Blanton v. the Dep't of Pub. Health

• Decision Date: 28 June 2011
• Docket Number: No. DA 10–0231.,DA 10–0231.
• Citation: 255 P.3d 1229,360 Mont. 396,2011 MT 110
• Parties: Terry BLANTON, individually and on behalf of himself and all others similarly situated, Plaintiffs, Appellees, and Cross–Appellants,v.The DEPARTMENT OF PUBLIC HEALTH AND HUMAN SERVICES, a department of the State of Montana, Defendant and Appellant.
• Court: Montana Supreme Court

360 Mont. 396

255 P.3d 1229

2011 MT 110

Terry BLANTON, individually and on behalf of himself and all others similarly situated, Plaintiffs, Appellees, and Cross–Appellants,

v.The DEPARTMENT OF PUBLIC HEALTH AND HUMAN SERVICES, a department of the State of Montana, Defendant and Appellant.

No. DA 10–0231.

Supreme Court of Montana.

Argued and Submitted March 2, 2011.Decided May 24, 2011.Rehearing Denied June 28, 2011.

For Appellant: Randy J. Cox (argued), Dean A. Stensland (argued); Boone Karlberg, P.C.; Missoula, Montana, Steve Bullock, Montana Attorney General; Katherine J. Orr, Assistant Attorney General, Agency Legal Services Bureau; Helena, Montana.For Appellees and Cross–Appellants: Alan J. Lerner (argued), Linda C. Semrow; Lerner Law Firm; Kalispell, Montana, James A. Manley; Manley Law Firm; Polson, Montana.Justice BETH BAKER delivered the Opinion of the Court.

¶ 1 The Department of Public Health and Human Services (the “Department”) appeals from the judgment of the Lake County District Court in favor of Terry Blanton (Blanton) and the approximately 2,500 class members (the “Class”). Blanton and the Class cross-appeal. We consider the following issues on appeal:

¶ 2 1. Whether the District Court correctly determined the retroactive applicability of Ark. Dept. of Health & Human Servs. v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006).

¶ 3 2. Whether the District Court's order requiring the Department to compile data on each class member's claim constituted an abuse of discretion.

¶ 4 3. Whether the District Court erred in determining that interest should be assessed from the date of collection on any amounts improperly collected by the Department.

¶ 5 4. Whether the District Court erred in determining that a Medicaid recipient's insurer is not a “third party” as that term is used in state and federal Medicaid reimbursement laws.

¶ 6 On cross-appeal, we consider whether the District Court erred by failing to apply the common law “made whole” doctrine.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 7 This suit concerns the Department's collection on liens filed against other sources of financial support available to Medicaid recipients for the same or similar injury. State and federal laws require Medicaid (administered by the Department) to seek reimbursement for medical assistance from all third parties liable for the Medicaid recipient's medical expenses, in keeping with Medicaid's function as the payer of last resort. Under § 53–2–612, MCA, the Department holds a lien against payments made to Medicaid assistance recipients, so the Medicaid program can recoup costs paid on behalf of aid recipients when another source is legally liable for the same injury or condition.

¶ 8 Terry Blanton filed suit on February 14, 2006, individually and on behalf of a class of similarly situated plaintiffs who received Medicaid assistance and were subject to a Medicaid lien pursuant to § 53–2–612, MCA. The suit alleged that the Department had collected a greater amount than it was entitled from the plaintiffs' recoveries from other sources. Individually and on behalf of the Class, Blanton sought declaratory and injunctive relief, seeking a ruling that the Department's liens were invalid under federal Medicaid law and the Montana and U.S. Constitutions. Blanton claimed the Department was not entitled to reimbursement until he (or any given class member) had been “made whole.” Blanton asked the court to order the Department to report on all subrogation recoveries, give class members an opportunity to contest these reports, and return to the Class monies improperly collected.

¶ 9 Soon after plaintiffs' complaint was filed, the United States Supreme Court held in Ahlborn that an Arkansas statute nearly identical to the Montana Medicaid lien statute violated federal Medicaid law, because it authorized the State to seek reimbursement from all settlement proceeds, rather than only those settlement proceeds representing compensation for medical expenses.

