John R. Latham, Appellant,
Office of Recovery Services, Appellee.
Direct Appeal Third District, Salt Lake The Honorable Richard
D. McKelvie No. 160904935
R. Smith, Jeffrey D. Gooch, C. Michael Judd, Salt Lake City,
D. Reyes, Att'y Gen., Brent A. Burnett, Asst. Solic.
Gen., Tony S. LeBlanc, Asst. Att'y Gen., Salt Lake City,
Justice Petersen authored the opinion of the Court, in which
Chief Justice Durrant, Associate Chief Justice Lee, Justice
Himonas, and Justice Pearce joined.
John R. Latham suffered a stroke and his injuries were
exacerbated by a hospital's failure to properly diagnose
it. Latham sought compensation from the hospital for past and
future medical expenses as well as other damages. He
ultimately settled his claim for an amount much less than
what he believed it was worth.
At the time of his injury, Latham was receiving Medicaid,
which paid for his treatment. When a third party is legally
liable for medical expenses paid by Medicaid-like the
hospital here-federal law requires that state Medicaid plans
seek reimbursement from the third-party tortfeasor.
The parties dispute how much of Latham's settlement award
the Office of Recovery Services (ORS) is permitted to collect.
Latham argues ORS may place a lien on only the part of his
award allocable to past medical expenses. And according to
Latham's calculations, the State's expenditures far
exceed that portion of his award. He argues that if the State
is fully reimbursed, it would violate a federal Medicaid
statute that prohibits states from imposing a lien on
recipient's property because ORS would be taking
settlement proceeds intended to compensate him for damages
other than past medical expenses.
The district court disagreed with this argument and ruled
against Latham on a motion for judgment on the pleadings. The
court held that ORS was entitled to recover from the portion
of Latham's settlement award representing all medical
expenses, both past and future.
Latham appeals. The question before us is whether ORS may
place a lien on and collect from the portion of Latham's
tort recovery allocable to all medical expenses, both past
and future, or only past medical expenses. Based on the
language of the relevant federal statutes and United States
Supreme Court precedent, we conclude that ORS may recover
from only that portion of an award representing past medical
expenses. Accordingly, we reverse and remand.
Latham suffered a stroke in early 2014. When he began to
experience symptoms, he went to the hospital. Without
conducting a neurological exam, doctors there examined
Latham, provided him with some pain and anti-nausea
medication, and then discharged him.
Throughout the day, Latham's condition worsened. In the
evening, he went by ambulance to a different hospital. There,
doctors performed a brain scan, which revealed that he had
suffered a stroke.
Latham brought malpractice and negligence claims against the
first hospital. He alleged that the hospital's failure to
diagnose his stroke caused severe and permanent injuries.
At the time of his injuries, Latham received Medicaid through
the State of Utah. The parties agree that Medicaid paid a
total of $104, 065.32 in medical expenses related to
Generally, Medicaid does not seek reimbursement from Medicaid
recipients when it pays for their medical treatment. But if a
third party is liable for any or all of a recipient's
injuries, then federal law requires state Medicaid programs
to seek reimbursement from those third-party tortfeasors.
See 42 U.S.C. § 1396a(a)(25)(A)-(B); Utah Code
§ 26-19-401. And it requires recipients to assign to
the State any proceeds they receive from the third party.
See 42 U.S.C. § 1396k(a)(1)(A).
To that end, ORS entered into a collection agreement with
Latham that permitted Latham to "include medical costs
paid by the State of Utah when making a claim against"
the hospital and allowed ORS to recover from funds Latham was
able to recover from the hospital. The collection agreement
provided that "ORS' recovery shall be the statutory
claim, as reduced by the attorney's fee of 33.3% of
ORS' recovery." Both parties agree that ORS'
potential recovery of $104, 065.32 must be reduced by at
least $34, 688.44 in attorney fees. Thus, the most ORS could
recover from the settlement is $69, 376.88.
Latham ultimately settled his claim for $800, 000-an amount
not nearly what he believed his claim was worth. ORS
participated in the settlement negotiations and approved the
agreement. Latham and ORS agree that the full value of
Latham's claim was $7, 257, 972.52. This amount includes,
among other damages, $104, 065.32 in past medical expenses
paid by Medicaid and $6, 430, 614 in future medical expenses
that Medicaid is not currently obligated to pay.
Latham filed a complaint for declaratory relief in the
district court, seeking a determination of how much ORS was
entitled to collect from his settlement award. Citing federal
Medicaid law, Latham argued that ORS was permitted to place a
lien on only that portion of the settlement amount
attributable to past medical expenses. He argued that the
district court should divide the settlement amount ($800,
000) by the total value of the claim ($7, 257, 972.52) and
then multiple the resulting ratio (11 percent) by the total
past medical expenses ($104, 065.32). According to
Latham's calculations, that meant ORS' recovery was
capped at $7, 631.46 after attorney fees.
ORS countered that it was entitled to collect from the
portion of the award representing all medical expenses-be it
for past or future expenses. Under ORS' calculation, this
meant it could collect from up to 90 percent of the
settlement amount (or $720, 000), permitting a full recovery
Latham filed a motion for judgment on the pleadings, which
the district court denied. Instead, the court entered
judgment in favor of ORS, ruling that ORS could place a lien
on the portion of Latham's settlement amount representing
all medical expenses. And because $720, 000 was greater than
the State's lien amount, the State ...