STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SHATAYSHIA BRINSON, A MINOR, BY AND THROUGH HER PARENTS AND NATURAL GUARDIANS, JENCEY S. BRINSON AND FREDDIE BRINSON, JR.,

Petitioners, vs.

AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondent.

/

Case No. 19-5547MTR

FINAL ORDER

On January 16, 2020, Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings (DOAH), conducted the final hearing by videoconference in West Palm Beach and Tallahassee, Florida.

APPEARANCES

For Petitioners: Floyd B. Faglie, Esquire

Staunton and Faglie, P.L. 189 East Walnut Street Monticello, Florida 32344

For Respondent: Alexander R. Boler, Esquire

2073 Summit Lake Drive, Suite 300

Tallahassee, Florida 32317

STATEMENT OF THE ISSUES

The issues are whether, pursuant to section 409.910(17)(b), Florida Statutes (17b), Petitioner1 has proved that Respondent's recovery, under section 409.910(11)(f) (11f), of $685,615 in medical assistance expenditures2 from $10.4 million in proceeds from the settlement of a personal injury action must be reduced to avoid conflict with 42 U.S.C. § 1396p(a)(1) (Anti-Lien Statute)3 ; and, if so, what is the maximum allowable amount of Respondent's recovery.

PRELIMINARY STATEMENT

On October 16, 2019, Petitioner filed with DOAH a Petition to Determine Amount Payable to Agency for Health Care Administration in Satisfaction of Medicaid Lien. The petition invokes Petitioner's right to a 17b proceeding and alleges that Respondent's 11f recovery is excessive because it violates the Anti-Lien Statute. The petition alleges that Petitioner settled a personal injury action for 26% of its true value,4 so Respondent's recovery may not exceed 26% of its medical assistance expenditures of $685,614, or $178,260.

By Joint Pre-Hearing Stipulation filed on January 10, 2020 (Stipulation), the parties agreed to the values, as stated below, for the settlement amount, the total medical assistance expended by Respondent, and Respondent's 11f recovery.

1 All references to "Petitioner" are to the recipient and her legal representatives.

2 "Medical assistance expenditures" is the proper term for Medicaid payments, and the terms are used interchangeably in this final order.

3 All references to the "Anti-Lien Statute" include its counterpart, 42 U.S.C. § 1396p(b)(1), which similarly limits the ability of a state Medicaid agency to recover medical assistance expenditures properly paid on behalf of a recipient. "Recovery" and "lien" are used interchangeably in this final order to describe the portion of judgment or settlement proceeds allocable to the state Medicaid agency.

4 "True value" and "full value" are used interchangeably in this final order.

At the hearing, Petitioner called two witnesses--the lead trial counsel in the personal injury action and an experienced Tallahassee personal injury attorney, who has testified in numerous 17b proceedings--and offered into evidence ten exhibits: Petitioner Exhibits 1-10. Respondent called no witnesses and offered into evidence no exhibits. All exhibits were admitted.

The court reporter filed the transcript on February 26, 2020. The parties filed proposed final orders by March 9, 2020.

FINDINGS OF FACT

1. Shortly before midnight, on January 20, 2015, Petitioner, then 11 years old, suffered catastrophic injuries when she was ejected from a vehicle that rolled over on Interstate 75 near Micanopy. Petitioner has been left in a persistent vegetative state after suffering a traumatic brain injury, malignant cerebral edema, a depressed skull fracture, a contrecoup subdural hematoma, bilateral pulmonary hemorrhage, and fractured ribs.

2. The vehicle, a 2003 Ford Expedition, was driven by its owner, a

   42-year-old woman who was a friend of a cousin of one of Petitioner's family members. The driver had transported Petitioner, her brother, and two other persons from Tampa to Gainesville. After attending a college basketball game, the driver discovered that the right rear tire was flat, so she called a national automobile service company to install the spare tire. Even though the spare tire was 11 years old, the person whom the company dispatched on the service call replaced the flat tire with the spare tire.

3. While driving south on Interstate 75 in the left lane, the installed spare tire blew out. The driver lost control of the vehicle, which rolled over once, hurdled the guardrail, and came to rest, upright, in the emergency lane adjacent to the left lane of the northbound lanes.

4. The primary liability for the accident was borne by the driver. Two of the tires on the vehicle were so worn as to reveal their steel belts. The driver

   
   

   had ignored a warning five months earlier to replace at least two of the vehicle's tires. Additionally, expert witnesses testified that the driver could have controlled the vehicle after the blowout, so as to avoid the rollover.

5. Due to the age of the tire, it is difficult to find fault with the manufacturer of the vehicle or the manufacturer or vendors of the tire. The automobile service company and the technician bore more blame than the manufacturers, although there was a factual dispute about whether, prior to changing the tire, the technician had warned the driver that it was unsafe.

6. Petitioner herself bore considerable responsibility for her injuries because she was not wearing a seat belt at the time of the blowout. The other passengers were belted, remained within the vehicle, and suffered no more than minor injuries. The roof over Petitioner's seat survived the wreck intact, so she likely would have suffered no more than minor injuries if she had been wearing her seatbelt.

7. Petitioner filed a personal injury action against the manufacturers of the vehicle and the failed tire, vendors of the failed tire, companies responsible for changing the tire, and driver of the vehicle. In confidential settlements, Petitioner obtained $10.4 million, which was unallocated among the damages components. Claiming a true value of $40 million for the case, Petitioner accurately calculates a 74% settlement discount.5

8. The driver was unable to satisfy a large judgment. The driver carried liability insurance with a policy limit of $25,000, which the insurer immediately offered to avoid a bad-faith claim. The record is silent as to the creditworthiness of the other, less-liable parties.

