By Steven G. MehtaSteve Mehta


Medicare, Medicaid, and MediCal liens are big news in the legal world because of the enactment of the new law in effect July 1, 2009 regarding defendants notifying Medicare regarding the lien.  A new California case ruled on issues that relate to medical liens.  (See for prior discussion, Six Things That You Must Know (But Are Afraid to Know) About Medicare Reimbursement Rights: The Medicare Super Lien; Litigation Solutions To Medicare Reimbursement Rights — How to Avoid Liability to CMS)

In Lima v. Vous, 2009 WL 1464263, which was decided on May 27, 2009, the Court addressed the issue of extinguishing a government lien.

In Lima, 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). 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.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 ).

The court addressed the following issues:

Under established case law, the order denying plaintiff’s motion to extinguish is appealable as a final collateral order directing the payment of money.

  • “States are not required to participate in Medicaid, but all of them do. States have to make reasonable efforts to collect on the amounts paid.   The states have a law to assist in this process giving them a lien.
  • The court addressed the ruling by the Supreme Court in Ahlborn.  According to the court in Ahlborn, under the third-party lien provisions of the Medicare law “the State must be assigned ‘the rights of [the recipient] to payment by any other party for such health care items or services.’ § 1396a(a)(25)(H). The statute does not sanction an assignment of rights to payment for anything other than medical expenses-not lost wages, not pain and suffering, not an inheritance. The ‘amount recovered … under an assignment’ is not, as ADHS assumes, the entire settlement; as explained above, under the federal statute the State’s assigned rights extend only to recovery of payments for medical care. Accordingly, what § 1396k(b) requires is that the State be paid first out of any damages representing payments for medical care before the recipient can recover any of her own costs for medical care.
  • the California court in Bolanos, recognized, the formula used in Ahlborn is not the only formula that may be used in cases where there is no allocation of damages by verdict, judgment, or stipulation. “What matters is that past medical expenses are distinguished in the settlement from other damages on the basis of a rational approach; it may be that the parties can reach an agreement without recourse to the Ahlborn formula. In fact, subdivision (a) of [Welfare and Institution Code] section 14124.76 urges the parties to do so.
  • Here, unlike in Bolanos, the trial court made findings concerning the reasonableness of plaintiff’s “assessment” of her total damages and the reasonableness of the $950,000 settlement amount in light of those damages. Those findings were sufficient to allow the trial court to allocate an amount attributable to past medical expenses.
  • As to future expenses claimed by the DHS, The court rejected that because of the lack of factual support. The court refused to decide whether the issue of whether DHS could theoretically impose a valid lien on medical expenses it may be required to pay in the future.

The ruling has a definite impact on how Medicare liens could be addressed.  See Six Things That You Must Know (But Are Afraid to Know) About Medicare Reimbursement Rights: The Medicare Super Lien and Litigation Solutions To Medicare Reimbursement Rights — How to Avoid Liability to CMS

The ruling in Lima helps to give some guidance to lawyers in determining how a lien can be imposed.  For example, this could help cases involving claims of wrongful death because the court, in relying on Ahlborn, demonstrates that the lien should be only for medical expenses and not other claims such as wrongful death. 

Further, it behooves the lawyers to make sure that there is an allocation, and especially one by the court.  This could assist in the resolution of the claim.

Finally, this may help in the concern that the lien is not all encompassing on all aspects of the recovery.

If you would like to get a copy of this case, feel free to contact Steve Mehta and he will email it to you.