GALLARDO v. DUDEK

Filing 30

ORDER ON SUMMARY JUDGMENT MOTIONS - Gallardo's Motion for Summary Judgment, ECF No. 11 , is GRANTED. AHCA's Motion for Summary Judgment, ECF No. 13 , is DENIED. In its current form, § 409.910, Fla. Stat. (2016), is preempted by federal law; namely, 42 U.S.C. § 1396a, 42 U.S.C. § 1396k, and 42 U.S.C. § 1396p. The Clerk shall enter judgment stating: Gianinna Gallardo, an incapacitated person, by and through her parents and co-guardians, Pilar Vassallo and Walter Gallardo, successfully proved that portions of § 409.910(17)(b), Fla. Stat. (2016) are preempted by federal law. The State of Florida Agency for Health Care Administration is therefore enjoined from enforcing that statute in its current form. It is declared that the federal Medicaid Act prohibits the State of Florida Agency for Health Care Administration from seeking reimbursement of past Medicaid payments from portions of a recipient's recovery that represents fu ture medical expenses. It is also declared that the federal Medicaid Act prohibits the State of Florida Agency for Health Care Administration from requiring a Medicaid recipient to affirmatively disprove Florida Statutes § 409.190(17)(b)'s formula-based allocation with clear and convincing evidence to successfully challenge it where, as here, that allocation is arbitrary and there is no evidence that it is likely to yield reasonable results in the mine run of cases. The Clerk shall close the file. Signed by JUDGE MARK E WALKER on 4/18/2017. (cle)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF FLORIDA
TALLAHASSEE DIVISION

GIANINNA GALLARDO, AN
INCAPACITATED PERSON, BY

AND THROUGH HER PARENTS
AND CO-GUARDIANS, PILAR
VASSALLO AND WALTER
GALLARDO,

Plaintiff,
v.

Case No. 4:16cv116-MW/CAS

ELIZABETH DUDEK, IN HER
OFFICIAL CAPACITY AS SECRETARY
OF FLORIDA AGENCY FOR HEALTH
CARE ADMINISTRATION,
Defendant.
__________________________/
ORDER ON SUMMARY JUDGMENT MOTIONS
Imagine this scenario. You’re the parent of a thirteen-yearold girl, whom you love dearly. She is your world. Tragically, one
day you receive the phone call that every parent fears more than
anything; the daughter that you adore was struck by a vehicle,
medevacked to a nearby hospital, and is now in critical condition.
Medicaid covers around $800,000 for her treatment. Although the
hospital staff tries their best, they aren’t miracle workers. As a
result of the accident, your beloved daughter is now in a persistent
1

vegetative state and can no longer ambulate, communicate, eat, or
care for herself in any manner. You try to wake up from this
nightmare. But you’re not asleep—the nightmare is real.
And it only gets worse. Knowing that your daughter will
need continuous medical care for the rest of her life (and hoping to
recover past expenses and emotional damages), you file suit
against the responsible parties. Even though your suit is worth
somewhere around $20,000,000, you eventually settle for
$800,000; a 4% recovery. You then notify the applicable state
agency, which will for purposes of this hypothetical be called “the
agency” for short, of the settlement and explain that around
$35,000 of that settlement is for past medical expenses—4% of the
approximately $800,000. Nonetheless, as allowed by the state’s
statute, the agency imposes an approximately $300,000 lien—an
amount representing, as prescribed by the state’s statute, 37.5% of
your settlement. Moreover, the agency seeks to satisfy that lien
from the settlement funds representing both past and future
medical expenses. And the only way you can successfully reduce
that lien is to prove by clear and convincing evidence that the

2

actual amount allocable to past and future medical expenses is, in
fact, less than that $300,000.
Gianinna Gallardo’s parents are currently living that
nightmare.

After

initiating

administrative

proceedings

to

challenge that lien, Gallardo’s parents and guardians filed this
case on her behalf seeking a declaratory judgment that Florida’s
reimbursement statute—which that hypothetical was based on—
violates federal law. Particularly relevant to that issue is the
federal Medicaid statute’s anti-lien provision, which generally
prohibits participating states from placing a lien on any portion of
a Medicaid beneficiary’s recovery not designated as payments for
medical care.
Is Florida’s reimbursement statute preempted by federal
Medicaid law? The short answer is “yes.” By allowing the State
Agency for Health Care Administration (“AHCA”)—Florida’s
agency that is charged with administering Medicaid—to satisfy its
lien from settlement funds allocable to both past and future
medical expenses, Florida has run afoul of the Medicaid statute.
The same is true for Florida’s arbitrary, one-size-fits-all statutory
formula. Specifically, Florida’s reimbursement statute—which,
coupled with a host of other obstacles, only allows the Medicaid
3

recipient to rebut that formula-based allocation by presenting
clear and convincing evidence that it is inaccurate—amounts to a
quasi-irrebuttable presumption and thus conflicts with and is
preempted by federal law.
Gallardo’s Motion for Summary Judgment, ECF No. 11, is
therefore GRANTED, and AHCA’s