9. The parties agree that the past medical expenses component of the settlement proceeds was $685,614. This sum represents the total medical assistance expenditures made by Respondent and another agency.

   
   

   5 From the settlement proceeds, Petitioner's attorneys collected $4 million in attorneys' fees and $400,000 in costs, leaving Petitioner with a net recovery of $6 million, but Petitioner has not sought to reduce Respondent's recovery by a proportional share of these fees and costs.

   
   

   A conservative estimate of the loss of future earning capacity was

   $1.3 million. These sums support about $2 million of the $40 million putative true value of the case. The question is thus whether another $38 million in damages was supported by other damages components--mostly future medical expenses and past and future noneconomic damages, such as pain and suffering.

10. The 1st Update of the Life Care Plan, dated November 5, 2018 (Life Care Plan), includes all applicable treatments, except the cost of hyperbaric oxygen therapy, which is $7150 per set of 26 sessions. Treatments include periodic evaluations by a neuropsychologist, physiatrist, physical therapist, occupational therapist, speech therapist, pediatric pulmonary consultant, pulmonary consultant, pediatric ear, nose and throat consultant, pediatric gastroenterology consultant, pediatric neurologist, and multidisciplinary team. Other listed expenses include pharmaceuticals; periodic diagnostic services, such as imaging studies and lab work; the preparation and maintenance of orthiotics and durable medical equipment, such as wheelchairs, hospital and shower beds, lifts, suction machines, oxygenation equipment, a home generator, and an augmentive communication device; feeding and incontinence equipment and supplies; in-home skilled care on a continual basis; adaptive vans and medical transportation services; architectural modifications to the home; the installation of a special in-home ventilation system; annual hospitalizations of one-week duration each; and various surgeries. The components of the Life Care Plan, including the costs of the goods and services and the stated intervals on which they are to be provided, all appear to be reasonable and necessary.

11. An important issue regarding the Life Care Plan is the number of years that these costs are reasonably expected to be incurred. The evidentiary record provides no basis to find that Petitioner will recover significant function, so the question is whether the Life Care Plan has

    
    

    incorporated a reasonable remaining life expectancy in light of the catastrophic injuries that Petitioner has suffered.

12. Having progressed from a coma to a minimally conscious state, Petitioner exhibits some awareness of her surroundings and her mother and father, who report that she has verbalized once or twice in the past two years, although she is incapable of speech. Petitioner's youth at the time of the accident may have helped her avoid organic decline, at least over the first five years after the accident. She is now five feet, nine inches tall and weighs

    163 pounds. Her height prior to the accident is unavailable, but she weighed 110 to 115 pounds. Petitioner cannot walk or assist with transfer, but she can stand without assistance and can move her limbs.

13. Petitioner no longer is fed by a PEG tube and her ability to swallow is slowly improving. She can open her mouth in response to the sight of a spoon and is able to eat puréed food. Petitioner requires oxygenation and suffers from sleep apnea, but needed a ventilator only for the first six months after the accident. She has had only an occasional respiratory infection and has suffered no seizures.

14. On these facts, the Life Care Plan reasonably projected Petitioner's remaining life expectancy to be slightly in excess of 30 years. Thus, the Life Care Plan conservatively estimates the present value of the future medical expenses at not less than $37 million.

15. The pain and suffering that Petitioner has suffered are considerable, as are other noneconomic damages. Given the relatively short span between the accident and the settlement and the longer span between the settlement and the projected end of Petitioner's life, the greater amount of these noneconomic damages probably will relate to the future. Based on comparable jury verdicts, a reasonable estimate of past and future noneconomic damages is not less than $10 million.

16. The presentation of damages to a jury would not have been impeded by extrinsic factors. Petitioner's family would have made excellent witnesses

    
    

    to support the damages claims. Petitioner's lead trial counsel is experienced in personal injury cases, has produced numerous large verdicts and settlements, and presented himself at hearing as a thoughtful, patient, and effective communicator with a firm grasp of the facts and law--in sum, an attorney who would have maximized Petitioner's chances for a good damages verdict.

17. The settlement discount was partly explained by the family's need for funds to care for Petitioner. Medicaid has not paid for the hyperbaric oxygen treatments that have proven somewhat efficacious, nor for renovations to the family home necessitated by Petitioner's disabilities. Petitioner's family lacks the financial means to pay these expenses on their own. At the time of the accident, Petitioner's father was on full disability due to back injuries, her mother worked as an administrative assistant, and the family's home had been constructed by Habitat for Humanity. The sooner the family received the settlement proceeds, the sooner they could obtain additional goods and services for Petitioner.

18. Petitioner has proved by any standard of proof that the true value of the case exceeds $40 million. Applying the settlement discount of 74% to the past medical expenses component of the settlement proceeds, Respondent's recovery is limited to 26% of $685,614, or $178,260, as Petitioner contends.

19. For the benefit of Respondent, Petitioner has deposited into an interest-bearing account an amount equal to the Medicaid lien, pending a determination of Respondent's proper recovery amount.

CONCLUSIONS OF LAW

20. DOAH has jurisdiction. §§ 120.569, 120.57(1), and 409.910(17)(b); Stipulation6; Giraldo v. Ag. for Health Care Admin., 248 So. 3d 53 (Fla. 2018).

6 The Stipulation fails to indicate the date on which Petitioner deposited the funds into an account for the benefit of Respondent. Better practice would be to provide this date because section 409.910(17)(b) requires the recipient to file its 17b petition within 21 days of depositing the funds.

