DEVYN JEFFRIES AND MAKAYLA JEFFRIES, MINORS, BY AND THROUGH THEIR PARENTS AND NATURAL GUARDIANS, THERESA JEFFRIES AND CHRISTOPHER JEFFRIES,
vs.
Respondent.
Case No. 20-2079MTR
Pursuant to notice, a final hearing was held in this case on August 25, 2020, by Zoom Conference, before E. Gary Early, a designated Administrative Law Judge of the Division of Administrative Hearings (DOAH).
For Petitioners: Floyd B. Faglie, Esquire
For Respondent: Alexander R. Boler, Esquire
The issue to be determined is the amount to be reimbursed to Respondent, Agency for Health Care Administration (Respondent or AHCA), for medical expenses paid on behalf of Petitioners, Devyn Jeffries (Devyn) and Makayla Jeffries (Makayla), minors, by and through their parents and natural guardians, Theresa Jeffries and Christopher Jeffries, (collectively Petitioners), from settlement proceeds received by Petitioners from third parties.
On April 30, 2020, Petitioners filed a Petition to Determine Amount Payable to Agency for Health Care Administration in Satisfaction of Medicaid Lien, by which they challenged AHCA’s lien for recovery of medical expenses paid by Medicaid in the amount of $108,068.58 on behalf of Devyn and
$107,912.33 on behalf of Makayla. The basis for the challenge was the assertion that the application of section 409.910(17)(b), Florida Statutes, warranted reimbursement of a lesser portion of the total third-party settlement proceeds than the amount calculated by AHCA pursuant to the formula established in section 409.910(11)(f).
The final hearing was scheduled for August 25, 2020, and was held as scheduled.
The parties filed a Joint Pre-hearing Stipulation in which they identified stipulated facts for which no further proof would be necessary. The stipulated facts have been accepted and considered in the preparation of this Final Order.
At the final hearing, Petitioners presented the testimony of William E. Hahn, Esquire, who represented Petitioners in the medical malpractice action from which the third-party settlement proceeds were obtained, and Karen Gievers, Esquire. Both Mr. Hahn and Ms. Gievers have the knowledge, skill, training, experience, and education to testify as experts in the form of opinions regarding the issues of valuation of damages raised in this proceeding. Petitioners’ Exhibits 1 through 13 were received into evidence.
AHCA offered no independent witnesses or exhibits.
A one-volume Transcript of the proceedings was filed on October 2, 2020. The parties requested and were granted until October 21, 2020, to file their post-hearing submittals. Both parties filed Proposed Final Orders, which have been duly considered in the preparation of this Final Order.1
All citations are to the 2020 Florida Statutes, except as otherwise indicated.
On January 24, 2010, Devyn and Makayla were born via emergency C-Section at 27 weeks gestation. During the birthing process, both children
suffered severe and permanent brain damage. As a result, Devyn suffers from Cerebral Palsy with spastic paralysis and cognitive developmental disabilities, and Makayla suffers from Cerebral Palsy, failure to thrive, feeding difficulties, and cognitive deficits.
Devyn and Makayla’s medical care related to their birth injuries was paid by Medicaid in the following amounts:
1 Respondent’s Proposed Final Order was served by email and received by DOAH at
9:50 p.m. on October 21, 2020. It was, therefore, “filed” at 8:00 a.m. on October 22, 2020, in accordance with Florida Administrative Code Rule 28-106.104(3). However, it is accepted and considered as though timely filed.
In regard to Devyn, Medicaid, through AHCA, provided $108,068.58 in benefits and Medicaid, through a Medicaid Managed Care Plan known as Simply Healthcare, provided $25,087.08 in benefits. The sum of these Medicaid benefits, $133,155.66, constituted Devyn’s entire claim for past medical expenses.
In regard to Makayla, Medicaid, through AHCA, provided $107,912.33 in benefits and Medicaid, through a Medicaid Managed Care Plan known as Simply Healthcare, provided $13,915.84 in benefits. The sum of these Medicaid benefits, $121,828.17, constituted Makayla’s entire claim for past medical expenses.
Devyn and Makayla’s parents and natural guardians, Theresa and Christopher Jeffries, pursued a medical malpractice lawsuit against the medical providers responsible for Devyn and Makayla’s care (“Defendants”) to recover all of Devyn and Makayla’s damages, as well as their own individual damages associated with their children’s injuries.
The medical malpractice action settled through a series of confidential settlements, which were approved by the court on February 21, 2020.
