Filed 5/16/23 Davis v. Regents of the Univ. of Cal. CA2/3
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
JASON CRAIG DAVIS, an B310313
Incompetent Person, etc.,
Los Angeles County
Plaintiff and Respondent, Super. Ct. No. BC528870
v.
REGENTS OF THE UNIVERSITY
OF CALIFORNIA,
Defendant;
STATE DEPARTMENT OF
HEALTH CARE SERVICES,
Claimant and Appellant.
APPEALS from orders of the Superior Court of Los Angeles
County, Ralph C. Hofer, Judge. Reversed and remanded.
Rob Bonta, Attorney General, Cheryl L. Feiner, Assistant
Attorney General, Richard T. Waldow and Gregory D. Brown,
Supervising Deputy Attorneys General, and Kenneth K. Wang,
Deputy Attorney General, for Claimant and Appellant.
Law Offices of Marilyn M. Smith and Marilyn M. Smith for
Plaintiff and Respondent.
Pollak, Vida & Barer, Daniel P. Barer and Anna L.
Birenbaum as Amicus Curiae on behalf of Defendant The
Regents of the University of California.
_______________________________________
INTRODUCTION
Plaintiff and respondent Jason Craig Davis (plaintiff)
suffered catastrophic physical injuries after falling from a
freeway overpass. Appellant, the California Department of
Health Care Services (Department), through the Medi-Cal
program, funded plaintiff’s medical care following the accident
and expects to do so for the foreseeable future. Plaintiff initiated
the present suit again his psychiatrist and a psychiatric hospital
alleging, among other things, that their negligence caused or
contributed to the accident. They settled and the Department
asserted reimbursement liens against plaintiff’s settlement
proceeds.
The issue before us relates to the method a trial court
should use to calculate the allowable amount of such a lien when
the injured-party plaintiff is expected to receive virtually all
future medical care through the Medi-Cal program. As we
explain, the trial court erred by failing to apply the methodology
adopted in Aguilera v. Loma Linda University Medical Center
(2015) 235 Cal.App.4th 821 (Aguilera). We therefore reverse and
remand for further proceedings.
2
BACKGROUND: MEDI-CAL LIENS
We recently explained the intricacies of Medicaid, a federal
program that funds, together with money from participating
states, medical care for low-income individuals. (See Daniel C. v.
White Memorial Medical Center (2022) 83 Cal.App.5th 789
(Daniel C.).) California’s implementation of the Medicaid
program, known as Medi-Cal, is administered by the
Department. Under both federal and state law, the Department
is generally prohibited from seeking reimbursement for services
provided to Medi-Cal beneficiaries unless the services were
related to an injury caused by a third-party tortfeasor. In that
event, the Department is required to seek reimbursement for its
services from the third-party tortfeasor by filing a lawsuit against
it, by intervening in a Medi-Cal beneficiary’s lawsuit against it,
or, as here, by filing a lien against judgment or settlement
proceeds obtained by the Medi-Cal beneficiary. (See generally id.,
at p. 800.)
As we will explain, the Department asserted liens against
settlement proceeds recovered by plaintiff from two third-party
tortfeasors. The trial court was required to determine the
permissible amount of the liens under Welfare and Institutions
Code1 sections 14124.72, 14124.76, 14124.78, and 14124.785. The
focus of the present appeal relates to section 14124.76,
subdivision (a), which states: “No settlement, judgment, or award
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
1All undesignated statutory references are to the Welfare and
Institutions Code.
3
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.
All reasonable efforts shall be made to obtain the director’s
advance agreement to a determination as to what portion of a
settlement, judgment, or award … 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 [(Ahlborn)] and
other relevant statutory and case law.” (Italics added.)