Motion for Summary

Judgment, ECF No. 13, is therefore DENIED. 1
I
This

case

involves

a few relatively

straightforward

provisions of the otherwise dizzying Medicaid Act 2 and Florida’s
attempt to legislate against those provisions. To simplify this
Court’s analysis, it will outline the following in turn: (1) the
relevant portions of the federal Medicaid statute; (2) Florida’s
reimbursement statute; and (3) the underlying facts of this case.
A. Federal Law
Medicaid is a joint federal–state program designed to help
participating states provide medical treatment for their residents

This Court reaches these conclusions with the benefit of an April 11,
2017, hearing.
1

The Supreme Court has previously stated that Medicaid’s “Byzantine
construction . . . makes [it] ‘almost unintelligible to the uninitiated.’” Schweiker
v. Gray Panthers, 453 U.S. 34, 43 (1981) (quoting Friedman v. Berger, 547 F.2d
724, 727 n.7 (2d Cir. 1976)).
2

4

that cannot afford to pay. Moore ex rel. Moore v. Reese, 637 F.3d
1220, 1232 (11th Cir. 2011). Although states are not required to
participate in Medicaid, all of them do. Id. The federal government
pays a significant portion of the costs for patient care and, in
return, the states pay the remainder and must comply with the
federal statutory and regulatory requirements. See Alexander v.
Choate, 469 U.S. 287, 289 n.1 (1985) (stating that the federal
government “subsidizes a significant portion of the financial
obligations the State has agreed to assume” and that “[o]nce a
State voluntarily chooses to participate in Medicaid, the State
must comply with the requirements of Title XIX and applicable
regulations” (citing Harris v. McRae, 448 U.S. 297, 301 (1980))).
Two of those requirements are the so-called anti-lien and
anti-recovery provisions. These requirements are broad and
“express limits on the State’s powers to pursue recovery of funds it
paid on the recipient’s behalf.” Ark. Dep’t of Health & Human
Servs. v. Ahlborn, 547 U.S 268, 283 (2006). Specifically, the antilien provision states that “[n]o lien may be imposed against the
property of any individual prior to his death on account of medical
assistance paid or to be paid on his behalf under the State plan,
[with exceptions not relevant here].” 42 U.S.C. § 1396p(a)(1)
5

(2012). Similarly, the anti-recovery provision states that “[n]o
adjustment or recovery of any medical assistance correctly paid on
behalf of an individual under the State plan may be made, [with
exceptions not relevant here].” Id. § 1396p(b). Thus, considered
“literally and in isolation,” the anti-lien and anti-recovery
provisions prohibit states from reaching the proceeds from a
Medicaid recipient’s recovery. Ahlborn, 547 U.S. at 284.
But the third-party liability and assignment provisions
temper that sweeping prohibition by providing narrow exceptions.
The third-party liability provision, for example, requires states “to
ascertain the legal liability of third parties . . . to pay for care and
services under the plan[.]” § 1396a(a)(25)(A). If third-party liability
is found to exist, states must seek reimbursement for medical
expenses incurred on behalf of recipients who later recover from
those third parties. See id. § 1396a(a)(25)(B) (“[I]n any case where
such a legal liability is found to exist after medical assistance has
been made available on behalf of the individual and where the
amount of reimbursement the State can reasonably expect to
recover exceeds the costs of such recovery, the State or local agency
will seek reimbursement for such assistance to the extent of such
legal

liability[.]”

(emphasis

added)).
6

Likewise,

under

the

assignment provision, states must have in effect laws that, “to the
extent that payment has been made under the State plan for
medical assistance for health care items or services furnished to an
individual,” give the state the right to recover payment “for such
[furnished] health care items or services” from liable third parties.
Id. § 1396a(a)(25)(H) (emphasis added). To help effectuate that
requirement, states must require a recipient “to assign the State
any rights . . . to payment for medical care from any third party.”
Id. § 1396k(a)(1)(A) (emphasis added).
To summarize, the third-party liability and assignment
provisions outlined in §§ 1396(a)(25) and 1396k(a) are narrow
exceptions to the broad anti-lien and anti-recovery provisions, and
those exceptions only apply to payments for medical care. See
Ahlborn, 547 U.S. at 284–85 (“As explained above, the exception
carved out by §§ 1396a(a)(25) and 1396k(a) is limited to payments
for medical care.”). “Beyond that, the anti-lien provision” shields a
recipient’s recovery from the state’s clutches. Id. at 285–86.
B. State Law
Florida applies a one-size-fits-all statutory formula to
determine how much of a recipient’s recovery constitutes medical
expenses and is therefore available for Medicaid reimbursement.
7

First, the formula reduces the gross recovery by 25% to account for
the recipient’s attorney’s fees. See § 409.910(11)(f)(1), Fla. Stat.
(2016) (deducting “attorney’s fees and taxable costs” from the
“judgment, award, or settlement”); id. § 409.910(11)(f)(3) (deciding
for purposes of the statutory formula that attorney’s fees “shall be
calculated at 25 percent of the judgment, award, or settlement”).
The already-reduced total is then cut in half, and AHCA is
awarded the lesser of the amount it actually paid or the resulting
number. See id. § 409.910(11)(f)(1) (awarding AHCA “one-half of
the remaining recovery” after accounting for attorney’s fees, “up to
the total amount of medical assistance provided by Medicaid”). The
remaining amount is paid to the Medicaid recipient. Id.
§409.910(11)(f)(2).
The Medicaid recipient, however, may challenge that
formula-based allocation through an administrative proceeding.
To do so, the recipient must either pay AHCA the formula-based
reimbursement or place those reimbursement funds in an interestbearing trust account and then file a petition with the Division of
Administrative Hearings in Tallahassee. See id. § 409.910(17)(b)
(outlining the administrative procedure); id. § 409.910(17)(d)
(“Venue for all administrative proceedings pursuant to this
8

