Judge Jill Feeney, Case Number: BC585574, Date: 2023-07-20 Tentative Ruling

Plaintiff Daniel Corona (“Plaintiff”) was born on May 12, 2012, with profound mental and physical disabilities. He is dependent on others for his daily care, including feeding, dressing, toileting, hygiene, and mobility. It is highly unlikely that he will experience meaningful improvement.

Through his mother and guardian ad litem, Rebecca Gutierrez (“Gutierrez”), Plaintiff filed a wrongful life suit against his mother’s prenatal health care provider, Dr. Kathryn Shaw (“Dr. Shaw”). Plaintiff alleged Dr. Shaw negligently failed to diagnose his serious abnormalities, though they were evident on his ultrasound.

Since Plaintiff’s birth, the California Department of Health Care Services (“DHCS”) has paid for Plaintiff’s medical care through the California Medical Assistance Program, Medi-Cal. In April 2018, DHCS notified Plaintiff of its right to assert a lien against any third-party settlement or judgment the Plaintiff reached in this action. In recognition of this alleged right, the Court ordered that $358,117 of Plaintiff’s settlement be held in Plaintiff’s counsel’s trust account pending a determination of DHCS’s lien; this number is the full amount of the settlement allocated to Plaintiff’s medical expenses.

On July 6, 2020, DHCS provided a revised final lien letter stating that it had paid $358,061 for Plaintiff’s medical care, from which it sought to recover $229,696. This number represents the amount DHCS paid to cover Plaintiff’s medical expenses, minus 25% of that amount to provide for the Department’s share of Plaintiff’s attorney’s fees, plus the department’s statutory share of litigation costs, pursuant to Welfare and Institutions Code section 14124.72, subd. d.

On May 18, 2020, Plaintiff filed a Motion to Determine DHCS’s Lien Claim pursuant to Welfare and Institutions Code section 14124.76. In that Motion, Plaintiff contended, as relevant here, that his past and future damages exceeded $13 million, and his $1.25 million settlement represented just about 9% of his total damages. Plaintiff argued that DHCS’s lien should be reduced proportional to that amount. Additionally, Plaintiff attested that Gutierrez provides the majority of Plaintiff’s medical care, as Gutierrez had difficulty finding Medi-Cal approved nurses to provide the care Plaintiff required. Plaintiff submitted the declaration of economist David Fractor (“Fractor”), who stated that the present value of Plaintiff’s future care was $13.4 million.

In Opposition to Plaintiff’s motion, DHCS argued that because Plaintiff’s settlement arose from a wrongful life action, it necessarily included only medical and educational damages. As Plaintiff’s life care plan (“LCP”) claimed only $23,000 in educational expenses, DHCS contended that the remainder of the $1.25 million settlement necessarily was for medical expenses and was therefore subject to DHCS’s lien.

DHCS further contended that DHCS should be compensated for future medical expenses that Medi-Cal will cover. DHCS submitted multiple declarations attesting that Plaintiff is eligible for “full-scope” Medi-Cal coverage, which means he is eligible to receive all services available through the Medi-Cal program that are determined to be medically necessary. As DHCS would be covering all of Plaintiff’s future medical expenses, DHCS argued that it was entitled to recover the full amount of its Medi-Cal lien as allowed by statute.

On Reply, Plaintiff argued that there was no evidence that any portion of his settlement was for past medical expenses. Next, Plaintiff argued that some of his past medical expenses had been paid for by two managed care plans, for which Medi-Cal paid premiums, and that DHCS should not recover for the medical expenses it did not directly pay. Finally, Plaintiff argued that DHCS failed to demonstrate that DHCS would actually pay for any of Plaintiff’s future medical expenses.

On August 10, 2020, this Court granted DHCS’s Medi-Cal Lien in the amount of $229,696. This Court found that both parties agreed Plaintiff’s past medical expenses were $358,118, and that sum should be reduced by 25 percent to account or DHCS’s share of attorney fees.

This Court rejected Plaintiff’s argument that DHCS’s lien should be proportionally reduced to the same extent that Plaintiff’s settlement was reduced against his actual damages, finding that “[i]f the Court were to include future costs in its calculations, the Department would be entitled to an even greater share of the recovery, based on the assumption that it will be responsible for all or a substantial portion of plaintiff’s future medical expenses.” Accordingly, this Court found that the DHCS lien was reasonable, and that it was entitled to recover on its lien in the amount of $229,696.

The Court noted that in Arkansas Department of Health & Human Services v. Ahlborn (2007) 547 U.S. 268 (Ahlborn), the United States Supreme Court found that a state agency may impose a lien on a Medicaid beneficiary’s recovery from a third-party tortfeasor, but that lien may only be to recover the amount from the settlement attributable to the plaintiff’s medical expenses.

The Court found that “as a predicate to deciding how much of a Medi-Cal beneficiary’s tort settlement DHCS may claim, the trial court must determine which portion of the settlement is attributable to past medical expenses, against which DHCS is entitled to collect its lien, and other damages, against which it is not. [Citations.]” (Daniel C. v. White Memorial Medical Center (2022) 83 Cal.App.5th 789, 811 (Daniel C.).) The Court noted that this Court did not necessarily need to use the Ahlbon formula to determine the proper attribution of the settlement amount to past medical expenses, but that this Court “must distinguish medical expenses in the settlement from other damages on the basis of a rational approach. [Citation].” (Ibid.) Finally, the Court found that while this Court may exclude future medical expenses from its calculation of DHCS’s lien, it may only do so if it expressly finds that it is reasonably probable that DHCS will pay such expenses based on competent evidence. (Ibid.)