1. Respondent is obligated by statute to obtain reimbursement7 of medical assistance expenditures from judgment or settlement proceeds obtained by a Medicaid recipient from a tortfeasor whose wrongdoing necessitated the Medicaid payments. To obtain full repayment of its medical assistance expenditures, Respondent is subrogated to the recipient's right to any proceeds derived from third parties and has a lien against such proceeds, and the recipient assigns to Respondent the recipient's right to such proceeds.8

2. However, in Department of Health & Human Services v. Ahlborn, 547

   U.S. 268 (2006), the Supreme Court ruled in favor of the recipient that the imposition of a state Medicaid agency's lien on the full amount of the recipient's settlement proceeds conflicts with the Anti-Lien Statute to the extent that the encumbered proceeds include damages components other than "medical expenses."9 The Court reasoned that the damages allocable to components other than medical expenses, such as noneconomic damages, are reserved exclusively for the recipient by the Anti-Lien Statute. To determine the agency's allowable recovery, the Court applied the stipulation of the parties that, if the Court ruled for the recipient, the agency's lien would undergo a proportional reduction. There was no dispute that the agency had paid about $216,00010 in medical assistance and the recipient had obtained settlement proceeds of $550,000 that were unallocated between medical expenses and other categories of damages. The parties had stipulated that the true value of the case was about $3 million and the true value ratio was

   
   

   
   

   7 The recovery of a state Medicaid agency is always limited by its total medical assistance expenditures. This reimbursement principle applies in all recovery disputes discussed in this final order.

   
   

   8 § 409.910(6).

   9 As discussed below, the Court has never indicated whether "medical expenses" includes future medical expenses or only past medical expenses, but the Florida supreme court has held that "medical expenses" is limited to past medical expenses. See text preceding footnote 20.

   
   

   10 Most values in this final order are approximations.

   
   

   thus about 1:6, so the agency's recovery, which was 1/6 of the Medicaid payments, was about $36,000.11

3. Eight years prior to Ahlborn,12 the Florida legislature enacted section 409.910(11)(f), which, notwithstanding Respondent's broad statutory assignment, subrogation, and lien rights, ensures that, ignoring attorneys' fees in excess of 25% of the proceeds and taxable court costs, Respondent's recovery leaves a recipient with at least 37.5% of the gross proceeds from a settlement or judgment arising out of a third-party action against a tortfeasor whose wrongdoing has necessitated the expenditure of medical assistance. In practice, though, a recipient's actual recovery is highly variable.13

4. However, in Wos v. E. M. A., 568 U.S. 627, 638 (2013), a recipient objected to a statutory formula that allocated to the state Medicaid agency one-third of the recipient's gross settlement proceeds, and the Supreme Court

   
   

   11 This adjustment process, which is inapplicable to judgment proceeds, unless the recipient has accepted a settlement discount from adjudicated damages, is known by many names, including the full value ratio, true value ratio, proportional reduction, and Ahlborn formula. All of these processes describe the relationship expressed by the following formula, in which "x" is the agency's recovery: settlement amount/true value = x/agency's Medicaid payments. This final order will refer to this adjustment process as the full value ratio or proportional reduction. Variations of the process arise, such as when the past medical expenses are larger than the total Medicaid payments.

   
   

   12 Ch. 1998-191, § 32, Laws of Fla. The 11f formula replaced an earlier statutory formula that applied only when the judgment or settlement proceeds were no more than double the amount of the Medicaid payments and generally provided the recipient with about 25% of those proceeds. § 409.910(12)(f) (1997). It seems that, under the lien, assignment, and subrogation provisions identified above, the recipient received none of the excess proceeds, until the state Medicaid agency had obtained full reimbursement.

   
   

   13 The 11f allocation identifies Respondent's allocation as half of the net proceeds, which are the gross proceeds reduced by taxable costs and 25% for attorneys' fees. In a typical settlement of $1 million in which the attorneys' fees are 40% and without regard to taxable costs, Respondent could recover Medicaid payments of up to $375,000. If Respondent had expended at least $375,000 of medical assistance, after the payment of actual attorneys' fees of $400,000, the recipient would be left with $225,000--or 22.5% of the gross proceeds. However, if medical assistance expenditures totaled only $200,000, the recipient would be left with $400,000--or 40% of the gross proceeds.

   
   

   In the present case, the Stipulation correctly states that the 11f formula would authorize Respondent to recover "the full $330,072.86 of its Medicaid lien." Stipulation, p. 11. Under the 11f formula, Respondent could recover the entire $685,614 expended by both Medicaid agencies. Based on the information contained in footnote 5, the 11f net proceeds would be about $7.4 million, so Respondent could recover as much as $3.7 million. In this case, then, if the 11f formula allowed Respondent to recover the total medical assistance expenditures of about $700,000, Petitioner would be left with about $5.3 million or about 51% of the gross proceeds: $10.4 million less $400,000 in taxable costs, less $4 million in attorneys' fees, less

   $700,000 in Respondent's recovery.

   
   

   invoked the Supremacy Clause14 to provide the recipient with an evidentiary hearing to determine if the Anti-Lien Statute limited the agency's recovery to a lesser amount. An expert witness estimated the true value of the recipient's medical malpractice action to be over $42 million in economic damages, including over $37 million of future medical expenses in the form of skilled home care. The agency expended about $1.9 million in medical assistance, and, largely due to policy limits, the recipient settled for $2.8 million. The settlement did not allocate the proceeds among damages components. In declining to allow the agency to recover $933,33315 of the $2.8 million settlement without a hearing, the Court rejected the agency's argument that ascertaining the true value of a case was impossible and instead exhorted trial judges and lawyers16 to find "objective benchmarks" on which to determine the damages that the recipient would have been able to prove, if its case had gone to trial.

