The Maine Supreme Judicial Court vacated a summary judgment applying a one-size-fits-all proportional formula to reduce the amount that the Department of Health and Human
Services (DHHS) could recover from a minor’s tort settlement. When a settlement does not allocate damages between medical expenses and other damages and the parties have not stipulated to an allocation, a genuine issue of material fact exists as to what portion of the settlement is attributable to medical expenses, and a court must hold an individualized evidentiary hearing to determine that portion. Lynne v. Dep’t of Health and Hum. Svcs., No. and-25-479 (Me. Sept. 1, 2026).
L.W., a minor covered by MaineCare, Maine’s Medicaid program, suffered an injury to her arm and elbow in April 2021. Providers billed MaineCare $207,591.04 for her treatment, and MaineCare paid them $34,078.70. L.W.’s mother, Ashley Lynne, sued two third-party tortfeasors on L.W.’s behalf. The claim was valued at $375,000, including $204,183.78 in medical bills. The parties settled the claim for $160,000, an amount equal to 42.67 percent of $375,000, and did not allocate the settlement between medical expenses and other damages.
The DHHS asserted a statutory lien against the settlement for the full $34,078.70 it had paid for L.W.’s treatment. Ashley filed an action under title 22, section 14(2-F) of the Maine Revised Statutes, asking the court to apply the pro-rata allocation formula used in Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), to reduce the DHHS’s lien based on the ratio of the settlement to the total claimed damages. The DHHS moved for summary judgment, arguing that, under the Ahlborn formula, it was the portion of the total claim attributable to medical bills ($204,183.78), rather than the amount the DHHS paid ($34,078.70), that should be reduced pro rata. Using the amount paid as the amount that should be reduced pro rata, the superior court entered summary judgment for Ashley, capping the DHHS’s recovery at $14,540.25. The DHHS appealed.
The Supreme Judicial Court of Maine noted that, under Maine law, when the DHHS pays medical costs on behalf of a Medicaid recipient for which a third party is responsible, it is entitled to recover the costs of the benefits paid from a settlement between the recipient and the third party; moreover, this right constitutes a statutory lien on the proceeds of the settlement. However, the DHHS’s right to recover from a recipient’s settlement is subject to limitations under federal Medicaid law: The US Supreme Court harmonized the applicable federal Medicaid statutes in Wos v. E.M.A., 568 U.S. 627 (2013), holding that, under 42 U.S.C. § 1396k(a)(1)(A) and other relevant statutes, a state is permitted to recover its costs only from the portion of the settlement that represents payments for medical care, but the anti-lien provision, 42 U.S.C. § 1396p(a)(1), bars the state from any lien on the remainder.
The court noted that in Wos, the US Supreme Court had ruled that, although states have considerable latitude to design procedures to ensure a prompt and fair allocation of damages, in each case they must employ processes to determine the portion of a beneficiary’s tort recovery attributable to medical expenses and cannot adopt an arbitrary, one-size-fits-all statutory allocation for all cases. However, Maine’s legislature has not enacted a rebuttable statutory formula for determining the portion of the settlement attributable to medical expenses when the parties to the settlement have not stipulated what that portion is. The court noted that, if the DHHS and the Medicaid recipient disagree, section 14(2-F) permits them to apply to the court to determine a “reasonable amount” that is consistent with federal law to satisfy the statutory lien. The court held that, to determine that “reasonable amount,” there must be an individualized evidentiary hearing that evaluates all factors relevant to identifying the amount of the settlement that the parties reasonably attributed to medical expenses. The court rejected Ashley’s contention that it may forgo assessing those factors and instead simply use a formula enabling it not only to determine the amount of the settlement attributed to medical expenses but also to order that the DHHS be reimbursed at an amount lower than its payments, even if that amount is lower than the amount of the settlement allocated to medical expenses.
Rather, the court must apply the law enacted by Maine’s legislature. In doing so, the court held that it must read section 14(2-F) in concert with other relevant subsections. The court held that, under section 14 as a whole, the DHHS may recover the full amount it paid for medical care as long as that amount does not exceed the settlement amount allocated to medical expenses. Section 14(2-F) requires that the court’s determination of the amount of the settlement allocated to medical expenses be consistent with federal law, i.e., with the US Supreme Court’s decision in Wos, which requires an individualized review of the relevant factors; thus the use of the word “reasonable” cannot be understood to mean that a court can engage in any analysis it chooses to reduce the amount to which the DHHS would otherwise be entitled. Rather, in section 14(2-F), the use of the word “reasonable” simply reflects that the court cannot determine the precise amount but instead provides a reasonable calculation based on the facts of a particular case. Further, the court found no basis to read section 14(2-F) as granting courts unfettered power to preclude the DHHS from obtaining a full recovery of the portion of the settlement representing medical expenses when the amount it paid does not exceed that portion.
The court found that, in the present case, the superior court erred in applying the Ahlborn proportional formula without a factual basis demonstrating that the formula accurately reflected the medical-expense component of the settlement. In the absence of a rebuttable statutory formula or a stipulation by the parties, the relevant question is not what a court views as equitable, but rather the amount the DHHS paid, capped by a reasonable computation of the portion of the settlement attributable to medical expenses. Thus, the superior court must hold a hearing to identify a reasonable calculation of that cap, in which it examines all relevant evidence offered by the DHHS and Ashley.
The parties’ competing positions before the superior court illustrated the factual disputes at issue, so summary judgment in favor of either party was improper.
The court vacated the judgment and remanded the case to the superior court for an evidentiary hearing consistent with its opinion.
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