         FIRST DISTRICT COURT OF APPEAL
                STATE OF FLORIDA
                 _____________________________

                         No. 1D17-355
                 _____________________________

JOHN GRAY,

    Appellant,

    v.

AGENCY FOR HEALTH CARE
ADMINISTRATION,

    Appellee.
                 _____________________________


On appeal from the Division of Administrative Hearings.
J. Bruce Culpepper, Judge.

                       September 3, 2019


PER CURIAM.

    After John Gray settled a lawsuit arising from a car accident
in which he suffered a spinal cord injury, the State of Florida
obtained a lien against the proceeds of the settlement to satisfy
payments made by the Medicaid program for Gray’s medical care.
Gray filed an administrative petition seeking to reduce the lien
amount. The administrative law judge determined that Gray did
not establish entitlement to a reduction of the lien. Because the
ALJ’s factual findings are supported by competent, substantial
evidence, and because the ALJ correctly applied the operative
statute when determining the lien amount, we affirm.
               Medicaid Third-Party Liability Act

     Medicaid is intended to be the payor of last resort. Under
Florida law, Medicaid must be repaid from any third-party
benefits obtained by the Medicaid recipient, such as a settlement
in a lawsuit, “regardless of whether a recipient is made whole or
other creditors paid.” § 409.910(1), Fla. Stat. (2016). Repayment
to Medicaid is accomplished through an automatic lien for the full
amount of medical assistance provided by Medicaid.              §
409.910(6)(c), Fla. Stat. (2016).

    The Medicaid Act allows AHCA to recover from a recipient
provided medical care through the Medicaid program:

    Except as otherwise provided in this section,
    notwithstanding any other provision of law, the entire
    amount of any settlement of the recipient’s action or
    claim involving third-party benefits, with or without suit,
    is subject to the agency’s claims for reimbursement of the
    amount of medical assistance provided and any lien
    pursuant thereto.

§ 409.910(11)(e), Fla. Stat. (2016) (emphasis added). However,
the Florida Supreme Court has determined that the lien that may
be placed on a Medicaid recipient’s tort recovery is limited to
reimbursement for medical expenses already paid to the recipient.
Giraldo v. Agency for Health Care Admin, 248 So. 3d 53, 56 (Fla.
2018). The Court reasoned that allowing AHCA to obtain recovery
for payments not yet made by the program would conflict with the
anti-lien provisions of the federal Medicaid laws. Id. at 55. Thus,
the Court held that AHCA may not obtain a lien against any
portion of a Medicaid recipient’s settlement that is allocated for
future medical expenses. Id. at 56.

     However, settlement agreements do not always neatly
identify and allocate amounts recovered for past or future medical
expenses. When there is a judicial finding or approval of an
allocation between medical and non-medical damages or between
past and future medical damages “in the form of either a jury
verdict, court decree, or stipulation binding on all parties—that is
the end of the matter.” Wos v. E.M.A., 568 U.S. 627, 638 (2013).

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But without an agreement about the allocation, the parties may
resolve the dispute in an administrative proceeding. Id.

     When there has been no judicial finding or approval of an
allocation in a settlement agreement, Florida’s Medicaid Third-
Party Liability Act provides a default formula to calculate
Medicaid’s share of a settlement received from a third-party:

    After attorney’s fees and taxable costs . . . one-half of the
    remaining recovery shall be paid to the agency up to the
    total amount of medical assistance provided by
    Medicaid.

§ 409.910(11)(f)1., Fla. Stat. (2016). To contest the amount
calculated under the statutory formula, a Medicaid recipient must
“prove, by clear and convincing evidence, that a lesser portion of
the total recovery should be allocated as reimbursement for past
and future medical expenses than the amount calculated by the
agency pursuant to the formula set forth in paragraph (11)(f) or
that Medicaid provided a lesser amount of medical assistance than
that asserted by the agency.” § 409.910(17)(b), Fla. Stat. (2016).

