Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: California Department of Health Services
Date: January 5, 1995
Docket No. A-94-114
Control No. A-09-92-00095
Decision No. 1504
DECISION
The California Department of Health Services (California or State)
appealed a determination by the Health Care Financing Administration
(HCFA) disallowing $7,592,786 in federal financial participation (FFP)
claimed under title XIX (Medicaid) of the Social Security Act (Act).
The disallowance represents the federal share of amounts which HCFA
determined California should have collected from third party liability
(TPL) settlements and awards received by Medicaid recipients from July
1, 1988 through June 30, 1992. HCFA determined that these amounts
should have been credited against California's previous claims for its
expenditures on behalf of these recipients.
Under California law, when California provides medical benefits to a
Medi-Cal (California's name for Medicaid) recipient because of an injury
for which a third party is liable, California is entitled to recover the
reasonable value of the benefits from that third party. This case arose
because California did not fully recover, from TPL settlements and
awards obtained by Medi-Cal recipients, reimbursement for the reasonable
value of the Medi-Cal benefits it provided; instead, California allowed
recipients to retain at least 50% of the settlement or award. HCFA
determined that, under the Act, HCFA must be fully reimbursed for the
federal share before the recipient may receive any money from a TPL
settlement or award. HCFA therefore disallowed the federal share of TPL
payments that California allowed the recipients to retain.
California appealed this disallowance on the ground that HCFA had no
authority under the Act to prohibit states from allowing recipients to
retain portions of TPL payments which did not represent payment for
medical care. California further argued that its TPL recovery program
was highly successful and furthered federal TPL requirements by
maximizing TPL recoveries while reducing TPL associated administrative
expenses.
Based on our review of the evidence and argument in the record, and the
relevant provisions of the Act, we conclude that HCFA's interpretation
of the Act is a reasonable construction of its express terms and is
supported by the legislative history. Further, California has had
notice of HCFA's interpretation of these TPL provisions since 1988.
Accordingly, we uphold the disallowance.
Relevant Federal Authority
The Act requires a state to take "all reasonable measures to ascertain
the legal liability of third parties . . . to pay for care and services
available under the [Medicaid] plan . . . ." Section 1902(a)(25)(A).
In cases where liability is found to exist after medical assistance is
provided, "the State . . . will seek reimbursement for such assistance
to the extent of such legal liability." Section 1902(a)(25)(B). A
state is not required to seek such reimbursement if "the amount of
reimbursement the State can reasonably expect to recover exceeds the
costs of such recovery . . . ." Id.
Applicants for Medicaid are required to assign to the state their rights
to "payment for medical care from any third party" and to cooperate
with
the state's pursuit of third party payment. Section 1912(a). The
amount collected under such an assignment--
shall be retained by the State as is necessary to reimburse it for
medical assistance payments made on behalf of an individual with
respect to whom such assignment was executed (with appropriate
reimbursement of the Federal Government to the extent of its
participation in the financing of such medical assistance), and the
remainder of such amount collected shall be paid to such
individual.
Section 1912(b).
Legitimate costs of obtaining the settlement or award, such as
attorney's fees , may be deducted prior to reimbursement of the Medicaid
program. HCFA's State Medicaid Manual (SMM) 3907, HCFA Exhibit (Ex.)
A. Relevant California Statutory Authority
Under California law, if California provides Medi-Cal benefits to a
recipient because of an injury for which a third party is liable,
California is entitled to recover, from that third party, the reasonable
value of the benefits it provided. Cal. Welf. & Inst. Code
14124.71(a).
California has enacted a statutory scheme to effectuate such TPL
recoveries from tortfeasors and their insurers. Cal. Welf. & Inst. Code
14124.70-14124.90. Under California's scheme, any settlement,
judgment, or award obtained by a recipient is subject to California's
claim for reimbursement of the Medi-Cal benefits. Cal. Welf. & Inst.
Code 14123.74. If a representative of a Medi-Cal recipient or the
recipient brings an action against a third party who may be liable for
an injury which has resulted in Medi-Cal expenditures, he or she must
provide notice of the action to California. Cal. Welf. & Inst. Code
14124.79. This notice enables California to perfect a lien upon any
judgment or settlement that the recipient obtains from the third party.
Cal. Welf. & Inst. Code 14124.76, 14124.77. Further, after payment
of the litigation costs and attorney's fees, California's lien is given
priority in the distribution of any judgment or award obtained by the
victim. Cal. Welf. & Inst. Code 14124.74.