On remand, the Court of Appeal ordered that this court allocate the settlement between past medical expenses, other compensable past expenses paid by Plaintiff, and any future compensable medical expenses that DHCS has not demonstrated it is reasonably likely to pay. The Court of Appeal then ordered that this court only permit DHCS to recover its lien from that portion of the settlement reasonably allocated to past medical expenses, as reduced by DHCS’s statutory share of attorney fees and costs.

On remand, this court must determine, first, whether DHCS has shown that it is reasonably likely that DHCS will cover Plaintiff’s future medical expenses, and second, what proportion of the settlement amount is attributable to past medical expenses and is therefore subject to DHCS’s lien.

First, the court must determine whether DHCS has shown that there is a reasonable likelihood that DHCS will cover Plaintiff’s future medical expenses. This determination is necessary, as DHCS urges the court to forego the Ahlbon formula pursuant to Aguilera v. Loma Linda University Medical Center (2015) 235 Cal.App.4th 821 (Aguilera).

In Aguilera, plaintiff settled a medical negligence action against her physician for $950,000. (Id. at p. 825.) DHCS contended that its lien should not be reduced proportional to the settlement amount as it would be paying the plaintiff’s future medical and attendant care expenses, and those expenses are properly excluded from the calculation. The trial court agreed and excluded plaintiff’s future medical expenses from its determination of the plaintiff’s future expected damages.

The Court of Appeal reversed, holding that while it agreed with DHCS’s contention that future health care expenses paid by Medi-Cal are properly excluded from the Ahlborn formula, such exclusion is “contingent on the Department presenting sufficient evidence that it will in fact pay [plaintiff’s] expenses as long as she qualifies for the benefits that she is presently receiving.” (Aguilera, supra, 235 Cal.App.4th at pp. 831-32.) The Aguilera Court found that to deduct future expenses from the Ahlbon formula, “the trial court must make a determination whether it is reasonably probable that the Department will pay [the plaintiff’s] future health care expenses. If the trial court makes such a finding, it is directed to exclude those expenses from its Ahlborn calculation.”

DHCS provides declarations from several DHCS employees attesting that Plaintiff is currently eligible for the Medi-Cal program on the basis of his age, disability, and assets, and that it is reasonably probable that Plaintiff will remain eligible for full-scope Medi-Cal coverage for the rest of his life. (See McDonald Decl. ¶¶ 7-8; Garbett Decl. ¶ 12; Saunders Decl. ¶¶ 6-7.)

In Opposition, Plaintiff contends that DHCS’s evidence demonstrates only that Plaintiff is eligible for Medi-Cal coverage for future medical expenses, not that Plaintiff is actively receiving same benefits, or will continue to do so. Plaintiff notes that none of the declarations state that DHCS is presently providing Plaintiff an in-home licensed vocational nurse (“LVN”) or supervisory nursing care, which constitute the majority of Plaintiff’s future medical expenses. (Gutierrez Decl. ¶ 5.) Plaintiff attests that Plaintiff’s mother, father, and sister provide for Plaintiff’s daily needs. (Id. ¶ 6.) Plaintiff attests that in late 2017 or 2018 she contacted a health care agency to see if it would provide a nurse for respite care, but that agency was unable to do so. (Ibid.)

Plaintiff argues that it has been eleven years since Medi-Cal provided for LVN or supervisory nursing care, which both parties agree is the largest part of Plaintiff’s future damages. Plaintiff contends that DHCS’s assertion that it will be providing this care, which it has not provided since 2012, moving forward is untenable.

Under Aguilera, the burden is on DHCS to show that it is reasonably probable that DHCS will provide for the majority of Plaintiff’s future medical expenses. DHCS cannot meet that burden where it has not been providing for such care for nearly a decade, and where DHCS’s evidence only demonstrates that Plaintiff is eligible to receive such care.

As the deduction for future medical expenses is the only basis on which DHCS objects to the use of the Ahlbon formula, the Court finds that the Ahlbon formula is the proper method to determine what portion of Plaintiff’s settlement is attributable to past medical expenses.

Under the Ahlbon formula, the lien recoverable by DHCS for past medical expenses is determined by reducing DHCS’s claimed medical expenses in the same proportion as Plaintiff’s claimed damages against his eventual settlement award.

Here, the overall value of Plaintiff’s future damages is $13,415,139. (See Fractor Decl. pg. 4.). Excluding $1,401,324 in future services covered by Med-Cal, this leaves future damages of $12,013,815.

This number is then reduced by 25 percent to allow for DHCS’s contribution to Plaintiff’s attorney’s fees pursuant to Welfare and Institutions Code section 14124.72(d). DHCS owes $9,041 in attorney’s fees.

Under section 14124.72(d), the court determines the amount of litigation costs DHCS owes by dividing the amount reimbursed to DHCS before reducing for attorney fees ($36,164.19) by the full amount of the settlement ($1,250,000). This equals .0289.