In Medicaid Lien Case, Court Rules ERISA Settlement Is Not Evidence of Medical Expense Allocation

A Florida appeals court rules that a Medicaid recipient's settlement of an ERISA lien cannot be used as evidence of the allocation of medical expenses to support full reimbursement of Medicaid’s lien. Mobley v. Agency for Healthcare Administration (Fla. Dist. Ct. App., 1st, No. 1D14-2770, Dec. 18, 2015).

In 2005, 14-year-old Michael Mobley suffered irreversible anoxic brain damage after he became intoxicated and drowned (and then was revived) while at a hotel beach party thrown by off-duty hotel employees.  Through his guardians, he sued the hotel operators and a third-party contractor that provided lifeguard services for the hotel, ultimately settling all claims, including those for medical expenses, for $500,000, or 3.3 percent of the estimated total damages.

The total claim against the settlement for past medical expenses was $627,804.14, including $515,860.29 paid by an ERISA plan and $111,943.89 paid by Medicaid. The ERISA plan asserted a lien for the full amount of its expenses, but accepted $120,000 in satisfaction of the lien. The parties allocated $20,717.54 to the Medicaid lien, representing 3.3 percent of the actual medical expenses.  After Florida's Agency for Health Care Administration (AHCA) asserted a lien for the full amount of its medical expenses, Michael's guardian filed a petition for a determination of the proper amount of its Medicaid lien.

Following a hearing, an administrative law judge found that the parties had allocated $140,717.54 to past medical expenses ($120,000 for the ERISA settlement and $20,717.54  for Medicaid).  Because the total amount allocated was greater than the Medicaid lien of $111,943.89, the ALJ concluded that the state's Medicaid recovery formula entitled the AHCA to full reimbursement of its lien.  Michael's guardian appealed.

Relying on the Supreme Court's decision in Ahlborn, the District Court of Appeal of Florida, First District, reverses, finding that the ALJ erred in considering the ERISA settlement as competent evidence of the allocation of medical expenses because unlike Medicaid liens, which can only be paid from the portion of a settlement allocated to medical expenses, ERISA liens can be paid from any part of a settlement.  Based on the Court's decision in Wos v. E.M.A., the matter is remanded for a determination of whether, without consideration of the ERISA settlement, Michael's guardian proved “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 formula.”

To read the full text of this decision, go to: https://edca.1dca.org/DCADocs/2014/2770/142770_DC13_12182015_083910_i.pdf

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