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State Dep't of Health Care Policy & Fin. v. S.P.

Court of Appeals of Colorado, Seventh Division

June 18, 2015

State of Colorado Department of Health Care Policy and Financing, Plaintiff-Appellant and Cross-Appellee,
v.
S.P., Defendant-Appellee and Cross-Appellant

City and County of Denver District Court No. 13CV32372. Honorable Herbert L. Stern III, Judge.

Cynthia H. Coffman, Attorney General, Alisa Campbell, Assistant Attorney General, Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee.

Solem, Mack & Steinhoff, P.C., R. Eric Solem, Englewood, Colorado; Bogue Paoli & Thomas LLC, Fred Paoli, Denver, Colorado, for Defendant-Appellee and Cross-Appellant.

Richman and Sternberg[*], JJ., concur.

OPINION

NEY, JUDGE[*].

Page 1034

[¶1] S.P. was injured in a snowboarding accident at a ski area. She applied for Medicaid assistance and was accepted. Over the course of several years, Medicaid paid $142,779 for her medical care necessitated by the accident. S.P. sued the ski area, alleging negligence, and eventually settled the case for one million dollars. Medicaid was entitled to a statutory lien against the settlement for repayment of the medical assistance it had provided. § 25.5-4-301(5)(a), C.R.S. 2014. The settlement agreement, however, did not

Page 1035

specify the portion of the settlement amount attributable to medical expenses, as opposed to other categories of damages. The question was: how much was S.P. required to repay?

[¶2] After the settlement, S.P. and the Medicaid administration agency could not agree on a repayment amount. The agency -- Colorado Department of Health Care Policy and Financing (the Department) -- sued S.P. to enforce its lien. The trial court was then required to determine the repayment amount. The parties informed the court how they each believed the repayment amount should be calculated. The court applied its own formula, a hybrid of S.P.'s method and the Department's, and ordered S.P. to repay Medicaid $25,375. Both parties now appeal from the court's judgment. We affirm and remand for the trial court to release the funds held in the court registry accordingly.

I. Apportionment of Third-Party Settlement Funds for Medicaid Lien Purposes

A. Medicaid Third-Party Reimbursement Requirements

[¶3] " Medicaid is a cooperative federal-state program that provides financial assistance to states to subsidize certain costs of medical treatment for low-income individuals." Christy v. Ibarra, 826 P.2d 361, 363 (Colo.App. 1991); see generally 42 U.S.C. § 1396a (2012). " Although participation in the Medicaid program is optional, once a state elects to participate, it must comply with the federal statutory scheme and the regulations promulgated by the Secretary of Health and Human Services." Christy, 826 P.2d at 363.

[¶4] As a condition of Medicaid participation, federal law requires states to seek reimbursement from liable third parties for care and services provided. See 42 U.S.C. § § 1396a(a)(25), 1396k (2012); 42 C.F.R. § § 433.138 to .140 (2015). Once a state has identified a legally liable third party, it must seek reimbursement for medical assistance provided " to the extent of such legal liability." 42 U.S.C. § 1396a(a)(25)(B). This federal requirement is embodied by Colorado's third-party liability statute. See § 25.5-4-301(4)-(6); see also 42 U.S.C. § 1396a(a)(25)(H) (mandating that states have laws establishing their right to reimbursement). Colorado's statute gives the Department the right to an assignment from the Medicaid recipient for covered medical expenses recovered from a responsible third party. § 25.5-4-301(4); see also 42 U.S.C. § 1396k(a)(1)(A) (requiring Medicaid recipients to assign to the state their rights to recover payment for medical care provided from third parties).

[¶5] The Colorado statute also prescribes a collection mechanism by way of an automatic lien against a third-party settlement or judgment:

When the state department has furnished medical assistance to or on behalf of a recipient . . . for which a third party is liable, the state department shall have an automatic statutory lien for all such medical assistance. The state department's lien shall be against any judgment, award, or settlement in a suit or claim against such third party and shall be in an amount that shall be the fullest extent allowed by federal law as applicable in this state, but not to exceed the amount of the medical assistance provided.

§ 25.5-4-301(5)(a) (emphasis added). The italicized portion of the statute was added in 2009, apparently in response to the United States Supreme Court's opinion in Arkansas Department of Health & Human Services v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006). See Ch. 100, sec. 1, § 25.5-4-301(5)(a), 2009 Colo. Sess. Laws 372; see also I.P. ex rel. Cardenas v. Henneberry, 795 F.Supp.2d 1189, 1194 (D. Colo. 2011) (discussing this portion of the statute in relation to Ahlborn ).

