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Neal v. Detroit Receiving Hospital

Court of Appeals of Michigan

May 16, 2017

LADONNA NEAL, Plaintiff-Appellant,
v.
DETROIT RECEIVING HOSPITAL and UNIVERSITY HEALTH CENTER, also known as VHS RECEIVING HOSPITAL INC., also known as LEGACY DMC, also known as LEGACY ERH-UHC, Defendants, and MERIDIAN HEALTH PLAN OF MICHIGAN, also known as MHPM, Intervening Plaintiff-Appellee, and DEPARTMENT OF HEALTH and HUMAN SERVICES, Amicus Curiae.

         Wayne Circuit Court LC No. 13-004369-NH

          Before: Servitto, P.J., and Cavanagh and Fort Hood, JJ.

          Cavanagh, J.

         Plaintiff appeals as of right an opinion and order requiring her to pay the full amount of a Medicaid lien, $110, 238.19, following the settlement of her medical malpractice action. We reverse the decision, vacate the order, and remand for further proceedings consistent with this opinion.

         In April 2013, plaintiff filed a medical malpractice action. It is undisputed that plaintiff's medical care was paid for by Meridian Health Plan of Michigan, a Medicaid plan. Meridian Health Plan was billed $298, 869.10, but paid $110, 283.19 for plaintiff's medical expenses and asserted a lien in that amount.

         On March 20, 2015, after the parties reached a confidential settlement agreement, the trial court entered two stipulated orders dismissing plaintiff's lawsuit against all defendants.

         On April 21, 2015, plaintiff filed a motion to reinstate the case to resolve the Medicaid lien with Meridian Health Plan.[1] Plaintiff claimed that the confidential settlement agreement between the parties allocated the settlement funds as follows: 55% to non-economic damages, 40% to economic damages (lost earning capacity, attendant care, and household services), and 5% for medical expenses, totaling $26, 775. But, plaintiff argued, attempts to settle the Medicaid lien with First Recovery Group, which represented Meridian Health Plan with regard to its lien rights, were unsuccessful. First Recovery Group relied on MCL 400.106(5) and claimed a right to recover the full amount of the Medicaid lien, $110, 283.19, while plaintiff argued that MCL 400.106(5) was preempted by the Supremacy Clause of the United States Constitution. That is, as set forth in the leading case of Arkansas Dep't of Health & Human Servs v Ahlborn, 547 U.S. 268; 126 S.Ct. 1752; 164 L.Ed.2d 459 (2006), the anti-lien provision, 42 USC 1396p(a)(1), invalidated MCL 400.106(5). The Ahlborn Court held that states could not recover any amount in excess of the recipient's recovery for medical expenses. And in this case, plaintiff argued, the parties stipulated to the proper allocation of damages and "that stipulation is reasonable and should be respected." Thus, plaintiff requested the court to reinstate the case and enter an order requiring plaintiff to pay $26, 775 in full settlement of the Medicaid lien.

         Meridian Health Plan responded to plaintiff's motion to reinstate the case to resolve the Medicaid lien, arguing that it was entitled to recover its full lien amount as set forth in MCL 400.106(5), which was not preempted by the federal anti-lien provision. "Plaintiff was statutorily obligated to assign her Medicaid recovery rights to [Meridian Health Plan] and Ahlborn only applied the anti-lien provision to the extent that the Medicaid lien recovery included attaching a lien to 'property' of the Medicaid recipient other than 'medical expenses.' " Further, as the Ahlborn Court held, "the risk that parties to a tort suit will allocate away the State's interest can be avoided either by obtaining the State's advance agreement to an allocation or, if necessary, by submitting the matter to a court for decision." In this case, plaintiff claims to have conveniently-and improperly, "allocated away" the state's right to recover the full amount of its Medicaid lien but Meridian Health Plan neither participated in those negotiations nor agreed to such allocation. Thus, Meridian Health Plan concurred with plaintiff's request to reinstate this case, but requested the trial court to enter an order requiring plaintiff to pay the full amount of its Medicaid lien, $110, 238.19.