5. Responding to Wos,17 the Florida legislature enacted section 409.910(17)(b), which authorizes a recipient to commence a 17b proceeding to prove by clear and convincing evidence18 that the portion of Respondent's

   
   

   14 Ahlborn fails to mention the Supremacy Clause, but impliedly relies on this constitutional principle when ruling that the Anti-Lien Statute protects settlement proceeds not allocable to medical expenses from the broad reach of the Arkansas recovery law.

   
   

   15 The amount is one-third of the gross proceeds. E.M.A. v. Cansler, 674 F.3d 290, 294 (4th Cir.2012), aff'd sub nom., Wos v. E.M.A., 568 U.S. 627 (2013).

   
   

   16 In its proposed final order, Petitioner misreads the Court's invitation for lawyers and judges to establish legal principles for allocation as an invitation to convert trial lawyers (but, one trusts, not judges) into witnesses to prove proper allocations.

   
   

   17 A few months after the Wos decision, the legislature passed and the Governor signed into law two slightly different bills: ch. 2013-48, §§ 6 and 14, and ch. 2013-150, §§ 2 and 7, Laws of Fla.

   
   

   18 In Gallardo v. Dudek, 263 F. Supp. 3d 1247 (N.D. Fla. 2017), the court held that the Anti-Lien Statute prohibits Respondent from recovering any portion of a recipient's proceeds that represents future medical expenses and requiring a recipient to prove by clear and convincing evidence in a 17b proceeding that Respondent's recovery should be less than its 11f recovery. In Gallardo v. Senior, 2017 U.S. Dist. LEXIS 112448 (N.D. Fla. 2017), the court clarified its ruling to enjoin Respondent from seeking to recover from any portion of a recipient's proceeds that represents future medical expenses, but not to enjoin Respondent from implementing the clear and convincing standard, because this responsibility rests with a DOAH administrative law judge, who, the court observed, was likely to abide by the court's ruling. These decisions are presently on appeal at the Eleventh Circuit.

   
   

   recovery that "should be allocated as past and future medical expenses" is less than its recovery under the 11f formula. Construing 17b in conjunction with the Anti-Lien Statute and relevant case law, the Florida supreme court in Giraldo held that Respondent's recovery is limited to settlement proceeds properly allocable to past medical expenses.19 So, at least since Giraldo, the 17b proceeding requires an administrative law judge to identify the past medical expenses component of settlement proceeds and limit Respondent's recovery to this component of the settlement proceeds, if the 11f formula produces a larger recovery.20 In the Stipulation, the parties further modified this 17b proceeding by agreeing to the preponderance evidentiary standard in place of the clear and convincing evidentiary standard.21

6. In her proposed final order, relying on the expert testimony of her two witnesses, Petitioner seeks a proportional reduction, so that Respondent would recover the same 26% of its medical assistance expenditures that Petitioner recovered of the true value of her case. Having called no witnesses nor introduced any exhibits, Respondent contends in its proposed final order that Petitioner failed to prove that Respondent's recovery must be reduced from its 11f recovery, because: 1) the witnesses failed to set forth their experience in allocating damages; 2) the witnesses failed to prove that Petitioner recovered each damages component in the same ratio to the true value of the case; and 3) the courts have not required the use of a proportional reduction to calculate the recovery of a state Medicaid agency. Thus, the parties present the usual choices in the mine run22 of 17b

   
   

   19 Giraldo v. Ag. for Health Care Admin., 248 So. 2d at 56.

   20 For comparative purposes in the 17b proceeding, the administrative law judge may make a provisional determination of the agency's recovery under the 11f formula to determine if the 17b recovery is less, but 11f confers upon a circuit judge, not an administrative law judge, the jurisdiction to determine the amount of Respondent's recovery, if a recipient fails to prove a reduced recovery in a 17b proceeding.

   
   

   21 See footnote 18.

   22 Wos v. E.M.A., 568 U.S. at 638, 643. Synonymous with the arguably more pejorative phrase, "run of the mill," "mine run" was a popular phrase as recently as the late 1930s and early 1940s. https://books.google.com/ngrams/graph?content=%22mine+run%22&year_start=1800&year_end=2008&c

   
   

   proceedings: from the perspective of the recipient, "all" (proportional reduction) or "nothing" (11f recovery).23

7. Recent Florida case law displaces the administrative law judge's "nothing" result with the "all" result when the recipient presents expert testimony for a proportional reduction, and Respondent fails to call a witness to rebut the recipient's evidence.24 Under these circumstances, Giraldo and its progeny have effectively transformed Florida into a proportional-reduction jurisdiction.

   
   

   
   

   orpus=15&smoothing=3&share=&direct_url=t1%3B%2C%22%20mine%20run%20%22%3B%2Cc0#t1% 3B%2C%22%20mine%20run%20%22%3B%2Cc0

   
   

   23 There are at least three truly "nothing" results, in which the state Medicaid agency recovered its Medicaid payments in their entirety, obviously in jurisdictions without an 11f-like formula, even though the recipients accepted settlement discounts. Prange v. Ark. Dep't of Human Servs., 574 S.W.3d 693 (Ark.