During the pendency of the medical malpractice action, AHCA was notified of the action and AHCA asserted a $108,068.58 Medicaid lien associated with Devyn’s cause of action and settlement of that action and a
$107,912.33 Medicaid lien associated with Makayla’s cause of action and settlement of that action.
AHCA did not commence a civil action to enforce its rights under section 409.910, nor did it intervene or join in the medical malpractice action against the Defendants.
By letter, AHCA was notified of the settlement.
AHCA has not filed a motion to set aside, void, or otherwise dispute the settlement.
The Medicaid program through AHCA spent $108,068.58 on behalf of Devyn and $107,912.33 on behalf of Makayla, all of which represents
expenditures paid for past medical expenses. No portion of the $215,980.91 paid by AHCA through the Medicaid program on behalf of Petitioners represented expenditures for future medical expenses. The $215,980.91 combined total in Medicaid funds paid towards the care of Devyn and Makayla by AHCA is the maximum amount that may be recovered by AHCA.
In addition to the foregoing, Simply Health spent $39,002.92 on Petitioners’ medical expenses. Thus, the total amount of past medical expenses incurred by Petitioners is $254,983.83.
The taxable costs incurred in securing the settlement totaled
$109,701.62.
Application of the formula at section 409.910(11)(f) to the settlement requires payment to AHCA of the full $108,068.58 Medicaid lien associated with Devyn and the full $107,912.33 Medicaid lien associated with Makayla.
Petitioners have deposited the full Medicaid lien amounts in interest- bearing accounts for the benefit of AHCA pending an administrative determination of AHCA’s rights, and this constitutes “final agency action” for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17).
This case is somewhat unique in that it involves two petitioners, with separate injuries and separate Medicaid expenditures. However, the incident causing the injuries was singular, and resulted in a total settlement of all claims asserted by Devyn, Makayla, and their parents of $2,650,000. Therefore, for purpose of determining the appropriate amount of reimbursement for the Medicaid lien, it is reasonable and appropriate to aggregate the amounts paid in past medical expenses on behalf of Devyn and Makayla, and the economic and non-economic damages suffered by them.
There was no suggestion that the monetary figure agreed upon by the parties represented anything other than a reasonable settlement.
The evidence firmly established that the total of Devyn’s and Makayla’s economic damages, consisting of lost future earnings, past medical expenses, and future medical expenses were, at the conservative low end,
roughly $4,400,000 for Devyn and $2,400,000 for Makayla, for a sum of
$6,800,000 in economic damages.2
Based on the experience of the testifying experts, and taking into account jury verdicts in comparable cases, Petitioners established that non- economic damages would reasonably be in the range of $10,000,000 to
$15,000,000 for each of the children.
Based on the forgoing, it is found that $15,000,000, as a full measure of Petitioners’ combined damages, is very conservative, and is a fair and appropriate figure against which to calculate any lesser portion of the total recovery that should be allocated as reimbursement for the Medicaid lien for past medical expenses.
The $2,650,000 settlement is 17.67 percent of the $15,000,000 conservative value of the claim.3
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties in this case pursuant to sections 120.569, 120.57(1), and 409.910(17), Florida Statutes.
AHCA is the agency authorized to administer Florida’s Medicaid program. § 409.902, Fla. Stat.
The Medicaid program “provide[s] federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons.” Harris v. McRae, 448 U.S. 297, 301 (1980). Though participation is optional, once a State elects to participate in the Medicaid program, it must comply with federal requirements governing the same. Id.
2 The higher-end figures were up to $7,900,000 for Devyn, and $5,100,000 for Makayla, for a total of $13,000,000, a figure that, though supported, was not used in the formulation of the opinion of either expert witness.
3 Petitioners used 17.5 percent as the percentage throughout the case. However, 2,650,000 divided by 15,000,000 is 17.67.
As a condition for receipt of federal Medicaid funds, states are required to seek reimbursement for medical expenses incurred on behalf of Medicaid recipients who later recover from legally liable third parties. See 42 U.S.C. § 1396a(a)(25); § 409.910(4), Fla. Stat.; Ark. Dep’t of Health & Human Servs. v. Ahlborn, 547 U.S. 268, 276 (2006).
Consistent with this federal requirement, the Florida Legislature has enacted section 409.910, which authorizes and requires the state to be reimbursed for Medicaid funds paid for a recipient’s medical care when that recipient later receives a personal injury judgment, award, or settlement from a third party. Smith v. Ag. for Health Care Admin., 24 So. 3d 590
(Fla. 5th DCA 2009).