         On July 8, 2015, plaintiff's motion to reinstate the case was granted. On September 29, 2015, the trial court issued an opinion holding that Meridian Health Plan was entitled to recover the full amount of its Medicaid lien, $110, 238.19. The trial court noted that, under MCL 400.106(3) and (5), the state had first priority right against the net proceeds of a settlement in an action involving a person receiving medical assistance. Further, the court held, the "medical expenses paid are a sum certain and the lien exists as to the amount paid." Thus, in this case, although Meridian Health Plan had been billed for $298, 869.10 in medical expenses, it paid $110, 238.19, which was the amount of its lien. The court rejected plaintiff's arguments that MCL 400.106(5) is preempted by the federal anti-lien provision and that the holding in Ahlborn barred Meridian Health Plan's claim for the entire amount of its lien. Plaintiff, as a Medicaid recipient, was obligated to assign the right to receive payments in reimbursement for medical care to Meridian Health Plan, MCL 400.106(5), as authorized by 42 USC 1396a(a)(25)(H), and such lien existed prior to and independent of the lawsuit or its subsequent settlement. Accordingly, the trial court held, Meridian Health Plan was entitled to recover the full amount of its lien asserted for medical expenses paid on behalf of plaintiff. An order was subsequently entered requiring plaintiff to pay Meridian Health Plan $110, 238.19 to settle the Medicaid lien. This appeal followed.

         Plaintiff argues that MCL 400.106(5) is preempted by the federal anti-lien provision, 42 USC 1396p(a)(1), which precludes Meridian Health Plan from recovering on its Medicaid lien an amount greater than the portion of the settlement proceeds designated as payment for medical expenses, $26, 775. We agree, in part.

         Issues of statutory interpretation, including those related to preemption, are reviewed de novo as questions of law. Thomas v United Parcel Serv, 241 Mich.App. 171, 174; 614 N.W.2d 707 (2000).

         "Medicaid" is a program which provides medical assistance for the medically indigent under title XIX, 42 USC 1396 et seq., of the Social Security Act. MCL 400.105(1); Workman v Detroit Auto Inter-Ins Exch, 404 Mich. 477, 500; 274 N.W.2d 373 (1979). The Medicaid program is a cooperative funded by federal and state funds, and states participating in the program must make reasonable efforts to ascertain the legal liability of third parties to pay for the recipient's medical care. 42 USC 1396a(a)(25)(A). Where legal liability is found to exist, the state is to seek reimbursement. 42 USC 1396a(a)(25)(B). To facilitate the state's reimbursement from liable third parties, the state must enact laws under which it is deemed to have acquired the right to such recovery. 42 USC 1396a(a)(25)(H). Accordingly, a state's Medicaid plan must require the recipient to assign to the state any rights to payment for medical care from any third party as a condition of eligibility for Medicaid. 42 USC 1396k(a)(1)(A).

         In an effort to comply with federal requirements of the Medicaid program, Michigan enacted MCL 400.106, which includes the state's subrogation and assignment rights related to the liability of a third party for a recipient's medical care.[2] The state is "subrogated to any right of recovery that a patient may have for the cost of [medical care and services] not to exceed the amount of funds expended by the state" for the care and treatment of the recipient. MCL 400.106(1)(b)(ii). And that recipient must execute and deliver an assignment of claim to the state to secure the state's right of recovery. Id. Accordingly, as set forth in MCL 400.106(3), a recipient who received medical assistance from the state must notify the state when filing an action in which the state may have a right to recover expenses paid. And if a matter was settled after November 29, 2004 without providing proper notice to the state, the state can sue the recipient, the recipient's legal counsel, or both, to recover the medical expenses that were paid. MCL 400.106(4).

         Further, MCL 400.106(5) provides that the state has first priority against the proceeds of the "net recovery" from any settlement or judgment in an action in which notice had been provided under MCL 400.106(3). With regard to the state's recovery or reimbursement, MCL 400.106(5) provides:

The state department, the department of community health, and a contracted health plan shall recover the full cost of expenses paid under [the Social Welfare Act] unless the state department, the department of community health, or the contracted health plan agrees to accept an amount less than the full amount. If the individual [recipient] would recover less against the proceeds of the net recovery than the expenses paid under this act, the state department, department of community health, or contracted health plan, and the individual shall share equally in the proceeds of the net recovery. As used in this subsection, "net ...

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