   App. 2019) (the court held that it was not clearly erroneous for the trial court to find that, if the recipient settled its case for $4.5 million, then $4.5 million was its true value, even though the recipient sustained catastrophic injuries at birth that left him with cerebral palsy; unable to see, walk, talk, or eat, except through a tube; in need of continual care for the rest of his life; and with projected future medical expenses of $25 million and estimated noneconomic damages of $6 million); Lomeli v. Dep't of Health Care Servs., 249 Cal. Rptr. 3d 115 (Cal. 2d DCA), rev. denied and ordered not published, 2019 Cal. LEXIS 7751 (Cal. 2019) (the intermediate appellate court approved the trial court's "reality-based approach" in allowing the state Medicaid agency to recover its full lien of $270,000 from settlement proceeds of $4 million; reasoned that, absent a stipulation, the quest for a true value of a case is "naively unrealistic"; precluded the possibility of the construction of a true value fraction because the denominator--the putative true value-- may not be the actual true value; and contended, without record support, that maximizing the recipient's recovery inequitably denied medical assistance to other recipients); Schmidt v. Bellvue Med. Ctr., LLC, 2018 U.S. Dist. LEXIS 85006 (D. Neb. 2018) (after $17 million jury verdict reduced to $1.75 million due to damages cap, the court allowed the full recovery of Medicaid payments of $216,000, evidently failing to understand the purpose of the stipulated proportional reduction in Ahlborn and incorrectly claiming that the amount of medical expenses in Wos was unknown when, based on the decision, the amount was irrelevant, even though it can readily be found on the first page of the lower court decision. E.M.A. v. Cansler, 674 F.3d 290, 292 (4th Cir.2012) ("more than $1.9 million"), aff'd sub nom., Wos v. E.M.A., 568 U.S. 627 (2013).

   
   

   These three decisions highlight the difficulty of achieving consistency with Ahlborn and Wos while rejecting a proportional reduction in favor of a "nothing" result.

   
   

   24 Giraldo v. Ag. for Health Care Admin., 248 So. 3d 53; Bryan v. State, So. 3d , 2020 Fla. App. LEXIS 3183 (Fla. 1st DCA 2020) (not yet final); Mojica v. State, 285 So. 3d 393 (Fla. 1st DCA 2019) (court remanded for further proceedings consistent with opinion, which approved of the proportional reduction method, but possibly did not mandate its use on remand); Larrigui-Negron v. Ag. for Health Care Admin., 280 So. 3d 550 (Fla. 1st DCA 2019) (per curiam); Eady v. State, 249 So. 3d 1249 (Fla. 1st DCA 2019).

   
   

8. In rejecting the administrative law judge's "nothing" result, these recent Florida decisions reveal almost no25 judicial interest in finding middle ground between "all" or "nothing" results. Few reported decisions anywhere have explored such middle ground. In Price v. Wolford, 608 F.3d 698 (10th Cir. 2010), the court reversed the trial court's "all" result and remanded for additional factfinding. The state Medicaid agency claimed a lien of $544,000 against a $1.1 million settlement. The trial court made a proportional reduction to the Medicaid payments and limited the agency's recovery to

   $68,000. The putative true value of the case was based exclusively on future medical expenses of over $12 million, which the trial court accepted as the true value of the case.26

9. On appeal, the Price court reversed the trial court's proportional reduction, although the court did not disapprove of the proportional reduction method itself. The court reasoned that a Medicaid lien could be reduced only if a recipient proved a reason for allowing a tortfeasor to pay less than the Medicaid lien, such as due to problems in proving liability or the lack of creditworthiness of the tortfeasor. The court stated that a "further reduction" to medical expenses--evidently, past medical expenses--might be justified if doubt attached to whether the wrongdoing of the tortfeasor caused all of these expenses, although, the court noted, generally it is more likely that a recipient will recover all of its past medical expenses than all of its pain and suffering damages. The court focused on the absence of evidence as to the probability of liability and the expected damages--a reference to the crucial failure by the recipient to introduce into evidence the life care plan. But the

   
   

   
   

   25 The lone exception is Justice Polston's Giraldo dissent, in which he objects to the court's decision effectively to apply a proportional reduction, rather than to remand the case to the administrative law judge, so she could determine factually the past medical expenses component of the settlement proceeds. Giraldo, 248 So. 3d at 58 (Fla. 2018) (Polston, J., concurring specially in part and dissenting in part).

   
   

   26 The trial judge's ruling was complicated by a redirection of a portion of the settlement proceeds from a legal representative of the recipient to the state Medicaid agency, but the process was a proportional reduction: 1.1/12 x $544,000 = $68,000.

   
   

   court added that, even if the life care plan had been admitted into evidence, it was flawed in two respects: its projection of future medical expenses had not been reduced to present value and the life expectancy that it used for the recipient had not been reduced from a standard life expectancy, despite the catastrophic birth damages that the recipient had suffered.

10. The Price court reversed the trial court's recovery order and remanded the case to allow the trial court to decide, initially, if an evidentiary hearing should be conducted. Clearly, the court expected the trial court, prior to performing a proportional reduction, to examine more critically the putative true value of the case and, if necessary, reduce it to the actual true value, so as to generate a lower settlement discount. See also Ka Yang v. Portage Cnty, 2013 U.S. Dist. LEXIS 101521 (W.D. Wis. 2013) (court referred case to magistrate for hearing on true value of case after the recipient accepted a settlement of $25,000 for a case with a true value of $10 million--according to counsel's conclusory affidavit).

