Olvin Mejia Palacios v. Agency for Health Care AdministrationOlvin Mejia Palacios v. Agency for Health Care Administration
TANENBAUM, J.
The Medicaid Act mandates States like Florida—federal-funds recipients providing medical assistance to the financially needy—“seek reimbursement for medical expenses incurred on behalf of beneficiaries who later recover from third-party tortfeasors.” Wos v. E.M.A. ex rel. Johnson, 568 U.S. 627, 633 (2013); see
I
Olvin Palacios suffered severe injuries when he fell two stories off a roof while doing work.1 His injuries included a fractured skull, other broken bones, and a collapsed lung. Medicaid paid $35,031.49 in medical costs; Palacios paid an additional $9,653.00 on his own toward his care. His employer had no insurance, but the licensed contractor ultimately responsible for the job did. So Palacios sued the contractor. Discovery during litigation revealed that Palacios could have accessed fall-protection-safety equipment, but he had declined to wear it. Palacio later conceded this equipment—if he had worn it—would have prevented his fall. The facts being what they were, the case settled for $238,500.00. The parties did not stipulate to how much of that amount covered Palacios‘s medical care.
Meanwhile, Florida‘s Medicaid Third-Party Liability Act implements the federal Medicaid reimbursement requirements and restrictions outlined above. The act makes Medicaid “the payor of last resort for medically necessary goods and services
As already mentioned, federal law “limits [AHCA] to reimbursement from the recovered medical expense damages,” so the beneficiary “may contest the amount designated as recovered medical expense damages payable to the agency” under the statutory formula set out above.
When AHCA sought to collect the full amount of its lien (i.e., the $35,031.49 in hospital charges covered by Medicaid) based on the statutory formula, Palacios contested the amount by filing a
The ALJ generally accepted and applied this “proportionality methodology advanced by [Palacios], and adopted in Eady [v. State, 279 So. 3d 1249 (Fla. 1st DCA 2019)].” But he did not stop there. The ALJ determined “adjustments [must be] made to the ‘total value’ based on the uncontradicted finding . . . that there was a very high degree of comparative negligence, by [Palacios], which contributed to causing this workplace accident and his injuries.” He reasoned that the “proportionality method[] should include any reasonable and relevant factors affecting how much a plaintiff could expect to receive at trial.” According to the ALJ, comparative negligence is one of those factors, “the impact of Palacios‘s comparative negligence on the total value of his claim [being] highly relevant,” such that it “cannot be disregarded when using and applying the proportionality method.” The ALJ in turn rejected the valuation advanced by Palacios‘s experts because “[t]hey failed to explain why [his] comparative negligence should not affect their opinions regarding the total value of the case,” their opinions therefore lacking the “required objectivity.”
The ALJ explained that if Palacios‘s suit had gone to trial, the “total recovery at trial would have been $200,000.00 ($1,000,000.00 anticipated trial verdict reduced by Petitioner‘s 80 percent comparative negligence, equaling a $200,000.00 recovery).” From there, the ALJ concluded that “by settling for
II
A
Recall that the ALJ‘s task was to determine how much of the settlement proceeds—money that otherwise belongs to Palacios as recompense for his claimed damages—was “fairly allocable” to past and future medical expense; so, by law, excepted from the federal anti-lien provision and subject to AHCA‘s lien. Giraldo v. Ag. for Health Care Admin., 248 So. 3d 53, 56 (Fla. 2018); Gallardo, 596 U.S. at 430 (abrogating Giraldo, but only because Florida may “seek reimbursement from settlement amounts representing [both] past or future payments for medical care”; but not questioning the use of a proportional approach for a “fairly allocable” determination (internal quotation and citation omitted)). In other words, the whole of the settlement proceeds—all $238,500.00—belong to Palacios as his property, save for that “portion” of the whole that constitutes compensation for his medical expenses; and when called upon to do so by petition, the ALJ must figure out what that “portion” is.
