Medicaid Liens After Gallardo: Dagenhart v. Agency for Healthcare Administration

Rafael Gonzalez, Esq., Cattie & Gonzalez, PLLC

On June 10, 2022, the United States Supreme Court published its decision on?Gallardo v. Marstiller, declaring that Florida’s state Medicaid agency may recoup its lien, not just from settlement funds allocated for past medical expenses, but may also collect its lien from settlement funds allocated for future medical expenses.?

We knew the decision would create headaches, confusion, and litigation. We knew the decision would ask each state to look at their statutory provisions and decide whether Gallardo changed the way in which each state handled its Medicaid third party liability liens in liability, no-fault, and workers compensation claims.

Although we are watching very carefully for proposed federal and state legislation that may affect how states may collect its Medicaid liens after Gallardo, several states have begun to provide legal opinions on the effect of Gallardo on states’ authority, processes and procedures in chasing after reimbursement of Medicaid payments from an automobile personal injury, medical malpractice, nursing home, product liability, wrongful death, or workers’ compensation settlements.

Over the next several weeks, we will provide an analysis of the various decisions handed down by different courts throughout the country on state Medicaid agencies’ entitlement to reimbursement, not just from settlement monies allocated towards past medical expenses, but settlement dollars specifically allocated for future medical expenses associated with the injuries related to the specific claim. Today, we review Dagenhart v. Agency for Healthcare Administration.?

And So The Headaches, Confusion, and Litigation Begin

Less than a month after the Gallardo opinion, on July 6, 2022, Florida’s Division of Administrative Hearings published its opinion on?Dagenhart v. Agency for Health care Administration?concluding that Mr. Dagenhart failed to prove by clear and convincing evidence that a lesser portion of his settlement should be allocated as past and future medical expenses than?the amount determined via Florida’s statutory formula and therefore ordered that the Agency for Health Care Administration is entitled to $91,975.88 in satisfaction of its Medicaid lien out of the $250,000 workers compensation settlement.??

The court however goes one step further and indicates that even if Mr. Dagenhart had presented evidence sufficient to justify utilizing the pro rata method allowed in Florida to reduce the lien produced by Florida’s statutory formula, the state formula would still control based on?Gallardo, the United States Supreme Court most recent ruling that a Medicaid lien attaches not just past medical, but to past and future medical expenses.???

Facts

On November 28, 2018, Mr. Dagenhart was catastrophically injured when he slipped and fell approximately 30 feet from the roof of an airplane hangar while in the course and scope of his employment. Mr. Dagenhart underwent multiple surgeries and extensive rehabilitation, with charges from his hospital stay totaling $1,448,817.80.?

Because Mr. Dagenhart was in the course and scope of his employment at the time of the November 28, 2018, accident, he filed a workers' compensation claim. The Employer/Carrier (E/C) denied that Mr. Dagenhart was entitled to workers' compensation benefits because he tested positive for marijuana metabolites while in the hospital. Mr. Dagenhart also refused to submit to a drug/alcohol test as requested by the E/C.?

Because of the substantial uncertainty associated with pursuing a claim for workers' compensation benefits, Mr. Dagenhart elected to accept $250,000, inclusive of attorney's fees and costs, as payment for past and future medical and indemnity benefits.??Non-compensatory damages, such as pain and suffering, are unavailable under Florida's Workers' Compensation Act.?

From the total $250,000 settlement, Mr. Dagenhart's net recovery was $183,951.77 after he paid attorney's fees of $62,500 and costs of $3,548.23.??

Florida Medicaid, AHCA, and WellCare, a managed care organization which also provided Medicaid benefits, paid $98,238.31 and $13,311.87, respectively, for Mr. Dagenhart's past medical expenses. AHCA and Wellcare, through their respective collection contractors, asserted liens totaling $111,550.18.??

Pursuant to the formula set forth in Section 409.910(11)(f), Fla. Stat., AHCA and WellCare would be entitled to half of Mr. Dagenhart's net recovery after deducting the taxable costs and 25 percent for attorney's fees. After deducting $66,048.23 in attorney’s fees and costs, Mr. Dagenhart's net recovery was $183,951.77. Therefore, the maximum lien allowable under the Florida statutory formula would be $91,975.88 ($183,951.77 x .5 = $91,975.88).??

Disputing Medicaid’s Lien

Mr. Dagenhart disagreed with AHCA and Wellcare’s lien and therefore requested an administrative determination regarding the amount of the Medicaid lien.??On May 26, 2021, Mr. Dagenhart filed a "Petition to Determine the Amount Payable to AHCA and Wellcare in Satisfaction of Medicaid Lien" to challenge Medicaid liens filed by AHCA and Wellcare against settlement proceeds recovered by Mr. Dagenhart.

Mr. Dagenhart valued his total damages as being well in excess of $2,500,000.00. He settled his workers’ compensation claim for $250,000. After accounting for attorney's fees and costs, Mr. Dagenhart asserted that his net recovery?was $183,951.77, or approximately 7.3 percent of the full value of his damages. Accordingly, Mr. Dagenhart asserted that AHCA was only entitled to recover 7.3 percent of the medical expenses it paid on his behalf. Since AHCA and Wellcare had paid $111,550.18, he argued AHCA and Wellcare were only due $8,143.16 (7.3% of $111,550.18).

At hearing, Mr. Dagenhart’s expert testified that in her opinion the full value of the case would be approximately $2.5 million. Present value of permanent total disability was $804,418. Carriers normally pay between 50 and 60 percent of present value to settle indemnity benefits, so indemnity was valued at between $400,000 and $500,000. Outstanding medical bills were about $1.5 million. Future medical was $600,000 based on life expectancy of 42.6 years.?

