Gallardo v. Dudek, Case No. 4:16cv116–MW/CAS

• Decision Date: 18 April 2017
• Docket Number: Case No. 4:16cv116–MW/CAS
• Citation: 263 F.Supp.3d 1247
• Parties: Gianinna GALLARDO, an incapacitated person, BY AND THROUGH her parents and co-guardians, Pilar VASSALLO and Walter Gallardo, Plaintiff, v. Elizabeth DUDEK, in her official capacity as Secretary of Florida Agency for Health Care Administration, Defendant.
• Court: U.S. District Court — Northern District of Florida

263 F.Supp.3d 1247

Gianinna GALLARDO, an incapacitated person, BY AND THROUGH her parents and co-guardians, Pilar VASSALLO and Walter Gallardo, Plaintiff,

v.Elizabeth DUDEK, in her official capacity as Secretary of Florida Agency for Health Care Administration, Defendant.

Case No. 4:16cv116–MW/CAS

United States District Court, N.D. Florida, Tallahassee Division.

Signed April 18, 2017

Floyd Benjamin Faglie, Staunton & Faglie PL, Monticello, FL, Bryan Scott Gowdy, Mills & Carlin PA, Meredith A. Ross, Creed & Gowdy PA, Jacksonville, FL, for Plaintiff.

ORDER ON SUMMARY JUDGMENT MOTIONS

MARK E. WALKER, United States District Judge

Imagine this scenario. You're the parent of a thirteen-year-old girl, whom you love dearly. She is your world. Tragically, one day you receive the phone call that every parent fears more than anything; the daughter that you adore was struck by a vehicle, medevacked to a nearby hospital, and is now in critical condition. Medicaid covers around $800,000 for her treatment. Although the hospital staff tries their best, they aren't miracle workers. As a result of the accident, your beloved daughter is now in a persistent vegetative state

and can no longer ambulate, communicate, eat, or care for herself in any manner. You try to wake up from this nightmare. But you're not asleep—the nightmare is real.

And it only gets worse. Knowing that your daughter will need continuous medical care for the rest of her life (and hoping to recover past expenses and emotional damages), you file suit against the responsible parties. Even though your suit is worth somewhere around $20,000,000, you eventually settle for $800,000; a 4% recovery. You then notify the applicable state agency, which will for purposes of this hypothetical be called "the agency" for short, of the settlement and explain that around $35,000 of that settlement is for past medical expenses—4% of the approximately $800,000. Nonetheless, as allowed by the state's statute, the agency imposes an approximately $300,000 lien—an amount representing, as prescribed by the state's statute, 37.5% of your settlement. Moreover, the agency seeks to satisfy that lien from the settlement funds representing both past and future medical expenses. And the only way you can successfully reduce that lien is to prove by clear and convincing evidence that the actual amount allocable to past and future medical expenses is, in fact, less than that $300,000.

Gianinna Gallardo's parents are currently living that nightmare. After initiating administrative proceedings to challenge that lien, Gallardo's parents and guardians filed this case on her behalf seeking a declaratory judgment that Florida's reimbursement statute—which that hypothetical was based on—violates federal law. Particularly relevant to that issue is the federal Medicaid statute's anti-lien provision, which generally prohibits participating states from placing a lien on any portion of a Medicaid beneficiary's recovery not designated as payments for medical care.

Is Florida's reimbursement statute preempted by federal Medicaid law? The short answer is "yes." By allowing the State Agency for Health Care Administration ("AHCA")—Florida's agency that is charged with administering Medicaid—to satisfy its lien from settlement funds allocable to both past and future medical expenses, Florida has run afoul of the Medicaid statute. The same is true for Florida's arbitrary, one-size-fits-all statutory formula. Specifically, Florida's reimbursement statute—which, coupled with a host of other obstacles, only allows the Medicaid recipient to rebut that formula-based allocation by presenting clear and convincing evidence that it is inaccurate—amounts to a quasi-irrebuttable presumption and thus conflicts with and is preempted by federal law.

Gallardo's Motion for Summary Judgment, ECF No. 11, is therefore GRANTED , and AHCA's Motion for Summary Judgment, ECF No. 13, is therefore DENIED.¹

I

This case involves a few relatively straightforward provisions of the otherwise dizzying Medicaid Act² and Florida's attempt to legislate against those provisions. To simplify this Court's analysis, it will outline the following in turn: (1) the relevant portions of the federal Medicaid statute; (2) Florida's reimbursement statute; and (3) the underlying facts of this case.