subsection lies in Leon County, at the discretion of the agency.”
(footnote omitted)). To successfully challenge the formula-based
allocation and thus reduce the amount payable to AHCA, “the
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” required by the statutory formula. Id. § 409.910(17)(b).
That administrative process “is the exclusive method for
challenging” the formula-based allocation. Id.
C. Present Litigation
On November 19, 2008, Gianinna Gallardo (“Gallardo”),
then a thirteen-year-old student, suffered severe and permanent
injuries as a result of being struck by a vehicle after she was
dropped off by her school bus. ECF No. 1, at 11. She is in a
persistent vegetative state and is no longer able to care for herself.
Id. Gallardo’s medical expenses were paid by Medicaid and
WellCare of Florida, which paid $862,688.77 and $21,499.30,
respectively. Id. at 12.
Gallardo’s parents filed suit in state court against those
allegedly responsible for her injuries—the truck’s owner, the
truck’s driver, and the Lee County School Board. ECF No. 10-1.
9

Gallardo sought past medical expenses, future medical expenses,
lost earnings, and other damages, while her parents sought lossof-consortium damages. Id. As required by Florida law, see §
409.910 (11)(a), AHCA was notified of that lawsuit and, in turn, it
asserted a lien against that cause of action for the amount it
expended for Gallardo’s past medical expenses: $862,688.77. ECF
No. 1, at 17. Gallardo’s case eventually settled for $800,000, and
the court approved that settlement. Id. at 13; see also ECF No. 102 (approving the settlements). Thus, pursuant to Florida’s
formula-based allocation, AHCA was due to be reimbursed
$323,508.29 in medical expenses.
Shortly after the settlement was finalized, Gallardo’s
counsel notified AHCA of the settlement by letter. ECF No. 1, at
17–18. In that letter, counsel explained that Gallardo’s damages
were valued at over $20,000,000, and that the settlement
amounted to a mere 4% recovery. Id. at 18. Thus, according to
Gallardo, only $35,367.52 of her $800,000 settlement represented
past medical expenses. Id. AHCA never responded to Gallardo’s
letter. Id.
Gallardo chose to contest AHCA’s lien through the state
administrative procedure outlined in § 409.910(17)(b). Id. She
10

therefore followed the necessary requirements; namely, depositing
the formula-based reimbursement of $323,508.29 into an interestbearing account and filing a petition with the Division of
Administrative Hearings in Tallahassee. Id. In those proceedings,
Gallardo has argued that contrary to federal law, AHCA is
endeavoring to recover its past Medicaid payments from
settlement funds that do not represent compensation for past
medical expenses. Id. at 18–19. AHCA, however, has argued that
it is entitled to satisfy its lien from the portion of Gallardo’s
settlement representing compensation for past and future medical
expenses. Id at 19. AHCA has further argued that Gallardo may
successfully challenge the formula-based allocation only if she can
prove by clear and convincing evidence that the amount of her
settlement representing past and future medical expenses is less
than $323,508.29. Id.
Gallardo brought this case seeking an injunction and
declaratory judgment that Florida’s reimbursement statute
violates federal law to the extent it (1) allows ACHA to satisfy its
lien

beyond

the

portion

of

her

settlement

representing

compensation for past medical expenses and (2) only allows her to
successfully challenge the formula-based allocation by presenting
11

clear and convincing evidence that that amount is more than the
portion of her settlement that represents compensation for past
medical expenses. ECF No. 11, at 2. After this case was filed, the
parties moved the Administrative Law Judge to hold those
proceedings in abeyance, and that motion was granted pending
resolution of the instant case. ECF No. 10-3. In this case, the
parties have filed cross motions for summary judgment. ECF Nos.
11–12 (Gallardo); ECF Nos. 13–14 (AHCA).
II
Summary judgment is appropriate when “the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). The parties agree to all material facts; thus, the only
disputes relate to questions of law. “‘Where the unresolved issues
are primarily legal rather than factual, summary judgment is
particularly appropriate.’” Bruley v. Village Green Mgmt. Co., 592
F. Supp. 2d 1381, 1388 (M.D. Fla. 2008) (quoting Uhl v.
Swanstrom, 79 F.3d 751, 754 (8th Cir. 1996)).
III
Gallardo contends that § 409.910 conflicts with federal law
and is therefore preempted to the extent that it allows AHCA to
12

