Superior Court of California 

County of Los Angeles 

Department 78 

 

KARSON CURTIS, et al., 

Plaintiffs,  

vs. 

CALIFORNIA HOSPITAL MEDICAL CENTER, et al., 

Defendants. Case No.: BC679022 

MOTION TO DETERMINE LIEN CLAIM FILED BY PLAINTIFFS KARSON CURTIS AND DANA DUNMORE; MOTION TO DETERMINE MEDI-CAL REIMBURSEMENT FILED BY REAL PARTY IN INTEREST, MICHELLE BAASS, DIRECTOR OF THE CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES

The Department’s motion to determine Medi-Cal reimbursement is GRANTED in the reduced amount described below.

Plaintiffs’ motion to reduce the Medi-Cal lien is DENIED.

Moving parties are to provide notice.

FACTUAL BACKGROUND

This is an action for medical negligence. Plaintiffs allege that on January 16, 2014, Defendants were negligent in providing medical care during the birth of Plaintiff Karson Curtis thereby causing him injury.

PROCEDURAL HISTORY

On October 11, 2017, Plaintiffs Karson Curtis and Dana K. Dunmore filed their Complaint against Defendants California Hospital Medical Center, Michael A. Core, and Kelly Jones. 

On May 26, 2020, Plaintiffs filed a notice of settlement.

On August 31, 2020, the Court granted Plaintiffs’ petition to approve minor’s compromise. 

On July 26, 2023, the California Department of Health Care Services (DHCS) filed its motion to determine Medi-Cal Reimbursement under Welfare & Institutions Code, section 14124.76.

On October 3, 2023, Plaintiffs filed their motion to determine DHCS’s lien claim.

On March 12, 2024, DHCS filed a notice of lien adjustment related to its motion to determine Medi-Cal reimbursement.

On March 21, 2024, DHCS filed an opposition to Plaintiffs’ motion to determine Medi-Cal lien.

On March 25, 2024, Plaintiffs filed their opposition to DHCS’s motion to determine lien claim.

On March 28, 2024, Plaintiffs and DHCS filed replies.

ANALYSIS

Statutory Framework

Welfare & Institutions Code § 14124.71 provides that, if a Medi-Cal beneficiary is injured by a third party, DHCS may sue that party directly to recover the cost of treating the beneficiary. The DHCS lawsuit is independent of any personal injury suit brought by the beneficiary and does not prevent the beneficiary from suing. Welfare & Institutions Code § 14124.71(c).

In the alternative, DHCS may assert a lien against any proceeds obtained by the beneficiary through the beneficiary’s lawsuit. Welfare & Institutions Code §§ 14124.70(d), 14124.71(c), and 14124.72(d). However, since DHCS does not contribute to the beneficiary’s legal costs, the amount of the lien is reduced to: 75% of the cost of treatment (the other 25% covers DHCS’s theoretical “share” of the attorney’s fees) minus a pro rata share of recoverable costs. Welfare & Institutions Code § 14124.72(d). Welfare & Institutions Code § 14124.74(a) prioritizes this lien ahead of the liens of any other medical providers.

Welfare & Institutions Code § 14124.76 authorizes the filing of motions:

(a) No settlement…in any action or claim by a beneficiary to recover damages for injuries, where the director has an interest, shall be deemed final or satisfied without first giving the director notice and a reasonable opportunity to perfect and to satisfy the director's lien. Recovery of the director's lien from an injured beneficiary's action or claim is limited to that portion of a settlement, judgment, or award that represents payment for medical expenses, or medical care, provided on behalf of the beneficiary…Absent the director's advance agreement as to what portion of a settlement, judgment, or award represents payment for medical expenses, or medical care, provided on behalf of the beneficiary, the matter shall be submitted to a court for decision. Either the director or the beneficiary may seek resolution of the dispute by filing a motion, which shall be subject to regular law and motion procedures. In determining what portion of a settlement, judgment, or award represents payment for medical expenses, or medical care, provided on behalf of the beneficiary and as to what the appropriate reimbursement amount to the director should be, the court shall be guided by the United States Supreme Court decision in Arkansas Department of Health and Human Services v. Ahlborn (2006) 547 U.S. 268 and other relevant statutory and case law.

(b) If the beneficiary has filed a third-party action or claim, the court where the action or claim was filed shall have jurisdiction over a dispute between the director and the beneficiary regarding the amount of a lien asserted pursuant to this section that is based upon an allocation of damages contained in a settlement or compromise of the third-party action or claim…

(c) The court shall issue its findings, decision, or order, which shall be considered the final determination of the parties' rights and obligations with respect to the director's lien….

