Issue #23     October 24, 2005



By John J. Campbell, CELA, MSCC


            On October 7, 2005, the Florida Court of Appeals for the Second District ruled that the state Medicaid agency was entitled to reimbursement from the settlement of a wrongful death claim before the apportionment of the settlement between the estate of the deceased Medicaid recipient and her surviving parents.  Strafford, et al. v. Agency for Health Care Administration, Case No. 2D04-5502 (Fl. App. 10/07/2005). 


            The decedent, Lexi E. Stafford-Luneke, was born at a birthing clinic in Collier County, Florida in July, 2001.  During her birth, Lexi suffered a loss of oxygen to her brain and remained in a vegetative state until her death on August 3, 2003.  Prior to her death, Lexi accumulated $74,903.41 in medical expenses, which were paid by Medicaid.


            Lexi's parents, who were also co-personal representatives of Lexi's probate estate, brought a wrongful death action on behalf of the estate and on behalf of themselves, individually as Lexi's surviving parents, against the birthing clinic and several of its employees.  The co-personal representatives sought damages under the Florida Wrongful Death Act, including the medical expenses paid for by Medicaid.  The state Medicaid agency timely notified the co-personal representatives of its lien against any third-party recovery in the amount of $74,903.41.


            The co-personal representatives eventually settled the claim for a single, undivided sum of $485,000.  After the settlement, they petitioned the probate court for an apportionment of the settlement proceeds between the estate and themselves, as Lexi's survivors.  The petition sought an apportionment to the estate in an amount equal to Lexi's Medicaid covered medical expenses.  Under Florida law, this would have triggered a statutory formula that would have reduced the amount recoverable by Medicaid to $4,986.49. 


            The state Medicaid agency objected, arguing that Florida's Medicaid lien statute required that Medicaid be reimbursed from the entire settlement, before apportionment among the various parties.  The agency's argument was based upon Fla. Stat. §409.910(11)(c), which requires a court to segregate from any settlement an amount sufficient to repay the state for any benefits paid under the Medicaid program; and Fla. Stat. §409.910(6)(a), which provides that the state's right to recover "shall not be reduced, prorated, or applied to only a portion of a . . . settlement, but is to provide full recovery by the agency from any and all third-party benefits." 


            The probate court agreed with the agency and held that the state was entitled to full recovery of its Medicaid lien from the total amount of the joint settlement, before any allocation of the settlement between the estate and Lexi's surviving parents, individually.  The Florida Court of Appeals affirmed the decision of the probate court.


            The court's decision is problematic in that the state was permitted to recover from the entire third-party tort settlement, rather than just that portion representing compensation to the recipient's estate for past medical expenses.  In a decision reached earlier in 2005, the United States Court of Appeals for the Eight Circuit ruled that 42 U.S.C. §1396p(a), the federal Medicaid "anti-lien statute," limited the state's ability to recover its Medicaid lien from a third-party liability settlement to that portion of the settlement representing compensation for the recipient's past medical expenses.  Ahlborn v. Arkansas Dept. of Human Services, 397 F.3d 620 (8th Cir., Feb. 9, 2005), cert. granted, Order List, No. 04-1581 (U.S. 09/27/2005).  The Ahlborn case is currently before the U.S. Supreme Court for review. 


            Unless or until the U.S. Supreme Court reverses Ahlborn, it represents strong federal precedent on this issue.  If the Supreme Court affirms Ahlborn, it will constitute precedent binding on all federal and state courts.  The fact that the Florida Court of Appeals failed to even mention Ahlborn indicates a startling lack of awareness of the recent developments in this area of law.


            Even more problematic is the fact that the Florida Court of Appeals appears to have interpreted the state's Medicaid lien statute as allowing the state Medicaid agency to recover its lien from settlement proceeds that belong to parties other than the Medicaid recipient.  Florida's Wrongful Death Act provides that damages for wrongful death are recoverable by both the estate of the decedent and by certain survivors of the decedent, including the decedent's surviving parents.  Fla. Stat. §768.21.  These damages are distinct and separate – that is, the damages recoverable by the decedent's estate are different in kind from the damages recoverable by the decedent's surviving parents.  Id.