[¶6] In Ahlborn, the Court held that a state's Medicaid lien is limited to the portion of the recipient's third-party settlement " designated as payments for medical care." 547 U.S. at 284-85. The parties in Ahlborn had stipulated to the portion of the settlement constituting compensation for medical care, id. at 275, but " [t]he Court nonetheless anticipated the concern that some settlements would not include an itemized allocation." See Wos v. E.M.A. ex rel. Johnson, 568 U.S.__,__, 133 S.Ct. 1391, 1397, 185 L.Ed.2d 471 (2013)

Page 1036

(discussing Ahlborn ). The Ahlborn Court thus acknowledged the risk that parties to a tort suit might try to " allocate away the State's interest." 547 U.S. at 288.[1] However, the Court noted that such problems could " be avoided either by obtaining the State's advance agreement to an allocation or, if necessary, by submitting the matter to a court for decision." Id.

[¶7] Ahlborn, then, did not prescribe any particular method for " how to determine what portion of a settlement represents payment for medical care." Wos, 568 U.S. at__, 133 S.Ct. at 1397; accord Henneberry, 795 F.Supp.2d at 1196; In re E.B., 229 W.Va. 435, 729 S.E.2d 270, 296 (W.Va. 2012). In Wos, the Supreme Court suggested that settlement allocations could be accomplished by stipulations between parties (as in Ahlborn ) or potentially by using established ex ante administrative criteria. 568 U.S. at__, 133 S.Ct. at 1399-1400. However, both Wos and Ahlborn also recognized that, in some circumstances, parties might need to seek a judicial determination of how to fairly apportion a settlement. Id. at__, 133 S.Ct. at 1399, 1401; Ahlborn, 547 U.S. at 288; accord Yang v. Portage Cnty., Wis., No. 12-cv-797-bbc, 2013 WL 3778142, at *4 (W.D. Wis. July 19, 2013) (" Because Wisconsin does not provide a mechanism for resolving the dispute administratively, the responsibility falls on this court to hold a hearing." ).

[¶8] As for judicial determinations, the Wos Court observed that " [t]he task of dividing a tort settlement is a familiar one." 568 U.S. at__, 133 S.Ct. at 1401. " In a variety of settings, state and federal courts are called upon to separate lump-sum settlements or jury awards into categories to satisfy different claims to a portion of the moneys recovered." Id. As an example of how courts have managed to accomplish such allocations, Wos cites Colorado Compensation Insurance Authority v. Jones, 131 P.3d 1074, 1077-78 (Colo.App. 2005). In Jones, a division of this court noted, in the context of apportioning workers' compensation settlements, that courts " must determine the amount of each category of damages actually suffered by the employee, and based on these findings, allocate the settlement among the categories." Id. at 1077; see also Colo. Comp. Ins. Auth. v. Jorgensen, 992 P.2d 1156, 1166 (Colo. 2000) (courts apportioning settlements should look to the totality of the circumstances). In the end, " [w]hatever method of allocation is used, what matters is that past medical expenses are distinguished from other damages on the basis of a rational approach." E.B., 729 S.E.2d at 297; accord Smalley v. Neb. Dep't of Health & Human Servs., 283 Neb. 544, 811 N.W.2d 246, 257 (Neb. 2012) (" [S]tates are generally free to employ any reasonable means to determine what portion of a settlement relates to medical expenses and is therefore recoverable by a state Medicaid administrator." ); but cf. Wos, 568 U.S. at__, 133 S.Ct. at 1402 (holding that states may not " adopt an arbitrary, one-size-fits-all allocation for all cases" ).

[¶9] The Wos Court certainly recognized that, absent stipulation, a fair settlement allocation " may be difficult to determine." 568 U.S. at__, 133 S.Ct. at 1400. Furthermore, Wos acknowledged that fact-specific considerations might be relevant to judicial determinations in particular cases. See id. (noting that apportioning settlement funds will depend upon both how likely a plaintiff is to prevail on his or her claims at trial and how much he or she " reasonably could have expected to receive on each claim if successful, in view of damages awarded in comparable tort cases" ); see also Price v. Wolford, 608 F.3d 698, 707-08 (10th Cir. 2010) (discussing considerations that might justify reduced Medicaid repayment amounts). Nevertheless, the Court ...


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