Case Title: Cargill v. State, Dept. of Health, Div. of Health Care Financing

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1998-11-09T00:00:00Z

Document:
Cargill v. State, Dept. of Health, Div. of Health Care Financing1998 WY 137967 P.2d 999Case Number: 97-315Decided: 11/09/1998Supreme Court of Wyoming
 
Linda CARGILL, Appellant (Plaintiff),

v.

STATE of Wyoming, 
DEPARTMENT OF HEALTH, DIVISION OF HEALTH CARE FINANCING, Appellee 
(Intervenor).

 

Appeal from the District 
Court, Fremont County, Nancy J.

Frederick J. 
Harrison of Harrison & Massey, LLC, Rawlins, for Appellant 
(Plaintiff).

William U. Hill, 
Attorney General; Michael L. Hubbard, uty Attorney General; and N. Denise Burke, 
Assistant Attorney General, Cheyenne, for Appellee 
(Intervenor).

Before 
LEHMAN, C.J., and MACY, GOLDEN, and TAYLOR,* JJ., and PRICE, 
D.J.

* Chief Justice at time of 
oral argument and retired 11/2/98. 

TAYLOR, Justice, 
Retired.

[¶1]      Appellant 
contests the district court's order awarding the Department of Health full 
reimbursement, from appellant's settlement with a third party, of benefits paid 
by Medicaid on her behalf. Finding no error in the district court's order, we 
affirm.

I. 
ISSUES

[¶2]      Appellant, Linda 
Cargill (Cargill), seeks review of the following issues:

I. Can the 
Department of Health Care Financing enforce a medical expense lien without 
actually filing the lien?

II. When the 
plain language of the applicable statute states that the Department's lien 
"shall be reduced by the attorney's fees and expenses authorized pursuant to 
this section," Wyo. Stat. § 42-4-202(f), may the Department claim that it is 
entitled to the full amount of its lien and further reduce the Plaintiff's 
settlement?

III. Do the 
Department's regulations violate the Constitution's doctrine of separation of 
powers, in that they exceed the authority delegated by the Wyoming Legislature, 
such that an agency of the executive branch is encroaching on the legislative 
branch?

[¶3]      Appellee, the 
Department of Health, Division of Health Care Financing (the Department), states 
the issues as:

I. Does the 
Department of Health, Division of Health Care Financing have the right to 
recover against proceeds of a settlement for medical claims it paid on behalf of 
a Medicaid recipient under Wyo. Stat. §§ 42-4-201 et seq.?

II. Did the 
district court correctly order settlement proceeds to the Division of Health 
Care Financing in accordance with Wyo. Stat. §§ 42-4-201, 42-4-202, and Medicaid 
Rules, Chapters 4 and 35?

III. Are duly 
promulgated agency rules regarding third party liability and Medicaid benefit 
recovery unconstitutional because they violate the separation of powers 
doctrine?

II. 
FACTS

[¶4]      Cargill was 
burned by a home health care provider employed by St. John's Hospital Home Care 
Services (St.John's). Medicaid paid the expenses of Cargill's medical treatment 
for her burns. Cargill filed a complaint against the health care provider and 
St. John's, and entered into settlement negotiations with them. Under the terms 
of the settlement reached, $70,000.00 was to be placed in a special needs trust 
for Cargill's benefit during her life, with the Department as remainderman. The 
settlement terms also provided that, in the event the trust was not established, 
the $70,000.00 was to be paid to Cargill immediately, "subject to the Medicaid 
lien claimed or which may be claimed by the State of Wyoming * * 
*."

[¶5]      Cargill and St. 
John's sought approval of their settlement agreement from the district court, 
and a hearing was scheduled. At this juncture, the Wyoming Attorney General was 
notified, for the first time, of Cargill's complaint and the settlement 
negotiations. The attorney general was invited to participate in the hearing to 
approve the proposed settlement.1 The Department moved to intervene 
in the case, seeking disapproval of the special needs trust. The complaint in 
intervention also alleges that the Department paid $13,579.69 for medical 
services related to Cargill's burns. Intervention was granted over Cargill's 
objection. 