11. In McKinney v. Philadelphia Housing Authority, 2010 U.S. Dist. LEXIS 86773 (E.D. Pa. 2010), the trial court itself found the middle ground between the "all" and "nothing" results. The city Medicaid agency expended

    $1.2 million in medical assistance for several recipients, who allegedly had been injured by unhealthy conditions in public housing. Claiming a total true value of $45 million, the recipients settled their personal injury actions for

    $11.9 million and argued that the city Medicaid agency must accept the same 75% settlement discount on its recovery of Medicaid payments. To this end, the recipients obtained testimony from a life care expert for future medical expenses, a professor of economics for loss of earnings, and two fact witnesses as to pain and suffering. For its part, the city Medicaid agency based its claimed allocation on an 11f-like regulation that split the settlement proceeds equally between the recipient and agency, after deducting actual attorneys' fees and costs.

    
    

12. The court rejected the recipients' invitation for it to conduct a "mini trial" to determine the true value of a case.27 Asking why it should assume that the recipients accepted the same settlement discount on all of their claims, the court declined to reduce the past medical expenses by the 75% settlement discount28 or, on the other hand, to assume that the jury would have awarded in full the "readily quantified" past medical expense damages component. Turning to whether a reduction of this damages component was needed due to liability issues, the court found that the recipients had a "strong case" against each of the multiple defendants, but there were elements of comparative negligence and a questionable causal link between the acts and omissions of the defendants and some of the injuries or illnesses suffered by the recipients. Lastly, the court considered the recipients' need for an "immediate cash settlement," which would also relieve them of the risk of noncollection. Based on these factors, the court reduced the past medical expenses by one-third and thus reduced the agency's recovery by the same fraction. McKinney is unique in a court's use of a seat-of-the-pants, but reasoned, approach to determining an agency's recovery that avoids the "all" result sought by the recipient and the "nothing" result sought by the agency, although the effect of the McKinney court's approach tends to produce a comparable result to the anticipated result in Price: a proportional reduction after the removal of inflated damages components in the putative true value, such as for future medical expenses or noneconomic damages.

13. McKinney notwithstanding, there is no reason for a court to reject the "all" result of a proportional reduction if the putative true value of the case is

    
    

    
    

    27 The court noted its familiarity with the facts of the case, so this ruling does not imply that allocations are a legal exercise. They are likely findings of fact. See, e.g.., Giraldo v. Ag. for Health Care Admin., 248 So. 3d 53; Gray v. Ag. for Health Care Admin., 288 So. 3d 95 (Fla. 1st DCA 2019); Latham v. Off. of Recovery Servs., 448 P.3d 1241, 1249 (Utah 2019); Byrnes v. Martinez, N.W. 2d , 2019 Mich. App. LEXIS

    8377 (Mich. 1st DCA 2019).

    
    

    28 Accord, Allstate Ins. Co. v. Manasse, 707 So. 2d 1110, 1111 (Fla. 1998) ("'Future damages are, by nature, less certain than past damages,'" citing Allstate Ins. Co. v. Manasse, 681 So. 2d 779, 784 (Fla. 4th DCA 1996) (Klein, J., dissenting)).

    
    

    not inflated.29 A recipient may accept a large settlement discount for many reasons that do not indicate an inflated putative true value: e.g., comparative liability, a lack of creditworthiness of one or more defendants, a damages cap, a lack of a causal connection between certain damages and the wrongdoing at issue, shortcomings among witnesses or counsel in their ability to present proof of damages, and the recipient's immediate financial needs. This case supports a finding that the putative true value is the true value due to Petitioner's comparative liability, a lack of creditworthiness of the clearly liable defendant, and Petitioner's immediate financial needs.

14. To determine directly whether the damages components are inflated in the putative true value, the main focus should be on the two largest damages components: future medical expenses and past and future noneconomic damages. In support of a true value of $40 million in the present case, past medical expenses and the loss of earning capacity totaled about $2 million. All noneconomic losses totaled about $8 million, and future medical expenses totaled about $30 million.30 As discussed above, the settlement of $10.4 million produced a settlement discount of 74%, which yields a recovery of

    $178,260. As is typical in a big-dollar case, future medical expenses are the largest fraction of the total value--here, 75%. Focusing exclusively on the effect of future medical expenses31 on the settlement discount and, thus,

    
    

    29 Typically, as in the present case, the parties do not dispute the other two elements of the true value ratio: the settlement amount and total expenditures of medical assistance. The 17b proceeding implicitly extends to a determination of the settlement amount, if, for example, Respondent were to claim concealment of all or part of the settlement proceeds or the parties could not agree on the valuation of any part of the settlement not paid in cash. The 17b proceeding explicitly extends to a determination of the total expenditures of medical assistance.

    
    

    30 Due to Petitioner's conservative true value of $40 million, it is necessary to reduce, proportionately, the future medical expenses of $37 million and noneconomic damages of $10 million to $30 million and $8 million, respectively, to generate $38 million, which, when added to past medical expenses and the loss of earning capacity of $2 million, yields the $40 million true value that Petitioner has claimed.

    
    

    31 Although noneconomic damages are also a large fraction of the total value, they are not as amenable to generalization. Noneconomic damages may be sustained both before and after the date of settlement (or verdict), but past and future noneconomic damages may be based on different per diem amounts, and the award of past pain and suffering damages does not ensure the award of any future pain and suffering damages, even in a big-dollar case.

    
    

    Respondent's recovery, if the remaining life expectancy were reduced so as to halve the future medical expenses, the true value would be reduced to $25 million and the settlement discount would be 58%, which would yield a recovery of $397,656. If the remaining life expectancy were increased so as to double the future medical expenses, the true value would be $70 million, and the settlement discount would be 85%, which would yield a recovery of

    $102,842. These examples demonstrate the overriding importance of the remaining life expectancy in generating a true value of a case, the settlement discount, and Respondent's recovery.