California courts have interpreted Ahlborn to mean that
the Department may only assert a lien against the portion of
judgment or settlement proceeds that represents compensation
for past medical expenses. (Daniel C., supra, 83 Cal.App.5th at
pp. 806–807.) In addition, if the parties cannot agree on an
allocation of funds as between past medical expenses and other
elements of a plaintiff’s recovery, we have said that the formula
4
used by the parties in Ahlborn is a rational method to determine
such allocation. (Id., at p. 807.) That formula, to which the
parties in Ahlborn stipulated, is the ratio of the plaintiff’s actual
recovery to the total value of the plaintiff’s claim, which ratio is
applied to any liens asserted by the Department. (Ibid.) For
example, if a plaintiff values a claim at $10 million and settles for
$1 million, the plaintiff has recovered 10 percent of the value of
the claim and the Department will be reimbursed 10 percent of
the value of medical services provided to the plaintiff.
FACTS AND PROCEDURAL BACKGROUND
1. Background
Plaintiff sustained catastrophic injuries after falling from a
freeway overpass, including traumatic brain injury, paralysis of
his upper right side, and aphasia. His injuries are permanent and
unlikely to improve. He is non-verbal, subject to violent
outbursts, and requires round-the-clock attendant care. In the
operative complaint, plaintiff alleged that his fall resulted from
the negligence of third parties including his treating psychiatrist,
Dr. Jeffrey Becker, and a hospital operated by the University of
California Board of Regents (the Regents).
2. Becker Settlement
2.1. Approval of the Settlement and Payment to the
Department
Plaintiff settled his claim against Dr. Becker for $1 million.
As of the date of the Becker settlement, the Department had
already spent more than $1 million to provide plaintiff’s medical
care. In December 2019, the court approved the Becker
settlement and allocated $376,201 to satisfy the Department’s
5
lien against the settlement proceeds. After accounting for the
Department’s lien, other medical expenses, attorney’s fees, and
litigation costs, the remaining settlement proceeds of $221,240
were distributed to a special needs trust for plaintiff’s benefit.
2.2. Plaintiff’s Motion for Reimbursement from the
Department
In September 2020, plaintiff filed a motion seeking
reimbursement of a portion of the funds paid to the Department
from the proceeds of the Becker settlement. Plaintiff represented,
and the Department did not contest, that the total value of his
case was $14 million and therefore the $1 million settlement
represented a 7 percent recovery for plaintiff. Plaintiff asserted,
therefore, that under section 14124.76, the Department was only
entitled to recover 7 percent of its expenditures for plaintiff’s past
medical care, less the Department’s share of attorney’s fees and
litigation costs, i.e., $52,500. Accordingly, plaintiff requested
reimbursement of $323,701 from the Department.
The Department opposed the motion and argued mainly
that the amount of its lien should be calculated under section
14124.782 rather than section 14124.76. Specifically, the
Department argued that section 14124.76 should not be applied
because the present case is distinguishable from Ahlborn. In the
2 Section 14124.78 provides, “Notwithstanding any other provision of
law, in no event shall the director recover more than the beneficiary
recovers after deducting, from the settlement judgment, or award,
attorney’s fees and litigation costs paid for by the beneficiary. If the
director’s recovery is determined under this section, the reductions in
subdivision (d) of Section 14124.72 shall not apply.” According to the
Department, it was permitted to recover $373,720.50 under this
section.
6
alternative, the Department argued that if the court applied
section 14124.76, it should follow Aguilera, supra, 235
Cal.App.4th 821. There, the Court of Appeal held that if it is
reasonably probable the Department will pay for a plaintiff’s
future medical care under the Medi-Cal program, then the value
of that future medical care should be subtracted from the case
value used to determine the percentage of the plaintiff’s
recovery.3 (Id. at p. 833.) The Department submitted five
declarations by staff members attesting to plaintiff’s medical
condition, his likely future care needs, care covered under the
Medi-Cal program, and plaintiff’s future eligibility for Medi-Cal,
suggesting generally that plaintiff will more than likely receive
from Medi-Cal nearly all of the care included in his $14 million
life care plan. Following Aguilera, the Department asserted,
would yield a recovery much higher than the $373,720.50
purportedly available under section 14124.78.