Welfare & Institutions Code § 14124.78 provides that the size of the DHCS lien cannot be larger than the beneficiary’s ultimate recovery after attorney’s fees and costs. 

Requests for Judicial Notice

DHCS requests that the Court take judicial notice of the following:

1. Plaintiffs’ Complaint;

2. Court Order Approving Compromise of this action; and

3. DHCS’s special motion to determine Medi-Cal reimbursement.

The requests are granted.

Objections

DHCS objects to Plaintiffs’ evidence submitted in support of their motion to determine Medi-Cal lien. 

The following objections are SUSTAINED:  1, 2, 9, 10.

The following objections are OVERRULED: 3, 4, 5, 6, 7, 8.

Discussion

Plaintiffs and DHCS dispute whether DHCS may seek reimbursement of the cost of Plaintiff Karson Curtis’s medical care from the settlement in this case. 

In January 2018, DHCS sent a notice of its right to assert a lien in this case to Plaintiffs’ counsel. (Valadez Decl., ¶6.) 

The Form MC-350 filed by Plaintiff on June 25, 2020 indicated that Medi-Cal had paid medical expenses in the amount of $272,511.24. The petition further stated that Plaintiffs were entitled to a reduction of the Medi-Cal Lien under Welfare and Institutions Code Section 14124.76 and requested that the Court retain jurisdiction over the matter to settle the dispute over the lien.

On August 31, 2020, the Court approved Curtis’s petition for approval of minor’s compromise, ordering that $272,511.24 to be kept in Plaintiffs’ counsel’s client trust account pending resolution of the lien issue. 

Throughout 2018-2020, DHCS sent itemizations of the injury-related services paid for by Medi-Cal on behalf of Curtis. (Valadez Decl., ¶7.) 

DHCS sent Plaintiffs’ counsel a net lien amount of $242,774.15 on August 6, 2021. (Id., ¶14.) 

On March 12, 2024, DHCS filed a notice of lien adjustment stating the net lien was further reduced to $191,941.18 after Curtis’s managed care plan revised the paid amounts it reported for Curtis’s injury-related services. 

A. DHCS Lien Not Prohibited by the Medicaid Act’s Anti-Lien Provision

Plaintiffs cite the Medicaid Act’s anti-lien provision, 42 U.S.C. §1396p(a)(1), which provides in pertinent part that “[n]o lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan.” 

Plaintiffs’ argument was analyzed and rejected by the Court of Appeal in  

in L.Q. v. California Hospital Medical Center (2021) 69 Cal.App.5th 1026 (L.Q.). 

B. DHCS Not Required to Pursue Separate Action Against Third Party Tortfeasors

Contrary to Plaintiffs’ arguments, DHCS is not limited to recovery only against third party tortfeasors. In L.Q., the Court of Appeal rejected this argument. (Id. at p. 1047.) Wel. & Inst. Code, section 14124.74 explicitly allows DHCS to issue a first lien against the amount of the settlement, judgment, or award in the amount the agency is entitled to recover where a beneficiary brings an action alone. Plaintiffs cite no authority that DHCS was limited to pursuing its own claims against the third-party tortfeasors to recover the value of benefits it provided to Curtis. 

C. Portion of the Settlement Attributable to Medical Expenses

In Arkansas Department of Health & Human Services v. Ahlborn (2007) 547 U.S. 268, 288, the Supreme Court ruled that the Medicaid Act precludes state agencies from imposing a lien on any portion of a settlement not attributable to a Medicaid beneficiary’s medical expenses. 

DHCS argues that when the Court approved Plaintiff’s petition for approval of minor’s compromise, the Court set aside $272,511.24 to satisfy DHCS’s lien. However, the August 31, 2020 minute order merely specifies that the funds in the amount of DHCS’s claimed lien were to be held in Plaintiffs’ counsel’s trust account. Additionally, Plaintiffs’ MC-350 submitted in support of the petition states the lien was in dispute and that the Court was to retain jurisdiction over the issue. Therefore, there is no evidence that the Court made a determination on this issue already.

Plaintiffs assert that none of the settlement is attributable to a claim for medical expenses because Curtis assigned his claim for recovery of past medical expenditures to the state and thus did not seek reimbursement for medical expenses as part of the agreed upon settlement amount. Plaintiffs are wrong.

Here, there is no agreement among the litigants as to the allocation of the settlement proceeds and there is no evidence that the settlement agreement itself allocated proceeds. In this circumstance, the allocation of the settlement proceeds shall be decided by a court to avoid “the risk that parties to a tort suit will allocate away the State’s interest.” (See Ahlborn, supra., 547 U.S. at p. 288.)

