Federal Eastern District Judge Provides Guidance on Determining Recoverability of DPW Lien

In the case of McKinney v. PHA, 2010 WL 3364400 (E.D.Pa. 2010 Schiller, J.), Pennsylvania Eastern District Federal Court Judge Schiller ruled that a settling Plaintiff cannot be automatically be required to reimburse the Pennsylvania Department of Public Welfare for 100% of her Medicaid expenses.

In this case, the Department of Public Welfare was seeking to recover the full amount of its $1.2 million lien. The Department asserted that the agency was legally entitled to the full amount, particularly where the full amount did not exceed half of the total settlement in the case.

In this case involving at $12 million settlement, the Department of Public Welfare was relying upon a state law that allegedly established a presumption in Pennsylvania that half of a Plaintiff’s settlement should be properly attributed to compensation for medical expenses.

Judge Schiller rejected the Department of Public Welfare’s position and noted that the “Department of Public Welfare’s proposed rule ignores the reality of settlement.”

Rather, the Court noted that settlement involves compromise on all parties involved in a settlement. As such, the Court rejected Department of Public Welfare’s argument that it need not compromise at all unless its lien is for more than half of a Plaintiff’s total recovery.

Judge Schiller recommended that the Department of Public Welfare lien recovery be determined in such cases by the trial judge assessing “the factors that would have influenced the parties’ settlement position and [making] an ultimate determination of what portion of the settlement represents compensation for past medical expenses.”

In this matter, Judge Schiller, who had provided over the proceedings and the settlement talks, concluded that the Plaintiff’s had settled for 2/3 of the total value of the case. As such, the Court felt that the Department of Public Welfare was entitled to 2/3 of its $1.2 million dollar lien, minus fees and costs.

Source: Shannon P. Duffy, “Fed Judge Cuts Medicaid Lien in 12 Mil Mold Settlement,” The Legal Intelligencer (August 26, 2010).

Anyone desiring a copy of this Opinion may call the Pennsylvania Instant Case Service of the Pennsylvania Law Weekly at 800-276-PICS and provide the PICS Case No. 10-3001.

In the alternative, here's a link to the opinion online: http://www.paed.uscourts.gov/documents/opinions/10D0874P.pdf