Mr. Dagenhart’s expert did not provide any testimony that a pro-rata reduction would accurately or correctly determine the portion of Mr. Dagenhart's settlement that accounts for past and future medical expenses. In other words, his expert witness did not testify that AHCA was only entitled to recover 7.3 percent of the medical expenses it paid on his behalf (since AHCA and Wellcare had paid $111,550.18, AHCA and Wellcare were only due $8,143.16 (7.3% of $111,550.18). His expert witness did not also testify that past and future medical should be limited to 10% of the settlement (since Mr. Dagenhart recovered 10 percent of the full value of his case, or $250,000 of the $2.5 million).

Post hearing, in his proposed order to the administrative law judge, Mr. Dagenhart’s argument was that carving out $804,000, the approximate value of Mr. Dagenhart's potential indemnity benefits, from the $2,500,000.00 full value of the Petitioner's workers' compensation case, reveals that approximately 68% of the full value of the Petitioner's case, or approximately $1,700,000.00, was attributable to past and future medical care. Applying this percentage to approximate how much of the gross settlement is attributable to the medical care reveals that approximately $170,000.00 of the $250,000 settlement should be allocated to past and future medical care. ($250,000.00 gross settlement X 68% = $170,000.00). Thus, Mr. Dagenhart's settlement represents approximately 10% of the full value of his past and future medical care. ($170,000.00 is 10% of $1,700,000.00).?

Consequently, Mr. Dagenhart argued Florida’s statutory formula allowing AHCA and Wellcare to recover $91,975.88 represented a recovery of approximately 82.4% of the total amount expended by Medicaid, whereas the Petitioner only recovered 10% of the full value of his case.??In short, Mr. Dagenhart argued that the statutory formula does not achieve a fair allocation because it would result in AHCA recovering over 82 percent of the amount it spent on Mr. Dagenhart's medical care while his settlement only represents 10 percent of the full value of his workers' compensation claim. Therefore, Petitioner suggests using the "pro rata method" to argue that AHCA's recovery should be limited to 10 percent,?i.e., $9,823.83, of the $98,238.31 AHCA spent on Petitioner's past medical care.?

Court’s Findings

The Court finds Mr. Dagenhart's argument regarding what portion of his settlement represents past and future medical expenses is unsupported by any expert testimony opining that his computational argument is a reasonable method by which to determine what portion of Mr. Dagenhart's settlement amounts to a recovery of past and future medical expenses.?

The court concludes Mr. Dagenhart failed to carry his burden of demonstrating that AHCA's Medicaid lien should be reduced as there was no competent, substantial evidence on which the administrative law judge could base a finding 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 statutory formula.

The court goes one step further and indicates that even if Mr. Dagenhart had presented evidence sufficient to justify utilizing the pro rata method, the state formula would still control based on the United States Supreme Court most recent ruling that a Medicaid lien attaches to past and future medical expenses.?Gallardo v. Marstiller, 2022 WL 1914096 at 5 (U.S. 2022).

The court concludes that Mr. Dagenhart's past medical expenses include $1,448.817.80 in outstanding medical bills, $98,238.31 in medical bills paid by AHCA, and $13,311.87 in medical bills paid by Wellcare. Thus, Mr. Dagenhart's total past medical expenses are $1,560,367.98. Mr. Dagenhart's expert estimated future medical expenses to be $600,000. Therefore, his past and future medical expenses total $2,160,367.98. Because 10 percent of that total results in a recovery far in excess of AHCA's lien (i.e., $216,036.80 as compared to $91,975.88), the court finds the lien must be paid via the statutory formula, totaling $91,975.88.

Where the Court Went Wrong

The court however misses the mark altogether.?Gallardo?did not overrule?Ahlborn?and?Wos, previous US Supreme Court opinions allowing for a pro-rata share reduction of Medicaid liens.?Gallardo?simply cleared up that the pool of funds from which Medicaid can collect its lien is both past and future medical expenses.??Therefore, post?Gallardo, the review is now a three step process: (a) first, the court must determine the value of past and future medical expenses, (b) second, it must determine the pro-rata share of settlement to value of case to apply to the determined value of past and future medical expenses and (c) third, it must compare same with the statutory formula reimbursement number and choose the lower of the two as the reimbursable amount.

If in fact past and future medical expenses total $2,160,367, this is equivalent to 86.4% of the $2,500,000 the case was evaluated at. Following the same math, out of the $250,000 total settlement, 86.4%, or $216,036 would be categorized as past and future medical expenses. Since the settlement here was 10% of what the case was valued at ($250,000 settlement compared to $2.5 million value), Medicaid would only be entitled to 10% of the established past and future medical expenses. Here 10% of the $216,036 established past and future medical expenses would equal $21,603 as reimbursement back to Medicaid. Since the state formula would elicit a $91,975 Medicaid lien, the lower $21,603 should be the reimbursable amount from settlement proceeds.

About Rafael Gonzalez

Rafael earned his Bachelors of Science degree from the University of Florida, and his Jurisprudence Doctorate degree from the Florida State University.?

Rafael has over 35 years experience in the legal and insurance industries. He is currently a partner in Cattie & Gonzalez, PLLC, a national law firm serving clients in all 50 states, focused on Medicare and Medicaid secondary payer law and compliance in auto, bodily injury, liability, mass tort, medical malpractice, nursing home, no-fault, products, workers compensation, and wrongful death claims and litigated cases.

Rafael writes and speaks about workers compensation, social security, Medicare, Medicaid, marketplace, mandatory insurer reporting, conditional payments resolution, set aside allocations, MSA and SNT administration, social determinants of health, and diversity, equity, and inclusion throughout the country.

Rafael can be reached at 844.546.3500 or at [email protected]. You may also reach out to him on social media, as he is active on LinkedIn, Twitter, Facebook, Instagram, and Youtube.