[¶6]      At the hearing, 
it was generally conceded that the law does not permit a special needs trust 
with a Medicaid recipient as lifetime beneficiary and the Department as 
remainderman. Cargill turned, instead, to argue that the Department should not 
be reimbursed because it had not filed a lien statement to perfect its lien. 
Cargill also argued that, even if the Department is entitled to reimbursement 
without having perfected its lien, Wyoming statutes require that attorney's fees 
and expenses be deducted from the lien amount, and since Cargill's fees and 
expenses were higher than the Department's lien, the Department should receive 
nothing.

[¶7]      The district 
court found that the special needs trust contemplated in the settlement 
agreement was not permitted by Wyoming law. The remainder of the settlement was 
approved. The district court also found that Wyoming statutes and Department 
rules and regulations require full reimbursement of Medicaid payments from the 
settlement proceeds, and ordered that the Department be fully reimbursed. 
Cargill appeals the reimbursement order.

III. STANDARD OF 
REVIEW

[¶8]      The crux of this 
case is whether Cargill is required to reimburse the Department, out of her 
$70,000.00 settlement with St. John's, the $13,579.69 Medicaid paid for 
treatment of her burns. All three of Cargill's arguments against reimbursement 
require interpretation of statutory provisions enacted to ensure Medicaid 
benefit recovery when there is a liable third party. "Statutory interpretation 
is a question of law, so our standard of review is de novo. * * * If the 
conclusion of law is in accordance with the law, we affirm it; if it is not, we 
correct it." May v. May, 945 P.2d 1189, 1191 (Wyo. 1997) (citing Parker Land and 
Cattle Co. v. Wyoming Game and Fish Com'n, 845 P.2d 1040, 1042 (Wyo. 
1993)).

"We endeavor to 
interpret statutes in accordance with the Legislature's intent. We begin by 
making an ' "inquiry respecting the ordinary and obvious meaning of the words 
employed according to their arrangement and connection." ' Parker Land and 
Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1042 (Wyo. 
1993) (quoting Rasmussen v. Baker, 7 Wyo. 117, 133, 50 P. 819, 823 (1897)). We 
construe the statute as a whole, giving effect to every word, clause, and 
sentence, and we construe together all parts of the statute in pari 
materia."

State ex rel. 
Wyoming Workers' Safety and Compensation Div. v. Bruhn, 951 P.2d 373, 376 (Wyo. 
1997) (quoting State Dept. of Revenue and Taxation v. Pacificorp, 872 P.2d 1163, 
1166 (Wyo. 1994)).

IV. 
DISCUSSION

[¶9]      Medicaid is 
funded jointly by the state and federal governments. Before a state can receive 
federal appropriations for Medicaid, a state plan must be approved by the 
federal Health Care Financing Administration. 42 U.S.C. § 1396; 42 C.F.R. § 430. 
Under federal law, the state plan must include provisions for collecting 
payments from liable third parties and reimbursement of those payments to 
Medicaid. States must require recipients to assign to the state any rights to 
recovery of payment of medical care from a liable third party. This assignment 
is a condition of eligibility to receive Medicaid benefits. 42 U.S.C. § 
1396(k).

[¶10]   Wyoming's compliance with this 
federal mandate is found at Wyo. Stat. §§ 42-4-201 - 42-4-208 (1997). Wyo. Stat. 
§ 42-4-201(a) clearly and succinctly reiterates federal law and states the 
intent of the Wyoming legislature:

If a recipient 
covered by this chapter receives an injury under circumstances creating a legal 
liability in some third party, the recipient shall not be deprived of any 
medical assistance for which he is entitled under this chapter. He may also 
pursue his remedy at law against the third party. If the recipient recovers 
from the third party in any manner, including judgment, compromise, settlement 
or release, the state is entitled to be reimbursed for all payments made, or to 
be made, on behalf of the recipient under this 
chapter.