Under California's statutory scheme, any recovery by the Medi-Cal
recipient is distributed pursuant to one of three alternative methods:
o The 25% method. California Welfare and Institutions Code
section 14124.72(d) provides that, where the action is brought
by the victim (without California) and the victim incurs a
personal liability to pay attorney's fees and costs of
litigation, California's claim for reimbursement is limited to
the amount of California's Medi-Cal expenditures, less a portion
of the costs of litigation and 25% for attorney's fees. 1/
o The 50% method. California Welfare and Institutions Code
section 14124.78 limits California's claim to not more than one
half of the recipient's recovery after deducting for attorney's
fees, litigation costs and medical expenses paid for by the
recipient relating to the injury. 2/
o The waiver method. California Welfare and Institutions Code
section 14124.71(b) allows California to waive part or all its
claim on the lien and take less than it would be entitled to
under the 25% or 50% method if it determines that waiver is
appropriate. 3/
When California is notified that a settlement or judgment has occurred,
California compares the collection obtainable under the 25% and the 50%
methods. California collects the lower of the two identified amounts
unless a waiver is appropriate under Welfare and Institutions Code
section 14124.71(b). If it determines that a waiver is appropriate,
California further reduces the amount it could have collected under the
25% or the 50% method.
The Federal Audit
The Office of the Inspector General of Audit Services (OIGOAS) examined
State records concerning TPL recoveries for the period July 1, 1988
through June 30, 1992. A universe of 2,445 cases was defined by
identifying all cases with transaction codes indicating that
California's TPL collection was calculated pursuant to the 50% method
under Welfare and Institutions Code section 14124.78 (transaction code
449) or was reduced pursuant to the waiver method under section
14124.71(b)(2) (transaction code 440). The auditors then reviewed a
random sample of 300 cases in the universe to evaluate the amount
California actually collected from the TPL settlements and awards.
For each sample case, OIGOAS calculated a Medicaid "net lien" by
applying California's 25% method: the total Medicaid expenditures less
a percentage for attorney's fees and a pro rata share of costs. It
concluded this was the amount California should have sought from the
recipient's third party recovery. OIGOAS then determined whether the
amount of the settlement was sufficient to compensate the attorney, pay
the litigation costs, and reimburse California for the net lien amount.
If it was, OIGOAS questioned the federal share of the difference between
the net lien amount and the amount California collected. If the
settlement amount was not sufficient, OIGOAS questioned the federal
share of the difference between the amount of the settlement less actual
legal fees and costs and the amount California collected. 4/
OIGOAS found that California did not give HCFA full financial credit in
241 of the 300 cases sampled. The majority of the cases (about
two-thirds) involved the 50% rule, whereby California limited its
recovery to half of the amount remaining after deducting for attorney's
fees, litigation costs, and out-of-pocket medical expenses. The waiver
rule made up most of the balance of cases. (Miscellaneous errors,
chiefly mathematical and clerical, account for the remaining, small
fraction of cases.)
OIGOAS projected the results of its sample case findings to the universe
of 2,445 cases. By projecting its findings, OIGOAS determined that, at
a minimum, the federal share of the amount available but not collected
by California was $7,592,786. HCFA adopted OIGOAS' audit
recommendations and disallowed that amount.
Analysis
California appealed this disallowance on the grounds that HCFA had
unreasonably prohibited California from allowing recipients to retain
portions of TPL payments which did not represent payment for medical
care.
HCFA took the position that the Act requires states to fully reimburse
HCFA for the federal share of medical assistance expenditures resulting
from the acts of a liable third party before allowing a recipient to
receive money from a TPL settlement or award. Thus, according to HCFA,
a state must collect from a recipient's TPL recovery, to the maximum
extent possible after deducting attorney's fees and litigation costs,
the full amount of its Medicaid expenditures and remit the federal share
of the expenditures to HCFA. HCFA based its position on three
provisions of the Act:
o Section 1912(a)(1)(A), which requires all recipients to execute
an assignment of rights "to payment for medical care from any
third party;"
o Section 1902(a)(25)(B), which requires states to seek TPL
reimbursement to the extent of a third party's liability;
o Section 1912(b), which provides that any amount a state collects
under a recipient's assignment to payment for medical care must
be used first to reimburse the Medicaid program for medical
assistance payments and that the recipient is entitled only to
the remainder.