satisfy its lien from a Medicaid recipient’s recovery for future
medical expenses. This Court agrees.
When a statute’s text is unambiguous, as is the case here,
the court’s analysis begins and ends with the text. Reeves v. Astrue,
526 F.3d 732, 734 (11th Cir. 2008) (citing CBS Inc. v. PrimeTime
24 Joint Venture, 245 F.3d 1217, 1222–25 (11th Cir. 2001)). That
is because “‘[i]f the statute speaks clearly to the precise question
at issue, [courts] must give effect to the unambiguously expressed
intent of Congress.’” Jackson v. Comm’r of Soc. Sec., 601 F.3d 1268,
1271 (11th Cir. 2010) (quoting Barnhart v. Walton, 535 U.S. 212,
217–18 (2002)).
AHCA suggests that, given the Gordian knot that is the
Medicaid Act, the issue before this Court is “not an easy” one to
decide. ECF No. 14, at 3 & n.1. But as to the issue presented to
this Court, the Medicaid Act could not be any clearer. By its plain
language, it prohibits AHCA from satisfying its lien from anything
but a Medicaid recipient’s recovery for past medical expenses.
As a general matter, the anti-lien provision prohibits AHCA
from imposing a lien against the property of a Medicaid recipient.
§ 1396p(a)(1). That includes liens against “medical assistance paid
or to be paid.” Id (emphasis added). And although the third-party
13

liability and assignment provisions are exceptions that grant
AHCA a restricted right of recovery, they are exceedingly narrow
ones. See Ahlborn, 547 U.S. at 284–85 (noting these are narrow
“exception[s] to the anti-lien provision” (citing Wash. State Dep’t of
Soc. and Health Servs. v. Guardianship Estate of Keffeler, 537 U.S.
371, 383–85 & n.7 (2003))).
A plain reading of the statutory text shows that AHCA’s
right of recovery is even narrower than it suggests; namely, it only
applies to payments made for past medical expenses. To simplify
this Court’s analysis, the critical statutory language is italicized.
The

anti-lien

provision

prohibits

ACHA

from

seeking

reimbursement from a recipient’s recovery for “medical assistance
paid or to be paid.” § 1396p(a) (emphasis added). But “to the extent
that payment has been made under the State plan for medical
assistance,” AHCA may assert a lien or otherwise acquire a
Medicaid recipient’s rights “to payment by any other [third] party
for

such

[furnished]

health

care

items

or

services.”

§

1396a(a)(25)(H). That necessarily suggests that AHCA may only
seek reimbursement from funds representing payments for
medical expenses that it previously made on the beneficiary’s
behalf. See McKinney ex rel. Gage v. Phila. Housing Auth., No. 0714

4432, 2010 WL 3364400, at *9 (E.D. Pa. Aug. 24, 2010) (“It is clear
from a reading of the statutory language that the italicized word
‘such’ refers to the ‘payment [that] has been made’—that is, the
payments the state made on the beneficiary’s behalf in the past for
medical expenses.” (emphasis in original)).
Other provisions bolster that conclusion. For example, §§
1396a(a)(25)(A)–(B) direct AHCA to seek reimbursement only to
the extent of the third party’s liability “to pay for care and services
available under the plan . . . .” See Ahlborn, 547 U.S. at 280
(“‘[S]uch legal liability’ refers to ‘the legal liability of third parties
. . . to pay for care and services available under the plan.’” (quoting
§ 1396a(a)(25)(A)) (emphasis in original)). Similarly, § 1396k(b)
suggests that AHCA may only be reimbursed “for medical
assistance payments made on behalf of an individual with respect
to whom such assignment was executed . . . .” The Medicaid
statute’s text is unambiguous and must therefore be followed;
AHCA cannot reimburse itself for its past medical expenses from
portions of the recipient’s recovery allocated to compensate for
future medical expenses. 3

See, e.g., In re E.B., 729 S.E.2d 270, 299 n.35 (W. Va. 2012) (agreeing
that “Ahlborn is more consistent with limiting a state’s recovery to settlement
3

15

Although the Supreme Court has not addressed this precise
issue, related cases suggest it would reach the same conclusion.
Take Ahlborn, for example. There, the Court held that a state may
satisfy its Medicaid lien only through the portion of a recovery
allocated for medical expenses. See Ahlborn, 547 U.S. at 281
(limiting reimbursement to “medical expenses—not lost wages, not
pain and suffering, not an inheritance”). In reaching that
conclusion, it reasoned that “the federal third-party liability
provisions require an assignment of no more than the right to
recover that portion of a [recovery] that represents payments for
medical care.” Id. at 282 (emphasis added and in original).
Likewise, the Supreme Court later emphasized that states may
“seek

reimbursement

for

medical

expenses

paid

on

the

beneficiary’s behalf, but the anti-lien provision protects the
beneficiary’s interest in the remainder of the settlement.” Wos v.
E.M.A. ex rel. Johnson, 133 S. Ct. 1391, 1397 (2013) (emphasis
added) (citing Ahlborn, 547 U.S. at 284). The Supreme Court’s

proceeds that are allocated to past medical expenses, rather than to proceeds
allocated to both past and future medical expenses generally”); McKinney, 2010
WL 3364400, at *9 (“Therefore, it would appear that [the state agency] cannot
draw on portions of the settlement designed to compensate for future medical
expenses in order to reimburse itself for past medical expenditures.” (emphasis
in original)).
16

