vs.
Respondent.
Case No. 19-4496MTR
A final hearing was held by video teleconference in Tallahassee and Miami, Florida, on December 16, 2019, before Robert L. Kilbride, an Administrative Law Judge of the Division of Administrative Hearings ("DOAH").
For Petitioner: Floyd B. Faglie, Esquire
Staunton and Faglie, P.L. 189 East Walnut Street Monticello, Florida 32344
For Respondent: Alexander R. Boler, Esquire
What is the proper amount of Petitioner's personal injury settlement payable to Respondent, Agency for Health Care Administration ("AHCA"), to satisfy AHCA's $191,298.99 Medicaid lien under section 409.910(17)(b), Florida Statutes.
On August 22, 2019, Petitioner filed a petition with DOAH pursuant to section 409.910(17)(b), Florida Statutes (2019).1 The matter was assigned to the undersigned to conduct a formal administrative hearing and enter a final order.
A final hearing was scheduled for December 16, 2019. Prior to the final hearing, Petitioner filed an unopposed Motion for Leave to Amend the Petition, which was granted. As a result, the Amended Petition to Determine Medicaid Lien is the operative petition in this matter.
Prior to the final hearing, the parties filed a Joint Pre-hearing Stipulation (“JPHS”), which included numerous stipulated matters. The stipulated issues of fact have been incorporated herein.
The December 16, 2019, final hearing proceeded as scheduled, with Petitioner calling two expert witnesses, attorneys Steven C. Jugo, Esquire, and R. Vinson Barrett, Esquire. Petitioner’s Exhibits 1 through 9 were admitted into evidence. AHCA did not call any witnesses or submit any exhibits.
The one-volume Transcript of the proceedings was filed with DOAH on January 13, 2020. After being granted an extension of time, the parties filed their respective proposed final orders on January 31, 2020. Both proposed final orders were considered by the undersigned in the preparation of this Final Order.
1 Unless otherwise noted, all references to section 409.910 are to the 2019 version of the statute, which is the version of the statute in effect when the personal injury action settled. The parties stipulated that the 2019 version was applicable.
Based on the stipulations of the parties, the evidence presented at the hearing, and the record as a whole, the following findings of fact are made:
On August 9, 2018, Petitioner, Russell Wellington ("Wellington"), who was 59 years old, was driving a motorcycle in the inside northbound lane of
U.S. Highway 1 at or near mile marker 99 in Monroe County, Florida.
A vehicle driven by JI Young Chung ("Chung"), and owned by a car rental company, was northbound in the outside lane on U.S. Highway 1. Chung turned left into Wellington’s motorcycle causing him to be ejected from the motorcycle.
As a result of the accident, Wellington sustained catastrophic injuries including a right leg amputation, a fractured pelvis, fractured humerus, fractured ribs, kidney failure, and a head injury. Wellington is now disabled and unable to work. JPHS p. 10, ¶1.
Wellington’s medical care related to the injury was paid by Medicaid, and Medicaid, through AHCA, provided $191,298.99 in benefits. This
$191,298.99 constituted Wellington’s entire claim for past medical expenses. JPHS p. 10, ¶2.
Wellington pursued a personal injury claim against the driver and owner of the car that struck his motorcycle (“tortfeasors”) to recover all his damages. JPHS p. 10, ¶3.
The other driver, Chung, maintained an insurance policy with only
$100,000 in insurance limits, and had no other recoverable assets. The rental company that owned the vehicle maintained an insurance policy with only
$10,000 in insurance limits. Wellington’s personal injury claim against the tortfeasors was settled for an unallocated lump sum amount of $110,000.00. JPHS p. 10, ¶4.
As a condition of Wellington’s eligibility for Medicaid, Wellington assigned to AHCA his right to recover from liable third-parties medical
expenses paid by Medicaid. See 42 U.S.C. § 1396a(a)(25)(H) ; § 409.910(6)(b), Fla. Stat.
During the pendency of Wellington’s personal injury claim, AHCA was notified of the claim and asserted a $191,298.99 Medicaid lien against Wellington’s cause of action and settlement of that action. JPHS p. 10, ¶5.
