Case Title: Idaho Dept. of H&W v. Jess C. Matey, Chris J. and Pam S. Matey Reimbursement from Medicaid recipients settlement

Citation: 

Docket Number: 34483

State: idaho

Court: Idaho Supreme Court (civil)

Date: 2009-07-09T00:00:00Z

Document:
1 
IN THE SUPREME COURT OF THE STATE OF IDAHO 
 
Docket No. 34483 
 
IN THE MATTER OF THE PERSON OF:  
JESS C. MATEY, AN INCAPACITATED 
PERSON.                                   
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IDAHO DEPARTMENT OF HEALTH & 
WELFARE,                   
                                                        
          Plaintiff-Appellant,                          
                                                        
v.                                                      
                                                        
JESS C. MATEY, an incapacitated person,                 
                                                        
          Defendant,                                    
                                                      
and                                                     
                                                        
CHRIS J. and PAM S. MATEY,    
                                                    
       Real Parties in Interest-Respondents.    
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Boise, June 2009 Term 
 
2009 Opinion No. 95 
 
Filed:  July 9, 2009 
 
Stephen W. Kenyon, Clerk 
 
Appeal from the District Court of the Fifth Judicial District of the State of Idaho, 
Blaine County.  Honorable Robert J. Elgee, District Judge.  Honorable R. Ted 
Israel, Magistrate Judge. 
 
The decision of the district court is affirmed in part and reversed in part and the 
case is remanded.   
 
Honorable Lawrence G. Wasden, Idaho Attorney General, Boise, for appellant.  
Margaret P. White argued. 
 
Hepworth, Lezamiz & Janis, Chtd., Twin Falls, for respondents.  Robyn M. Brody 
argued.   
_____________________ 
 
J. JONES, Justice 
 
 
The Idaho Department of Health and Welfare appeals from the district court’s decision 
determining the amount of its reimbursement from a Medicaid recipient’s settlement.  We affirm 
in part, reverse in part and remand the case for further proceedings. 
2 
I. 
In June 2004, sixteen-year-old Jess Matey was seriously injured in a car accident.  He 
sustained a traumatic brain injury and now requires continual care.  As a result of his injuries, he 
became eligible for and received Medicaid benefits.  An Idaho statute requires Medicaid 
recipients who receive damages from third parties to reimburse the Department to the extent of 
the medical expenses it paid.  See I.C. § 56-209b.  In Arkansas Department of Health and 
Human Services v. Ahlborn, 547 U.S. 268 (2006), the United States Supreme Court limited the 
reimbursement obligation to that portion of the damages representing medical expenses.  At the 
time of the accident, Jess’ parents, Chris and Pam Matey, (the Mateys) were insured by State 
Farm,1 which ultimately agreed to pay the Mateys $1,250,000.00, conditioned on them obtaining 
court approval of the proposed settlement and payment of the funds into a special needs trust for 
Jess.   
In compliance with their settlement with State Farm, the Mateys filed a petition with the 
magistrate court in July 2006.  They asked the court to approve the settlement with State Farm, 
to establish a special needs trust for Jess, and to determine the amount of money necessary to 
satisfy the Department’s statutory right of reimbursement.  Notice of the hearing on the Mateys’ 
petition was given to the Department, as required by I.C. § 68-1403(5).  The Department 
objected to the petition, asserting that no settlement funds should be paid to the special needs 
trust until the Department’s Medicaid statutory right of reimbursement was satisfied pursuant to 
I.C. § 68-1405(4).2   
On September 26, 2006, a hearing was held before the magistrate court.  At the hearing, 
the Mateys presented the following evidence regarding Jess’ total damages: 
Type of Damage 
 
 
 
 
 
 
Amount 
Past Medical Expenses Paid by Medicaid 
 
 
$ 
       60,752.54 
Other Past Medical Expenses Paid 
 
 
 
$ 
     345,562.74 
Miscellaneous Expenses Paid by Mateys 
 
 
$ 
       30,031.18 
Past Lost Earnings 
 
 
 
 
 
$ 
       28,685.00 
Future Lost Earnings  
 
 
 
 
$ 
  2,538,755.50 
Lost Household Services 
 
 
 