A. Federal Law

Medicaid is a joint federal—state program designed to help participating states provide medical treatment for their residents that cannot afford to pay. Moore ex rel. Moore v. Reese , 637 F.3d 1220, 1232 (11th Cir. 2011). Although states are not required to participate in Medicaid, all of them do. Id. The federal government pays a significant portion of the costs for patient care and, in return, the states pay the remainder and must comply with the federal statutory and regulatory requirements. See Alexander v. Choate , 469 U.S. 287, 289 n.1, 105 S.Ct. 712, 83 L.Ed.2d 661 (1985) (stating that the federal government "subsidizes a significant portion of the financial obligations the State has agreed to assume" and that "[o]nce a State voluntarily chooses to participate in Medicaid, the State must comply with the requirements of Title XIX and applicable regulations" (citing Harris v. McRae , 448 U.S. 297, 301, 100 S.Ct. 2671, 65 L.Ed.2d 784 (1980) )).

Two of those requirements are the so-called anti-lien and anti-recovery provisions. These requirements are broad and "express limits on the State's powers to pursue recovery of funds it paid on the recipient's behalf." Ark. Dep't of Health & Human Servs. v. Ahlborn , 547 U.S 268, 283, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006). Specifically, the anti-lien provision states that "[n]o lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan, [with exceptions not relevant here]." 42 U.S.C. § 1396p(a)(1) (2012). Similarly, the anti-recovery provision states that "[n]o adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan may be made, [with exceptions not relevant here]." Id. § 1396p(b). Thus, considered "literally and in isolation," the anti-lien and anti-recovery provisions prohibit states from reaching the proceeds from a Medicaid recipient's recovery. Ahlborn , 547 U.S. at 284, 126 S.Ct. 1752.

But the third-party liability and assignment provisions temper that sweeping prohibition by providing narrow exceptions. The third-party liability provision, for example, requires states "to ascertain the legal liability of third parties ... to pay for care and services under the plan[.]" § 1396a(a)(25)(A). If third-party liability is found to exist, states must seek reimbursement for medical expenses incurred on behalf of recipients who later recover from those third parties. See id. § 1396a(a)(25)(B) ("[I]n any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery, the State or local agency will seek reimbursement for such assistance to the extent of such legal liability[.]" (emphasis added)). Likewise, under the assignment provision, states must have in effect laws that, "to the extent that payment has been made under the State plan for medical assistance for health care items or services furnished to an individual," give the state the right to recover payment "for such [furnished] health care items or services" from liable third parties. Id. § 1396a(a)(25)(H) (emphasis added). To help effectuate that requirement, states must require a recipient "to assign the State any rights ... to payment for medical care from any third party." Id. § 1396k(a)(1)(A) (emphasis added).

To summarize, the third-party liability and assignment provisions outlined in §§ 1396(a)(25) and 1396k(a) are narrow exceptions to the broad anti-lien and anti-recovery provisions, and those exceptions only apply to payments for medical care. See Ahlborn , 547 U.S. at 284–85, 126 S.Ct. 1752 ("As explained above, the exception carved out by §§ 1396a(a)(25) and 1396k(a) is limited to payments for medical care."). "Beyond that, the anti-lien provision" shields a recipient's recovery from the state's clutches. Id. at 285–86, 126 S.Ct. 1752.

B. State Law

Florida applies a one-size-fits-all statutory formula to determine how much of a recipient's recovery constitutes medical expenses and is therefore available for Medicaid reimbursement. First, the formula reduces the gross recovery by 25% to account for the recipient's attorney's fees. See § 409.910(11)(f)(1), Fla. Stat. (2016) (deducting "attorney's fees and taxable costs" from the "judgment, award, or settlement"); id. § 409.910(11)(f)(3) (deciding for purposes of the statutory formula that attorney's fees "shall be calculated at 25 percent of the judgment, award, or settlement"). The already-reduced total is then cut in half, and AHCA is awarded the lesser of the amount it actually paid or the resulting number. See id. § 409.910(11)(f)(1) (awarding AHCA "one-half of the remaining recovery" after accounting for attorney's fees, "up to the total amount of medical assistance provided by Medicaid"). The remaining amount is paid to the Medicaid recipient. Id. § 409.910(11)(f)(2).

The Medicaid recipient, however, may challenge that formula-based allocation through an administrative proceeding. To do so, the recipient must either pay AHCA the formula-based reimbursement or place those reimbursement funds in an interest-bearing trust account and then file a petition with the Division of Administrative Hearings in Tallahassee. See id. § 409.910(17)(b) (outlining the administrative procedure); id. § 409.910(17)(d) ("Venue for all administrative proceedings pursuant to this subsection lies in Leon County, at the discretion of the agency." (footnote omitted)). To successfully...