references to “past medical expenses” and “medical expenses paid”
support the conclusion that state agencies may not seek
reimbursement of their past Medicaid payments from portions of
a recipient’s recovery representing future medical expenses.
Of course, this Court acknowledges that other courts have
disagreed. See Special Needs Trust for K.C.S. v. Folkemer, No.
8:10-cv-1077, 2011 WL 1231319, at *12 (D. Md. Mar. 28, 2011)
(“The fact that the settlement in this case contained unstipulated
amounts that might represent payments for future medical
expenses, and the fact that the Department is seeking to recover
from this unstipulated amount does not violate the anti-lien
provision . . . .”); IP ex rel. Cardenas v. Henneberry, 795 F. Supp.
2d 1189, 1197 (D. Colo. 2011) (concluding that the state agency
“may seek reimbursement for its past medical expenses from funds
allocated to ‘medical expenses,’ regardless of whether those funds
are allocated for past or future medical expenses”); In re Matey,
213 P.3d 389, 394 (Idaho 2009) (“Nothing in 42 U.S.C § 1396p
indicates that the State may not seek recovery of its payments
from a Medicaid recipient’s total award of damages for medical
care whether for past, present, or future care.”). Those cases are
non-binding. That aside, those cases are not persuasive because
17

the courts do not address the language referencing past medical
expenses highlighted in Ahlborn, Wos, or §§ 1396a(a)(25)(A)–(B),
1396a(a)(25)(H), and 1396k.
AHCA cites to other provisions in § 1396k to argue that it
may seek reimbursement for past medical expenses through
portions of a recipient’s recovery allocated to compensate for future
medical expenses. ECF No. 14, at 16–18. Specifically, it references
language in § 1396k(a)(1)(A) that requires the recipient “to assign
the State any rights . . . to support . . . and to payment for medical
care from any third party.” According to AHCA, “payment for
medical care” contemplates all medical care—including future
medical care. ECF No. 14, at 17.
That argument is clever, yet ultimately unconvincing.
“[C]ourts cannot use tunnel vision when construing statutes;
rather, statutes must be considered as a whole.” Fla. Democratic
Party v. Scott, No. 4:16-cv-626, 2016 WL 6080990, at *2 (N.D. Fla.
Oct. 10, 2016) (Walker, J.) (citing John Hancock Mut. Life Ins. Co.
v. Harris Trust & Sav. Bank, 510 U.S. 86, 94 (1993)). Moreover,
“specific statutes prevail over general ones.” Id. (citing D. Ginsberg
& Sons v. Popkin, 285 U.S. 204, 208 (1932)). The Supreme Court
thus construes the assignment provision in § 1396k(a) identically
18

as the one in § 1396a(a)(25); indeed, it has stated that §
1396a(a)(25)(H)—which limits recovery “to the extent that
payment has been made . . . for medical assistance for health care
items

or

services

furnished

to”

a

recipient—“echoes

the

requirement of mandatory assignment rights in § 1396k(a)[.]”
Ahlborn, 547 U.S. at 281. Because § 1396k(a) is not interpreted as
narrowly as AHCA suggests, its blinders-on approach is
unavailing.
This Court concludes that federal law prohibits state
agencies from seeking reimbursement of past Medicaid payments
from portions of a recipient’s recovery that represents future
medical expenses. Florida’s statute is therefore preempted if and
to the extent that it operates that way. See Irving v. Mazda Motor
Corp., 136 F.3d 764, 768 (11th Cir. 1998) (“Conflict preemption
exists where state law actually conflicts with federal law, making
it impossible to comply with both, or where the state law ‘stands
as an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress.’” (quoting Lewis v. Brunswick
Corp., 107 F.3d 1494, 1500 (11th Cir. 1997))). And for that reason
it is preempted. Florida law does not prohibit AHCA from
asserting a lien on portions of a recipient’s recovery representing
19

future medical expenses; in fact, it explicitly allows it to do just
that. § 409.910(17)(b) (allowing AHCA to recover from the “portion
of the total recovery . . . for past and future medical expenses”
(emphasis added)). Accordingly, that portion of the statute is
preempted.
IV
Gallardo also asserts that § 409.910 and its one-size-fits-all
statutory formula—which the Medicaid recipient may only rebut
by presenting clear and convincing evidence to the contrary—
violates due process and is preempted by federal law.
A
At first glance, Gallardo’s due-process argument is both
circular and conclusory. According to her, the reimbursement
statute violates due process because it takes the recipient’s
property without affording it adequate process. Reading between
the blurred lines of her gaunt argument, however, this Court can
conceive of two possible due-process challenges.
Gallardo could first argue, and it appears she does, that
Florida’s reimbursement statute effectively turns due process on
its head. The argument goes as follows. Florida’s statutory formula
violates the Due Process Clause by allowing AHCA to take
20

Gallardo’s property—namely, the settlement funds not allocated
for past medical expenses—and only allowing her to recover those
funds if she can affirmatively disprove the formula-based
allocation with clear and convincing evidence. In support, Gallardo
cites cases holding that “the State’s power to regulate procedural
burdens [is] subject to proscription under the Due Process Clause
if it ‘offends some principle of justice so rooted in the traditions and
conscience of our people as to be ranked as fundamental[.]’” Cooper
v. Oklahoma, 517 U.S. 348, 367 (1996) (citing Patterson v. New
York, 432 U.S. 197, 201–02 (1977)); see also Del Valle v. State, 80
So.3d 999, 1013 (Fla. 2011) (holding that the necessity of certain
criminal procedures “is rooted in the fundamental fairness notion
required by due process”). But this case just doesn’t involve such a
rule. Those cases highlight rare circumstances where a person is
deprived of something so fundamental that imposing a heightened
burden to challenge that deprivation violates the Due Process
Clause. And in fact, those cases make explicit that the mere
deprivation of money is not one of those rare circumstances. See
Cooper, 517 U.S. at 363 (distinguishing the “‘mere loss of money’”
from other civil proceedings where due process allows a heightened

