APPEAL from an order of the Superior Court of Los Angeles County, John A. Torribio, Judge. Reversed and remanded with instructions. (Los Angeles County Super. Ct. No. KC047502).
The opinion of the court was delivered by: Mosk, J.
CERTIFIED FOR PUBLICATION
As part of a proposed medical malpractice settlement that did not allocate the proceeds to categories of damages, plaintiff and appellant Guadalupe Lima (plaintiff) made a motion to extinguish a portion of a Medicaid lien asserted by the Department of Health Services (DHS).*fn1 In ruling on the motion to extinguish the lien, the trial court made findings, including the reasonableness of the amount of plaintiff's total damages claimed and of the settlement, as well as the amount of plaintiff's past medical expenses. Nevertheless, the trial court denied plaintiff's motion to extinguish the DHS lien, without determining the portion of the settlement proceeds allocable to plaintiff's past medical expenses. In doing so, the trial court failed to follow the federal requirements as enunciated in Arkansas Department of Health and Human Services v. Ahlborn (2006) 547 U.S. 268 (Ahlborn). Accordingly, we reverse the trial court's ruling on the amount of the Medicaid lien recovery and remand the matter with instructions to make the required allocation consistent with the trial court's findings.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff, a minor, was born prematurely and, as a result, suffers from cerebral palsy. Because plaintiff qualified for benefits under the California Medicaid*fn2 plan, known as Medi-Cal,*fn3 DHS paid in excess of $435,000 for plaintiff's medical care. In conformity with California law (Welf. & Inst. Code, § 14124.74),*fn4 DHS asserted a lien on any recovery from defendant in the amount of the medical costs it had paid on behalf of plaintiff, minus certain statutory deductions.
On December 15, 2005, plaintiff, through her mother as guardian ad litem, filed a complaint against defendant Steve Vous, M.D. (defendant) for ―medical negligence.‖ According to plaintiff, defendant provided ―[n]egligent obstetrical care [to] plaintiff's mother including failure to properly recognize mother's RH negative blood, improper antibody screening, [as well as providing] negligent treatment of mother for her hospital and prenatal care[,] failure to administer Rhogam, failure to give proper counseling, [and providing] negligent care to [plaintiff] the newborn.‖ Defendant answered the complaint on March 8, 2006.
On March 2, 2007, plaintiff filed a petition for approval of a compromise of her claim against defendant and to extinguish or strike the DHS lien to the extent it exceeded $21,446.45 (motion to extinguish). Plaintiff described her injuries as ―[c]erebral palsy secondary to prematurity, manifested by global developmental delay and gait disturbance . . . .‖ She indicated that defendant had offered to pay $950,000 by ―way of settlement.‖ She also explained that DHS had claimed a lien in the amount of $319,275.30, that plaintiff disputed that amount under Ahlborn, supra, 547 U.S. 268, and that DHS was entitled to only $21,446.45.
In her petition, plaintiff detailed the various economic components of the $950,000 settlement amount as follows:
―A. $50,000 to [plaintiff's mother] for her individual claim for the prospective wrongful death of [her] daughter.
―B. Periodic payments for the benefit of [plaintiff] in the initial amount of $2,046.33 per month, beginning on June 11, 2021 (age 18). The payments will be made for the life of [plaintiff], increasing at 3% per annum and be guaranteed for 20 years. The last guaranteed payment will be made on May 11, 2041. The payments will be made by Prudential Life Insurance Company, or its assign (A.M. Best rated A 15-Superior). The cost of providing these payments is $300,000.00. The guaranteed benefit is $659,828.00. The expected benefit is $1,924,978.00. The remaining guaranteed payments after the death of [plaintiff] (if any) will be made to [plaintiff's] mother.
