L.Q. v. Cal. Hosp. Med. Ctr.

• Decision Date: 30 September 2021
• Docket Number: B305723
• Citation: 69 Cal.App.5th 1026,285 Cal.Rptr.3d 93
• Parties: L.Q., a Minor, etc., Plaintiff and Respondent, v. CALIFORNIA HOSPITAL MEDICAL CENTER et al., Defendants; Bradley P. Gilbert, as Director, etc., Claimant and Appellant.
• Court: California Court of Appeals

69 Cal.App.5th 1026

285 Cal.Rptr.3d 93

L.Q., a Minor, etc., Plaintiff and Respondent,

v.CALIFORNIA HOSPITAL MEDICAL CENTER et al., Defendants;

Bradley P. Gilbert, as Director, etc., Claimant and Appellant.

B305723

Court of Appeal, Second District, Division 3, California.

Filed September 30, 2021

Xavier Becerra and Rob Bonta, Attorneys General, Cheryl L. Feiner, Assistant Attorney General, Gregory D. Brown and Tara L. Newman, Deputy Attorneys General, for Claimant and Appellant.

Law Offices of Michels & Lew, Philip Michels and Steven B. Stevens, Los Angeles, for Plaintiff and Respondent.

EDMON, P. J.

Respondent L.Q. (plaintiff) is a severely disabled child who suffered catastrophic injuries during her birth in 2015. She sued various medical providers for professional negligence, settling those actions in 2019 for $3,000,000. The California Department of Health Care Services (hereafter, DHCS), through its director, appellant Bradley Gilbert, asserted a lien on plaintiff's settlement to recover what DHCS paid for plaintiff's medical care through the state's Medi-Cal program. The trial court denied the lien, concluding that it was prohibited by the "anti-lien" provision of the federal Medicaid Act, 42 U.S.C. section 1396 et seq. (the Medicaid Act or the Act).

We conclude that the trial court erred by denying DHCS's lien. While the anti-lien provision of the Medicaid Act generally prohibits liens against the property of Medicaid beneficiaries, other provisions of the Act carve out exceptions for settlements or judgments recovered from third-party tortfeasors, to the extent such settlements or judgments are attributable to payments made by the state for the beneficiaries’ medical care. We therefore will reverse and remand the matter to the trial court to determine what portion of the settlement properly is subject to DHCS's lien.

FACTUAL AND PROCEDURAL BACKGROUND

A. Background

Plaintiff was catastrophically injured during her birth in June 2015, and as a result suffers severe disabilities, including quadriplegic cerebral palsy, microcephaly, profound developmental delays, profound intellectual disabilities, and epilepsy.

In 2016, through her mother and guardian ad litem, Carolina Q., plaintiff sued the California Hospital Medical Center, USC-Eisner Family Medicine Center, and individual doctors and nurses for professional negligence. Plaintiff and defendants settled the action in 2019 for $3,000,000, subject to court approval.

B. DHCS Lien

Since plaintiff's birth, DHCS has paid for her medical care through the California Medical Assistance Program, known as Medi-Cal. In March 2017, DHCS notified plaintiff of its right pursuant to Welfare and Institutions Code ¹ section 14124.76 to assert a lien on any recovery she obtained through her medical negligence action; subsequently, in 2019, DHCS advised that it had paid $672,959 for plaintiff's medical care and would assert a lien of $477,264 (DHCS's expenditures, less its statutory share of attorney fees and litigation costs) on the settlement funds.

In June 2019, plaintiff and defendants sought trial court approval of the settlements. The court granted the petitions to approve the settlements, ordered $649,289 to be held in plaintiff's attorney's trust account to satisfy a potential Medi-Cal lien, and reserved jurisdiction to determine any claim for a reduction of the lien.

In November 2019, plaintiff filed a motion in the trial court pursuant to section 14124.76 to determine DHCS's lien. Plaintiff contended the federal Medicaid Act precluded states from imposing liens on judgments or settlements received by Medi-Cal recipients from third-party tortfeasors, and thus DHCS was not entitled to any portion of the settlement. Alternatively, plaintiff urged she had recovered only about 11 percent of her total damages, and thus DHCS's recovery should also be limited to 11 percent of its total expenditures, or about $72,000.²