HCFA's position is directly supported by these provisions of the Act.
Recipients, as a condition of eligibility, must assign their rights to
payment for medical care. States are then charged with the
responsibility of seeking third party recovery pursuant to such
assignments. States are further required to seek as much reimbursement
as possible, i.e., to the extent of the third party's liability.
Finally, when a recovery is made, the Act sets forth a distribution
scheme which requires the Medicaid program to be reimbursed prior to
distributing any funds to the recipient. While section 1912(a) refers
to assignment only of "payment for medical care," the statutory scheme
as a whole contemplates that the actual recovery might be greater and,
if it is, that Medicaid should be paid first.
HCFA's position is also consistent with the purposes behind Medicaid TPL
requirements: to make Medicaid the payor of last resort where there is
a liable third party, so as to reduce Medicaid expenditures. In 1985,
when Congress amended the Act to strengthen TPL recovery requirements,
the accompanying legislative history provided: "Medicaid is intended to
be the payor of last resort; that is, other available resources must be
used before Medicaid pays for the care of an individual enrolled in the
Medicaid program." Consolidated Omnibus Budget Reconciliation Act of
1985, H.R. Conf. Rep. No. 453, 99th Cong., 1st Sess. 542 (1985),
reprinted in Legislative History of Titles I-XX of the Social Security
Act, Vol. XXII, 99th Congress 1985-1986, Part 1. The language clearly
indicates that Congress intended for the Medicaid program to be
reimbursed from available third party sources to the fullest extent
possible.
Moreover, California has had timely notice of HCFA's construction of the
statutory provisions relating to TPL payments since June 1988. In
Medicaid Regional Memorandum No. 88-10, HCFA expressly addressed the
issue of "State lien laws which permit a Medicaid recipient, who
initiates pursuit of TPL recovery from a liable third party, to keep a
fixed percentage of the recovered amounts before the State (and Federal
Government) receives its share of the settlement." In the memorandum,
HCFA instructed states that
[i]n the absence of specific State provisions assuring full
reimbursement of the Federal share, the State laws in question
would be in conflict with section 1912(b). As a result, the
State's actual recovery becomes impermissibly reduced such that the
full Federal share (based on the total net recovery) would not be
refunded. The recipient has a right only to the remainder after
Medicaid payments are fully reimbursed.
HCFA Ex. C. 5/
Since California had notice of HCFA's interpretation of the Act, and
that interpretation is reasonable, HCFA's interpretation is entitled to
deference in this case. The Board has repeatedly stated that it will not
substitute its judgment for, or overturn, a reasonable interpretation of
the agency charged with administering a statute merely because there may
be an alternative interpretation which arguably is also permissible.
Georgia Dept. of Human Resources, DAB No. 995 (1988); Missouri Dept. of
Social Services, DAB No. 468 (1983).
California challenged HCFA's interpretation by arguing that: (1) HCFA
misconstrued the law of assignment and its application in TPL cases; (2)
HCFA has no right to assert a priority over funds obtained by victims;
(3) HCFA misapplied section 1902(a)(25)(B) of the Act; and (4)
California's TPL program complies with federal law. Below we explain why
we reject California's arguments in this case.
First, California argued that HCFA misconstrued the law of assignment.
It pointed out that a Medicaid recipient is required by federal law to
assign only his or her rights to payment for medical care. This
assignment, California argued, does not prevent a recipient from seeking
recovery for other aspects of the injury such as pain and suffering and
lost wages. California argued that HCFA had incorrectly assumed that
all of the money a recipient recovered from a third party represented
the cost of medical care.
However, HCFA did not argue that a recipient cannot seek redress for
injuries beyond the cost of medical care nor did it assume that the
recipient's recovery must represent only payment for medical care.
Rather, HCFA's position is that, where there is a third party or
casualty insurer that is responsible for paying a recipient's medical
expenses, the recipient may not recover money for him/herself until the
federal government is reimbursed for its expenditures for the
recipient's medical care. Moreover, while arguing that HCFA incorrectly
assumed that 100% of a recipient's recovery was for medical expenses,
California offered no factual basis its assumption that only 50% of a
recipient's recovery was medical expenses. Instead, California simply
stated that "apportionment done on a 50:50 basis is symbolically fair."
California Appeal Brief at 21.
HCFA's position, that it is entitled to be reimbursed first from the
recipient's tort recovery, relates to California's second argument.