In reply, plaintiff asserted that the declarations submitted
by the Department were speculative. Plaintiff also suggested that
the Department was impermissibly attempting to recover
payment for the cost of his future medical care.
3 Calculating the recovery ratio in this manner may make a huge
difference. Assume a plaintiff recovers $1 million in settlement
proceeds and the total case value is $14 million. Including the cost of
future medical care in the total case value yields a recovery ratio of
7 percent. But if the Department could establish that $12 million of the
$14 million case value relates to future medical care Medi-Cal is
reasonably likely to provide, the recovery ratio would be 50 percent
($1 million settlement divided by $2 million reduced case value.)
7
2.3. Ruling and Appeal
The court granted plaintiff’s motion, accepted plaintiff’s
calculations, and ordered the Department to reimburse plaintiff
the requested $323,701. The court declined to follow Aguilera,
citing Congressional modifications to the Medicaid statute after
Aguilera was decided and stating “[i]t would appear that the
effort to exceed the lien recognized in Ahlborn by means of
discounting … future medical expenses is not appropriate.” The
court also noted that section 14009.5, which had been recently
amended, limited the Department’s right of reimbursement to the
probate estate of a Medi-Cal beneficiary.
The Department timely appeals.
3. The Regents Settlement
3.1. Settlement
Plaintiff settled his claim with the Regents for $500,000.
The Department asserted that it had paid $638,022.50 for
plaintiff’s medical care after the Becker settlement and asserted
a lien against the settlement proceeds.
3.2. Motion for Lien Determination
Plaintiff brought a motion to determine the amount of the
Department’s lien against the settlement proceeds. Citing section
14124.76, plaintiff asserted that the Department could only
recover $14,235.74. To reach that figure, plaintiff applied the
Alhborn formula and asserted that the $500,000 settlement
represented 3.5 percent recovery on his $14 million case. Plaintiff
applied that percentage to the Department’s $638,000 lien
($22,330) and subtracted the Department’s statutory share of fees
($5,582.50) and costs ($2,511.76).
8
In opposition, the Department again argued that the
amount of its lien should be calculated under section 14124.78
rather than section 14124.76. According to the Department, it
was allowed to recover $214,117.72 under section 14124.78. The
Department asserted that section 14124.76 should not be applied
because the present case is distinguishable from Ahlborn. In the
alternative, the Department again urged that if the court applied
section 14124.76, it should follow Aguilera, supra, 235
Cal.App.4th 821, and exclude almost all of plaintiff’s future
medical care from the total value of the case when calculating the
recovery ratio. As it did previously, the Department submitted
five declarations by staff members attesting generally that
plaintiff would receive nearly all of the care included in his $14
million life care plan through the Medi-Cal program. Following
Aguilera, the Department asserted, would yield a recovery much
higher than the $214,117.72 available under section 14124.78.
3.3. Ruling and Appeal
The court granted plaintiff’s motion regarding the
Department’s lien, thereby limiting the lien to $14,235.74. As in
its prior ruling, the court declined to follow Aguilera, stating that
“[i]t would appear that the effort to exceed the lien recognized in
Ahlborn by means of discounting … future medical expenses is
not appropriate.” In support of its conclusion, the court cited the
same Congressional and legislative authority as in its prior
ruling.
The Department timely appeals.
At the Department’s request, which was unopposed, we
consolidated the two appeals for all purposes.
9
DISCUSSION
1. Standard of Review
Reimbursement of a Medi-Cal lien in a third-party suit is
mandatory. (See McMillian v. Stroud (2008) 166 Cal.App.4th 692,
699.) Accordingly, “we review the trial court’s resolution of
questions of law de novo [citation], and otherwise examine the
record for substantial evidence to support its factual
determinations [citation].” (Ibid.)
