Lomeli v. State Dept. of Health Care Services (June 25, 2019, B290608) __Cal.App.5th __ [2019 WL 2590799]

DHCS’s Medi-Cal lien on patient’s tort recovery is not preempted and is based on the cost of care

Ethan Lomeli’s guardian sued medical care providers for his birth injuries. Through Medi-Cal, the California Department of Health Care Services paid for his medical care before and during the lawsuit. After Lomeli settled with defendants for $4 million, the Department moved to impose a $267,159.60 lien on the settlement, seeking reimbursement for the care it provided. The trial court granted the motion, and Lomeli appealed.

The Court of Appeal affirmed, rejecting Lomeli’s argument that certain provisions of the Social Security Act preempt state Medicare liens. The purpose of Welfare and Institutions Code sections 14124.72 and 14124.76, which allow the Department to seek repayment for the costs of medical care, is to ensure that Medicaid beneficiaries do not receive a windfall by recovering (as damages in a tort action) medical costs they did not bear. The Court followed Tristani ex rel. Karnes v. Richman (3rd Cir. 2011) 652 F.3d 360, which interpreted the federal statutes as containing implied exceptions to provisions that otherwise seemed to bar the liens.

The Court of Appeal also affirmed the trial court’s “reality-based” lien calculation approach. To determine the proper lien amount, the trial court began with the sum of actual medical costs, then subtracted attorney fee and litigation cost adjustments (required by statute). The court rejected Lomeli’s “best-case scenario” approach, which divides the “amount of actual settlement” by a “hypothetical best-case scenario” for Lomeli’s tort suit, and then multiplies this fraction by the amount of the Department’s medical cost expenditures. The court criticized this approach as resting on an unjustified hypothetical number rather than an actual one, and as inequitably diminishing the Department’s recovery to benefit Lomeli at the expense of others who need the Department to cover their medical care.

The bulletin describing the Court of Appeal’s 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.