Gallardo v. Dudek, No. 17-13693

• Citation: 963 F.3d 1167
• Decision Date: 26 June 2020
• Docket Number: No. 17-13693
• Parties: Gianinna GALLARDO, an incapacitated person, BY AND THROUGH her parents and co-guardians Pilar VASSALLO and Walter Gallardo, Plaintiff - Appellee, v. Elizabeth DUDEK, in her official capacity as Secretary of the Florida Agency for Health Care Administration, Defendant, Mary Mayhew, in her official capacity as Secretary of the Florida Agency for Health Care Administration, Defendant - Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

963 F.3d 1167

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

v. Elizabeth DUDEK, in her official capacity as Secretary of the Florida Agency for Health Care Administration, Defendant,Mary Mayhew, in her official capacity as Secretary of the Florida Agency for Health Care Administration, Defendant - Appellant.

No. 17-13693

United States Court of Appeals, Eleventh Circuit.

June 26, 2020

Bryan Scott Gowdy, Meredith Abernathy Ross, Creed & Gowdy, Jacksonville, FL, Floyd Faglie, Staunton & Faglie, PL, Monticello, FL, for Plaintiff - Appellee

Andre V. Bardos, GrayRobinson, PA, Tallahassee, FL, Andrew Taylor Sheeran, Leslei Gayle Street, Florida Agency for Health Care Administration, Tallahassee, FL, for Defendant - Appellant

Before WILSON, BRANCH, and ANDERSON, Circuit Judges.

BRANCH, Circuit Judge:

This appeal requires us to decide the enforceability of Florida's statutory scheme through which it obtains reimbursement from third parties for Medicaid expenses it has paid to injured persons. Specifically at issue in this appeal is whether the Florida Agency for Health Care Administration ("FAHCA"),¹ when it has not consented to the settlement agreement in a personal injury lawsuit between the injured person and a third party, is limited to recovering the expenses it has paid only from amounts of a third-party recovery representing compensation for past medical expenses or whether it can also recover from those amounts that may be compensation for future medical expenses.² That determination turns on whether federal Medicaid law preempts the way Florida pursues reimbursement from Medicaid recipients’ personal injury settlements.

The plaintiff in this suit sought declaratory and injunctive relief to prevent FAHCA from recovering beyond that portion of her settlement specifically designated by the settling parties as compensation for her past medical expenses. The district court granted summary judgment for the plaintiff, concluding that federal law preempts Florida's statutory scheme for recovering Medicaid expenses. We conclude that federal law does not preempt these Florida policies, and we reverse the contrary decision of the district court.

I. BACKGROUND

Gianinna Gallardo was grievously injured in 2008 when she was hit by a pickup truck after getting off her school bus. She remains in a persistent vegetative state. Florida's Medicaid program³ paid $862,688.77 for her medical care. Her parents filed suit in state court on her behalf against the truck's owner, the truck's driver, and the school district. In 2015, the parties negotiated, and the state court approved, settlement of that suit for a total of $800,000, which Gallardo's parents view as covering only a small fraction of the total damages she suffered and the future costs she will face for her care.⁴ The settlement included an explicit allocation of $35,367.52 for past medical expenses.⁵ It further stated that although some of the balance may represent compensation for future medical expenses Gallardo will incur in the future, no portion of the settlement is reimbursement for future medical expenses because Gallardo or others on her behalf have not yet paid any.⁶ Importantly, FAHCA did not participate in or agree to the terms of the settlement.

When Medicaid recipients receive a personal injury judgment or settlement compensating them for medical expenses, federal law requires that the Medicaid program be reimbursed out of those funds. See 42 U.S.C. §§ 1396a(a)(25)(H), 1396k. Florida law acknowledges the requirement to seek reimbursement for medical payments it has made in its Medicaid Third-Party Liability Act:

It is the intent of the Legislature that Medicaid be the payor of last resort for medically necessary goods and services furnished to Medicaid recipients. All other sources of payment for medical care are primary to medical assistance provided by Medicaid. If benefits of a liable third party are discovered or become available after medical assistance has been provided by Medicaid, it is the intent of the Legislature that Medicaid be repaid in full and prior to any other person, program, or entity. Medicaid is to be repaid in full from, and to the extent of, any third-party benefits, regardless of whether a recipient is made whole or other creditors paid.... It is intended that if the resources of a liable third party become available at any time, the public treasury should not bear the burden of medical assistance to the extent of such resources.

