Kain v. Dept. of Health Services

• Decision Date: 02 August 2001
• Docket Number: No. B144391.,B144391.
• Citation: 109 Cal.Rptr.2d 891,91 Cal.App.4th 325
• Court: California Court of Appeals Court of Appeals
• Parties: Karen KAIN et al., as Guardians, etc., Plaintiffs and Appellants, v. STATE DEPARTMENT OF HEALTH SERVICES, Defendant and Respondent.

109 Cal.Rptr.2d 891

91 Cal.App.4th 325

Karen KAIN et al., as Guardians, etc., Plaintiffs and Appellants, v. STATE DEPARTMENT OF HEALTH SERVICES, Defendant and Respondent.

No. B144391.

Court of Appeal, Second District, Division 6.

August 2, 2001.

Review Denied November 20, 2001.

Andrew M. Wolf, Ventura, for Plaintiffs and Appellants.

Bill Lockyer, Attorney General of the State of California; Charlton G. Holland, III, Senior Assistant Attorney General; John H. Sanders, Supervising Deputy Attorney General; Susan A. Nelson, Deputy Attorney General, for Defendant and Respondent.

COFFEE, J.

Welfare and Institutions Code section 14124.70 et seq., allows the state to place a lien on a settlement or judgment obtained by a Medi-Cal beneficiary against a third party when Medi-Cal payments were used to treat an injury for which the third party is liable. We conclude that an award under the National Vaccine Injury Compensation Program (NVICP) (42 U.S.C. § 300aa-1 et seq.) is a judgment from which a Medi-Cal lien may be recovered.

FACTS AND PROCEDURAL HISTORY

Lorrin Kain was born on March 15, 1994, and was seriously injured by a routine childhood vaccination. She suffers from a severe seizure disorder, spastic quadriplegia, scoliosis and cortical blindness and will require extensive medical treatment throughout her life. Lorrin's parents, appellants Karen and Thomas Kain, have been appointed as her legal guardians.

In 1995, the Kains filed a petition in the United States Court of Federal Claims seeking recovery under the NVICP. They were represented by attorney Andrew W. Dodd. The special master assigned to the case issued an award which included a lump sum payment of $841,174.65 and an annuity of over $3 million. The lump sum portion of the award included compensation for pain and suffering, lost earnings and unreimbursed medical expenses. Judgment was entered on March 13, 1998, after the Kains accepted the award on Lorrin's behalf.

In 1996, while the NVICP claim was still pending, Karen Kain applied for Medi-Cal to cover some of Lorrin's medical expenses. Lorrin ultimately received $111,184.13 in Medi-Cal benefits from the State Department of Health Services (DHS), the respondent in this appeal. The Kains did not inform DHS that they had filed a claim under the NVICP. The information about the Medi-Cal services was never presented to the Court of Federal Claims, and the NVICP award did not include an allowance for any of the expenses paid by Medi-Cal.

After judgment was entered in the NVICP action, attorney Dodd informed DHS of the award. In response, DHS notified Dodd and the Kains that it would be seeking reimbursement for Medi-Cal benefits paid to Lorrin and was placing a lien on the money recovered under the NVICP.

The Kains then filed this action for declaratory relief, seeking a judicial determination of the parties' rights with respect to DHS's claim for reimbursement. The trial court trial ruled that DHS was entitled to seek reimbursement for Medi-Cal benefits and that its lien on the NVICP award was proper. It entered judgment in favor of DHS for $75,500.95, the net amount recoverable under the Medi-Cal lien. (See Welf. & Inst.Code, § 14124.72, subd. (d).)

DISCUSSION

The Kains contend that a Medi-Cal lien may be asserted only against a negligent third-party tortfeasor or an insurance carrier that is contractually obligated to pay for services covered by Medi-Cal. They argue that the NVICP fits neither of these categories, and that the judgment in favor of DHS on its lien must be reversed. We disagree.

The NVICP was established by the National Childhood Vaccine Injury Act of 1986 (Vaccine Act), and is a no-fault system for compensating individuals who are injured by routine vaccinations. (42 U.S.C. §§ 300aa-11(c), 300aa-13, 300aa-14, 300aa-15; Lowry v. Secretary of Health and Human Services (9th Cir.1999) 189 F.3d 1378, 1381.) It requires a vaccine-injured person to file a petition in the United States Court of Federal Claims naming the Secretary of the Department of Health and Human Services as the respondent. (42 U.S.C. §§ 300aa-11, 300aa-12.) If the court determines that the claimant's injuries were caused by a vaccine, he or she will be awarded compensation out of the Vaccine Injury Compensation Trust Fund (Vaccine Fund), which is financed by an excise tax on certain vaccines. (26 U.S.C. § 9510; 42 U.S.C. § 300aa-15(i)(2); Lowry, supra, at p. 1381.) A claimant may either accept that award or reject it in favor of the right to pursue a traditional tort action against the vaccine manufacturer. (42 U.S.C. § 300aa-21.)¹

Title XIX of the Social Security Act (42 U.S.C. §§ 1396-1396s), commonly known as Medicaid, is a cooperative federal-state program designed to provide medical assistance to persons whose resources are insufficient to meet the costs of medical care. (Ruth v. Kizer (1992) 8 Cal.App.4th 380, 385, 10 Cal.Rptr.2d 274.) Medi-Cal is the California implementation of the federal Medicaid program and is administered by DHS. (Welf. & Inst Code, §§ 10721, 14000 et seq.; Cal.Code Regs., tit. 22, § 50004; Mission Community Hospital v. Kizer (1993) 13 Cal.App.4th 1683, 1687, 17 Cal.Rptr.2d 303.)

