Colorado’s Court of Appeals Re-Affirms Equitable Apportionment to Resolve Medicaid Liens
On June 18, 2015, the Colorado Court of Appeals decided a case which dealt with the issue of how to determine the amount of Colorado Medicaid’s lien under Colorado Medicaid’s third party liability recovery statute (C.R.S. § 25.5-4-301). Specifically, the Court of Appeals addressed the issue of how to calculate the allocation of a personal injury settlement to determine the amount of past medical expenses. In general, through operation of a Federal anti-lien statute as applied to state Medicaid lien statutes, a Medicaid agency’s lien on a plaintiff’s personal injury settlement may not exceed the amount of the settlement that is allocated to medical expenses (see Arkansas Dep’t of Health & Human Services v. Ahlborn, 547 U.S. 268 (2006)). In the cases where the Medicaid agency and the plaintiff have not agreed or stipulated to an allocation, then settlement allocations may be accomplished by administrative criteria or judicial determinations (see Ahlborn and Wos v. E.M.A. ex rel. Johnson, 568 U.S.__, 133 S. Ct. 1391 (2013)). The method of allocation may be different based on the circumstances of a case, but the method of allocation cannot be arbitrary and must be based on a rational approach (see Wos).In this case, Colorado Medicaid sued the plaintiff in Colorado state court to recover on its’ statutory lien from the settlement amount because Colorado Medicaid and the plaintiff could not agree on a final lien amount and what portion of the settlement represented past medical expenses from which Colorado Medicaid could recover in compliance with Ahlborn and its’ lineage of cases. Colorado Medicaid and the plaintiff agreed that the total case value, had the case gone to trial, was $4.9 million, but the plaintiff settled the personal injury claim with the defendant for $1 million. To determine the amount allocated to past medical expenses, Colorado Medicaid and the plaintiff agreed that the method of allocation should be based on a proportional value of the past medical expenses in relation to the total case value.
The trial court determined that the portion of the settlement amount that represents past medical expenses paid by Colorado Medicaid was 2.9%. To get this allocation percentage, the court divided the amount actually paid by Colorado Medicaid for past medical expenses ($142,779) by the projected total case value ($4.9 million). Based on this percentage, the amount of Colorado’s Medicaid lien was calculated to be $29,000 by multiplying the gross settlement amount by the allocation percentage ($1 million x 2.9%). The court then reduced the lien amount by the statutory 12.5% attorney fee reduction, to obtain a final Colorado Medicaid lien amount of $25,375.
Both Colorado Medicaid and the plaintiff appealed the allocation calculation of the trial court. Colorado Medicaid argued that since the total case value was determined based on the billed amount of the medical expenses; the billed amount ($776,383) should have been used to determine the allocation percentage and not the actual paid amount ($142,779). The Court of Appeals rejected this argument because the amount actually paid by Colorado Medicaid is an objective measure of the medical expenses, as opposed to the billed amount which represented an unreliable estimate of medical expenses. The objective nature of the actual paid amount complies with the rational and reasonable standard set forth in the Ahlborn lineage of cases for allocating a settlement to determine the portion that represents past medical expenses. The plaintiff appealed based on the argument that the allocation percentage should have been applied to the net settlement value after deducting for attorney fees and expenses ($442,213) as opposed to the gross settlement value ($1 million). The plaintiff argued that the attorney fees and expenses were never her property, but the Court of Appeals rejected this argument because the attorney possessed a right to a lien against the plaintiff’s settlement funds.
Ultimately, the Court of Appeals upheld the trial court’s calculation of the allocated amount of the settlement that was attributed to past medical expenses paid by Colorado Medicaid. The Court of Appeals reaffirmed the rules established by Ahlborn and its lineage of cases that Medicaid can only recover from that portion of the settlement that represents past medical expenses, and that if an allocation method is needed, the allocation method must be reasonable and rational. Thus far, Colorado has not determined a standard method of calculating apportionment of past medical expenses across all cases, and the particular method used in this case may not be applicable in every cases. Courts in the future may take different factors into account to determine allocation methods, but the allocation method must be reasonable and rational.
The Garretson Resolution Group continues to closely monitor how state and federal court decisions affect tort settlements and health care reimbursement claims / lien resolution. Please see our website at www.garretsongroup.com for resources such as White Papers, articles and other practice tips related to Medicaid, Medicare, VA, Tricare and / or private health care lien / claims resolution. For more specific information about how state Medicaid lien resolution strategies can impact your clients’ settlements, please contact Josh Albert, at (704) 559-4300, or at jalbert@garretsongroup.com.
[1] Colo. Ct. App., No. 14-CA-0249 (June 18, 2015).
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