15. The potential for inflating noneconomic damages, which are impossible to quantify, is limited if these damages comport with jury awards in comparable cases, as they do in the present case. Future medical expenses are typically anchored by a life care plan, which reduces to present value the annual costs of care over the remaining life expectancy of the recipient: these costs and their present value are readily quantified, although the

    multiplier--the remaining life expectancy of the recipient--is a difficult projection in many cases. Again, though, the evidence in this case supports each of the elements of the Life Care Plan and, thus, the future medical expenses component of the putative true value.

16. The only defense raised by Respondent not already addressed is the absence from the record of demonstrated experience of Petitioner's witnesses in allocating damages. The lead trial lawyer appears eminently qualified in all aspects of personal injury law, including protecting settlement proceeds from a Medicaid lien, and the Tallahassee trial lawyer has testified in other 17b proceedings, in which he evidently performed proportional reductions that have been sustained on appeal. Regardless, due to the conservative true value chosen by Petitioner, the administrative law judge would have chosen a proportional reduction, absent the testimony of Petitioner's witnesses, if

    
    

    Florida courts would permit an administrative law judge to make such a choice, unaided by expert testimony.32

17. The mathematical skills required for an allocation of damages by a proportional reduction are basic, so the allocation itself requires no skill, judgment, or expertise. The challenge of a proportional reduction is to establish the true value of the case. This means, in a big-dollar case, as demonstrated in paragraph 34, the challenge is to establish the future medical expenses and, thus, at least in big-dollar cases, the life care plan. Respondent's objection to the experience of Petitioner's expert witnesses in allocating damages therefore boils down to a challenge to the scope of their expertise in quantifying future medical expenses and the role of the Life Care Plan in their discharge of this important responsibility.

18. A life care plan "sets forth anticipated future medical treatment and care [that] the [subject of the plan] will require over the course of her life and provides a present-day monetary calculation of the cost of those treatments and care."33 A life care planner or rehabilitation counselor prepares the plan in conjunction with a qualified health provider, who identifies medically necessary goods and services, the duration of their provision, and, when applicable, the remaining life expectancy of the person who is the subject of the plan; an economist then calculates the present value of the costs documented in the life care plan.34

    
    

    32 Compare Gray v. Ag. for Health Care Admin., 288 So. 3d 95 (the court sustained the administrative law judge's "nothing" result because the recipient failed to call an expert witness to testify to a proportional reduction, even though the recipient introduced into evidence a $1.3 million verdict form, corresponding final judgment, Respondent's lien letters, and an exhibit documenting the collection of only $10,000).

    
    

    33 Hale v. Gannon, 2012 U.S. Dist. LEXIS 125756 (D. Ind. 2012).

    34 See, e.g., Hale v. Gannon, 2012 U.S. Dist. LEXIS 125756 (life care planner and rehabilitation counselor rely on the "opinions of appropriately credentialed individuals" for identification of "treatment and its duration"); Fertilizer v. Davis, 567 So. 2d 451, 455-56 (Fla. 1st DCA 1990) (rehabilitation counselor relies on physician for medical and nursing goods and services and life expectancy; economist calculates the present value); Olges v. Dougherty, 856 So. 2d 6 (Fla. 1st DCA 2003) (discussion of the respective roles of a physician, life care planner, and rehabilitation counselor; economist for present value).

    
    

19. In a judicial action, a life care plan is subject to a Daubert35 challenge, which requires the party offering the plan to demonstrate that it is relevant and reliable.36 A life care plan is not exempt from the evidentiary rule that, although an expert witness may rely on hearsay,37 she may not serve as a conduit by which to transport otherwise-inadmissible hearsay into evidence, especially when the hearsay is outside of the expert witness's field of expertise and the opposing party is thus denied the opportunity of cross examination as to the hearsay.38

20. Given the dissent,39 the Giraldo court may have been aware of these evidentiary issues. Clearly, the court was aware that the authors of the life care plan had not testified and the administrative law judge had elected not to assign weight to the plan or testimony based on the plan.40 Even so, the court not only reversed, but, instead of remanding the case for a reopening of

    
    

    35 Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).

    36 See, e.g., Hale v. Gannon, 2012 U.S. Dist. LEXIS 125756. It is unclear whether Daubert applies to an administrative proceeding. Compare § 120.569(2)(b) ("Irrelevant, immaterial, or unduly repetitious evidence shall be excluded, but all other evidence of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs shall be admissible, whether or not such evidence would be admissible in a trial in the courts of Florida.") with SDI Quarry v. Gateway Estates Park Condo. Ass'n, 249 So. 3d 1287, 1293 (Fla. 1st DCA 2018) (dictum) (Daubert applies to a chapter 120 administrative proceeding).

    
    

    37 § 90.704.

    38 See generally Linn v. Fossum, 946 So. 2d 1032, 1037-38 (Fla. 2006). See also Martin v. Miss. Transp. Comm'n, 953 So. 2d 1163, 1166-67 (Miss. App. 2007) (expert witness with no knowledge of cost method of valuing sign in eminent domain case may not serve as conduit of another expert's hearsay statement); Lippe v. Bairnco Corp., 99 Fed. Appx. 274, 278-80 (2d Cir. 2004) (based on failure to satisfy Daubert requirements of relevance and reliability, valuation experts stricken as witnesses when they could not explain myriad underlying aspects of their valuation testimony in complex case).