Section 409.910(1) establishes the primacy of repayment to Medicaid for medical assistance paid by Medicaid, and provides that:
It is the intent of the Legislature that Medicaid be the payor of last resort for medically necessary goods and services furnished to Medicaid recipients. All other sources of payment for medical care are primary to medical assistance provided by Medicaid. If benefits of a liable third party are discovered or become available after medical assistance has been provided by Medicaid, it is the intent of the Legislature that Medicaid be repaid in full and prior to any other person, program, or entity. Medicaid is to be repaid in full from, and to the extent of, any third-party benefits, regardless of whether a recipient is made whole or other creditors paid. Principles of common law and equity as to assignment, lien, and subrogation are abrogated to the extent necessary to ensure full recovery by Medicaid from third-party resources. It is intended that if the resources of a liable third party become available at any time, the public treasury should not bear the burden of medical assistance to the extent of such resources.
As a condition of providing Medicaid funds, the state of Florida is placed in a priority position for recovery of all funds expended, as expressed in section 409.910(6)(a), which provides that:
[AHCA] is automatically subrogated to any rights that an applicant, recipient, or legal representative has to any third-party benefit for the full amount of medical assistance provided by Medicaid. Recovery pursuant to the subrogation rights created hereby shall not be reduced, prorated, or applied to only a portion of a judgment, award, or settlement, but is to provide full recovery by [AHCA] from any and all third-party benefits. Equities of a recipient, his or her legal representative, a recipient’s creditors, or health care providers shall not defeat, reduce, or prorate recovery by [AHCA] as to its subrogation rights granted under this paragraph.
The statute creates an automatic lien on any such judgment, award, or settlement for the medical assistance provided by Medicaid. § 409.910(6)(c), Fla. Stat. In addition, section 409.910(7) authorizes AHCA to recover payments paid from any third party, the recipient, the provider of the recipient’s medical services, or any person who received the third-party benefits.
The statutory formula for calculating the lien is established as one- half of the settlement proceeds after attorney fees (calculated at 25 percent of the judgment, award, or settlement) and taxable costs are subtracted, up to the full lien amount. § 409.910(11)(f), Fla. Stat.; see also Ag. for Health Care Admin. v. Riley, 119 So. 3d 514, 515 n.3 (Fla. 2d DCA 2013).
AHCA is not automatically bound by any allocation of damages set forth in a settlement between a Medicaid recipient and a third party that may be contrary to the formulaic amount. § 409.910(13), Fla. Stat. (“No action of the recipient shall prejudice the rights of [AHCA] under this section. No ... ‘settlement agreement,’ entered into or consented to by the recipient or his or her legal representative shall impair [AHCA]’s rights.”); see also
§ 409.910(6)(c)7., Fla. Stat. (“No release or satisfaction of any ... settlement agreement shall be valid or effectual as against a lien created under this paragraph, unless [AHCA] joins in the release or satisfaction or executes a release of the lien.”).
In cases such as this, where AHCA has not participated in or approved the settlement, the administrative procedure created by section 409.910(17)(b) is the means for determining whether a lesser portion of a total recovery should be allocated as reimbursement for medical expenses in lieu of the amount calculated by application of the formula in section 409.910(11)(f). “[W]hen AHCA has not participated in or approved a settlement, the administrative procedure created by section 409.910(17)(b), serves as a means for determining whether a lesser portion of the total recovery should be allocated as reimbursement for medical expenses in lieu of the amount calculated by application of the formula in section 409.910(11)(f).” Eady v. Ag. for Health Care Admin., 279 So. 3d 1249, 1255 (Fla. 1st DCA 2019) (quoting Delgado v. Ag. for Health Care Admin., 237 So. 2d 432, 435 (Fla. 1st DCA 2018)).
Section 409.910(17)(b) provides, in pertinent part, that:
A recipient may contest the amount designated as recovered medical expense damages payable to [AHCA] pursuant to the formula specified in paragraph (11)(f) by filing a petition under chapter
120 within 21 days after the date of payment of funds to [AHCA] or after the date of placing the full amount of the third-party benefits in the trust account for the benefit of [AHCA] pursuant to paragraph (a). ... In order to successfully challenge the amount payable to [AHCA], the recipient must prove, by clear and convincing evidence, that a lesser portion of the total recovery should be allocated as reimbursement for past and future medical expenses than the amount calculated by [AHCA] pursuant to the formula set forth in
paragraph (11)(f) or that Medicaid provided a lesser amount of medical assistance than that asserted by [AHCA].