California asserted that HCFA has no right to a collection priority over
funds obtained by Medicaid recipients in TPL suits for two reasons.
First, California argued that the distribution methodology set forth in
section 1912(b), on which HCFA relied, establishes a priority in favor
of the federal government only when a state initiates and obtains
recovery for medical care, not when a recipient brings a legal action.
Second, California argued that the distribution methodology set forth in
section 1912(b) concerns only payments collected pursuant to assignments
for medical care and does not govern distribution of recoveries for
payments which are not for medical care.
We do not find these arguments persuasive. The distribution methodology
set forth in section 1912(b) must be read in conjunction with section
1902(a)(25)(B), which requires states, not recipients, to seek third
party reimbursement. 6/ Therefore, California has an obligation to
seek third party reimbursement to "to the extent of such liability."
While California has structured its tort recovery system to encourage
lawsuits by recipients and private attorneys rather than the State, it
would be inconsistent with the purposes of the provisions to permit this
structure to obviate California's obligation under section
1902(a)(25)(B) to seek third party reimbursement or to change the
distribution methodology established by section 1912(b). Further, unless
these private attorneys are considered to be acting on behalf of the
State so that the "collections" that they effectuate are subject to
the
distribution requirements of section 1912(b), then California cannot
reasonably rely on their efforts as meeting the section 1902(a)(25)(B)
requirement.
To allow the distribution of a settlement or an award to turn on whether
a recipient or a state initiated the liability action would distort the
Medicaid TPL system. Under California's construction, recipients could
avoid the third party recovery mandates of the Act simply by instituting
the action themselves. California identified no rational basis which
would justify such divergent treatment of similarly situated recipients,
or the resulting loss to the federal treasury.
California argued further that HCFA had misread section 1912(b) to
create a priority for itself over all funds recovered by the recipient.
California argued that such a priority ignored the fact that these
payments included amounts for things other than medical care. We reject
California's construction of section 1912(b) for the following reasons:
o In cases where a third party has caused the need for medical
care and is liable for its payment, the Act looks to that third
party to reimburse the public. Section 1902(a)(25)(B) requires
that "the State . . . will seek reimbursement for such
assistance to the extent of such legal liability." HCFA
reasonably construed this provision to require states to pursue
the full claim against a third party.
o HCFA reasonably read the Act to condition the availability of
Medicaid funds on the recipient's agreement to reimburse
Medicaid to the extent of a third party's liability. Therefore,
Medicaid has superior status to the recipient in relation to the
tortfeasor to recover costs Medicaid incurred on behalf of a
recipient on the condition that it would be reimbursed if there
was a liable third party from whom a recovery was collected.
o HCFA reasonably insisted on its right to characterize recoveries
from third parties first as payments for medical care. This
characterization prevents manipulation of tort awards by
recipients who seek to prevent the public from being reimbursed
for the funds it has advanced for their medical care (e.g., by
suing for pain and suffering or lost wages rather than for
medical costs). Without it, TPL recoveries would be subject to
a wide range of interpretations about what was appropriately
considered payment for medical care.
o Even though California objected to HCFA's assertion of a
priority over all the funds recovered by a recipient, its own
statutory scheme asserts a priority or "first lien" over a
recipient's recovery, no matter how the particular damage
components of that recovery might be characterized. Cal. Welf.
& Inst. Code 14124.71(a); 14124.72(c) and (d); 14124.74(a)
and (b). Thus, California recognized that such a priority is
essential to effectively collect TPL reimbursement. While
California's scheme goes on to limit what California may claim
pursuant to its lien and gives the director authority to waive
part or all of the lien, the fact is that California asserts a
priority over the recipient's entire recovery. 7/ Therefore,
California cannot reasonably maintain that a priority over
recipients' damage awards is contrary to the Act.
Third, California argued that section 1902(a)(25)(B) merely provided for
a "cost based" determination as to when it was appropriate to seek
third
party reimbursement and did not constitute "an independent requirement
that the state collect the full amount of the cost of providing medical
care from the victims' settlement of their claims." California Appeal
Brief, at 19. It concluded that section 1902(a)(25)(B) could not be
read to "quash or supersede lawful claims of the victim." Id.
