ANALYSIS OF FEBRUARY 17, 2022 SUPREME COURT OPINION
(Posted February 17, 2022) The Supreme Court of Virginia hands down a single opinion today, addressing the calculation of the state’s Medicaid lien against the proceeds of a tort settlement. The case is Farah v. Commonwealth, and arises in Fairfax County.
The tort plaintiff is a taxi driver who was struck head-on by a wrong-way driver. He suffered catastrophic injuries and sued for $3 million. The at-fault driver had only $350,000 in insurance coverage; the insurer tendered its policy limits and the driver kicked in $25,000 of his own money. The plaintiff reluctantly agreed to settle for that sum, recognizing that even a full $3 million judgment would only result in the defendant’s bankruptcy.
The Commonwealth asserted a lien of $92K for Medicaid benefits it had paid for the taxi driver’s extensive care. The parties eventually appeared before a circuit court for a hearing to apportion the lien.
The court acknowledged the taxi driver’s substantial damage claim, including future lost wages of over $800,000. A tort lawyer testified at the hearing that the value of the claim if fully insured was $4 million. The plaintiff asked the court to apply a formula to apportion the Medicaid lien: The recovery, divided by the actual case value, multiplied by the amount paid for Medicaid. As I read things, that would have resulted in a Medicaid lien of around $9,000.
The circuit court declined to use that formula. It apportioned $85K to reimburse the Commonwealth and divided the remainder between the taxi driver and his lawyer. The taxi driver got a writ to review the apportionment method and calculation.
Justice McCullough writes today’s opinion for a unanimous Supreme Court. Citing two seminal decisions from the Supreme Court of the United States, he concludes that federal law imposes no specific apportionment formula, and states are free to design their apportionment methods individually within certain constraints. Virginia has done so by statute, empowering the courts to consider the equities of the situation before making subjective judgment calls.
There are two key rulings here today. First, the court rejects the Commonwealth’s contention that courts should calculate the lien by considering the total amount of the medical expenses, not merely a reduced amount actually paid by Medicaid after discounts and write-offs. This is a victory for the plaintiffs’ bar, as the amount paid is usually far lower than the “rack rate” for medical services.
The justices next rule that the circuit court acted within its discretion here in fixing the amount of the lien at $85K. The Supreme Court defers to the circuit judge’s decision on this point, noting that he explained the factors that he considered in reaching his conclusion, even though he didn’t specify an amount of the settlement that he regarded as attributable to medical expenses. Because this is an abuse-of-discretion review, the SCV affirms the judgment, even while giving future tort plaintiffs an important procedural victory.