reasonable to conclude that
a large factor in the 2006 settlement was the cost of future medical care, and therefore
that the assumption of the so-called “Ahlborn formula”—that on average, the settlement
will be influenced most directly by the amount of past medical expenses—is less likely to
apply. See Bolanos, 87 Cal. Rptr. 3d at 181–82. Although plausible, this argument is
unpersuasive for the same reason articulated above: Plaintiff adopted the Court of
14
Claims’ allocation proportions. Furthermore, as discussed below, the court concludes
that it need not use the Ahlborn approximation here.
2. How to Use the Court of Claims’ Findings to Perform the Calculation
Each party has presented two sets of calculations using the Court of Claims
figures to arrive at an allocation. First, the State argues that the Court of Claims found
past medical expenses to be $2.9 million—more than enough to cover the State’s claim of
$506,810.9 State’s Reply at 22 (filed May 22, 2009). Alternatively, using a pro rata
reduction, the State calculates that the amount of the 2006 settlement attributable to past
medical expenses is $822,636, and concludes that that figure also exceeds $506,810. See
id. at 26–28. As discussed above, Plaintiff’s first calculation sums the 2001 and 2006
settlements and concludes that the State is entitled to recover a total of $521,349.33, but
has already recovered $72,859.70 more than that. Alternatively, assuming that the 2001
lien payment could not be reopened, Plaintiff employs a pro rata reduction to conclude
that the State can at most recover approximately $130,000. See Pl.’s Reply at 9 (filed
Aug 12, 2009).
The court rejects both sets of calculations. The State’s first calculation assumes
that Plaintiff’s recovery for past damages was not reduced at all in the 2006 settlement.
The court is unwilling to make that assumption; as stated above, the court concludes that
the allocation proportions in the Court of Claims’ opinion carry through to the 2006
settlement. The State’s second calculation comes closer, but fails to account for the fact
9
Presumably the State arrives at that figure by following the procedure in 42 C.F.R. § 411.37(c), without
any kind of pro rata reduction based on the 2004 opinion of the New York Court of Claims, or any other
attempt to account for what portion of the 2006 settlement was allocated for medical expenses. The
procedure in 42 C.F.R. § 411.37(c) basically sets forth the following formula. The “Medicare recovery
amount” is equal to: P (1 – (C / S)), where P is the “Medicare payment”; C is the “procurement costs”; and
S is the “settlement payment.” The State apparently uses the following figures: P = $771,111.37; C =
$4,113,038; and S = $12,000,000. The result is a recovery of about $506,810. Although Plaintiff argues
that the regulation the State uses applies to Medicare rather than Medicaid, it is consistent with 33 V.S.A. §
1910 in that it reduces the recovery by a proportionate share of costs and fees.
15
that the past medical expenses found by the Court of Claims include the period before
July 3, 2001—for which the State has already recovered.10
Plaintiff’s first calculation assumes it is possible to reconsider the 2001 lien; the
court has already determined otherwise. Plaintiff’s second calculation suffers from a
variety of problems, not least of which is that it begins by assuming that the pool of funds
available to satisfy the State’s lien is limited to the sum the State paid between July 3,
2001 and July 7, 2006. That assumption is untenable in light of the Ahlborn Court’s clear
statement that 42 U.S.C. § 1396k(b) requires “that the State be paid first out of any
damages representing payments for medical care before the recipient can recover any of
her own costs for medical care.” Ahlborn, 547 U.S. at 282. See also In re Matey, 213
P.3d 389, 393 (Idaho 2009). For this reason, the calculation the court performs below
does not attempt to account for the fact that the State did not pay all of Plaintiff’s medical
expenses.
Neither of the two sets of calculations offered by the parties attempts to account
for the present value of the Court of Claims’ future damages findings. However, in its
most recent filings, the State argues that, even if it is proper to rely on the Court of
Claims decision, that decision does not establish the value of Plaintiff’s claims because it
does not calculate the present value of his claims for future economic damages. State’s
Supplemental Opp’n at 5 (filed Oct. 29, 2009). The State maintains that, to arrive at any
proportional percentage for the purposes of an allocation, present value calculations of
10
The State concedes that the Court of Claims awarded damages from the point in time when Plaintiff’s
injury occurred, but argues that it “did so only in relation to plaintiff’s claims against [NYSTA].” Reply
at 13 (filed May 22, 2009). To the extent the State argues that the Court of Claims’ damages finding was
anything less than comprehensive, this court disagrees. The Court of Claims would not have mentioned an
offset for the $8 million received in settlement in Supreme Court if it were aggregating anything less than
all of Plaintiff’s damages. See Ex. 12 to State’s Mot. for Summ. J. at 60 (filed July 17, 2008) (noting that
the “offset” for $8 million received in Supreme Court would be applied at the “50-B” hearing).