AHCA did not commence a civil action to enforce its rights under section 409.910 or intervene or join in Wellington’s claim against the tortfeasors. JPHS p. 10, ¶6.
By letter, AHCA was notified of Wellington’s settlement. JPHS p. 10,
¶7.
AHCA has not filed a motion to set-aside, void, or otherwise dispute
Wellington’s settlement. JPHS p. 10, ¶8.
The Medicaid program, through AHCA, spent $191,298.99 on behalf of Wellington, all of which represents expenditures paid for Wellington’s past medical expenses. JPHS p. 10, ¶9.
Wellington’s taxable costs incurred in securing the $110,000.00 settlement totaled $766.78. JPHS p. 10, ¶10.
Application of the formula at section 409.910(11)(f) to Wellington’s
$110,000.00 settlement requires payment to AHCA of $40,866.61. JPHS p. 11, ¶11.
Petitioner has deposited the section 409.910(11)(f) formula amount in an interest bearing account 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). JPHS p.11, ¶12.
Testimony of Steven G. Jugo, Esquire
Steven G. Jugo, Esquire ("Jugo"), was called by Petitioner. He has been an attorney for 41 years and practices with the law firm of Jugo & Murphy in Miami, Florida.
For the past 37 years, Jugo has practiced exclusively plaintiff’s personal injury, medical malpractice, and wrongful death law. He routinely handles jury trials and cases involving catastrophic injury. He is familiar with reviewing medical records, reviewing accident reports, and deposing fact and expert witnesses.
He stays abreast of jury verdicts in his geographic area by reviewing jury verdict reporters and discussing cases with other trial attorneys. He is a member of several trial attorney organizations including the Florida Justice Association and the American Association for Justice.
As a routine part of his practice, Jugo makes assessments concerning the value of damages suffered by injured clients. He briefly explained his process for making these determinations. Jugo is familiar with, and routinely participates in, processes involving the allocation of settlements in matters including health insurance liens, workers' compensation liens, and Medicare set-asides, as well as, allocations of judgments made by judges post-verdict.
Jugo represented Wellington in his underlying personal injury claim. Jugo reviewed the accident report, reviewed Wellington’s medical records, met with Wellington numerous times, and deposed the driver of the vehicle that struck Wellington’s motorcycle.
As a result of the accident, Wellington underwent many surgeries and extensive medical intervention. Jugo felt that Wellington’s injuries have tremendously impacted his life in a negative way. He explained that Wellington is no longer able to work and he is no longer able to adequately care for or play with the three young children he adopted.
Without objection by AHCA, Jugo testified that based on his professional training and experience, it was his opinion that a very conservative value for Wellington’s damages would be $4 million. Jugo explained that his valuation of Wellington’s total projected damages was based on his experience, his comparison of Wellington’s case to similar jury verdicts, and discussions about the case with other attorneys.
He explained that the jury verdicts outlined in Petitioner’s Exhibit 9 were comparable to Wellington’s case and supported his valuation of Wellington’s total and projected damages in this case.
Jugo detailed that about 70 percent of the verdicts he reviewed which were similar in nature, were in the $5 million range. He opined that this demonstrated that Wellington’s total and projected damages would also have a minimum value of $4 million.
Jugo discussed the value of Wellington’s damages with other attorneys, and they agreed with the valuation of Wellington’s total projected damages being in excess of $4 million.
Wellington’s personal injury claim was brought against the driver and the rental car company that owned the vehicle which struck Wellington’s motorcycle. The vehicle driver, Chung, maintained an insurance policy with only $100,000.00 in coverage, and had no other recoverable assets.
Jugo explained that because the vehicle was owned by a rental car company, the law shielded the rental car company from suit. Nonetheless, he explained that the rental car company had a $10,000.00 insurance policy it made available. As a result, the total settlement was $110,000.00.
Jugo believed that the personal injury settlement did not fully compensate Wellington for all of his projected personal injury damages.
Without objection by AHCA’s counsel, Jugo testified that based on a conservative value of all damages of $4 million, Wellington recovered in the settlement only 2.75 percent of the value of his total and projected damages.