            The Florida Court of Appeals did acknowledge this fact in its opinion.  However, the court then proceeded, without any analysis or discussion of the Florida Wrongful Death Act, to conclude that the Medicaid lien statute required full reimbursement of the state's Medicaid lien before any apportionment of the settlement proceeds between damages payable to the estate and damages payable to Lexi's surviving parents.  A close reading of the opinion indicates that the court apparently treated Lexi's surviving parents as "creditors" of her estate, rather than as parties with a separate and distinct right of recovery directly from the third-party tortfeasor.


            Fla. Stat. §768.20 defines the status of the parties to a wrongful death claim.  That statute provides: "The action shall be brought by the decedent's personal representative, who shall recover for the benefit of the decedent's survivors and estate, as specified in this act, caused by the injury resulting in death . . ."  Fla. Stat. §768.20 (emphasis added). 


            This statutory language would appear to create a fiduciary relationship between the decedent's personal representative and the decedent's survivors, rather than a debtor-creditor relationship.  This interpretation is consistent with the stated legislative intent behind the Florida Wrongful Death Act: "It is the public policy of the state to shift the losses resulting when wrongful death occurs from the survivors of the decedent to the wrongdoer. Sections 768.16-768.26 are remedial and shall be liberally construed."   Fla. Stat. §768.17 (emphasis added).


            The existence of a fiduciary relationship between the personal representative and the survivors, rather than a debtor-creditor relationship, is also consistent with Fla. Stat. §768.21, which grants the decedent's survivors a separate right to recover damages not recoverable by the decedent's estate.  Further, the liability to the survivors for these damages is placed upon the wrongdoer, not the estate.  Fla. Stat. §768.19.   Finally, nothing in the Florida Wrongful Death Act requires a survivor to file a creditor's claim against the estate to recover damages from a settlement, judgment or award.


            The court's interpretation of the Medicaid lien statute expands the state's Medicaid lien rights to reach settlements of claims belonging to persons who are not Medicaid recipients.  There is absolutely no provision in federal law that would permit the state to recover from any third-party settlement other than one belonging to the Medicaid recipient. 


            The Strafford decision creates a "slippery slope."  For example, the state would also be able to recover its lien from a co-plaintiff's settlement of a breach of contract or breach of warranty claim that may have, in part, resulted in the death of a Medicaid recipient.  See, Fla. Stat. §768.19.  The state even would be able to recover its Medicaid lien from a class-action settlement before the settlement is allocated among the various members of the plaintiff class, if that class included a single Medicaid recipient. 


            To the extent Florida's Medicaid lien statute permits recovery of the state's lien from tort settlements belonging to persons who have never received Medicaid benefits, the statute goes far beyond what is authorized by federal law. Thus, the statute should be subject to federal preemption.  Ahlborn, supra.  Further, the statute would arguably violate the Fourteenth Amendment's prohibition against the states depriving any person of property without due process of law.


            It will be interesting to see whether the plaintiffs in Srafford seek a rehearing or an appeal to the Florida Supreme Court.  If the case reaches the appropriate procedural posture, it could even be the subject of a Petition for Certiorari to the U.S. Supreme Court.  It would certainly make an interesting companion case to Ahlborn.



         John J. Campbell, the founder and principal attorney of the Law Offices of John J. Campbell, P.C., has practiced law for 19 years and has practiced in the area of Medicare Set-Asides since 1996.  Mr. Campbell is certified as an Elder Law Attorney by the National Elder Law Foundation;* and is a Medicare Set-Aside Consultant Certified (national certification through the Commission on Health Care Certification).*  Mr. Campbell is licensed to practice law in Colorado and is also licensed and on inactive status in Missouri.  He is a member of the Colorado Bar Association (Trust & Estate Section and Elder Law Section), the Arapahoe County Bar Association, the Missouri Bar Association, the National Academy of Elder Law Attorneys, The National Structured Settlements Trade Association and the National Alliance of Medicare Set-Aside Professionals.  His areas of concentration include elder law; estate, disability and long term care planning; probate; guardianship and conservatorship; Medicare, Medicaid, Medicare Set-Aside Arrangements, and the preservation of public benefits in catastrophic third party liability and worker’s compensation settlements.  Mr. Campbell has published numerous articles and has presented numerous seminars on issues relating to Medicare Set-Aside Arrangements across the country.


*The State of Colorado does not certify attorneys as experts in any field





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