 
$ 
     338,355.00 
Future Medical Expenses 
 
 
 
 
$ 
16,288,637.00 
                                                 
1 The Mateys’ policy included underinsured motor vehicle coverage up to $250,000.00 and they had an umbrella 
policy providing an additional $1,000,000.00 in underinsured motor vehicle coverage.   
2 At the time the petition was filed, the amount paid by the Department was $60,752.54.  The amount at the time of 
the magistrate court’s final order was $76,757.70.   
3 
Non-Economic Damages3 
 
 
 
 
$ 
     268,026.56 
TOTAL VALUE  
 
 
 
 
 
$ 
19,888,805.52 
 
The Department did not dispute these damage figures and, in fact, presented no evidence or 
argument on the issue of damages.   
Because the Mateys’ settlement was only $1,250,000.00 – a fraction of the total value of 
the claim – they argued that the proceeds should be allocated proportionately between the 
different categories of damages as follows: 4 
Type of Damage 
 
 
 
 
 
 
Amount 
Past Medical Expenses Paid by Medicaid 
 
 
$ 
       3,818.26 
Other Past Medical Expenses Paid 
 
 
 
$ 
     21,718.42 
Miscellaneous Expenses Paid by Mateys 
 
 
$ 
       1,887.44 
Past Lost Earnings 
 
 
 
 
 
$ 
       1,174.34 
Future Lost Earnings  
 
 
 
 
$ 
   159,559.32 
Lost Household Services 
 
 
 
 
$ 
     21,265.42 
Future Medical Expenses 
 
 
 
 
$ 
1,023,731.48 
Non-Economic Damages 
 
 
 
 
$ 
     16,845.32 
TOTAL SETTLEMENT 
 
 
 
 
$ 
1,250,000.00 
 
Based on this allocation of the settlement, the Mateys argued that the Department was entitled to 
$3,818.26, or approximately 1/16th of the total expenses paid by Medicaid.  The Department did 
not dispute the Mateys’ proposed settlement allocation, nor did it present any proposed alternate 
allocation. 
Following the hearing, the magistrate court issued an order approving the settlement, 
establishing the special needs trust, and approving the proposed allocation to the Department.  A 
subsequent court order set the Department’s allocation at $4,817.88, based upon the amount of 
Medicaid payments as of the court’s final order, less $282.58 as its allocated share of attorney 
fees and costs, for a total of $4,585.30.5  The Department appealed to the district court, which 
affirmed the magistrate’s decision.  The Department appealed to this Court.   
                                                 
3 This amount was based on the cap contained in I.C. § 6-1603.  
4 The settlement was only 6.285% of the total value of Jess’ claim ($1,250,000.00 divided by $19,888,805.52).  
Therefore, each category of damages was reduced to 6.285% of its total value. 
5 The correct figure would be $4,535.30. 
4 
II. 
A. 
Standard of Review 
When reviewing a decision of the district court acting in its appellate capacity, this Court  
directly reviews the district court’s decision.  Losser v. Bradstreet, 145 Idaho 670, 672, 183 P.3d 
758, 760 (2008).   
B.  The District Court Properly Affirmed the Magistrate Court’s Decision Regarding the 
Allocation of Damages 
 
The Department argues that the district court erred in affirming the magistrate court’s 
decision because the magistrate court did not apply the presumption in I.C. § 56-209b(6): 
If a settlement or judgment is received by the [Medicaid] recipient without 
delineating what portion of the settlement or judgment is in payment of medical 
expenses, it will be presumed that the settlement or judgment applies first to the 
medical expenses incurred by the recipient in an amount equal to the expenditure 
for medical assistance benefits paid by the department as a result of the 
occurrence giving rise to the payment or payments to the recipient. 
 