The key here is the statute‘s directive for the ALJ to focus on a ratio: some percentage that expresses how much of the total damages recovered can reasonably be characterized as the recovery of medical expenses—those expenses typically being but one component of presumably several used in calculating the full value of damages suffered. On the one hand, the ALJ‘s “default formula” for calculating this “share of [the] recovery” belonging to AHCA is the one set out in paragraph (11)(f) (as detailed above, effectively 37.5 percent of the settlement proceeds). Gray v. Ag. for Health Care Admin., 288 So. 3d 95, 97–98 (Fla. 1st DCA 2019); see
Generally speaking, “proportionality methodology” is not novel, and in a different context, the supreme court has approved it as an evidentiary approach to demonstrate “apportion[ing] settlement proceeds between economic and noneconomic damages for purposes of calculating a nonsettling defendant‘s obligation.” Wells v. Tallahassee Mem‘l Reg‘l Med. Ctr., Inc., 659 So. 2d 249, 253-54 (Fla. 1995) (holding that “the allocation [should be] based upon the jury verdict,” so “divided between economic and noneconomic damages in the same proportion as the jury‘s award”); see id. at 254 (explaining that because “the economic damages comprised 35.349% of the total award,” applying that percentage “to the total of the settlements results in the determination that $106,047 of the $300,000 should be allocated to economic damages”). The statute in fact calls for the beneficiary to present evidence to overcome the statutory presumption, and it anticipates some “proportionality methodology,” given that it addresses determining a “portion” of the total settlement amount allocable to medical expenses. As the highlighting shows, the statutory term literally appears in the methodology‘s moniker.
To get out from under the statutorily presumptive ratio, Palacios bore the burden of proving, by clear and convincing evidence, not just the valuation of the total damages he claimed to have suffered, but also each component of that total valuation. See Giraldo, 248 So. 3d at 56; Eady v. State, 279 So. 3d 1249, 1259 (Fla. 1st DCA 2019); Mojica by & through Mojica v. Ag. for Health Care Admin., 285 So. 3d 393, 398 (Fla. 1st DCA 2019); but cf. Gray, 288 So. 3d at 99 (explaining that the beneficiary‘s submission of only
The ALJ‘s final order in fact acknowledged the viability of the proportionality evidentiary methodology testified to by Palacios‘s experts, and the order set out a description of Palacios‘s evidence—which the ALJ seems to have accepted—standing in marked contrast to the dearth of evidence this court noted in Gray. Palacios called two witnesses who testified to both the total valuation and the value of its constituent parts—including the $125,000.00 for past and future medical expenses. The ALJ also noted AHCA presented no evidence “to persuasively contradict or rebut the . . . valuation of [Palacios‘s] case at $1,000,000”; “[n]or did AHCA convincingly assail [the experts‘] opinions regarding” that total valuation.2
This testimony—admitted into evidence uncontested and unrebutted—should have resolved the matter in Palacios‘s favor. See Giraldo, 248 So. 3d at 56 (“Although a factfinder may reject uncontradicted testimony, there must be a reasonable basis in the evidence for the rejection.” (internal quotations and citation omitted)); see also
While the ALJ‘s final order acknowledged the proven proportion of medical expenses ($125,000.00) to the total value of the claim ($1,000,000.00), it went on to apply an entirely different ratio—a comparison of the total settlement proceeds to what the total recovery would have been following a jury verdict had the case gone to trial—the ALJ‘s order then concluding that because the ratio was greater than one (over 100 percent), AHCA was entitled to recover all the medical assistance it had paid. This ratio did not express a relationship between the various distinct components of Palacios‘s damages—which had been proven—and the whole of his established damages (also proven), so it carried no relevance to the ALJ‘s task at hand: calculate what portion of the settlement proceeds fairly can be attributed to medical expenses. Palacios‘s success in settling his suit, compared with what he would have recovered at trial, is not a proper consideration.3 But even if comparative negligence were a factor to be considered, the 80-percent discount would have to apply to each component of Palacios‘s damages as well as the total damages—effectively multiplying the ratio between these two numbers by one, resulting in no net effect on the ratio that matters.
Take the ratio of the settlement amount to the amount Palacios proved as his total damages (both economic and non-economic), reduced to present value, as this court did in cases like Eady and Mojica (each, in turn, following the supreme court in Giraldo):
| 238,500 | 477 | = 23.85% |
| 1,000,000 | 2,000 |
As Palacios‘s unchallenged evidence purported to prove, the total value of his damages ($1,000,000.00) was the sum of various economic and non-economic components, including $125,000.00 in medical expenses. The settlement amount, then, represented a compromise down of each of Palacios‘s constituent claims for damages to 23.85 percent of the total, or $0.2385 on the dollar. According to the proportionality methodology already discussed, Palacios reasonably could be said to have settled his claim of $125,000.00 in medical expenses for $29,812.50 (i.e., $125,000 x 0.2385).