Fla. Stat. § 409.910(1). The Act instructs FAHCA to "seek reimbursement from third-party benefits to the limit of legal liability and for the full amount of third-party benefits, but not in excess of the amount of medical assistance paid by Medicaid. " Id. § 409.910(4) (emphasis added).

Florida carries out this policy by granting FAHCA "an automatic lien for the full amount of medical assistance provided by Medicaid to or on behalf of the recipient for medical care furnished as a result of any covered injury or illness for which a third party is or may be liable." Id. § 409.910(6)(c). In the event the recipient of the Medicaid funds brings a tort action against a third party that results in a settlement, FAHCA is automatically entitled to half of the recovery (after 25 percent attorney's fees and costs), up to the total amount provided in medical assistance by Medicaid. Id. § 409.910(11)(f).

Crucially, and as will be seen below, in line with the Supreme Court in Wos v. E.M.A. ex rel. Johnson , 568 U.S. 627, 133 S.Ct. 1391, 185 L.Ed.2d 471 (2013), Florida law allows the Medicaid recipient to challenge this automatic allocation. A Florida Medicaid recipient who receives a personal injury settlement or judgment may challenge the amount FAHCA is claiming under that formula in the following way. Within 60 days of receiving the settlement proceeds, the Medicaid recipient must place the full amount of FAHCA's entitlement in an interest-bearing trust account. Id. § 409.910(17)(a). Then, within 21 days the recipient must file a petition with the state Division of Administrative Hearings. Id. § 409.910(17)(b). In that administrative proceeding, "the recipient must prove, by 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." Id.

In accordance with these procedures, while Gallardo's personal injury suit was pending, FAHCA attached a lien for $862,688.77 on her cause of action and any future settlement thereof. When the suit settled for $800,000, Gallardo's counsel asked the state how much it would accept in satisfaction of its lien, given that the settlement included only $35,367.52 specifically allocated by the parties for past medical expenses. When there was no response, Gallardo put $300,000 into a trust account⁷ and commenced an administrative action to challenge that amount. In the course of that action, FAHCA sought to recover more than the $35,367.52 specifically allocated by the parties for past medical expenses, arguing that it was also entitled to recover the amounts it paid from the portion of the settlement representing compensation for the recipient's future medical expenses.

Gallardo sued the Secretary⁸ of FAHCA in the district court under 42 U.S.C. § 1983,⁹ seeking a declaration that, under federal law, Florida is not entitled to reimbursement from anything more than the portion of the settlement representing compensation for past medical expenses. She represented that portion as being the parties’ unilateral allocation in the settlement to past medical expenses—that is, the cap on Florida's reimbursement would be $35,367.52. The suit also sought a declaration that Florida's administrative procedure for challenging the amount of the state's claim violates federal law. The parties filed cross-motions for summary judgment.

The district court granted Gallardo's motion for summary judgment and denied FAHCA's. Gallardo ex rel. Vassallo v. Dudek , 263 F. Supp. 3d 1247, 1249 (N.D. Fla. 2017). It found that Fla. Stat. § 409.910 is preempted by federal Medicaid law, and it enjoined FAHCA from enforcing that law by "seeking reimbursement of past Medicaid payments from portions of a recipient's recovery that represents future medical expenses." The court also declared that

the federal Medicaid Act prohibits the State of Florida from requiring a Medicaid recipient to affirmatively disprove § 409.910(17)(b) ’s formula-based allocation with clear and convincing evidence to successfully challenge it where, as here, that allocation is arbitrary and there is no evidence that it is likely to yield reasonable results in the mine run of cases.

FAHCA now appeals.

While this appeal was pending in our Court, the Florida Supreme Court ruled on an appeal from another Medicaid recipient's administrative action to challenge the amount of the state's claim on his tort settlement. The state court held that federal Medicaid law authorizes the state to obtain reimbursement out of personal injury settlements only from the portion of a settlement that represents past medical expenses. Giraldo v. Agency for Health Care Admin. , 248 So. 3d 53, 56 (Fla. 2018). When that decision became final, Gallardo moved our Court to dismiss this appeal because the question of future medical expenses was now moot. We will consider and rule upon that motion in this opinion.

II. STANDARD OF REVIEW

"We review the grant of summary judgment de novo , drawing all inferences and reviewing all the evidence in the light most favorable to the non-moving party." Fresenius Med. Care Holdings, Inc. v. Tucker , 704 F.3d 935, 939 (11th Cir. 2013).

III. DISCUSSION

FAHCA argues that it was entitled to summary judgment because federal law does not preempt its practices of (1) seeking reimbursement for the medical expenses it has paid from the portion of a...