Again, without objection, he testified that because Wellington recovered only 2.75 percent of his total and projected damages, he recovered in the settlement only 2.75 percent of his $191,298.99 claim for past medical expenses, or $5,260.72.
Jugo also testified that it would be reasonable to allocate $5,260.72 of the settlement to past medical expenses, stating “[t]hat’s the maximum amount I believe should be allocated to past medical expenses.”
Testimony of R. Vinson Barrett, Esquire
R. Vinson Barrett, Esquire ("Barrett"), has been a trial attorney for over 40 years. He is a partner with the law firm of Barrett, Nonni and Homola, P.A., in Tallahassee. His legal practice is dedicated to plaintiff’s personal injury and wrongful death cases. He has handled cases involving automobile accidents and catastrophic injuries. Barrett routinely handles jury trials.
Barrett stays abreast of jury verdicts by periodically reviewing jury verdict reports and discussing cases with other trial attorneys. He is a member of the Florida Justice Association and the Capital City Justice Association.
As a routine part of his practice, Barrett makes assessments concerning the value of damages suffered by injured parties. He briefly explained his process for making these assessments.
It has been part of his law practice to gain familiarity with settlement allocation involving health insurance liens, Medicare set-asides, and workers’ compensation liens.
He is also familiar with the process of allocating settlements in the context of Medicaid liens, and he described that process.
Barrett has been accepted as an expert in the valuation of personal injury damages in federal court, as well as numerous Medicaid lien hearings at DOAH.
Barrett addressed the instant case. He was familiar with Wellington’s injuries and the circumstances resulting in the injuries. Barrett detailed the extensive nature of Wellington’s injuries and the general impact of such injuries.
Barrett testified, without objection, that based on his professional training and experience, he believed Wellington’s damages had a conservative value of $4 million. More specifically, he stated, “I felt that the damages were conservatively, very conservatively, $4 Million. I believe this
case, if it had gone to a jury could well have gone up into the eight figures, probably would have, I think. If I was asking for damages in this case in front of a jury, it would probably be somewhere, between $8 and 12 million or even a little higher, if I was in South Florida jurisdiction.”
Barrett has been accepted as an expert in the valuation of personal injury damages in other cases at DOAH.
Barrett explained that the jury verdicts outlined in Petitioner’s Exhibit 9 involved injuries comparable to Wellington’s injuries and supported his valuation of Wellington’s total and projected damages at $4 million.
Barrett went on to explain that the average trial verdict and award he reviewed from Exhibit 9 was $5.5 million and the average award for pain and suffering was $3,788,333.00.
Barrett believed that the jury verdict in the Nummela case, from Exhibit 9, most closely tracked Wellington’s case. Barrett explained that the injuries suffered by Nummela compared most closely with Wellington’s injuries and he noted the similarities.
Barrett also pointed out that the jury in Nummela had determined that the damages had a value of $9.5 million, which Barrett testified was in line with what he believed a jury would have awarded to Wellington, if this matter had proceeded to trial.
Barrett was aware that Wellington’s case had settled for the insurance policy limits of $110,000.00. He testified that this settlement amount did not fully compensate Wellington for all the personal injury damages he had suffered.
Barrett testified, without objection by AHCA’s counsel, that using a conservative value of $4 million for all projected damages, the $110,000.00 settlement represented a recovery of 2.75 percent of the total and projected damages.
Barrett testified, again without objection, that because only 2.75 percent of his damages were recovered in the settlement, only 2.75 percent of
the $191,298.99 claim for past medical expenses was recovered by Wellington in the settlement, namely $5,260.72.
Barrett testified that it would be reasonable to allocate $5,260.72 of Wellington’s settlement to his past medical expenses.
Inexplicably, AHCA did not call any witnesses, present any contradictory evidence as to a lower value of Wellington’s projected or total damages, or call any witnesses to contest the methodology used to calculate the $5,260.72 allocation to past medical expenses.
The unrebutted evidence supports that Wellington’s total and projected damages had a value in excess of $4 million.