Another way to consider this calculation is to look at the ratio of Palacios‘s claimed medical expenses (one component of his economic damages) to his total claimed damages (both economic and non-economic), shown as follows:
| 125,000 | 1 | = 12.5% |
| 1,000,000 | 8 |
That means, according to the unrefuted evidence, the ratio of the amount allocated for medical expenses to the whole amount of damages should be 1 to 8; or, to put it another way, the total medical expenses made up 12.5 percent of the total value of his claim.
Implicit in proportionality methodology—when the constituent parts of the total damages are proven by clear and convincing evidence—is the premise that a fair allocation of otherwise unallocated settlement proceeds is intended to compensate a portion of each of those established constituent parts. And unless otherwise indicated, the only reasonable way to
The ALJ, upon determining that Palacios had proven both his medical expenses and his total damages, simply could have used the following algebraic equation to calculate how much of the settlement proceeds should be allocated to the medical expenses to maintain the ratio:
| 125,000 | 1 | y |
| 1,000,000 | 8 | 238,500 |
We solve for y as follows:
8y = 238,500
| y = | 238,500 | = 29,812.50 |
| 8 |
Once again, the amount of the settlement fairly allocable to medical expenses is $29,812.50. This makes sense. If Palacios‘s medical expenses made up one-eighth of his total claim—and taking this is as proven, which we must do in this appeal—they also should be allocated as one-eighth of the settlement amount.
In both approaches, all that is really happening mathematically is application of the multiplicative identity property of one (i.e., multiply any number by one and you get the number you started with) to convert the medical-expenses-total-damages ratio into an expression useful for allocation of the settlement proceeds—without changing the ratio. To put it another way, because dividing a number (other than zero) by itself has the quotient of one, we can multiply both the numerator and the denominator of a ratio (read: fraction) by the same number (so effectively, one) without changing the ratio, i.e., the relationship that ratio expresses. This has the effect of converting the ratio to express the same relationship in different terms.
So, if 125,000⁄1,000,000 represents the ratio of the part attributable to total medical expenses over the total amount of all claimed
| 125,000 | .2385 | 29,812.50 |
| 1,000,000 | .2385 | 238,500.00 |
The statute governing all this mentions nothing about using a comparative-negligence discount to alter this ratio or develop an entirely different—and inapplicable—ratio, like the ALJ sought to do in his order.4 And why would it? Florida‘s comparative negligence statute requires that “contributory fault chargeable to the [plaintiff] diminish[] proportionately the amount awarded as economic and noneconomic damages for an injury attributable to the [plaintiffs] contributory fault.”
Notably, the jury finds only the amount of each type of damages for which the defendant is liable and the percentage of fault attributable to the plaintiff and the defendant; the trial court
And for the purpose of determining proportionality, those relative fault percentages mathematically, as it turns out, are of no moment. In reducing the total damages for which the defendant would have been liable to Palacios—assuming the jury would have determined the amounts of both economic and non-economic damages in its verdict—the trial judge would reduce each component, including medical expenses, by 80 percent as well. So, if the jury found that Palacios‘s total damages were $1,000,000.00, and his medical expenses were $125,000.00; and if it also determined he was 80 percent responsible for his own injuries; the judge would have had to reduce the total damages by 80 percent, including the $125,000.00. That means the judge would have reduced Palacios‘s award for medical expenses to $25,000.00, and the total award of $1 million to $200,000.00. The ratio of $25,000.00 to $200,000.00 of course brings us back to that 1 to 8 ratio discussed above. Once again, if we apply 0.2⁄0.2 (the equivalent of one) to our original ratio, we of course get the same ratio. The comparative negligence percentage has no real effect in the determination here, and the ALJ erred in using it as a factor to alter the proven relationship between Palacios‘s medical expenses and his total damages.