16
future damages components must be performed. Id. at 9. Plaintiff says that present value
is irrelevant to the calculation because discounting a damage award to present value is
done only to determine the amount in which an annuity contract must be purchased in the
present to provide full value of future damages to the successful plaintiff. Pl.’s Reply at
11 (filed Dec. 31, 2009). The State replies that using the Court of Claims figures without
computing the present value of future damages would inflate the value of future damages
in relation to other damages, and that Plaintiff has failed to cite any authority for the
proposition that the undiscounted value of future damages can be used for purposes of
allocating a tort settlement. State’s Surreply at 10 (filed Jan. 13, 2010).
The court concludes that a calculation relying on proportions gleaned from the
Court of Claims’ opinion need not account for present value. Initially, the court notes
that neither of the calculations the State advocates in its earlier filings includes this
additional step. E.g., State’s Reply at 27 (filed May 22, 2009) (dividing past medicals by
$42,356,022—the total damages found by the Court of Claims without any reduction for
present value). The State is changing course and raising new arguments very late in the
summary judgment process. This is less than fair, especially in a case as mathematically
complex as this one. See Ernst Haas Studio, Inc. v. Palm Press, Inc., 164 F.3d 110, 112
(2d Cir. 1999) (stating, although in the context of appellate briefing, that “new arguments
may not be made in a reply brief”).
In any case, the court would still not perform a present value calculation on the
Court of Claims’ figures. The post-Ahlborn authorities this court has found, and those
cited by the parties, uniformly follow the general theme that a trial court must arrive at a
fair allocation. However, those authorities do not approach the present value question,
and certainly do not state that any allocation derived from a prior court ruling is unfair
17
unless any future economic damages in that ruling are reduced to present value. The
court concludes that it is not unfair to derive an allocation by comparing past medicals to
the amount of total damages found by the Court of Claims without making a reduction
for present value.
In light of all the above, therefore, and instead of using any of the parties’
calculations, the court computes the portion of the 2006 settlement allocable to medical
expenses between July 3, 2001 and July 7, 2006 as follows.11 The court begins by noting
that, while the Court of Claims did find total past medical expenses were $2,903,636, it
did not say what portion of that figure was for medical care during the period of interest
here: July 3, 2001 to July 7, 2006. The court concludes it is reasonable to approximate
that number by comparing the amount of medical expenses paid by the State from July 3,
2001 to July 7, 2006 ($771,111.37) to the total amount of medical expenses paid by the
State through July 7, 2006 ($1,666,004.48). That ratio is approximately 46%. The court
therefore concludes that approximately 46% of the $2,903,636 in total past medical
expenses was for the period July 3, 2001 to July 7, 2006—about $1,343,950.
Thus the percentage of the total award ($42,356,022) attributable to medical
expenses for the period July 3, 2001 to July 7, 2006 is the ratio of $1,343,950 to
$42,356,022—about 3.17%. Applying that percentage to the 2006 settlement
($12,000,000), the court concludes that the amount of the 2006 settlement attributable to
medical expenses for the period July 3, 2001 to July 7, 2006 is $380,758.14. The State
claims a lien on the 2006 settlement proceeds in the amount of $506,810. To the extent
that claim exceeds $380,758.14, Ahlborn prevents the State from recovering the excess.
11
Like the “Ahlborn formula,” the court’s calculation is only an approximation, however the court
concludes that this approximation is sufficiently accurate to be workable.
18
Finally, the court pauses to consider the affirmative defenses Plaintiff asserts in
his reply to the State’s counterclaim. Plaintiff asserts the defenses of (1) estoppel; (2)
unjust enrichment; (3) illegality; and (4) setoff. In the course of the extensive briefing on
the present motion, Plaintiff has not specifically discussed any of these defenses. The
court concludes that, to the extent Plaintiff still asserts them, each defense is a
manifestation of the arguments Plaintiff has already articulated. E.g., estoppel would
presumably go to the question of the 2001 settlement, and the remaining theories speak to
the proper way to calculate the allocation and ultimately the State’s recovery.
Order
The State’s motion for summary judgment is granted in part and denied in part.
To the extent the State seeks dismissal of Plaintiff’s claim for $72,859.70, the State’s
motion is granted. Plaintiff’s cross-motion for summary judgment is denied. To the
extent the State seeks summary judgment on its claim for $506,810, the court concludes
that the State’s recovery is limited to $380,758.14, and the State is accordingly entitled to
summary judgment in that amount.
Dated at Burlington this day of May 2010.
______________________________
Helen M. Toor
Superior Court Judge
19