L.Q. v. California Hospital Medical Center (Sept. 30, 2021, B305723) __ Cal.App.5th __ [2021 WL 4487768]

Medicaid does not bar States from asserting liens against beneficiaries’ recover of medical expense damages from third-party tortfeasors.

L.Q. suffered catastrophic birth injuries causing severe disabilities. She sued her medical providers for professional negligence and settled the claims for $3 million. The California Department of Healthcare Services (DHCS) asserted a lien on the settlement to recover amounts DHCS had paid for L.Q.’s medical care through Medi-Cal. The trial court denied the lien, ruling that California law permitting DHCS to place a lien on the settlement was preempted by the anti-lien provision of the federal Medicaid Act. DHCS appealed.

The Court of Appeal reversed.  The court explained that the Medicaid Act includes certain provisions that are in tension. On the one hand, the Act’s acquisition of rights provision deems states to have acquired the right to third-party payments for medical care, and the reimbursement provision requires states to seek reimbursement for those third-party payments. On the other hand, the anti-lien provision forbids states from asserting liens against the property of Medicaid beneficiaries, and the anti-recovery provision prohibits states from seeking to recover benefits that were correctly paid on behalf of Medicaid beneficiaries. Relying on dicta in Arkansas Dept. of Health and Human Services v. Ahlborn (2006) 547 U.S. 268 and Wos v. E.M.A. ex rel. Johnson (2013) 568 U.S. 627, theCourt of Appeal resolved this tension by holding that state liens on Medicaid beneficiary recoveries are not prohibited by the anti-lien or anti-recovery provisions, provided they are limited to past medical costs. The court reasoned that, under the assignment clause, a Medicaid beneficiary’s recovery of damages for past medical expenses belong to the state, not the beneficiary. Thus, the portion of L.Q.’s settlement on which DHCS asserted a lien was not L.Q.’s “property” within the meaning of the anti-lien provision. The court also rejected L.Q.’s argument that the reimbursement clause requires states to seek reimbursement directly from third parties, rather than by asserting a lien against recoveries by beneficiaries. The court directed the trial court to determine the portion of L.Q.’s settlement attributable to medical care expenses paid by the State and the amount of DHCS’s reimbursement.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy LLP, and is republished with permission.

For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or htwatson@horvitzlevy.com.