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Bolanos v. Superior Court of the State of California for the County of Los Angeles

December 23, 2008

REBECCA BOLANOS, A MINOR, ETC., PETITIONER,
v.
SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES, RESPONDENT; STATE DEPARTMENT OF HEALTH CARE SERVICES, REAL PARTY IN INTEREST.



ORIGINAL PROCEEDING in mandate. Edward A. Ferns, Judge. Petition granted. (Los Angeles County Super. Ct. No. BC354361).

The opinion of the court was delivered by: Flier, J.

CERTIFIED FOR PUBLICATION

INTRODUCTION

These proceedings involve amendments enacted in 2007 to statutes that govern claims for reimbursements made by the California Department of Health Services for funds expended on behalf of injured parties by the state's Medi-Cal program. The background of the Medi-Cal program has been described in Shewry v. Arnold (2004) 125 Cal.App.4th 186, 193.*fn1 The amendments in question came in response to Arkansas Dept. of Health and Human Servs. v. Ahlborn (2006) 547 U.S. 268 (Ahlborn). Because the relevant statutes speak not of the department but of the director of the Department of Health Services, we will also refer to the director and not the department.

Prior to Ahlborn and the amendments we discuss in this opinion, the director was able to recoup the full amount of the benefits provided, less 25 percent; the deduction represented the director's contribution toward attorney's fees and costs. The director's recovery was also limited to 50 percent of the beneficiary's recovery.

Ahlborn brought two basic changes that are reflected in the 2007 amendments. First, the director is limited to recovering only from payments, whether by settlement, judgment or award, made for medical expenses. Second, 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 director's recovery is limited to that portion of the settlement that is allocated to past medical expenses. We explain in our opinion why, in a settlement that is not allocated between past medical expenses and other damages, the ratio of the settlement to the total of the claim, when applied to the director's total payments to the beneficiary, is an acceptable approximation of the amount of medical expenses.

We entertained the petition for a writ of mandate because in this case the trial court did not determine the portion of the settlement that was effected in this case that is allocable to medical expenses. The effect of this was to make the entire sum expended by the director recoverable; this does not comply with Ahlborn and the amendments to the statutes that implement this decision. We set aside the trial court's order, explain the operation of the amendments enacted in response to Ahlborn,and direct the trial court to undertake further proceedings consistent with this opinion.

We begin by stating the facts that underlie the petition for the writ of mandate.

FACTS

In June 2006, then four-year-old Rebecca Bolanos, by and through her guardian ad litem, Bertha Gallegos, filed a medical malpractice complaint against a number of health care providers. Bolanos sought both special and general damages. The complaint contained no details of the alleged malpractice, but according to the motion that is the subject of this writ proceeding, Bolanos is in an irreversible coma and requires life support and nursing care around the clock.

The director paid $746,017*fn2 for the medical care and treatment that Bolanos required as a result of the alleged malpractice. In February 2007, the director advised Bolanos's counsel in writing that she was placing a lien on any recovery Bolanos obtained in her malpractice action.

In October 2007, Bolanos and the malpractice defendants agreed to settle for a total of $1.5 million. Ultimately, the director advised Bolanos's counsel that the amount of the lien was $546,651.

The difference between what the director actually spent ($746,017) and the lien that she claimed ($546,651) introduces the first of several statutes that apply to this case. This is Welfare and Institutions Code section 14124.72.*fn3 Subdivision (d) of this provision requires the director to deduct 25 percent from the amount claimed. According to the statute, this represents the "director's reasonable share of attorney's fees paid by the beneficiary and that portion of the cost of litigation expenses determined by multiplying by the ratio of the full amount of the reasonable value of benefits so provided to the full amount of the judgment, award, or settlement." (§ 14124.72, subd. (d).)*fn4

We digress at this point to set forth part of the statutory framework that was enacted in response to Ahlborn,because it explains what Bolanos's counsel did after learning of the director's claim of a lien of $546,651.

We set forth the relevant provision below.*fn5 Because there was no agreement, in advance "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 statute goes on to state that "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." (§ 14124.76, subd. (a).)

Counsel for Bolanos proceeded to file the motion envisaged by subdivision (a) of section 14124.76. This was done after the effective date of the Ahlborn amendments, which is August 24, 2007. We defer a discussion of the substance of this motion to the DISCUSSION part of this opinion, save to note that in essence the motion attempted to follow and apply Ahlborn.

The director opposed the motion. Although the director's opposition cited Ahlborn, the director took the position that the total amount of Bolanos's damages was "not relevant" and that the entire $1.5 million settlement was subject to his claim for reimbursement. According to the director, the court was required only to apply the 25 percent reduction formula in section 14124.72, subdivision (d). The director explained that, under this formula, the director was entitled to recover approximately $548,000 from the settlement proceeds.

The trial court heard the matter in mid-December 2007. It took the matter under submission, and issued a decision approximately one week later denying the motion.*fn6

The trial court took note of Ahlborn,but it interpreted this decision to be limited to the holding that the state could not recover Medicaid benefits that were not attributable to medical expenses. While this is correct as far as it goes, it is also true that Ahlborn went on to reject the contention that the entire settlement was subject to the state's claim for reimbursement, holding that "the State's assigned rights extend only to recovery of payments for medical care." (Ahlborn, supra, 547 U.S. at p. 282.) As we discuss below, this requires a determination of what portion of the settlement is attributable to medical expenses. The trial court did not take account of this further aspect of Ahlborn; in essence, we granted the petition to correct this error.

Bolanos moved for reconsideration based primarily on a number of post-Ahlborn trial court decisions from New York State that applied a proportionate reduction methodology like the one proposed by Bolanos. The trial court granted the motion, but it reaffirmed its original decision. Bolanos then petitioned this court for a writ of mandate.*fn7

PROCEEDINGS IN THIS COURT

Initially, we advised the parties of our intention to issue a peremptory writ in the first instance (Palma v. U.S. Industrial Fasteners, Inc. (1984) 36 Cal.3d 171; Ng v. Superior Court (1992) 4 Cal.4th 29, 35), and invited the director to file an opposition to the petition. In the opposition we received, the director advanced essentially the same arguments she had raised before the trial court.

After receiving the director's opposition and a reply from Bolanos, we issued an order to show cause to provide the parties with an opportunity to present oral argument. We also advised the parties they ...


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