21

burden of proof (citing Santosky v. Kramer, 455 U.S. 745, 756
(1982))). Those cases are therefore readily distinguishable.
Alternatively, Gallardo could have asserted that Florida’s
reimbursement statute violates the Due Process Clause because it
does not provide notice and a meaningful opportunity to be heard.
See Mathews v. Eldridge, 424 U.S. 319, 349 (1976) (stating that
“the essence of due process is the requirement that” a person be
provided notice and a “meaningful opportunity to present their
case”). It is undisputed that Medicaid recipients are provided
notice. Thus, the only issue is whether Florida’s reimbursement
statute grants recipients a meaningful opportunity to be heard.
Gallardo could have argued that it doesn’t; that is, by placing such
an onerous burden on Medicaid recipients to regain their property,
Florida has so drastically undermined § 409.910’s post-deprivation
remedy that it is essentially nonexistent and thus inadequate
under federal law. See Hamlin v. Vaudenberg, 95 F.3d 580, 585
(7th Cir. 1996) (holding that a “meaningless or nonexistent” postdeprivation remedy is inadequate). But that argument was not
made, and this Court will not go out of its way to decide an issue
that is not before it. This is particularly true where, as here, this
Court explicitly asked Gallardo’s counsel to define the contours of
22

her due process claim at the hearing and whether he was making
this specific argument, and counsel redirected this Court to Cooper
and its progeny.
B
Secondly, and more broadly, Gallardo argues that Florida’s
entire reimbursement statute conflicts with and is preempted by
federal law. To the extent that Medicaid recipients must
affirmatively disprove the arbitrary formula-based allocation with
clear and convincing evidence to successfully overcome it, this
Court agrees.
One particular issue relevant to this case remained
undecided

after

Ahlborn.

Because

states

may

not

seek

reimbursement from “any part of a Medicaid beneficiary’s tort
recovery ‘not designated as payments for medical care,’” how can
states “determine what portion of a settlement represents
payment for medical care[?]” Wos, 133 S. Ct. at 1397–98 (quoting
Ahlborn, 547 U.S. at 284). In Wos, the Supreme Court considered
a North Carolina statute that “establishe[d] a conclusive
presumption that one-third of the [Medicaid recipient’s] recovery
represents compensation for medical expenses.” Id. at 1398. The
Court recognized that while some “rebuttable presumptions and
23

adjusted burdens of proof” may comply with the Medicaid statute,
“[a]n irrebuttable, one-size-fits-all statutory presumption” that a
pre-determined percentage of the recipient’s recovery constitutes
“payment for medical care” does not. Id. at 1398–99, 1401
(citations omitted). That is particularly so if the state has not
provided evidence that such an allocation was “reasonable in the
mine run of cases” and has no process “for determining whether
[such an allocation] is a reasonable approximation in any
particular case.” Id. at 1398–99. Because North Carolina’s
irrebuttable, one-size-fits-all statutory presumption allowed “the
State to take a portion of a Medicaid beneficiary’s tort judgment or
settlement not ‘designated as payments for medical care[,]’” id. at
1402 (quoting Ahlborn, 547 U.S. at 284), it was preempted by
federal law.
Florida’s statute suffers from that same defect, yet for more
nuanced reasons. And this Court is not reaching that conclusion
just because Florida’s reimbursement statute doesn’t pass the
“smell test.” Rather, the Supreme Court has provided an effective
framework to analyze this kind of scenario—a rebuttable
presumption that is nearly impossible to rebut. Specifically, Wos
teaches that states cannot accomplish through creative legislative
24

draftsmanship that which is prohibited under federal law. See
Wos, 133 S. Ct. at 1398 (“A State may not evade the pre-emptive
force

of

federal

law

by

resorting

to

creative

statutory

interpretation or description at odds with the statute’s intended
operation and effect.” (citing Nat’l Meat Assn. v. Harris, 565 U.S.
452 (2012))). That is because “[i]n a pre-emption case . . . a proper
analysis requires consideration of what the state law in fact does,
not how the litigant might choose to describe it.” Id. In other words,
preemption “is not a matter of semantics.” Id.
But that is precisely what Florida has tried to do here;
namely, evade federal law by enacting a “rebuttable” one-size-fitsall statutory formula that almost by definition allows AHCA to
obtain more than that which it is entitled to. And by setting a
baseline wholly detached from any rational standard—for
instance, the federal Medicaid statute, Supreme Court case law, or
AHCA’s past medical expenditures in that specific case—it does so
in a wildly arbitrary fashion.
Like in Wos, nothing in the record helps explain why Florida
chose the precise formula that it did. It is therefore impossible to
judge whether it is “likely to yield reasonable results in the mine
run of cases.” Id. at 1402. If this case is any example, it is not likely
25

to do so. When the Florida legislature amended the reimbursement
statute, it had the benefit of Wos and knew what changes were
required to comply with federal law. See ECF No. 10-5, at 5. But
rather than trying to adequately address Wos through thoughtful
amendments, the Florida legislature simply slapped a band-aid on
the reimbursement statute by calling the formula-based allocation
rebuttable and requiring the recipient to meet a heightened
burden to successfully challenge it. That superficial response is
simply not enough.
Similarly, although not before this Court, Florida’s
reimbursement statute ignores that “[w]hen there has been a
judicial finding or approval of an allocation between medical and
nonmedical 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, 133 S. Ct. at 1399. In Florida, not even a jury’s
allocation is immune from the reimbursement statute. See §
409.910(11)(f) (applying Florida’s statutory formula to any case “in
which the recipient or his or her legal representative is a party
which results in a judgment, award, or settlement from a third