“[A]s 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.).) 

As part of this process, 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 proportionally 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.” 

Here, DHCS and Plaintiffs dispute Plaintiffs’ damages for attendant care and loss of earning capacity. DHCS contends that it has met its burden of showing that it is reasonably probable that DHCS will provide for Curtis’s medical expenses moving forward. 

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, Plaintiffs argue that Curtis is not receiving attendant care during school days as estimated in Curtis’s life care plan. DHCS provides evidence that Curtis is presently receiving in-home supportive services for approximately 153 hours a month, or about 5 hours a day, through Medi-Cal. (Garbett Decl., ¶8.) Plaintiffs’ life care plan states he would require 12-16 hours of attendant care per day until the age of 18. (Id., ¶7.) Curtis has not applied for any kind of 24-hour in-home attendant caregiving assistance but is eligible for this additional assistance with Medi-Cal. (Id., ¶12.) 

Neither side explains why Plaintiff’s in-home supportive services care is limited to 153 hours a month. Although Plaintiffs provide declarations from experts who estimate the cost of attendant care, Plaintiffs provide no evidence of whether Curtis is receiving or requires additional attendant care which he was not qualified to receive through Medi-Cal. It appears Curtis is not receiving the full 12-16 hours of attendant care he requires because Plaintiffs have not applied for this care. Because the evidence shows Curtis is already receiving in-home supportive services and is likely to continue this and other services due to his condition, DHCS meets its burden of proving it is reasonably probable that it will pay for Plaintiff’s future attendant care. Therefore, future attendant care will be deducted from the lien calculation.

With respect to Plaintiff’s estimation of loss of earning capacity, DHCS alleges Plaintiffs significantly inflated this figure. At the time of settlement, Plaintiffs estimated Curtis’s lost earning capacity was $4,958,799. (Valadez Opp. Decl., Exh. J, p. 47.) Now, the figure is $7,134.151 despite Plaintiffs submitting the same preliminary economic analysis they submitted at the time Plaintiffs petitioned for approval of minor’s compromise. 

It appears Plaintiffs now seek the value of Curtis’s lost earning capacity assuming he would have earned a bachelor’s degree rather than an associate’s degree. (Plaintiff’s evidence, pdf p. 60.) DHCS argues these damages should not be worth more now than when the claim settled. The Court agrees. Plaintiffs’ MC-350 recorded the present value of Curtis’s loss of earning capacity as the lower number, $4,958,799. Because this is the value Plaintiffs submitted to the Court at the time settlement funds were allocated, the Court finds it is more likely that the value of Curtis’s loss of earning capacity is $4,958.799. 

Although DHCS’s proposed calculation lacks some expenses and contains different numbers than Plaintiff’s calculation, DHCS does not dispute any other category of Plaintiff’s proposed valuation. The value of the case is as follows:

Conservator: $124,802

Fiduciary: $1,250

Private School: $703,344

Therapeutic Recreation $31,007

Loss of Earning Capacity: $4,958,799

Noneconomic damages: $250,000

Medi-Cal Expenditure: $191,941.18

Total value: $6,261,143.18

As the deduction for future medical expenses and loss of earning capacity are 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.

The calculation is as follows:

$4,700,000/$6,261,143.18X $191,941.18= 

0.7507 X $191,941.18= $144,090.24

The portion of the settlement attributable to past medical expenses paid by DHCS is $144,090.24.

This value must be reduced by 25% to account for DHCS’s contribution to attorney’s fees under Wel. & Inst. Code, §14124.72(d). The calculation is as follows:

$144,090.24 X .25=$36,022.56

Thus, the value of the amount attributable to past medical expenses should be reduced by $36,022.56.

The value must be further reduced to account for DHCS’s contribution to litigation costs pursuant to Wel. & Inst. Code §14124.72(d), which provides that litigation costs are calculated by multiplying actual litigation expenses by the ratio of the total amount attributable to past medical expenses to the total settlement. Here, the parties agree total litigation costs were $63,916. The calculation is as follows:

Ratio: $144,090.24/$4,700,000=0.0307

$63,916 X 0.0307 = $1,962.22

DHCS’s lien will be further reduced by $1,962.22.

After these deductions, DHCS’s total lien is $106,105.46. Accordingly, the Court finds that DHCS is to recover on its lien in the amount of $105,459.91.

DATED: April 5, 2024 

________________________

Hon. Jill Feeney 

Judge of the Superior Court