We disagree with California's construction of this section. Sections
1902(a)(25)(B) and 1912(b), read together, require states to seek TPL
reimbursement and to distribute any collection first to the Medicaid
program and then to the victim. The fact that the victim may have other
"lawful claims" for such things as pain and suffering or lost wages
does
not override Congress' intent, as evidenced by the terms of the Act,
that the Medicaid program be fully reimbursed for its expenses before
the victim shares in a TPL recovery. The cost- benefit language on
which California relied merely creates a common-sense exception to the
general federal mandate that states seek TPL recovery. Here, we are not
dealing with a few isolated incidents where a state determined that
pursuit of a liable third party would not be cost-effective but the
recipient nevertheless pursued recovery. Instead, California's scheme
is based on recovery by recipients. Failure to apply the distribution
priority established in section 1902(a)(25)(B) in these circumstances
would allow a state to defeat Congressional intent.
Fourth, California argued that its "successful third party liability
program is in full compliance with the federal law and regulations."
California Appeal Brief, at 20. This argument focused on the
effectiveness of California's TPL recovery scheme which "balances
expectant costs with the potential recovery." Id. Specifically,
California argued that, by allowing victims to share in awards, it
created an incentive to seek out and pursue liable third parties,
thereby maximizing pursuit and shifting initial costs from California to
the victim. It argued that the 50% apportionment was fair, created "a
reasonable balance between the lawful claims of the victim and
California," and ended "the potential legal battle over the limited
funds" in which litigants would manipulate awards and settlements to
exclude medical damages. Id. at 20, 21. It pointed out that its waiver
authority furthered the purposes of the Act by allowing California to
condition the use of funds to avoid further public expenses. Finally,
it represented that all these factors resulted in a cost effective
program.
We do not find these arguments persuasive for the following reasons:
o The alleged effectiveness of California's statutory scheme is
not the criteria by which we must evaluate this disallowance.
Rather, we must apply the Act, as reasonably interpreted by
HCFA. We have explained why, under that criterion, California's
system does not comply with federal law.
o The role of evaluating the practical considerations that
California advanced in support of its system belongs to HCFA,
not the Board. As the administering agency, HCFA has the
expertise and knowledge to weigh the benefits of California's
system against the adverse effects of such a system on the
operation of the Medicaid program.
o As for California's assertion that its scheme created a
reasonable balance between the victim and the State, that
argument ignores the fact that half of the Medi-Cal funds the
State is allowing the victim to keep came from the federal
treasury. Consequently, HCFA is the entity which is logically
charged with the responsibility of deciding what constitutes a
"reasonable balance" for this aspect of the Medicaid program.
To allow the many jurisdictions which participate in the
Medicaid program the discretion to set that balance for third
party casualty claims could undermine the TPL system and lead to
divergent treatment of similarly situated recipients. Further,
as HCFA as informed California, a state is free to allow
recipients to retain the state's share of the FFP if they
believe that is an equitable result.
o While California maintained that the 50% apportionment is
necessary to make the TPL recovery system work, HCFA could
reasonably conclude otherwise. For example, even if California
had complete priority over the recoveries, private attorneys
would continue to have a financial incentive to take these cases
because they would continue to be compensated first. Further,
recipients are obligated under section 1912(a)(1)(C) to
cooperate with California's pursuit of third party payment as a
condition of eligibility, regardless of whether they retain any
third party payment.
o Contrary to what California argued, it is not unfair completely
or substantially to deny Medicaid recipients access to their
settlements. If Medicaid had not paid their medical expenses,
these recipients would have both unrestricted access to their
settlements and enormous medical debts to be paid from those
settlements. As Medicaid recipients, they do not have such
debts because the public has paid their medical expenses.
Therefore, in cases where Medicaid has incurred the "debt" for
recipients, it is not unfair for HCFA to require complete
reimbursement from these liability funds.
o California is correct that its TPL recovery scheme, by imposing
a lien on all of a recipient's recovery no matter how it is
characterized, prevents recipients from structuring recoveries
to exclude medical damages. However, California has the ability
to prevent such problems by amending its statutory scheme to
eliminate both the 50% limit on amount it will claim and its
discretion to reduce its lien.
o While California represented that its waiver method allows it to
condition the use of funds to avoid further public expenses, it
is free to use its share of the TPL recoveries to impose such
conditions.
In summary, HCFA has the authority and the expertise to interpret the
Act and to evaluate the practical considerations involved with seeking
third party reimbursement from personal injury settlements and awards.
In this case, HCFA has reasonably interpreted the Act to preclude
systems which allow recipients to retain TPL payments from which the
federal share of Medicaid expenditures has not been deducted.