By applying the same ratio to AHCA's lien that the settlement ($110,000.00) bears to the total projected monetary value of all the damages ($4,000,000.00), a finding is reached that $5,260.72 of the settlement is fairly allocable to past medical expenses.
Under the proportionality methodology, the $110,000.00 settlement represents a 2.75 percent recovery of the expert’s total and projected damages of $4 million ($110,000.00 is 2.75 percent of $4 million). Applying this same
2.75 percent to the $191,298.99 claim for past medical expense, the experts opined that Wellington recovered $5,260.72 in past medical expenses in the settlement.2
Of particular consequence to this case, AHCA did not call any expert witnesses, nor did it present any evidence, to rebut or contradict Petitioner's experts or proposed allocation of $5,260.72 in the settlement to past medical expenses.
Likewise, AHCA did not dispute or present any persuasive evidence or arguments that Wellington’s injuries were overstated or incorrectly described by Messrs. Jugo or Barrett.
2 This methodology is commonly referred to as the proportionality test or pro-rata formula.
On AHCA's cross-examination of the attorney experts, the methodology used by them to arrive at their opinion concerning a fair allocation of past medical expenses in Wellington’s settlement was not persuasively challenged or overcome by AHCA.
Simply put, the amount of $5,260.72 proposed by Petitioner as a fair allocation of past medical expenses from the settlement agreement was not successfully refuted or challenged by AHCA.
Under the circumstances and proof presented in this case, Petitioner proved by a preponderance of the evidence that $5,260.72 was a fair allocation of the total settlement amount to past medical expenses.
AHCA failed to develop any adequate basis or evidence in the record to reject Jugo’s or Barrett’s opinion, or to reach any other conclusion concerning a fair allocation, other than the amount of $5,260.72 presented by the evidence and proposed by Petitioner.
CONCLUSIONS OF LAW
The Agency for Health Care Administration is the state agency responsible for administering Florida's Medicaid program. § 409.910(2), Fla. Stat.
DOAH has jurisdiction of this matter, pursuant to section 409.910(17)(b), and the parties acknowledged that the proper standard of proof in this proceeding for Petitioner is a "preponderance of the evidence."
"Medicaid is a cooperative federal-state welfare program providing medical assistance to needy people." Roberts v. Albertson's Inc., 119 So. 3d 457 (Fla. 4th DCA 2012). Although state participation in this federal program
is voluntary, once a state elects to participate, it must comply with federal Medicaid law. Id.
Federal law requires that participating states seek reimbursement for medical expenses incurred on behalf of Medicaid recipients who later recover from legally-liable third parties.
Under the United States Supreme Court's reasoning in Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), the federal Medicaid anti-lien provision at 42 U.S.C. § 1396p(a)(1) prohibits a Medicaid lien on any proceeds from a Medicaid recipient's tort settlement.
However, the provisions in federal law requiring states to seek reimbursement of their Medicaid expenditures from liable third parties, also create an express exception to the anti-lien law and authorizes states to seek reimbursement from the medical expense portion of the recipient's tort recovery.
As noted, the Federal Medicaid Act limits a state's recovery to certain portions of the settlement funds received by the Medicaid recipient. In Florida, this has been recently interpreted by the Florida Supreme Court to be the amount in a personal injury settlement which is fairly allocable to past (not future) medical expenses. Giraldo v. Ag. for Health Care Admin., 248 So. 3d 53, 56 (Fla. 2018).
In this case, Wellington settled his personal injury claim against third parties who were liable to him for injuries associated with AHCA's Medicaid
claim. Therefore, AHCA has a lien which may be enforced against Wellington’s tort settlement.
The underlying question in this case, however, is how much is AHCA entitled to recover from Petitioner as payment for past medical services provided to him?
Section 409.910(11) establishes a formula to determine the amount AHCA may recover for medical assistance benefits paid from a judgment, award, or settlement from a third party. Section 409.910(11)(f) states, in pertinent part:
Notwithstanding any provision in this section to the contrary, in the event of an action in tort against a third party in which the recipient or his or her legal representative is a party which results in a judgment, award, or settlement from a third party, the amount recovered shall be distributed as follows:
After attorney's fees and taxable costs as defined by the Florida Rules of Civil Procedure, one-half of the remaining recovery shall be paid to the agency up to the total amount of medical assistance provided by Medicaid.