    
    

    39 See footnote 25.

    40 The final order in Giraldo identifies as the only witnesses two trial attorneys and assigns little weight to the life care plan, which, on its face, was incomplete and used a life expectancy uninformed by the subsequent death of the recipient; as hearsay, the plan was admitted to support the valuation testimony of the recipient's expert witnesses. Vila v. Ag. for Health Care Admin., Case No. 15-4423MTR, 2015 Fla. Div. Adm. Hear. LEXIS 506 (Fla. DOAH Dec. 30, 2015). (The recipient was the late Mr. Vila. On appeal, Ms. Giraldo, a legal representative, was substituted for the decedent.) The opinion of the intermediate appellate court, which was reversed by the supreme court, restated these evidentiary issues. Giraldo v. Ag. for Health Care Admin., 208 So. 3d 244, 247 (Fla. 1st DCA 2016).

    
    

    the evidentiary hearing, remanded it for the entry of a final order incorporating the proportional reduction sought by the recipient, notwithstanding the possibility41 that the death of the recipient six months after the settlement may have required a redetermination of the life expectancy used in the plan and, if so, dictated a recalculation of the true value of the case, the actual settlement discount, and Respondent's recovery. After Giraldo, it would seem that Florida is not only a proportional-reduction jurisdiction, but, more importantly, also applies special evidentiary rules to the establishment of the true value of the recipient's case.42

    
    

    41 The recipient died five years after the subject accident, after the 17b hearing, and before the issuance of the 17b final order. The death would be irrelevant if for causes unrelated to the subject accident.

    
    

    If due to causes related to the subject accident, the death was not irrelevant merely because it occurred after the settlement. Undoubtedly, the allocation of settlement proceeds must be based on the facts in existence at the time of the settlement; otherwise, the death of a recipient a few days after a large settlement would present an impossible allocation challenge, as millions of dollars in future medical expenses and future noneconomic damages would have to be reallocated to damages components that possibly could not fully accommodate them. But a relevant post-settlement death, if prior to the 17b final order, is evidence on which the administrative law judge may rely in determining the reasonableness of the most crucial element of the life care plan--the remaining life expectancy of the recipient, assuming that, as in most big-dollar cases, the future medical expenses in the life care plan do not end on the projected recovery of the recipient. In Giraldo, the administrative law judge would unlikely have determined that a six-month life expectancy must be substituted for the life expectancy actually used, but the judge might have determined that a shorter life expectancy would have been more reasonable--a finding rendered more likely by the greater extent to which the presumed life expectancy deviated from the actual life expectancy. (In other words, the administrative law judge more likely would have revisited the presumed life expectancy if it was 50 years, rather than five years.)

    
    

    42 Giraldo acknowledges the ability of an administrative law judge to reject uncontradicted testimony, if there is a "reasonable" evidentiary basis for its rejection. Giraldo v. Ag. for Health Care Admin., 248 So. 3d at 56. But this exception to the general rule is of little importance, as demonstrated by the facts set forth above and the court's failure to mention that, on learning of the recipient's death, the administrative law judge offered to reopen the record, but the recipient's personal representative declined the offer.

    
    

    Attaching no weight or perhaps relevance to the death of the recipient six months after the settlement, the evidentiary rulings in Giraldo suggest that the court was dissatisfied with the "nothing" result--a dissatisfaction seemingly shared by the post-Giraldo courts, listed in footnote 24, that have rejected "nothing" results. Perhaps these courts have realized, as illustrated by the truly "nothing" cases discussed in footnote 23, that the "nothing" result, even when driven by a recipient's failure to meet its burden of proof in a 17b proceeding, often allows Respondent's recovery to reach components of the settlement proceeds that are not fairly allocable to past medical expenses, as discussed at length by the court in the Gallardo decisions cited in footnote 18.

    
    

    However, after Giraldo, it is unclear whether, in the absence of rebuttal evidence from Respondent, an administrative law judge may prevent a recipient from imposing on Respondent an inflated settlement discount based on an inflated putative true value. If, for instance, Petitioner had claimed a putative true value of $400 million, instead of $40 million, by what means could the administrative law judge reject such

    
    

21. As noted in the Findings of Fact, Petitioner has proved her entitlement to a proportional reduction of the past medical expenses component of the settlement proceeds, based on a 74% settlement discount, because the putative true value is no greater than the true value. Thus, Respondent's recovery cannot exceed 26% of its Medicaid payments.

ORDER

It is

ORDERED that Respondent shall recover $178,260 from Petitioner's

$10.4 million settlement.

DONE AND ORDERED this 3rd day of April, 2020, in Tallahassee, Leon County, Florida.

S

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings this 3rd day of April, 2020.

an inflated claim? And, if such means exist, could the administrative law judge, instead of denying the 17b petition, determine a recovery amount between the 11f recovery amount and the excessively small recovery amount proffered by the Petitioner?

COPIES FURNISHED:

Alexander R. Boler, Esquire

2073 Summit Lake Drive, Suite 300

Tallahassee, Florida 32317 (eServed)

Floyd B. Faglie, Esquire Staunton and Faglie, P.L. 189 East Walnut Street Monticello, Florida 32344 (eServed)

Shena Grantham, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Building 3, Room 3407B Tallahassee, Florida 32308

(eServed)

Thomas M. Hoeler, Esquire

Agency for Health Care Administration 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)

Stefan Grow, General Counsel

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 (eServed)

Mary C. Mayhew, Secretary

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308 (eServed)

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the 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.

Docket for Case No: 19-005547MTR

Orders for Case No: 19-005547MTR