Southwest Fiduciary, Inc., v. Arizona Health Care Cost Containment System Administration, __Ariz. Adv. Rep. __ 1 CA-CV 10-0300 & 10-0301 (App., Div. I, March 10, 2011) (J. Johnsen)
STATE MEDICAID MAY RECOVER NO MORE THAN THE PORTION OF THE VICTIM'S SETTLEMENT THAT REPRESENTS RECOVERY OF THE PLAN'S PAYMENTS ON BEHALF OF THE VICTIM, LESS A DEDUCTION FOR LITIGATION EXPENSES
Southwest Fiduciary was the conservator for Lundy who was severely injured in an auto accident ultimately settling her auto accident claim for $842,696 despite the fact that a mediator placed the “full value” of her claim at $3-4 million and despite the fact her medical expenses alone were $920,000. She agreed to this compromise due to “difficult liability issues.” Flynn on the other hand was injured in a separate auto accident and settled for $100,000 where he estimated the full value of his damages at $250,000 with $138,710 in medical expenses. AHCCCS filed a lien on both cases seeking the total amount billed by the healthcare providers rather than the significantly reduced rates the hospital actually accepted from AHCCCS. While the director of AHCCCS decided this was proper the Arizona Superior Court on appeal disagreed and was affirmed by the Arizona Court of Appeals.
The court of appeals found that a logical extension of Arkansas Dept. of Health & Human Services v. Ahlborn, 547 U.S. 268 (2006) required a holding that AHCCCS recover no more than that portion of the victim's settlement that represents a recovery of what the plan actually paid and not what was billed minus attorneys' fees and costs. While the collateral source rule allows a plaintiff to seek recovery of the total amount billed despite what was actually paid to the hospitals, this rule does not further the public policy supporting the collateral source rule—that a defendant ought not to benefit from the fact a plaintiff has protection by way of insurance or Medicaid that will reduce the actual amounts paid nor ought a defendant be allowed to benefit from the fact a third party has actually extinguished the medical bill debt.
AHCCCS is not enforcing the victims' rights by way of any assignment; rather than sue the tortfeasors in the names of the tort victims, it chose instead to enforce its lien rights against settlements the tort victims negotiated for themselves. In any event, the Supreme Court held in Ahlborn that even under the federal assignment statute, “the State's assigned rights extend only to recovery of payments for medical care.” As such, the logical extension of Alhborn requires that AHCCCS recover no more than a proportionate share of the actual settlement based upon what it actually paid.