¶ 10 The Supreme Court explained that 42 U.S.C. § 1396p(a), the Medicaid “anti-lien provision,” generally prohibits liens against the property of aid recipients, and “the exception carved out by §§ 1396a(a)(25) and 1396k(a) is limited to payments for medical care.” Ahlborn, 547 U.S. at 284–85, 126 S.Ct. at 1763. The Court summarized, “Arkansas' statute finds no support in the federal third-party liability provisions, and in fact squarely conflicts with the anti-lien provision of the federal Medicaid laws.” Id. at 280, 126 S.Ct. at 1760. Like its Arkansas counterpart, § 53–2–612, MCA (2005), provided that Medicaid liens attached to all money paid by a third party to the extent the Department had paid medical assistance for the same personal injury. Thus, the standard practice of agencies administering Medicaid in Montana and Arkansas was to place a lien on third party payments to the full extent Medicaid had expended funds on behalf of the recipient, even if that amount exceeded the portion of the recipient's settlement or judgment attributable to medical costs.

¶ 11 This was a common interpretation nationwide of the federal Medicaid statute, until Ahlborn. The U.S. Supreme Court's decision meant the Department had impermissibly collected settlement proceeds attributable to non-medical costs in thousands of instances in the past. For example, were an injured person to have received $60,000 worth of Medicaid assistance for an injury that later gave rise to a $20,000 settlement between the recipient and a third party, if half of the settlement amount was attributable to medical costs and half to damages for pain and suffering, the Department would be limited by the federal anti-lien provision to reimbursement from the $10,000 payment for medical expenses. Previously, however, the Department asserted liens to the full extent of its assistance paid, and against all settlement proceeds received by the recipient—in the above example, against the full $20,000. The Montana Legislature amended § 53–2–612, MCA, in 2009, to conform to Ahlborn's holding.

¶ 12 In response to Ahlborn, the Department and the Class filed motions for summary judgment and/or partial summary judgment addressing the effect the decision should have on this case. Both parties agreed Ahlborn would apply retroactively to some extent, given the clear requirement under federal law that rules of law must be applied evenly to all cases open and pending on direct review. Harper v. Va. Dept. of Taxation, 509 U.S. 86, 97, 113 S.Ct. 2510, 2517, 125 L.Ed.2d 74 (1993); Danforth v. Minnesota, 552 U.S. 264, 266, 128 S.Ct. 1029, 1032, 169 L.Ed.2d 859 (2008). The parties strongly disagreed on the interpretation of this mandate as applied to the case, and on February 20, 2009, the court heard oral argument. Plaintiffs contended that Ahlborn should be applied retroactively to all members of the Class. The Department maintained that the holding should only apply to those members whose liens were still in place as of September 7, 2007, when the class was certified, or alternatively from May 1, 2006, the date of the Ahlborn decision. The District Court ruled that Ahlborn would apply retroactively, but “at this time,” only to those members of the class with “uncontested, non-settled cases which were not final as of February 14, 1998.”

¶ 13 The order encompassed two determinations made by the court: first, that Ahlborn would apply retroactively only to cases where the Medicaid recipient had not contested or settled the lien. The court emphasized the distinction between contested and uncontested cases in determining whether a case is “open and pending.” The court held that if the Department could show that any class members disputed their claim or lien, and that such dispute resulted in “an informed and represented negotiation of terms or a court order,” then Ahlborn would not apply retroactively. In this determination, the court found Paopao v. Dept. of Soc. and Health Servs., 145 Wash.App. 40, 185 P.3d 640 (2008), instructive. Id. at 644–45 (denying retroactive application of Ahlborn to a Medicaid recipient who had negotiated a resolution of her Medicaid lien six months prior to Ahlborn, on the ground that her case was “no longer pending,” as “[s]ettlement agreements between private parties are viewed with finality.”).

¶ 14 Second, the ruling incorporated the court's conclusion that the appropriate limitations period to apply to class members' claims was the eight-year period for written instruments in § 27–2–202(1), MCA. Thus, measuring back eight years from the date of the complaint, the court held that Ahlborn would apply to claims dating from February 14, 1998, to the present. The written instrument the court found applicable was the assignment of all rights to “monetary and medical support” to which the applicant for Medicaid assistance may be entitled, pursuant to § 53–2–613, MCA. The court noted that other statutes of limitation were argued by the parties, but offered no additional analysis given that the longest such period prevails when there is a “substantial question” as to which limitations period applies and all other possibilities involved shorter periods of time.

¶ 15 Observing that “[s]ome categorizing and separation must be done with the present members of the [C]lass in order for this case to proceed,” the District Court instructed the Department to categorize the class members based on distinctions noted by the court, such as contested and uncontested cases. The court further instructed the Department to compile data for each class member on the amount of actual medical expenses, other losses, the total amount of lien placed by the Department, and the amount actually collected by the Department. The court gave the Department six months to accomplish this task.

¶ 16 On March 18, 2009, the Department filed a motion to clarify and requested modification of the six-month time period given by the...