26

party”). That is further evidence that Florida did not adequately
tailor its reimbursement statute to federal law.
Moreover, Florida’s arbitrary statutory formula—which
plucks a 25% figure for attorney’s fees out of mid-air—allows
AHCA to take even more money than it is entitled to. The Rules
Regulating the Florida Bar allow attorneys to set their fee on a
sliding scale up to 40% of the plaintiff’s recovery. 4 See R.
Regulating Fla. Bar 4–1.5(f)(4)(B)(i) (2017) (allowing an attorney
to charge a contingent fee up to 33.3% of any recovery up to $1
million before the filing of an answer and up to 40% after the filing
of an answer). Florida’s statutory formula, however, only reserves
25% of the judgment for attorney’s fees. That necessarily strips
even more money from the recipient.
An example is helpful. Imagine that AHCA asserts a
$300,000

lien

against

a

recipient’s

cause

of

action

as

That figure is conditioned on whether an answer has been filed or
whether a demand for appointment of arbitrators has been made. Before either
of those conditions occurs, Plaintiff’s attorneys may charge “33 1/3% of any
recovery up to $1 million,” plus “30% of any portion of the recovery between $1
million and $2 million,” plus “20% of any portion of the recovery exceeding $2
million.” R. Regulating Fla. Bar 4–1.5(f)(4)(B)(i)(a) (2017). After one of those
conditions occur, Plaintiff’s attorneys may charge “40% of any recovery up to
$1 million,” plus “30% of any portion of the recovery between $1 million and $2
million,” plus “20% of any portion of the recovery exceeding $2 million.” Id. 4–
1.5(f)(4)(B)(i)(b).
4

27

reimbursement for expenditures it made on the recipient’s behalf.
Because of liability issues, the recipient settles the case for
$100,000—$10,000 of which represents past medical expenses.
Since the recovery is less than AHCA’s lien, the formula-based
allocation applies. Given the Florida Bar’s rules for attorney’s fees,
the recipient’s attorney in either scenario could receive up to
$40,000, and let’s say he does. Assuming a hypothetical formula
tied to the Florida Bar’s attorney’s fees rules—meaning that 40%
of the recipient’s recovery is reserved for attorney’s fees—and
further assuming that the recipient is not able to rebut the
formula-based allocation, AHCA and the recipient would both
receive $30,000. Yet under Florida’s actual statutory formula,
AHCA would receive $37,500, which would leave only $22,500 for
the recipient—$7,500 less than the recipient would have received
under the hypothetical formula.

Attorney’s Fees
AHCA’s
Reimbursement
Recipient
Recovery

Hypothetical FormulaBased Allocation tied to
the Florida Bar’s
Attorney’s Fees Rules
$40,000
$30,000

§ 409.910(17)’s
FormulaBased
Allocation
$40,000
$37,500

$30,000

$22,500

Consequently, Florida’s statutory formula allows AHCA to pocket
28

even more money it would have been entitled to under a formula
tailored to the Florida Bar’s attorney’s fees rules.
That result is not an accident. Florida did not hide the ball
here; rather, it made explicit its intent to tilt the scales in AHCA’s
favor. See ECF No. 10-4, at 4 (opining that § 409.910’s current
iteration “increase[es] the likelihood the State will prevail in
defending Medicaid liens,” “result[s] in an increase in [third-party
liability] collections[,]” and “reduc[es] the expense and staff time”
required to defend Medicaid liens). That is consistent with the
Florida legislature’s intent “that Medicaid be the payor of last
resort for medically necessary goods and services furnished to
Medicaid recipients.” § 409.910(1).
The arbitrary nature of Florida’s reimbursement statute
alone is likely enough to rule that it is preempted. See Wos, 133 S.
Ct. at 1398 (“If a State arbitrarily may designate one-third of any
recovery as payment for medical expenses, there is no logical
reason why it could not designate half, three-quarters, or all of a
tort recovery in the same way.”). Yet it gets worse. On top of that
arbitrary baseline, Florida has shifted the burden to the Medicaid
recipient to prove that she is entitled to that which is already hers.
And that burden is a particularly onerous one. Cf. Mfg. Research
29