I.C. § 56-209b(6).  The Department insists that it should have received the full amount it 
expended on Jess’ behalf based on this statutory presumption.  The Mateys counter that the 
presumption did not apply in this case because they did not “receive” the settlement until after a 
contested hearing at which the judge allocated the settlement monies.6  
In adopting the Mateys’ allocation of the settlement, the magistrate court noted that the 
Department had not presented any evidence on the issue of damages or how to distribute the 
settlement money.  The Court stated, however, that the Mateys presented an exhibit showing 
their total claim and the allocation thereof, including the Department’s share and that the 
Department “has not rebutted these propositions in any manner.”  Neither the magistrate court 
nor the district court explicitly referenced the statutory presumption in I.C. § 56-209b(6).   
In Department of Health and Welfare v. Hudelson, 146 Idaho 439, 196 P.3d 905 (2008), 
we held that a settlement is “received” for purposes of the statutory presumption when the trial 
court enters an order approving the settlement.  Hudelson, 146 Idaho at 443, 196 P.3d at 909.  In 
that case, the Medicaid recipient settled his claim with the third party and filed a petition with the 
magistrate court asking the court to approve the settlement, as well as a damage allocation agreed 
                                                 
6 One argument advanced by the Mateys – that Ahlborn overruled I.C. § 56-209b(6) – was rejected by this Court in 
Department of Health and Welfare v. Hudelson, 146 Idaho 439, 445, 196 P.3d 905, 911 (2008). 
5 
upon between these parties.  Id. at 441, 196 P.3d at 907.  The court approved both the settlement 
and the allocation.  Id.  In a separate action, the Medicaid recipient filed a petition to determine 
the amount of the Department’s reimbursement right, asserting that the presumption did not 
apply because the settlement was allocated in the prior action.  Id.  We held that the allocation 
approved in the first action was not binding on the Department because the Department was not a 
party to that action.  Id. at 444, 196 P.3d at 910.  Therefore, since Hudelson had received a 
settlement that did not delineate what portion of the settlement represented medical payments, 
the presumption applied.  Id. at 443-44, 196 P.3d at 909-10. 
 
Here, the presumption did not come into play because the Department, although having 
been given notice and an opportunity to be heard, failed to contest the evidence and proposed 
damage allocation presented by the Mateys.  Unlike in Hudelson, here the Court approved the 
allocation at the same time it approved the settlement – after a hearing where both the 
Department and the Mateys had an opportunity to present evidence.  The Department chose not 
to contest the evidence presented by the Mateys or to present its own evidence regarding the type 
and amount of damages sustained by Jess, including the amount of future medical expenses that 
Jess might reasonably incur or the source of payment of such expenses.  The Department did not 
avail itself of the opportunity to show what portion of the anticipated future medical expenses 
would be shouldered by the special needs trust, based on its terms, or what portion might fall 
upon Medicaid and other sources.7  The Department could have requested an evidentiary hearing 
on these issues, cross-examined the Mateys’ witnesses, presented its own evidence, and, if 
necessary, requested additional time in order to properly prepare its case.  Rather than doing so, 
the Department allowed the Mateys’ evidence to remain unopposed, as the magistrate noted in 
his decision.  The district court did not err in affirming the magistrate’s decision regarding the 
allocation of damages.   
                                                 
7 The special needs trust was to be funded by all categories of damages received by Jess but the lion’s share of 
damages represents medical expenses.   The trust is not limited to paying medical expenses but, rather, provides for 
payment of a wide variety of expenses, including a home, travel, entertainment, vacations, and the like.  The trust 
contemplates that Medicaid and other sources will pay most of Jess’ future medical expenses and that it will only 
pay expenses not covered by other payors.  The Department could have offered evidence bearing on the question of 
what portion of the trust funds would be necessary to meet these supplemental medical expenses.   
6 
C.  The District Court Erred in Affirming the Magistrate Court’s Determination of 
the Amount of Reimbursement 
 
 
The Department contends, further, that it is entitled to full reimbursement even with the 
allocation approved by the magistrate court and affirmed by the district court.  According to the 
Department, it is entitled to assert its claim against all medical expense categories in the damage 
allocation.  This would include past medical expenses paid by sources other than Medicaid and 
future medical expenses.  The Department acknowledges that Ahlborn, as interpreted by this 
Court in Hudelson, precludes it from making claim for future medical expenses that may be paid 
by Medicaid, but asserts that it can look to the full medical expense allocation as the source to 
satisfy its claim for past medical expenses paid by Medicaid.   
With regard to past medical expenses paid by others, the Department is clearly on solid 
ground.  Under I.C. § 56-209b(5) the Department: 
shall have priority to any amount received from a third party or entity which can 
reasonably be construed to compensate the recipient for the occurrence giving rise 
to the need for medical assistance, whether the settlement or judgment is obtained 
through the subrogation right of the department or through recovery by the 
recipient, and whether or not the recipient is made whole by the amount 
recovered.   
 