     The burden of proof required to challenge a statutory lien has
been questioned in a recent federal court decision. In Gallardo v.
Dudek, 263 F.Supp.3d 1247 (N.D. Fla. 2017), the court held that
the provision of the statute placing a clear and convincing burden
of proof on the Medicaid recipient was preempted by the federal
Medicaid law’s anti-lien and anti-recovery provisions. Id. at 1259-
60. The court also enjoined AHCA from requiring a Medicaid
recipient “to affirmatively disprove § 409.910(17)(b)’s formula-
based allocation with clear and convincing evidence.” Gallardo by
& through Vassallo v. Senior, 2017 WL 3081816, at *9 (N.D. Fla.
July 18, 2017). AHCA has appealed the ruling. Gallardo v.
Mayhew, No. 17-13693 (11th Cir. Aug. 17, 2017).

                             This Case

     A car accident left Gray with a spinal cord injury and other
permanent injuries.      Medicaid paid $65,615.05 in medical
expenses associated with Gray’s hospital stay following the
accident. Gray successfully sued the driver of the car and was

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awarded a verdict of over $2.8 million. Gray collected only $10,000
from the driver’s insurance company.

     By operation of the Medicaid third-party liability statute, an
automatic lien of $3,750 was applied against Gray’s $10,000
recovery. Gray sought to reduce the lien, arguing that the amount
calculated under the statutory formula allowed AHCA to collect
more from his settlement than the amount properly apportioned
for his past medical expenses.

     Gray argued that the $10,000 settlement represented 0.349%
of the value of his $2.8 million verdict, so AHCA’s lien should be
limited to 0.349% of the total amount Medicaid expended in
medical benefits ($65,615.05), which would equate to $229.49.
AHCA argued that, under the statutory formula, it was entitled to
$3,750 from Gray’s recovery and that Gray failed to prove that
AHCA should be entitled to a lesser amount. Gray conceded that
no case law or other statute authorized the ALJ to apply a pro rata
formula instead of the formula provided in the statute.

     The ALJ found that Gray failed to show by clear and
convincing evidence that AHCA was entitled to less than the
presumptive amount under the statute—$3,750. The ALJ found
no evidence in the record to show that “the $10,000 recovery does
not include at least $3,750 that could be attributed to [Gray’s]
medical costs. Neither does the evidence indicate that the $3,750
amount includes payments for expenses other than [Gray’s]
medical care and services.” The ALJ ruled that AHCA was entitled
to $3,750 from the $10,000 recovery.

                             Analysis

     We review an ALJ’s conclusion of law de novo. McAlpin v.
Criminal Justice Stds. & Training Comm’n, 155 So. 3d 416, 420
(Fla. 1st DCA 2014). Gray argues that the ALJ committed legal
error by: (1) placing a lien on Gray’s future medical expenses,
contrary to the decision in Giraldo; (2) requiring Gray to prove by
clear and convincing evidence that the lien should be reduced,
contrary to the decision in Gallardo; and (3) failing to use a pro
rata formula to calculate AHCA’s portion of the recovery. As
explained below, we find no reversible error.

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     First, no lien was placed on a portion of Gray’s settlement
representing payment for future medical expenses. The record
supports the ALJ’s conclusion that Gray failed to show that the
$10,000 settlement was anything other than a lump-sum payment,
with no allocations for any category of Gray’s damages. Because
the $10,000 recovery was unallocated, Gray’s argument that the
lien was improperly imposed on future medical expenses must fail.

     Second, relying on the Gallardo decision, Gray asserts that
the ALJ erred by imposing a clear and convincing burden of proof
on Gray to show that the Medicaid lien should be reduced. But the
decision in Gallardo is not binding on this Court or the Division of
Administrative Hearings, even though it may be persuasive
authority. Carnival Corp. v. Carlisle, 953 So. 2d 461, 465 (Fla.
2007). And, even if Gallardo were binding, the invalidated portion
of the statute—the clear and convincing burden of proof—would be
replaced with the default burden of proof for administrative
hearings under Florida’s Administrative Procedure Act. Section
120.57(1)(j), Florida Statutes (2016), provides that findings of fact
“shall be based upon a preponderance of the evidence.” Thus, if
Gallardo was binding, Gray would have to show by a
preponderance of the evidence that AHCA’s lien should be less
than the statutory amount.

