Nursing Home Litigation
Id. Tus, the court said, if plaintiffs went to a jury and prevailed on the merits, there would be no reason not to award the full amount of past medical expenses because they are so
readily quantified ... there would be no reason for a jury to find Defendants liable but not award Plaintiffs damages to make them whole for past medical expenses.
Id. at 9. On the other hand, in rejecting the Medicaid agency’s claim that it was entitled to the statutory formula or its total expenditures, whichever is less:
[W]here outcomes are uncertain, parties settle to hedge against the risk of an unfavorable outcome.
... Had
Plaintiffs taken this case to a jury verdict and been awarded $1.26 million as compensation for past medical expenses, DPW [the Medicaid agency] would undoubtedly be entitled to that money (less attorneys’ fees and costs). DPW would also have it that if Plaintiff traded away some of its recovery prospects for certainty (and cash) via a settlement, DPW would reap the benefits without giving up anything. Tat is not the way settlement works. When parties settled, everyone sacrifices. DPW’s suggestion that it does not need to sacrifice ... ignores this reality.
Id. To the extent what the court meant is that in settling to reduce risk means that plaintiffs obtained less as compensation for past medical expenses than their actual amounts, and that DPW was only entitled to get what the plaintiffs got for past medical expenses, that is plainly a correct reading of Ahlborn. After reviewing the strengths and weaknesses of each side, the court concluded that the settlement reflected a one-third reduction of what the plaintiff could otherwise hope to recover, including one-third of past medical expenses. Tat court, also unlike the one in K.C.S., held that its recovery must be reduced for a pro rata share of the legal fees; Medicaid’s share of costs was equal to the share that its 1/3 reduced recovery was to the total recovery. Te McKinney court’s approach stands out as a practical and
logical application of Ahlborn, of the very kind that the Supreme Court seems to have contemplated, and which the K.C.S. court did not get to by reason of its truncated comprehension of what the settlement reflected. By contrast, most courts have permitted state Medical agencies to establish formulas or presumptions in their favor,3
citing the Supreme Court’s reference in Ahlborn to the observation in an amicus brief that
some States have adopted special rules and procedures for allocating tort settlements in circumstances where, for example, private insurers’ rights to recovery are at issue. ... [W]e leave open the possibility that such rules and procedures might be employed to meet concerns about settlement manipulation.
3 See, e.g., Andrews, ex rel. Andrews v. Haywood, 362 N.C. 599, 669 S.E.2d 319 (2008), cert. denied, 129 S.Ct. 2792 (2009).
Trial Reporter / Fall 2011 11
126 S.Ct. at 1765 n. 17. But the Court had no such formulas in mind. Te reference was to the American Association of Justice’s amicus brief, which cited two cases approving post- settlement judicial proceedings or mini-hearings to determine the different elements of the settlements.Henning v. Wineman, 306 N.W.2d 550 (Minn. 1981); Rimes v. State Farm Mutual Automobile Ins. Co., 106 Wis.2d 263, 316 N.W.2d 348 (1982). In Rimes, the question was whether the settlement had made the plaintiff whole; the post-settlement hearing addressed the question of the value of the different elements of plaintiff ’s claim. 106 Wis.2d at 352, 316 N.W.2d at 268- 269. Although not reported in as much detail, Henning also had a post-settlement evidentiary hearing on the those parts of the plaintiff ’s claim subject to subrogation and those not. 306 N.W.2d at 551. Te Tird Circuit’s recent decision,Tristiani v. Richman, —
F.3rd —, 2011 WL 2557234 (3rd. Cir.), also skidded along the surface of Ahlborn on this issue, curiously so after a deep and thorough review of the scope of recovery
issue.Cf. slip op. at 13- 14 with id. at 7-11. But it vacated the district court’s holding that a statutory allocation statute was permissible. [I]n determining what portion of a Medicaid beneficiary’s third-party recovery it may claim in reimbursement for Medicaid expenses, the state must have in place procedures that allow a dissatisfied beneficiary to challenge the default allocation.”Slip op. at 14.
National Legal Research Group CHARLOTTESVILLE, VIRGINIA
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