The federal Medicaid statutes, particularly 42 U.S.C. §§ 1396a(a)(25)(H) and 1396k(a), require 
that a state medical assistance plan contain such provisions.  The Ahlborn decision did not affect 
a state’s ability to assert its priority to recovery of damages attributable to medical expenses.  
Indeed, the Supreme Court stated that 42 U.S.C. § 1396k(b) requires “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.”  Ahlborn, 547 U.S. at 282.  Thus, the Department was clearly 
entitled, as it argued both below and before this Court, to assert its claim against the amount 
allocated to other past medical expenses paid.  The magistrate court erroneously determined that 
section 56-209b(5) provided no authority “for reimbursement from medical assistance provided 
by others” and the district court erred in upholding that ruling.  Thus, we reverse the court’s 
decision in this regard. 
 
The Department, although acknowledging as it must that Hudelson prevents the State 
from seeking recovery with regard to future medical expenses it might pay on behalf of Jess 
under the Medicaid program, asserts that section 56-209b also allows it to recover 
7 
reimbursement for the past Medicaid expenditures made on his behalf from that part of his 
damage award allocated to future medical expenses.  In other words, the Department is not 
seeking to be paid for its future outlays but is asserting its past outlays should be reimbursed out 
of a Medicaid recipient’s award for future medical expenses, where the amount allocated to past 
medical expenses is not sufficient to satisfy the Department’s claim.  Here, again, the 
Department appears to be correct.  Under Ahlborn, a number of damage categories were put off 
limits to state Medicaid reimbursement claims on the grounds that they were the “property” of 
the Medicaid recipient and thereby shielded by 42 U.S.C. § 1396p, the anti-lien provision of the 
federal Medicaid law.  See Ahlborn, 547 U.S. at 283.  Thus, a state may not seek reimbursement 
from damages awarded for lost earnings, lost household services, non-economic injury and the 
like because, according to the Supreme Court, those damage categories are the property of the 
Medicaid recipient.  However, the Supreme Court specifically stated that damages received for 
medical care did not constitute property subject to the anti-lien provisions.  Id. at 284.  The court 
made no distinction between damages for past medical care and those for future medical care.  
Nothing in 42 U.S.C. § 1396p indicates that the State may not seek recovery of its payments 
from a Medicaid recipient’s total award of damages for medical care whether for past, present, or 
future care.  Thus, the Department is entitled to reimbursement for its past Medicaid payments8 
and the court erred in holding otherwise.   
D.  Attorney Fees 
The Mateys request reasonable costs and attorney fees on appeal, pursuant to I.C. § 12-
117(1).  That section provides that in any civil judicial proceeding involving a state agency and a 
person, “the court shall award the prevailing party reasonable attorney’s fees, witness fees and 
reasonable expenses, if the court finds that the party against whom the judgment is rendered 
acted without a reasonable basis in fact or law.”  I.C. § 12-117(1).  To award attorney fees under 
this section, the Court must rule in favor of the Mateys and also find that the Department acted 
without a reasonable basis in fact or law.  Canal/Norcrest/Columbus Action Comm. v. City of 
Boise, 136 Idaho 666, 671, 39 P.3d 606, 611 (2001).  Neither requirement has been met so we 
decline to award attorney fees.   
                                                 
8 Here, because the amount of damages allocated to the various categories of medical expenses exceeds the amount 
of the Department’s claim, it will receive full reimbursement.   
8 
III. 
 
The district court’s decision is affirmed in part and reversed in part.  The case is 
remanded for calculation of the Department’s additional entitlement and assessment of a 
proportionate share of fees and costs against said additional recovery.  We decline to award costs 
or attorney fees to either party.   
 
Chief Justice EISMANN, and Justices W. JONES and HORTON, and Justice Pro Tem 
KIDWELL CONCUR.