The only question Palacios had to answer—through conclusive evidence—is how much in medical expenses, as a proportion of his total damages, he could have proven at trial; this so the ALJ could assess, simply, whether the ratio of “past and future medical expenses” that have been proven to the total amount of settlement proceeds paid to the beneficiary is less than 37.5⁄100 (or, $37.50 out of every $100.00 of settlement proceeds allocated to medical expenses). Cf. Wos, 568 U.S. at 640–41. The uncontroverted, admitted evidence showed that the ratio indeed was less than the statutory ratio. Yet the ALJ refused to award AHCA the lower lien amount ($29,812.50) because Palacios‘s settlement exceeded an amount by which the trial judge would have remitted the jury verdict to comport with the comparative-negligence apportionment requirement of section 768.81. This refusal did not run contrary to any statutory mandate; but the order‘s conclusion drawn from the facts—which it indicated had been conclusively proven—defies mathematical logic. There not being a reasonable basis for rejecting Palacios‘s uncontested evidence in support of a lower lien, then, we must set the ALJ‘s final order aside. See
SET ASIDE; REMAND with instructions.
ROBERTS, J., concurs; LONG, J., concurs in result only with opinion.
Not final until disposition of any timely and authorized motion under Fla. R. App. P. 9.330 or 9.331.
I concur that the ALJ erred in considering comparative negligence as a factor for determining how much of the total recovery should have been allocated as past and future medical expenses. And I concur that we are bound by our prior decisions to permit the “proportionality methodology.” See Eady v. State, 279 So. 3d 1249 (Fla. 1st DCA 2019)Eady.
“Medicaid is intended to be the payor of last resort.” Gray v. Agency for Health Care Admin., 288 So. 3d 95, 97 (Fla. 1st DCA 2019). The statute is designed to prevent a plaintiff from being unjustly enriched by recovering for medical damages that the plaintiff did not actually bear. While the damages are real, the plaintiff did not pay them. Instead, Medicaid (i.e., the taxpayer) is made to foot the bill. Where a plaintiff recovers for medical damages that have been paid by Medicaid, the Agency for Health Care Administration (“AHCA”) must “seek reimbursement” from the recovery.
A plaintiff, however, may challenge the statutory lien amount by proving, with clear and convincing evidence, “that the portion of the total recovery which should be allocated as past and future medical expenses is less than the amount calculated by the agency pursuant to the formula.”
But all of this is just evidence that a plaintiff thinks his case is worth more than he agreed to settle it for. And that is insufficient to challenge the statutory lien amount. Even assuming a plaintiff can credibly demonstrate damages in excess of the settlement, that fact alone cannot show which parts of the total-case-damages were actually recovered by the settlement. Nor can it show the amounts in which those parts were recovered. A defendant might reasonably settle a case only for the hard medical damages and entirely discount the plaintiff‘s claimed non-economic damages. The proportionality method does nothing to address this uncertainty. But the uncertainty reflects the only question—i.e. what the actual settlement allocation was—that is relevant to challenging the statutory lien.
The statute creates a presumption in favor of the lien formula. To escape it, the plaintiff must present clear and convincing evidence of the actual settlement allocation. Absent such evidence, the proportionality methodology is entirely speculative and therefore legally insufficient to meet the burden. No amount of expert testimony about projected total-case-damages can rescue this speculative evidence. The proportionality method fails to tether the actual settlement allocation to the projected total-case-
There is no dispute here that Medicaid paid $35,031.49 in medical expenses for the plaintiff. It is a hard number. It is not the product of an exercise in judgment. It requires no balancing of interests or proportionality decisions. And it does not require witnesses to speculate on theoretical damages. The $35,031.49 lien is the actual medical expense paid by Medicaid and it is less than one-half of the settlement recovery after fees and costs. This should end the analysis. Absent clear and convincing evidence that demonstrates the medical expense recovery was in fact less than the statutory lien amount, the law requires the repayment of the full amount footed by Medicaid. Rather than a simple calculation that repays the taxpayers’ generosity (while ensuring the plaintiff keeps at least half), the proportionality method creates a murky recovery scheme ripe for gamesmanship. And it ultimately swallows the intent of the statute.
The majority correctly notes that the governing statute mentions nothing about using a comparative-negligence discount to alter the statutory lien amount. But neither does it mention the proportionality methodology.* The bottom line is that the proportionality methodology is speculative, and it impermissibly shifts the presumption away from the statutory lien formula. To avoid a lien amount determined by the simple formula in the statute, a plaintiff must “demonstrat[e], with evidence, that the lien amount exceeds the amount recovered for medical expenses.” Smith v. Agency for Health Care Admin., 24 So. 3d 590, 592 (Fla. 5th DCA 2009). We should return to a straightforward application of the statute.
Alexander R. Boler, Agency for Health Care Administration, Tallahassee, for Appellee.