2. The trial court erred by refusing to follow Aguilera.
The Department contends the court erred in calculating the
allowable amount of its lien under section 14124.76. Specifically,
the Department argues the court should have determined the
plaintiff’s ratio of recovery—particularly the value of plaintiff’s
case—using the method approved by the Court of Appeal in
Aguilera, supra, 235 Cal.App.4th 821. We agree.
2.1. The Medi-Cal Program
We have addressed the relevant statutory schemes at issue
in two recent cases, Daniel C., supra, 83 Cal.App.5th 789 and
L.Q. v. California Hospital Medical Center (2021) 69 Cal.App.5th
1026 (L.Q.). We incorporate our opinions by reference and include
only a brief summary of the points relevant to our analysis in the
present case.
“In 1965, Congress created the federal Medicaid program
by enacting Title XIX of the Social Security Act (42 U.S.C. § 1396
et seq.). Medicaid is a medical assistance program for low-income
individuals that is jointly funded by the federal and state
governments. States’ participation in the Medicaid program is
optional; however, any state that chooses to participate must
10
develop and implement a state plan that conforms to federal law.
(Harris v. McRae (1980) 448 U.S. 297, 301.)
“California has elected to participate in Medicaid by
establishing the Medi-Cal program. California’s implementing
legislation, known as the Medi-Cal Act, is codified at section
14000 et seq. (See § 14000.4 [short title].) [The Department] is
the state agency charged with administering the Medi-Cal
program. … A final determination of rights and obligations with
respect to a Medi-Cal lien is appealable pursuant to section
14124.76, subdivision (c).” (Daniel C., supra, 83 Cal.App.5th at
pp. 800–801.)
2.2. Medi-Cal Liens and Third-Party Tortfeasors
Federal law generally prohibits states from seeking
reimbursement for services provided under state Medicaid
programs from Medicaid beneficiaries. “The [Medicaid] Act[, 42
U.S.C. § 1396 et seq.] includes provisions that prohibit states
from recovering funds paid on behalf of Medicaid beneficiaries
from the beneficiaries themselves. One such provision—the ‘anti-
lien’ provision—says that, except in circumstances not relevant
here, ‘[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.’ (42 U.S.C.
§ 1396p(a)(1).) Another such provision—the ‘anti-recovery’
provision—says that ‘[n]o adjustment or recovery of any medical
assistance correctly paid on behalf of an individual under the
State plan may be made, except that the State shall seek
adjustment or recovery of any medical assistance correctly paid
on behalf of an individual under the State plan in [circumstances
not present here].’ (42 U.S.C. § 1396p(b)(1).)” (Daniel C., supra,
83 Cal.App.5th at p. 802.)
11
We have also explained one common exception to this
general rule. As required under federal law, “[t]he Medi-Cal Act
[§ 14124.70 et. seq.] states that when benefits are provided to a
Medi-Cal beneficiary because of an injury for which a third party
or carrier is liable, [the Department] has the right to recover from
such party or carrier the reasonable value of the Medi-Cal
benefits. (§ 14124.71, subd. (a).) [The Department] may obtain
reimbursement by filing an action directly against a third party
tortfeasor, by intervening in a Medi-Cal beneficiary’s action
against a third party, or by filing a lien against a beneficiary’s
settlement, judgment, or award. (§§ 14124.71, 14124.72,
14124.73; [citations].)”4 (Daniel C., supra, 83 Cal.App.5th at
p. 800.)
The Medi-Cal Act limits the amount of a Department lien
against settlement proceeds in cases involving recovery from
third-party tortfeasors. Section 14124.78 reflects the federal
“anti-lien” directive and restricts the Department’s recovery to
the proceeds of settlement after attorney’s fees and litigation
costs have been paid. In other words, even if the Department’s
lien is not fully satisfied from the settlement proceeds, the
Department may not recover the balance of its lien directly from
the Medi-Cal beneficiary. (See Bolanos v. Superior Court (2008)
169 Cal.App.4th 744, 757 (Bolanos) [noting that “section 14124.78
imposes a single, absolute limitation on the director’s recovery
4The applicable statutes apply to proceeds from a judgment, a
settlement, or an arbitration award. For convenience, we will refer
only to settlement proceeds in the discussion that follows.