Corp. v. Graybar Elec. Co., Inc., 679 F.2d 1355, 1360 (11th Cir.
1982) (suggesting that a clear and convincing burden “is an
onerous one”); Gordon v. Dennis Burlin Sales, Inc., 174 B.R. 257,
259 (Bankr. N.D. Ohio 1994) (stating that “a clear and convincing
evidence standard . . . is a more onerous burden of proof” (citing In
re Smith, 170 B.R. 111 (Bankr. N.D. Ohio 1994))).
What makes Florida’s reimbursement statute and AHCA’s
application of that statute even more pernicious is that AHCA has
both the authority and the capability to seek its reimbursement
directly from the responsible third party (or, as here, parties). See
§ 409.910(11) (“The agency may, as a matter of right, in order to
enforce its rights under this section, institute, intervene in, or join
any legal or administrative proceeding in its own name in one or
more of [a variety of] capacities[.]”). Yet in this case and many
others, it simply chooses not to. And the effect of that choice should
not be overlooked. Rather than paying its own attorneys to recover
these funds, AHCA shifts a disproportionate share of the costs to
the recipient—costs which come directly out of the recipient’s

30

recovery. Then AHCA seeks its reimbursement directly from the
recipient’s already-reduced recovery.
At a certain point, requiring a Medicaid recipient to
overcome a hodgepodge of hurdles amounts to a quasi-irrebuttable
presumption.

That

is

the

case

here;

although

Florida’s

reimbursement statute—which requires Medicaid recipients to
overcome obstacle after obstacle just to keep a portion of the
judgment that the recipient is already entitled to—may be
“rebuttable,” in practice, it is a quasi-irrebuttable one. 5 Yet that
flouts federal law. Because Florida cannot save its reimbursement
statute through wily draftsmanship, see Wos, 133 S. Ct. at 1398
(“A state may not evade the pre-emptive force of federal law by
resorting to creative statutory interpretation or description at odds
with the statute’s intended operation and effect.”), it is therefore
preempted.
In so ruling, this Court wants to make itself absolutely clear.
This Court is not saying that Florida may not enact a rebuttable,
formula-based allocation to determine what portion of a judgment
AHCA’s reference to other administrative proceedings where Medicaid
recipients successfully rebutted the formula-based allocation does not
undermine this conclusion. It is of no matter how certain Administrative Law
Judges apply Florida’s reimbursement statute; their application of that statute
isn’t before this Court. The statute itself is.
5

31

represents past medical expenses; in fact, the Supreme Court has
suggested, without holding, just the opposite. See id. at 1402
(mentioning that states “may even be able to adopt ex ante
administrative criteria for allocating medical and nonmedical
expenses”); see also Ahlborn, 547 U.S. at 288 n.18 (suggesting that
states can enact “special rules and procedures for allocating tort
settlements”). Nor is it saying that Florida may not shift the
burden to Medicaid recipients to disprove that allocation; that
issue is not before this Court, but it probably can. See Wos, 133 S.
Ct. at 1401 (implying that certain “rebuttable presumptions and
adjusted burdens of proof” may be “compliant with the federal
statute”).
And although this Court doesn’t get to rewrite Florida’s
statute—and it doesn’t endeavor to do so—it can say when a
Florida statute runs afoul of federal law. See Fresenius Med. Care
Holdings, Inc. v. Francois, 832 F. Supp. 2d 1364, 1367 (N.D. Fla.
2011) (Mickle, J.) (“Other times, preemption is implied, such as
when . . . the state and federal law are in such conflict that their
objectives are at odds or when it would be impossible to comply
with both (known as conflict preemption).” (citing Fla. State
Conference of the NAACP v. Browning, 522 F.3d 1153, 1167 (11th
32

Cir. 2008))). It does here. The reimbursement statute’s clear and
convincing burden—when coupled with a formula-based baseline
wholly divorced from reality and a requirement that the recipient
affirmatively disprove that baseline to successfully rebut it—is in
direct conflict with the Medicaid statute’s anti-lien and antirecovery provisions. Thus, in this specific scenario, Florida’s clear
and convincing burden is preempted by federal law.
Accordingly,
IT IS ORDERED:
1. Gallardo’s Motion for Summary Judgment, ECF No. 11,
is GRANTED.
2. AHCA’s Motion for Summary Judgment, ECF No. 13, is
DENIED.
3. In its current form, § 409.910, Fla. Stat. (2016), is
preempted by federal law; namely, 42 U.S.C. § 1396a, 42
U.S.C. § 1396k, and 42 U.S.C. § 1396p.
4. The Clerk shall enter judgment stating:
Gianinna Gallardo, an incapacitated person, by and
through her parents and co-guardians, Pilar Vassallo and
Walter Gallardo, successfully proved that portions of §
409.910(17)(b), Fla. Stat. (2016) are preempted by federal
law. The State of Florida Agency for Health Care
Administration is therefore enjoined from enforcing that
statute in its current form.
33

It is declared that the federal Medicaid Act prohibits the
State of Florida Agency for Health Care Administration
from seeking reimbursement of past Medicaid payments
from portions of a recipient’s recovery that represents
future medical expenses.
It is also declared that the federal Medicaid Act prohibits
the State of Florida Agency for Health Care
Administration from requiring a Medicaid recipient to
affirmatively disprove Florida Statutes § 409.190(17)(b)’s
formula-based allocation with clear and convincing
evidence to successfully challenge it where, as here, that
allocation is arbitrary and there is no evidence that it is
likely to yield reasonable results in the mine run of cases.
5. The Clerk shall close the file.

SO ORDERED on April 18, 2017.

s/ MARK E. WALKER
United States District Judge

34