The remaining amount of the recovery shall be paid to the recipient.
For purposes of calculating the agency's recovery of medical assistance benefits paid, the fee for services of an attorney retained by the recipient or his or her legal representative shall be calculated at 25 percent of the judgment, award, or settlement.
Notwithstanding any provision of this section to the contrary, the agency shall be entitled to all
medical coverage benefits up to the total amount of medical assistance provided by Medicaid. For purposes of this paragraph, "medical coverage" means any benefits under health insurance, a health maintenance organization, a preferred provider arrangement, or a prepaid health clinic, and the portion of benefits designated for medical payments under coverage for workers' compensation, personal injury protection, and casualty.
In essence, section 409.910(11)(f) provides that the agency's recovery for a Medicaid lien is limited to the lesser of: (1) its full lien; or (2) one-half of the total award, after deducting attorney's fees of 25 percent of the recovery and taxable costs, not to exceed the total amount actually paid by Medicaid on the recipient's behalf. See Ag. for Health Care Admin. v. Riley, 119 So. 3d 514 (Fla. 2d DCA 2013).
Here, the parties agreed that application of this section 409.910(11)(f) formula to Petitioner's settlement would require payment to AHCA of
$40,866.61. JPHS p. 11, ¶11.
However, another section, section 409.910(17)(b), provides a method by which a Medicaid recipient may challenge the amount AHCA seeks under the statutory default formula found above at section 409.910(11)(f).
This is done during an administrative hearing at DOAH. It is to the proof presented at the administrative hearing that a determination concerning the proper and fair allocation of the settlement agreement for past medical expenses should be made.
More specifically, following the United States Supreme Court decision in Wos v. E.M.A., 568 U.S. 627, 633 (2013), the Florida Legislature created an administrative process to challenge and ultimately determine what portion of a judgment, award, or settlement in a tort action is properly allocable to medical expenses and, thus, what portion of a Petitioner’s settlement may be recovered to reimburse the Medicaid lien held by AHCA.
Section 409.910(17)(b) states:
A recipient may contest the amount designated as recovered medical expense damages payable to the agency 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 the agency or after the date of placing the full amount of the third-party benefits in the trust account for the benefit of the agency pursuant to paragraph (a). The petition shall be filed with the Division of Administrative Hearings. For purposes of chapter 120, the payment of funds to the agency or the placement of the full amount of the third- party benefits in the trust account for the benefit of the agency constitutes final agency action and notice thereof. Final order authority for the proceedings specified in this subsection rests with the Division of Administrative Hearings. This procedure is the exclusive method for challenging the amount of third-party benefits payable to the agency. In order to successfully challenge the amount payable to the agency, 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 the agency pursuant to the formula set forth in paragraph (11)(f) or that Medicaid provided a lesser
amount of medical assistance than that asserted by the agency.3
In more simple terms, if Petitioner can demonstrate, by a preponderance of the evidence, that the portion of his settlement agreement fairly allocable as payment for past medical expense is less than the amount the agency seeks, then the amount Petitioner is obligated to pay to AHCA would be reduced.
How to arrive at this amount and fairly allocate the past medical expense portion of an undifferentiated settlement agreement has been the subject of considerable debate, and has not been squarely addressed by the United States Supreme Court:
A question the Court had no occasion to resolve in Ahlborn is how to determine what portion of a settlement represents payment for medical care. The parties in that case stipulated that about 6 percent of respondent Ahlborn's tort recovery (approximately $35,600 of a $550,000 settlement) represented compensation for medical care. Id., at 274, 126 S. Ct. 1752. The Court nonetheless anticipated the concern that some settlements would not include an itemized allocation. It also recognized the possibility that Medicaid beneficiaries and tortfeasors might collaborate to allocate an artificially low portion of a settlement to medical expenses.
Wos, 568 U.S. at 627, 634.