     The evidence offered by Gray consisted of the verdict form, the
final judgment, and letters providing the amount of the liens
imposed by Florida’s Medicaid Program, Georgia’s Medicaid
Program, and Florida’s Brain and Spinal Cord Injury Program.
None of these records showed that the $10,000 recovery was
allocated in any way between different categories of damages,
costs, or attorney’s fees. Thus, Gray could not show—even by a
preponderance of the evidence—that an amount other than the
total recovery of $10,000 should be considered when applying the
statutory formula to determine the amount of the Medicaid lien.
Thus, the ALJ did not err in ruling that Gray failed to meet his
burden to show that the lien should be reduced.

     Even though he failed to produce evidence or present
testimony to meet his burden to show that the lien amount should
be reduced, Gray maintains that the ALJ should have used a pro
rata formula to calculate AHCA’s share of the settlement

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recovery. Gray acknowledges that nothing in the statute
authorizes the ALJ to use a pro rata formula to calculate the lien
amount. Rather, in situations such as this case, when the plaintiff
fails to produce evidence or present testimony showing that the
lien amount should be reduced, the plain language of section
409.910(11)(f) requires the ALJ to apply the statutory
formula. The ALJ did exactly that here and did not err in
calculating the lien amount.

    The order on appeal is AFFIRMED.

LEWIS and ROWE, JJ., concur; MAKAR, J., concurring with opinion.

                 _____________________________

    Not final until disposition of any timely and
    authorized motion under Fla. R. App. P. 9.330 or
    9.331.
               _____________________________


MAKAR, J., concurring with opinion.

     John Gray obtained what appears to be an essentially
worthless $2.8 million-dollar verdict against the driver of a car
whose negligence caused him to suffer a severe spinal cord injury.
Gray’s only monetary recovery was $10,000 from an insurance
policy held by the driver. AHCA, which seeks repayment of $65,615
of Gray’s medical expenses, claims statutory entitlement to $3,750
of the policy proceeds while Gray says that AHCA should get $230,
which      is   a    pro-rated    amount     (i.e.,  ($65,615    x
($10,000/$2,800,000))).

     The rub is that the $10,000 of insurance proceeds, though
intended to apply to Gray’s past and future medical expenses, are
not allocated in any specific way to these categories, leaving it
unclear how they should be treated for purposes of determining
AHCA’s statutory recovery under section 409.910(11)(f)1., Fla.
Stat. (2019) (providing payment of “one-half of the remaining
recovery” to AHCA “up to the total amount of medical assistance
provided by Medicaid” after deducting attorneys’ fees and costs).

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In the absence of a specific allocation of the $10,000 in proceeds, it
is not illogical to conclude that the funds cannot be committed to
any specific allocation, whether that be 100% for future expenses,
100% for past expenses, or some percentage allocation in-between
such as a pro-rata apportionment as Gray has advocated. That
said, it would not be illogical to conclude that the $10,000 was
intended to apply to Gray’s past and future medical expenses
generally, and that a pro-rata approach would be a reasonable and
non-regressive way to apportion the proceeds.

     Because the current legislative structure supports the former
approach, rather than the latter, the administrative law judge did
not err in its award to AHCA. The legislature, however, may wish
to consider whether to adjust the statutory formula to reduce its
regressive effect on severely injured persons, such as Gray, who
receive uncollectible judgments and are then required to forego
half of the unallocated proceeds of small value insurance policies
in these unfortunate situations.

                  _____________________________


Brandon G. Cathey and Brent G. Steinberg of Swope, Rodante
P.A., Tampa, for Appellant.

Ashley Moody, Attorney General; Jonathan A. Glogau, Special
Counsel, and Elizabeth Teegen, Assistant Attorney General,
Tallahassee; and Tracy George, Chief Appellate Counsel, Agency
for Health Care Administration, Tallahassee, for Appellee.




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