The parties have stipulated that the applicable burden of proof is a preponderance of the evidence, which follows the opinion in Gallardo v. Dudek, 263 F. Supp. 3d 1247 (N.D. Fla. 2017). In Gallardo, the district court held that the section 409.910 clear and convincing burden of proof on the Medicaid recipient was preempted by the federal Medicaid law’s anti-lien and anti-recovery provisions. Id. at 1259-60. However, the United States Court of Appeals for the Eleventh Circuit recently reversed the Gallardo decision, and, inter alia, held that the application of the “clear and convincing evidence” burden of proof does not violate federal law. Gallardo v. Dudek, 963 So. 3d 1167, 1181 (11th Cir. June 26, 2020). The undersigned accepts the parties’ stipulation as to the burden of proof in this proceeding, since “[g]enerally, state courts are not required to follow the decisions of intermediate federal appellate courts on questions of federal law,” (Carnival Corp. v. Carlisle, 953 So. 2d 461, 465 (Fla. 2007)) and since Florida state appellate courts have applied the preponderance of the evidence standard in similar proceedings. Regardless, even if the stricter evidentiary standard was applied, it would not change the outcome of this case, as Petitioners proved their case by clear and convincing evidence.
The U.S. Supreme Court has interpreted the anti-lien provision in federal Medicaid law as imposing a bar which, pursuant to the Supremacy Clause, precludes “a state from asserting a lien on the portions of a settlement not allocated to medical expenses.” See, e.g., Mobley v. State, 181 So. 3d 1233, 1235 (Fla. 1st DCA 2015).
Under preemptive federal law as construed by the Florida Supreme Court, the state’s Medicaid lien may attach only to that portion of a recipient’s settlement recovery attributable to past medical expense damages, and section 409.910(17)(b) cannot be applied to allow AHCA to recover from
future medical expense damages. Giraldo v. Ag. for Health Care Admin., 248 So. 3d 53, 54 (Fla. 2018). Giraldo is binding precedent on Florida courts, which DOAH, applying state law, must follow.
Evidence of all past medical expenses must be presented, as AHCA may recover from the entirety of the past medical expense portion -- not just the portion that represents its lien. Smith v. Ag. for Health Care Admin.,
24 So. 3d 590 (Fla. 5th DCA 2009); see also Garcia v. Ag. for Health Care Admin., Case No. 19-2013MTR, F.O. at ¶ 31 (Fla. DOAH Aug. 27, 2019)( “The
full amount of all past medical expenses must then be considered, not just the past medical expenses representing the amount of AHCA’s lien.”). Further, section 409.910(17)(b) grants the undersigned the power to find “the portion of the total recovery which should be allocated as past … medical expenses,” and to limit AHCA to that amount. The statute does not authorize a reduction of the Medicaid lien based only on the AHCA-paid Medicaid portion of a recipient’s recovery. Accordingly, the undersigned concludes that Petitioners’ past medical expenses consist of the amounts provided for Devyn’s and Makayla’s care by Medicaid ($108,068.58 for Devyn and
$107,912.33 for Makayla) and by Simply Healthcare ($25,087.08 for Devyn and $13,915.84 for Makayla). The sum of these benefits ($133,155.66 for Devyn and $121,828.17 for Makayla, for a total of $254,983.83) constitutes the total amount of Petitioners’ past medical expenses.
With regard to the methodology for determining that portion of settlement proceeds to be allocated to past medical expenses, recent appellate decisions have accepted a proportional reduction as a valid, albeit nonexclusive, basis for making the required distribution. As the First District Court of Appeal explained:
[W]hile not established as the only method, the pro rata [or proportional reduction] approach has been accepted in other Florida cases where the Medicaid recipient presents competent, substantial evidence to support the allocation of a smaller portion of a
settlement for past medical expenses than the portion claimed by AHCA. See Giraldo v. Agency for Health Care Admin., 248 So. 3d 53 (Fla. 2018); Mojica v. Agency for Health Care Admin., 285 So. 3d 393 (Fla. 1st DCA 2019); Eady v. State, 279 So. 3d 1249 (Fla. 1st DCA 2019). But see Willoughby v. Agency for Health Care Administration, 212 So. 3d 516 (Fla. 2d DCA 2017) (quoting Smith v. Agency for Health Care Administration, 24 So. 3d 590, 591 (Fla. 5th DCA 2009)) (explaining that the pro rata formula is not the “required or sanctioned method to determine the medical expense portion of an overall settlement amount”).