DHCS opposed plaintiff's motion. It contended that it was entitled pursuant to section 14124.72 to recover the reasonable value of the medical care provided to plaintiff, reduced by the DHCS's share of plaintiff's attorney fees and litigation costs. DHCS further contended that the federal Medicaid Act did not preclude it from asserting a lien on plaintiff's recovery; to the contrary, it asserted the Act required it to seek reimbursement from that recovery. On February 6, 2020, the trial court issued an order denying DHCS's lien. It found that although California law permitted DHCS to place a lien on plaintiff's settlement, such lien was prohibited by the "anti-lien" provision of the federal Medicaid Act, 42 U.S.C. section 1396p(a)(1). The court explained: "[T]he plain language of [ 42 U.S.C.] Section 1396p(a)(1) bars a lien from being imposed against Plaintiff's settlement proceeds arising from medical expenses properly and correctly paid by DHCS.... DHCS does not argue that medical assistance benefits were incorrectly paid to Plaintiff which would allow the opportunity for DHCS to recover from Plaintiff pursuant to [ 42 U.S.C.] Section 1396p(b)(1). DHCS has instituted a lien due to the expenses it paid for Plaintiff's medical care. Thus, based on the statutory language[,] complying with [both] the federal and state provisions with respect to recovery of advanced medical expenses pursuant to a settlement is an impossibility .... ‘Under the Supremacy Clause, [w]here state and federal law ... conflict, state law must give way.’ [Citation.] Here, there is a conflict between the right of DHCS to be paid from a beneficiary's settlement proceeds and federal statutory law which prohibits a lien from being imposed against a settlement of an individual, before death, due to medical assistance expenses paid for that beneficiary." The court thus ordered that DHCS would "recover zero dollars on its lien claim with respect to this action[.]"

DHCS timely appealed from the order denying its Medi-Cal lien.

DISCUSSION

DHCS contends that the trial court erred in denying its lien because the United States Supreme Court has expressly held that a state may impose a lien on a Medicaid recipient's recovery from a third-party tortfeasor, so long as such lien is limited to the portion of the recovery attributable to past medical expenses. Alternatively, DHCS urges that the plain language and history of the Medicaid Act confirm that the Act does not preempt California's Medi-Cal lien statutes.

Plaintiff contends that the United States Supreme Court has never held that states may recover portions of tort settlements attributable to past medical care from Medicaid beneficiaries, and that such an interpretation is inconsistent with the Medicaid Act's plain language and legislative history. In the alternative, plaintiff contends there is no evidence that any portion of her settlement was attributable to her past medical expenses; to the contrary, she urges, the trial court made an implied finding, supported by substantial evidence, that her settlement did not include past medical expenses.

As we discuss more fully below, although the Supreme Court has never specifically held that Medicaid liens are permitted under the circumstances presented here, that conclusion is supported by Supreme Court dicta and is compelled by the plain language of the Act. The trial court therefore erred in entirely denying DHCS's lien. Further, because the trial court expressly did not consider whether plaintiff's settlement included compensation for past medical expenses, we cannot imply it made such a finding. We therefore will reverse and remand to the trial court for further proceedings.

I.Appealability and Standard of Review

A final determination of rights and obligations with respect to a Medi-Cal lien is appealable pursuant to section 14124.76, subdivision (c). Because the present appeal raises pure questions of law, our review is de novo. ( Lima v. Vouis (2009) 174 Cal.App.4th 242, 253, 94 Cal.Rptr.3d 183 ; Espericueta v. Shewry (2008) 164 Cal.App.4th 615, 622, 79 Cal.Rptr.3d 517 ( Espericueta ).)

II.Statutory Framework and Relevant Case Law

A. The Federal Medicaid Act

In 1965, Congress created the federal Medicaid program by enacting Title XIX of the Social Security Act ( 42 U.S.C. § 1396 et seq. ). Medicaid is a medical assistance program for low-income individuals that is jointly funded by the federal and state governments. States’ participation in the Medicaid program is optional; however, any state that chooses to participate must develop and implement a state plan that conforms to federal law. ( Harris v. McRae (1980) 448 U.S. 297, 301, 100 S.Ct. 2701, 65 L.Ed.2d 784.)

The Medicaid Act includes several provisions that require states, as a condition of receiving federal Medicaid funds, to seek reimbursement for payments made on behalf of Medicaid beneficiaries who later recover from third-party tortfeasors. As relevant here, states must require Medicaid beneficiaries to "assign [to] the State any rights [of the beneficiary] ... to payment for medical care from any third party" (the assignment clause). ( 42 U.S.C. § 1396k(a)(1)(A).) Further, states must "ha[ve] in effect laws under which, to the extent that payment has been made under the [state's Medicaid plan] for health care items or services furnished to an individual, the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or services" (the acquisition-of-rights clause). ( 42 U.S.C. § 1396a(a)(25)(H).) Finally, states must "take all reasonable measures to ascertain the legal liability of third parties ... to pay for care and services available under the [state's Medicaid] plan," and "in 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 [obtaining] such recovery, ... [to] seek reimbursement for such...