In its recent opinion in Giraldo, the Florida Supreme Court held that future medical expense damages recovered by a Medicaid recipient are not
3 The parties agree, however, that the standard of proof is a preponderance of the evidence, not clear and convincing.
available as a source of reimbursement for Medicaid payments made for the recipient. Rather, only past medical expenses may be considered.
Several recent district court of appeal opinions have considered noteworthy, the following statement by the Florida Supreme Court:
Because we hold that the federal Medicaid Act prohibits AHCA from placing a lien on the future medical expenses portion of a Medicaid recipient's tort recovery, we remand with instructions that the First District direct the ALJ to reduce AHCA's lien amount to $13,881.79. Although a factfinder may reject "uncontradicted testimony," there must be a "reasonable basis in the evidence" for the rejection. Wald v. Grainger, 64 So. 3d 1201, 1205-06 (Fla. 2011). Here, Villa presented uncontradicted evidence establishing $13,881.79 as the settlement portion properly allocated to his past medical expenses, and there is no reasonable basis in this record to reject Villa's evidence. For this reason, no further fact finding is required.
Giraldo, 248 So. 3d at 56.
In this case, there was no evidence presented by AHCA to contest or contradict the amount of $5,260.72 presented by Petitioner's expert as the fair allocation of past medical expenses in Wellington’s settlement.
Counsel for AHCA cross-examined Petitioner's experts, but elicited no compelling information or evidence assailing their opinions that a fair allocation of past medical expenses was $5,260.72.
In short, Petitioner's expert testimony concerning a fair allocation of the settlement agreement was unchallenged by AHCA, without any contrary or contradictory facts or evidence in the record.
Many of the questions that existed in the law regarding the proper methodology or proof to apply in a section 409.910(17)(b) hearing have been resolved by the First District Court of Appeal in a series of recent opinions. While the Florida Supreme Court has not, arguably, issued a definitive or express opinion on the matter, the prevailing law in the First District Court of Appeal appears now to be settled.
In Eady v. Agency for Health Care Admininistration, 279 So. 3d 1249 (Fla. 1st DCA 2019); Larrigui-Negron v. Agency for Health Care Administration, 280 So. 3d 550 (Fla. 1st DCA 2019); and Mojica v. Agency for Health Care Administration, 285 So. 3d 393 (Fla. 1st DCA 2019), the First District Court of Appeal panels discussed and accepted the proportionality test or method advanced by Petitioner.4
More specifically, a Petitioner may carry his burden of proving how much of his undifferentiated settlement agreement is fairly allocable to past medical expenses, by applying the same ratio or percentage Petitioner’s settlement amount bears to the total projected damage claim, to AHCA's claim for past medical expenses. This may be accomplished through the testimony of expert witnesses.
4 These cases recognize, however, that AHCA may present evidence in an effort to refute or contradict the expert testimony offered. Likewise, every case is different. Eady, Larrigui- Negron, and Mojica do not define the exact parameters of the pro-rata formula, nor do they exclude the possibility that there may be facts elicited from the experts or other evidence presented, to warrant an adjustment to the proportionality test or the total damages projected by the experts.
The First District Court of Appeal panels in these three recent cases have determined that it would be error to reject the expert testimony, unless there is a basis in the record to do so. There was no basis in this record to do so.
As such, and based on this record, the undersigned is constrained to conclude under the first district’s opinions in Eady, Larrigui-Negron, and Mojica, that $5,260.72 is the amount due to AHCA.
Based on the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the Agency for Health Care Administration is entitled to recover payment of $5,260.72 from the amount recovered in Petitioner's personal injury matter.
DONE AND ORDERED this 2nd day of March, 2020, in Tallahassee, Leon County, Florida.
ROBERT L. KILBRIDE
Division of Administrative Hearings this 2nd day of March, 2020.
Alexander R. Boler, Esquire
Floyd B. Faglie, Esquire Staunton and Faglie, P.L. 189 East Walnut Street Monticello, Florida 32344 (eServed)
Steven G. Jugo, Esquire Jugo & Murphy
Mary C. Mayhew, Secretary
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.