Ag. for Health Care Admin. v. Rodriguez, 294 So. 3d 441, 444 (Fla. 1st DCA 2020).
The First District’s opinion in Bryan v. Agency for Health Care Administration, 291 So. 3d 1033 (Fla. 1st DCA 2020), may be added to the cases cited in Rodriguez. In Bryan, the recipient settled a medical malpractice action for $3,000,000, and then initiated an administrative proceeding to adjust the Medicaid lien, which AHCA asserted should be payable in the full amount of approximately $380,000. Bryan, 291 So. 3d at 1034. At hearing, the recipient “offered the testimony of two trial attorneys who were both admitted as experts in the valuation of damages.” Id. These witnesses relied upon a life care plan and an economist’s report, which were filed as exhibits, as well as jury verdicts in similar cases, to support their opinion that “the value of [the recipient’s] damages exceeded $30 million.” Id.
The “experts both testified that, using the conservative figure
$30 million, the $3 million settlement only represented a 10% recovery,” and that, “based on that figure, it would be reasonable to allocate 10% of [the recipient’s] $381,106.28[4] claim for past medical expenses - $38,106.28 - from the settlement to satisfy AHCA’s lien.” Id. The recipient also “submitted an affidavit of a former judge,” who affirmed that the proportional allocation was
4 The actual number was, as set forth at other places in the opinion, $381,062.84, which makes the 10 percent calculation correct.
a reasonable, rational, and logical “method of calculating the proposed allocation.” Id.
In upholding the validity of proportional reduction as a valid means of establishing a lesser portion of the total recovery subject to reimbursement pursuant to section 409.410(17)(b), the court explained that:
[I]n this case, [the recipient] presented unrebutted competent substantial evidence to support that the value of her case was at least $30 million. She also presented unrebutted competent substantial evidence that her pro rata methodology did indeed support her conclusion that $38,106.28 was a proper allocation to her past medical expenses. Such methodology was similar to the methodology employed in Giraldo, Eady, and Mojica. AHCA did not present any evidence to challenge [the recipient’s] valuation, nor did it present any alternative theories or methodologies that would support the calculation of a different allocation amount for past medical expenses.
Id.
In this case, as in Bryan, two trial attorneys, one of whom was a
former circuit court judge familiar with the Medicaid lien process, gave unrebutted testimony to establish a conservative (and uncontested) appraisal of Petitioners’ damages. The combined settlement for all of Devyn and Makayla’s economic and non-economic damages represented 17.5 percent of the full, and very conservative, $15,000,000 value of their combined damages. As in Bryan, the experts opined that a proportional reduction was the proper method of determining the portion of the recipient’s recovery which should be allocated as past medical expenses. Their testimony, which was unrebutted, is credited.
The undersigned accepts the premise that the proportional reduction methodology, when established, as here, by unrebutted, competent substantial evidence, provides a valid formula for determining the portion of
the recipient’s recovery which should be allocated as past medical expense damages.
Summary
Petitioners have established that a lesser portion of the total recovery than the amount calculated pursuant to the formula in section 409.910(11)(f) should be reimbursed to AHCA as the proportionate share of the settlement proceeds fairly attributable to expenditures that were paid by AHCA for Petitioners’ past medical expenses.
The total value of Petitioners’ claims is, conservatively, $15,000,000.
The amount recovered from all third parties was $2,650,000. 45. $2,650,000 is 17.67 percent of $15,000,000. Thus, the amount
recovered by Petitioners in damages is 17.67 percent of the value of the total claim.
Upon consideration of the above Findings of Fact and Conclusions of Law, it is hereby
The Agency for Health Care Administration is entitled to $45,055.64 in satisfaction of its Medicaid lien.
DONE AND ORDERED this 28th day of October, 2020, in Tallahassee, Leon County, Florida.
E. GARY EARLY Administrative Law Judge
Division of Administrative Hearings this 28th day of October, 2020.
Floyd B. Faglie, Esquire Staunton & Faglie, PL 189 East Walnut Street Monticello, Florida 32344 (eServed)
Shena L. Grantham, Esquire
Alexander R. Boler, Esquire
Shevaun L. Harris, Acting Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1
Bill Roberts, Acting General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3
Richard J. Shoop, Agency Clerk
Thomas M. Hoeler, Esquire
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.