12
that precludes the reimbursement of medical expenses from the
beneficiary’s own resources”].)5
Section 14124.72 applies when the beneficiary rather than
the Department pursues a claim against the third-party
tortfeasor. If the Department files a lien in an action pursued by
a beneficiary alone, its claim for reimbursement is reduced by
25 percent, representing its share of attorney fees, as well as by
its statutory share of litigation costs. (§ 14124.72, subd. (d).)
Section 14124.76, the section at issue in the present appeal,
limits the Department’s recovery to that portion of settlement
proceeds that compensates the beneficiary for past medical
expenses. (§ 14124.76, subd. (a).) The Legislature revised this
section following the United States Supreme Court’s decision in
Ahlborn. (See Daniel C., supra, 83 Cal.App.5th at p. 806.) There,
stated very simply, the court held that the Medicaid Act limits a
state’s ability to recover on a reimbursement lien to the portion of
5 In the calculations presented to the trial court, the Department
appears to apply the previous version of section 14124.78, which
provided, “Except as otherwise provided in this article,
notwithstanding any other provision of law, the entire amount of any
settlement of the injured beneficiary’s action or claim, with or without
suit, is subject to the director’s claim for reimbursement of the
reasonable value of benefits provided and any lien filed pursuant
thereto, but in no event shall the director’s claim exceed one-half of the
beneficiary’s recovery after deducting for attorney’s fees, litigation
costs, and medical expenses relating to the injury paid for by the
beneficiary.” Following the Ahlborn decision, the legislature modified
the statute and eliminated the language restricting the state’s recovery
to one-half of the overall recovery. (See Bolanos, supra, 169
Cal.App.4th at p. 757 [“Section 14124.78 was amended to delete
therefrom the limitation that the director’s claim could not exceed one-
half of the beneficiary’s recovery.”].)
13
the beneficiary’s recovery from a third-party tortfeasor that
compensates for medical expenses. (Ahlborn, supra, 547 U.S. 268,
280.) Other portions of the recovery (such as pain and suffering,
lost wages, or lost earning capacity), the Court held, are the
beneficiary’s property and are therefore protected under the
“anti-lien” provisions of the Medicaid Act. (Id. at pp. 284–285.)
The parties in Ahlborn had stipulated that the state would be
reimbursed at the same percentage as plaintiff’s recovery.
Because plaintiff recovered approximately one-sixth of the value
of her claim, the Court held that the state’s recovery was
consequently limited to that same percentage of its lien. (Id. at
p. 274.)
California courts applying section 14124.76 have held that
the Department may only recover from the portion of settlement
proceeds representing compensation for past medical expenses.
(See Bolanos, supra, 169 Cal.App.4th at p. 748 [describing the
secondary holding of Ahlborn as “when the settlement, judgment
or award does not specify what portion thereof was for past
medical expenses, an allocation must be made in the settlement,
judgment or award that indicates what portion is for past medical
expenses as distinct from other damages. The [state’s] recovery is
limited to that portion of the settlement that is allocated to past
medical expenses.”].)
Finally, section 14124.785 provides that the allowable
amount of the Department’s lien is the lesser of the three
amounts reached under sections 14124.72, 14124.76, and
14124.78.
2.3. Aguilera’s Approach
In Aguilera, the Court of Appeal confronted the issue
presented here, namely, how to apply the Alhborn formula where
14
Medi-Cal expects to provide all, or nearly all, of a plaintiff’s
future medical care. (See also Daniel C., supra, 83 Cal.App.5th at
pp. 809–810.) More particularly, the court considered whether a
plaintiff’s recovery ratio should be calculated using the total
value of a plaintiff’s case, including the cost of future medical
care that is expected to be provided by Medi-Cal. There, the
plaintiff had settled a medical negligence action against her
physician for $950,000. (Aguilera, supra, 235 Cal.App.4th at
p. 825.) The Department asserted a lien on the plaintiff’s recovery
based on the roughly $200,000 it had spent on her behalf. (Ibid.)