Conclusion
For the preceding reasons, we uphold this disallowance.
__________________________ Judith A. Ballard
___________________________ Cecilia Sparks
Ford
___________________________ M. Terry Johnson
Presiding Board Member
1. Section 14124.72(d) provides:
Where the action or claim is brought by the beneficiary alone and
the beneficiary incurs a personal liability to pay attorney's fees
and costs of litigation, the director's claim for reimbursement of
the benefits provided to the beneficiary shall be limited to the
amount of the medical expenditures for the benefit of the
beneficiary less 25 percent which represents the director's
reasonable share of attorney's fees paid by the beneficiary and
that portion of the cost of litigation expenses determined by
multiplying the ratio of the full amount of expenditures to the
full amount of the judgment, award or settlement.
2. Section 14124.78 provides:
Except as otherwise provided in this article, notwithstanding any
other provision of law, the entire amount of any settlement of the
injured beneficiary's action or claim, with or without suit, is
subject to . . . [California's] claim for reimbursement of the
benefits provided and any lien filed pursuant thereto, but in no
event shall [California's] claim exceed one-half of the
beneficiary's recovery after deducting for attorney's fees,
litigation costs, and medical expenses relating to the injury paid
by the beneficiary.
3. Section 14124.71(b) provides:
The director may: * * * (2) Waive any such claim, in whole or in
part, for the convenience of the director, or if the director
determines that collection would result in undue hardship upon the
person who suffered the injury, or in a wrongful death action upon
the heirs of the deceased.
4. For example, in the case of C. M. (State Exhibit 2, line 9), the
recipient received $106,983 in Medi-Cal benefits, obtained a liability
settlement of $150,000, and incurred $48,506 in attorney's fees and
$2,641 in costs. OIGOAS calculated the "net lien" by applying
California's 25% percent method: it reduced the Medi-Cal benefits by
25% to account for legal fees ($106,983 x 25% = $26,746) and $1,884 for
its pro rata share of costs ({$106,983 ö $150,000} x $2,641 = $1,884).
Thus, OIGOAS determined that the Medi-Cal net lien was $78,353 ($106,983
- $26,746 - $1,884). However, in this case, California applied its 50%
method rather than its 25% method and recovered only $49,426 ($150,000 -
$48,506 [legal fees] - $2,641 [costs] = $98,853 x 50% = $49,426). OIGOAS
therefore determined that there was an overall deficiency of $28,927
($78,353 [net lien] - 49,426 [California's actual recovery] = $28,927)
and a shortfall in the federal reimbursement of $14,463 ($28,927 x 50%
FFP = $14,463).
5. Further, in 1990, HCFA amended the State Medicaid Manual to provide
that "[i]n liability situations, the Medicaid program must be fully
reimbursed before the recipient can receive any money from the
settlement or award." 3907 SMM, HCFA Ex. A. Finally, in 1991, HCFA
specifically informed California that its method for distributing TPL
personal injury settlements and awards was out of compliance with the
Act. HCFA Ex. B.
6. Under section 1912(a)(1)(c), recipients are required to cooperate
with a state's pursuit of TPL reimbursement but they are not required to
pursue such reimbursement themselves. The legislative history of this
provision states: "The conference agreement follows the Senate
amendment with a modification clarifying that individuals are required
to identify, to the extent they are able, potentially liable insurers
and other third parties, and to provide information to assist the State
in pursuing third parties. Beneficiaries are not required to pursue the
collection [of third party reimbursement] themselves. Pursuit is the
responsibility of the provider or the State as provided elsewhere in
this section." H. R. Conf. Rep. No. 453, at 544-545.
7. Further, we note that, until 1976, under California's prior
statutory scheme for recovering Medi-Cal expenses from tortfeasors,
California was given a 100% priority over the award and did not have to
reduce its lien to reflect attorney's fees. The current system was
enacted after several state court decisions interfered with California's
ability to recover from these awards and settlements. See Reid v.
Department of Health Care Services, 55 C.A.3d 418 (1976); Van Nuis v.
L.A. Soap Co., 36 C.A.3d 222 (1973). The 50% limitation was included in
the final version of the current statutory scheme. It represented a
codification of "long-standing settlement guidelines and was added to
assure that our lien recovery could not totally deprive a beneficiary of
his recovery." Enrolled Bill Report, Bill No. AB3569, dated August 19,
1976 and submitted as an attachment to California letter of November 21,