(Emphasis 
added.) There can be no clearer statement that Wyoming's legislature intended 
the Department be fully reimbursed for Medicaid payments made on behalf of a 
recipient who recovers those payments from a liable third 
party.

[¶11]   The statutes give the Department 
three methods for achieving reimbursement. Wyo. Stat. § 42-4-202 provides for a 
lien against the recipient's recovery. Wyo. Stat. § 42-4-204 makes the 
Department subrogated to the recipient's right of recovery and also grants the 
Department an assignment of "any entitlements from * * * a claim or action 
against any responsible third party for medical services, not to exceed the 
amount expended by the department * * *."

[¶12]   In her first issue, Cargill argues 
that the Department cannot be reimbursed unless it files and perfects a lien as 
permitted by Wyo. Stat. § 42-4-202, which states in part:

(a) When the 
department provides, pays for or becomes liable for medical care, it shall have 
a lien for the cost of the medical assistance provided upon any and all causes 
of action which accrue to the person to whom the care was furnished, or to the 
person's legal representatives, as a result of the injuries which necessitated 
the medical care.

(b) The 
department may perfect and enforce its lien by following the procedures set 
forth in W.S. 29-1-301 and 29-1-302

(Emphasis 
added.)

[¶13]   Almost completely ignoring Wyo. 
Stat. § 42-4-204, Cargill contends that, since the Department did not file a 
lien statement, she is not required to reimburse the payments made to treat her 
injuries. The Department counters that it chose not to perfect and enforce its 
lien, preferring in this case to rely upon the statutory assignment of benefits 
found in Wyo. Stat. § 42-4-204(a), and detailed in Chapters 4 and 35 of the 
Department's rules and regulations. These statutes and rules provide for an 
automatic assignment of benefits upon application for Medicaid. This assignment 
is a condition of eligibility for receiving benefits, and is mandated by federal 
law.

[¶14]   Cargill's assertion that perfecting 
its lien is the Department's only avenue for reimbursement is easily refuted by 
the plain language of Wyo. Stat. § 424-202(b). Clearly, perfecting and enforcing 
the Department's lien is optional. There may be circumstances in which 
perfecting a lien is in the Department's best interest, and is a prudent course. 
Here, as is undoubtedly true in most instances, it was not necessary. 
Statutorily, Cargill assigned to the Department her right to receive payment for 
medical care from a third party when she applied for Medicaid benefits. As 
between Cargill and the Department, this assignment is sufficient to ensure 
reimbursement to the state. Cargill's first argument is without 
merit.

[¶15]   Cargill next argues that the 
Department's recovery should be reduced by the full amount of her attorney's 
fees and litigation costs, which are greater than $13,579.69, leading to a zero 
recovery. She relies upon Wyo. Stat. § 42-4-202(f), which 
provides:

Upon any 
judgment, award or settlement of an action under this section, or any part of 
it, upon which the department has filed its lien, an attorney may collect 
fees and expenses incurred, in an amount and in a manner which shall be 
established by department rule and regulation. The department's lien shall be 
reduced by the attorney's fees and expenses authorized pursuant to this 
section.

(Emphasis 
added.)

[¶16]   This statute plainly applies only 
when the Department has exercised its option to file a lien statement. Here, 
since the Department did not file a lien, this section does not apply to 
Cargill's case and could not have been violated.2 The appropriate method for 
addressing the payment of attorney's fees and costs in this case is found in 
Chapter 35, Section 8 of the Department's rules and 
regulations:

(d) Amount of 
the Department's recovery. Except as provided in paragraph (ii), the Department 
shall recover the full amount of Medicaid funds paid to or on behalf of the 
recipient because of the injury, illness or disability involved in the cause of 
action.