The plaintiff filed a motion to determine the Department’s lien,
claiming that the full value of her claim was nearly $15 million,
and thus that her settlement was only about 6 percent of her
total damages. She asserted that the Department’s recovery
therefore should be limited to about $10,000, or approximately
6 percent of its lien claim, based on the Ahlborn formula. (Id. at
p. 826.) The Department disagreed, asserting that it would be
paying the plaintiff’s future medical expenses, and thus those
expenses should be excluded from the calculation. The trial court
excluded the plaintiff’s future medical expenses from its
determination of the plaintiff’s future expected damages, but not
her future attendant care expenses, and awarded the
Department a lien of about $15,000. The Department appealed.
(Id. at p. 826.)
The Court of Appeal reversed, agreeing “in theory” with the
Department’s contention that future health care expenses which
would be paid by Medi-Cal should be excluded from the Ahlborn
formula if the “the Department present[s] sufficient evidence that
it will in fact pay [the plaintiff’s] expenses as long as she qualifies
for the benefits that she is presently receiving.” (Aguilera, supra,
15
235 Cal.App.4th at pp. 831–832.) On the record before it, the
court concluded that the Department had failed to present such
evidence and it remanded the matter for further proceedings to
allow the Department to do so. (Id. at p. 833.) The court
instructed the trial court to receive additional evidence from both
parties on the issue and then “make a determination whether it
is reasonably probable the Department will pay [the plaintiff’s]
future health care expenses. If the trial court makes such a
finding, it is directed to exclude these expenses from its Ahlborn
calculation.” (Ibid; see also Daniel C., supra, 83 Cal.App.5th at
pp. 812–813.)
2.4. Analysis
Aguilera is controlling. Here, as there, plaintiff settled a
high-value professional negligence case for pennies on the dollar
and asserted that under section 14124.76, the Department should
recover the same small fraction of its lien. As noted, ante,
plaintiff used a total case value of $14 million to calculate his
recovery ratio using the Ahlborn formula and represented that he
recovered 7 percent with regard to the Becker settlement and
3.5 percent with regard to the Regents settlement. But as in
Aguilera, the Department asserted that it would provide nearly
all the future medical care set forth in plaintiff’s life care plan
and it submitted evidence, in the form of five declarations, to
support its contention. On that basis, the Department argued
that the recovery ratio was much higher than plaintiff’s asserted
percentages, which would result in a much greater recovery on
the Department’s liens. The court did not consider this evidence,
however, as it declined to apply Aguilera. It erred in doing so.
“Under the doctrine of stare decisis, all tribunals exercising
inferior jurisdiction are required to follow decisions of courts
16
exercising superior jurisdiction. Otherwise, the doctrine of stare
decisis makes no sense. The decisions of [the Supreme Court] are
binding upon and must be followed by all the state courts of
California. Decisions of every division of the District Courts of
Appeal are binding upon … all the superior courts of this state,
and this is so whether or not the superior court is acting as a trial
or appellate court. Courts exercising inferior jurisdiction must
accept the law declared by courts of superior jurisdiction. It is not
their function to attempt to overrule decisions of a higher court.
[Citations.]” (Auto Equity Sales, Inc. v. Superior Court (1962) 57
Cal.2d 450, 455; People v. Perez (2020) 9 Cal.5th 1, 13.) This is
not a case in which the courts of appeal have disagreed, and the
trial court had the discretion to choose between several
permissible approaches. (Auto Equity Sales, at p. 456 [“Of course,
[stare decisis] has no application where there is more than one
appellate court decision, and such appellate decisions are in
conflict. In such a situation, the court exercising inferior
jurisdiction can and must make a choice between the conflicting
decisions.”].) Aguilera has not been called into question.
