State Supreme Court Rules Hospitals Cannot Recover Costs Against Legal Settlements of Medi-Cal Beneficiaries

The California Supreme Court on Monday struck down a 1992 state law that had allowed hospitals to place liens against legal settlements or damages awarded to Medi-Cal beneficiaries injured in accidents to recover the full cost of their care, the Los Angeles Times reports (Dolan, Los Angeles Times, 6/3). The case before the court involved a 16-year-old girl injured in a car accident in 1998 who received care at a Scripps Health clinic under Medi-Cal. Scripps Health and a second provider filed a lien for $200,000 -- the estimated cost of the care that they provided -- against future settlements or damages that the girl might receive in a lawsuit against the driver of the other car. After the girl received $410,000 in arbitration, a state Superior Court judge upheld the lien, but a three-judge Court of Appeals panel in San Diego overturned the decision in 2001 (California Healthline, 5/10/01). In the decision Monday, the state Supreme Court ruled that the 1992 law is superceded by a federal Medicaid law that mandates that hospitals cannot charge Medicaid beneficiaries more than the cost of government reimbursement. "A health care provider may, at most, recover a 'nominal' amount" of damages won by a Medi-Cal beneficiary in a lawsuit, Justice Janice Rogers Brown wrote in the decision. However, the court ruled that hospitals will not have to "repay Medi-Cal patients whose monetary damages hospitals have taken in the past," according to the Times (Los Angeles Times, 6/3). According to the San Francisco Chronicle, the court struck down the 1992 law with "misgivings"; the decision will harm "the innocent health care provider," Brown wrote (Egelko, San Francisco Chronicle, 6/3). Brown also wrote that as a result of the decision, the individual responsible for the injury "escapes liability for the full amount of the medical expenses he or she wrongfully caused," which "harms society as a whole."

Kim Card, an attorney for the girl, praised the decision. She said that hospitals often take a large percentage of legal settlements or damages awarded to Medi-Cal beneficiaries to recover the cost of care. However, Deborah Giles, an attorney for Scripps Health, said that the decision "is going to have a significant financial impact statewide on hospitals, doctors and ancillary health care providers -- everyone who provides treatment to people who have been injured through the negligence of another party" (Los Angeles Times, 6/3). She added that Scripps Health may appeal the case to the U.S. Supreme Court (San Francisco Chronicle, 6/3).