"Because Congress intended Medicaid to be the `payor of last resort,' the state agency that administers Medicaid must seek reimbursement from any third party responsible for the patient's medical expenses." (Sullivan v. County of Suffolk (2d Cir.1999) 174 F.3d 282, 285; State of California v Superior Court (Bolduc) (2000) 83 Cal.App.4th 597, 601, fn. 2, 99 Cal.Rptr.2d 735.) As a condition of receiving federal Medicaid funds, a state program must provide for the mandatory assignment of the beneficiary's rights against third parties and must obligate the state's Medicaid director to "take all reasonable measures to ascertain the legal liability of third parties." (42 U:S.C. § 1396a(a)(25)(A) & (45); see also 42 C.F.R., § 433.138 (2000).) A "third party" is "any individual, entity or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a State [Medicaid] plan." (42 C.F.R., § 433.136 (2000).)

Consistent with these federal requirements, California has enacted several statutes allowing DHS to recover Medi-Cal funds from responsible third parties. Welfare and Institutions Code section 14124.71 authorizes DHS to bring an action for the reasonable value of Medi-Cal benefits paid "because of an injury `for which another person [or entity] is liable.'" (Riddell v. State of California (1996) 50 Cal.App.4th 1607, 1611-1612, 58 Cal.Rptr.2d 555.) Welfare and Institutions Code section 14124.74 allows DHS a first lien against a "judgment or award in a suit or claim" obtained by a Medi-Cal beneficiary "against a third party or [insurance] carrier." By operation of law, the recipient of Medi-Cal services assigns to DHS the right to recover medical expenses from a third party who is liable to pay for those expenses. (Welf. & Inst.Code, § 14008.6, subd. (a).)

The Medi-Cal statutes do not define "third party" for purposes of reimbursement, but when construed with the relevant federal statutes and regulations, that term is broad enough to cover an award under the NVICP. The NVICP offers a no-fault substitute for tort recovery against vaccine manufacturers who, if held liable in a civil case, clearly would qualify as "third parties." Though the acts of the Vaccine Fund did not cause the claimant's physical injuries, it is the entity financially responsible for those injuries on behalf of the vaccine manufacturers.

Neither state nor federal law limits Medi-Cal reimbursement to third party tortfeasors, as the Rains suggest. State law broadly refers to the liability of "third parties," and to Medi-Cal services rendered because of an injury "for which another person or party is liable." (Welf. & Inst.Code, §§ 14124.70, subd.(b), 14124.74, 14124.791.) The federal regulations define a "third party" from whom reimbursement may be sought as "any individual, entity or program that is or may be liable to pay all or part of the expenditures for medical assistance...." (42 C.F.R., § 433.136 (2000), italics added.)

The Vaccine Act expressly contemplates that Medicaid funds are a secondary resource for vaccine injuries. In contrast to the general rule that the NVICP will not pay for vaccine-related expenses covered by other insurance or state health care programs, Congress has specifically provided that the NVICP, rather than Medicaid, is the primary source of payment for such expenses. (42 U.S.C.A. § 300aa-15(g) & (h).)² This is consistent with Medicaid's status as a payor of last resort, which is available only when other funds are not.

In their briefs on appeal and in their arguments before the trial court, the parties appeared to agree that Lorrin's NVICP award would have included an amount sufficient to cover the Medi-Cal lien if information about that lien had been presented to the special master who heard their case in the Court of Federal Claims. At oral argument, counsel for the Kains argued that the Medi-Cal lien would not have been included in the NVICP award, citing two decisions by the same special master. The first of these decisions, Banuelos v. Secretary of the Department of Health and Human Services, 1990 WL 293400 (Cl.Ct. March 8, 1990, No. 89-25V) (Banuelos), rejected the claimant's request to order payment of a Medi-Cal lien as part of the NVICP award. The second, Hussey v. Secretary of the Department of Health and Human Services, 1991 WL 59454 (Cl.Ct. April 14, 1991, No. 90-896V) (Hussey), rejected the claimant's request for an order that no portion of the NVICP judgment would be subject to a Medi-Cal lien.

If the Kains are correct that an NVICP award necessarily excludes amounts owed on a lien under a state Medicaid plan, then enforcement of such a lien would require the vaccine-injured person to resort to other portions of their award to pay the...