Therefore, the trial court was required to follow it.
In any event, the trial court’s reasons for declining to follow
Aguilera are not persuasive. The court’s first concern is set forth
in the following passage: “Plaintiff argues in reply that to the
extent the court in Aguilera considered exclusion of future health
care benefits in applying the Ahlborn analysis, and legislation in
2013 included language overturning Ahlborn with respect to the
assertion of a lien for full benefits, a federal statute passed in
2018, after the decision in Aguilera in 2015, repealed the scope of
state [M]edicaid lien expansion, and effectively reinstated
Ahlborn, and limits recovery under such liens for both [M]edicaid
17
and [M]edicare.” We recently explained the impact of the Federal
legislation to which the court referred. “The plain language of the
amendments suggests that Congress acted in 2013 to legislatively
overrule Ahlborn by allowing states to place liens on Medicaid
recipients’ entire third party recoveries, rather than on only the
portion of such recoveries attributable to past health care. By
repealing these amendments, Congress restored the post-Ahlborn
status quo—that is, it prohibited states from placing liens on any
portion of a beneficiary’s third party recovery not attributable to
past health care.” (L.Q., supra, 69 Cal.App.5th at p. 1048.)
Aguilera does not suggest that Ahlborn had been effectively
overruled by federal legislation enacted in 2013 which was, in
any event, not yet in effect. Indeed, Aguilera makes no reference
to that legislation. Moreover, if Aguilera had been influenced by
the 2013 federal legislation cited by the court, the Court of
Appeal would have, at a minimum, questioned whether Ahlborn
was still good law. It did not. Aguilera applied the Ahlborn
formula as interpreted by California courts both before and after
the Congressional amendments. The amendments cited by the
court are therefore irrelevant here.
The court also noted, “Plaintiff also relies on … section
14009.5, enacted after Aguilera was decided, which now limits
Medicare’s recovery of reimbursement for its services to a probate
estate. The argument is then that [the Department] should not be
entitled to recover more from a beneficiary who settles a claim,
[than] it would otherwise be entitled to upon death.” As the
Department notes, section 14009.5 relates to the state’s right of
recovery from a Medi-Cal beneficiary after the beneficiary’s
death. Accordingly, it is not applicable in the present case, a
point plaintiff concedes. The state’s right to recovery from a Medi-
18
Cal beneficiary during the beneficiary’s lifetime is, as we have
said, severely restricted under both federal and state law. We are
concerned here with the exception relating to the state’s ability to
obtain reimbursement for its services from a beneficiary’s
settlement proceeds while the beneficiary is still alive, a matter
governed by section 14124.70 et seq., not section 14009.5.
In sum, in calculating the Department’s liens under section
14124.76, the court was required to consider the evidence offered
by the Department to establish that it was reasonably probable
that plaintiff would receive the vast majority of his future care
through Medi-Cal. On remand, the court shall consider that
evidence and determine, in the first instance, whether the
Department has cleared the threshold set in Aguilera. If it
determines the Department has done so, the court shall reduce
the total value of plaintiff’s case as appropriate, calculate the
plaintiff’s recovery ratio under the Ahlborn formula, and
determine the amounts of the Department’s liens under section
14124.76. The lien amounts shall be further reduced to account
for attorney’s fees and litigation costs pursuant to section
14124.72. (See Aguilera, supra, 235 Cal.App.4th at pp. 833–835.)
19
DISPOSITION
The orders are reversed. The trial court is directed to
recalculate the permissible amount of the Department’s liens
under section 14124.76 consistent with this opinion and then
determine the final amount of the Department’s liens under
section 14124.785. In the interests of justice, the parties shall
bear their own costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
LAVIN, J.
WE CONCUR:
EDMON, P. J.
BENKE, J.*
* RetiredAssociate Justice of the Fourth District Court of Appeal,
assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
20
Davis v. Regents of the Univ. of Cal. CA2/3
Combined Opinion