―C. $600,000.00 up-front cash for the benefit of [plaintiff].‖*fn5
At the same time plaintiff filed her petition to approve the compromise, she also filed her motion to extinquish. Relying on Ahlborn, supra, 547 U.S. 268, plaintiff argued that her ―over all damages were $14,000,000‖*fn6 and that DHS's lien should be ―reduced in the same proportion that the [$950,000] settlement has to plaintiff's overall damages.‖
According to plaintiff, the $950,000*fn7 settlement amount was 6.75 percent of her total damages of $14,000,000. Therefore, plaintiff calculated that the DHS lien should be reduced to approximately $21,000.*fn8 Plaintiff supported her motion with three declarations from (i) a board-certified physician specializing in rehabilitation medicine;
(ii) an economist specializing in damage valuations; and (iii) plaintiff's attorney.
On April 5, 2007, DHS filed its opposition to the motion to extinguish. It argued that plaintiff had misinterpreted Ahlborn, supra, 547 U.S. 268 which, according to DHS, decided only ―‗whether [Arkansas] can lay claim to more than the portion of [the plaintiff's]settlement that represents medical expenses.'‖ Although DHS objected to each of the declarations submitted in support of plaintiff's motion to extinguish, it did not submit any evidence or argument to rebut plaintiff's calculation of her overall damages or any element thereof.
On April 18, 2007, the trial court held a hearing on both the motion to extinguish and the petition to approve the minor's compromise. The trial court sustained DHS's objection to the declaration of plaintiff's attorney and struck that declaration, but overruled the objections to the declarations of the physician and the economist. Based on those declarations and the attached documents, the trial court made the following findings: ―I find your overall assessment of the case reasonable. I find your overall breakdown of damages. I'll put them in the record if you decide to appeal: [¶] Past medical costs $435,395. I'm dropping all the cents. [¶] Future medical care: . . . $12,941,63. [¶] Loss of earning capacity: $450,145. [¶] General damages as damages to MICRA: $250,000. [¶] Your total claim would be $14,077,177. That would be your total overall claim, including future damages.‖
After hearing argument, the trial court denied the motion to extinguish. The hearing then proceeded to the petition for approval of the minor's compromise. At the beginning of the discussion of the petition, the trial court noted that ―[t]his is without prejudice to appealing.‖ After a brief discussion of the petition to approve the minor's compromise, the trial court decided to continue the hearing on the petition, stating,*fn9 ―As much as I would like to go forward, I think it's important for you to crunch the numbers, talk to [the guardian ad litem] about them, and see what you can do with the money you have left. [¶] You may make a decision to sever and appeal with the lien number. [¶] . . . [¶] So we'll just treat this as the [hearing on] the minor's [petition for approval of the compromise] being continued to [May 23, 2007].‖ Neither party submitted a formal order on the motion to extinguish or gave notice of ruling on the motion.
Prior to the continued hearing on the petition for approval of the minor's compromise, plaintiff filed an amendment to her petition that indicated the amount of the DHS lien was $319,275.30.*fn10 Plaintiff also indicated that the $300,000 portion of the settlement originally designated for the purchase of an annuity was now being contributed to the up-front cash portion of the settlement to fund the special needs trust.
At the continued hearing on the amended petition, which was advanced to May 14, 2007, the trial court approved the proposed settlement and granted the petition.
On June 20, 2007, defendant filed a dismissal of the action with prejudice that had previously been executed by plaintiff's counsel and delivered to defendant's counsel on March 6, 2007, in anticipation of the approval of the original petition. On June 29, 2007, plaintiff's counsel served on defendant and DHSa proposed Order re: Plaintiff's Motion to Extinguish or Strike DHS Lien. Among other things, the proposed order recited the trial court's findings concerning plaintiff's assessment and breakdown of her overall damages. The proposed order further provided that if plaintiff filed and proceeded with an amended petition for approval of the minor's compromise, ―such filing and proceeding with the petition will be without prejudice to [plaintiff's] right to appeal from [the trial court's] order denying the motion to extinguish or strike the DHS lien . . . .‖
On July 12, 2007, DHS served objections to plaintiff's proposed order on the motion to extinguish. According to DHS, the trial court did not agree at the April 18, 2007, hearing that plaintiff could appeal from the order denying the motion in the event she elected to proceed with the settlement. DHS also asserted that because plaintiff agreed to the terms of the amended petition to approve the compromise of her ...