(i) If the 
recipient's net recovery is greater than or equal to the Medicaid funds paid to 
or on behalf of the recipient, the Department shall recover the full amount of 
the Medicaid funds.

* * 
*

(e) 
Determination of recipient's net recovery. The recipient's net recovery shall 
be:

(i) The 
recipient's gross recovery, minus

(ii) The 
necessary costs incurred in pursuing the judgment or settlement, 
minus

(iii) Attorney's 
fees not to exceed one-third of the amount determined by subtracting (ii) from 
(i).

[¶17]   These rules and regulations, which 
are promulgated pursuant to Wyo. Stat. § 42-4-104(a) (1997), give preference to 
attorney's fees and litigation expenses, providing Medicaid reimbursement only 
after payment of fees and costs. Here, Cargill's gross recovery of $70,000.00, 
minus costs and attorney's fees, leads to a net recovery greater than the amount 
of Medicaid funds paid on her behalf. The district court correctly ruled that 
the Department is entitled to full reimbursement, after Cargill's attorney's 
fees and costs are paid.

[¶18]   Cargill's last argument raises a 
constitutional separation of powers claim. She asserts that Wyo. Stat. § 
42-4-202(f) requires the Department to adopt rules and regulations establishing 
a procedure for payment of attorney's fees and litigation expenses which are 
deducted from the Department's lien. Since Chapter 35, Section 8 of the 
Department's rules and regulations requires the fees and expenses to be deducted 
from the recipient's recovery, not the Medicaid lien, Cargill asserts that the 
Department, as part of the executive branch of Wyoming's government, has 
overstepped the statutory authority it received from the 
legislature.

[¶19]   We have already determined that 
Wyo. Stat. § 42-4-202(f) is not at issue in this case. It is not appropriate, 
therefore, to consider whether the Department's rules and regulations are 
constitutionally sound. We will leave further analysis of Wyo. Stat. § 
42-4-202(f) and the applicable rules and regulations to another case. See Brad 
Ragan Tire Co. v. Gearhart Industries, 744 P.2d 1125, 1126 (Wyo. 1987) (supreme 
court will not issue what amounts to an advisory opinion).

V. 
CONCLUSION

[¶20]   Cargill has put forth tremendous 
effort to deny the Department reimbursement for the medical expenses paid on her 
behalf. Her settlement with St. John's includes the amount of those expenses, 
and clearly recognizes that the Department is entitled to reimbursement. We are 
sympathetic to Cargill's plight and understand her need for future medical 
attention unrelated to this case. However, she has received medical treatment 
paid for by Medicaid, and she has also received from St. John's the money to pay 
for that treatment. To allow her to avoid reimbursing the Department would not 
only result in a windfall to Cargill, it would violate both state and federal 
law.

[¶21]   The statutes at issue are plain and 
unambiguous. The district court did not err in its interpretation of these 
statutes, and, accordingly, we affirm the district court's 
order.

Footnotes

1 From the 
time the Department sought to intervene, through appellate briefs and oral 
argument to this court, Cargill's refrain has been that the Department was 
dilatory in dealing with this case and should recover nothing due to its failure 
to "jump through the hoops." We bring to counsel's attention Wyo. Stat. § 
42-4-201(b) (1997), which states in part:

The 
department shall be served * * * with a copy of the complaint filed in any suit 
initiated pursuant to subsection (a) of this section. * * * If there is a 
settlement * * * the attorney general * * * shall be made a party in all 
negotiations for settlement, compromise or release.

(Emphasis added.) Many of the circumstances of which Cargill complains 
would have been avoided had counsel complied with this 
statute.

2 Cargill's 
reply brief introduces the argument that principles of equity require the 
Department to pay a pro rata share of the attorney's fees, rather than receiving 
a "free ride" from her efforts. Since this argument is not a response to new 
issues in appellee's brief, we will leave consideration of this issue to another 
case. See W.R.A.P. 7.03.