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Supreme Court, New York County, New York.

Antastasia HARRIS, as Administratrix of Estate of Austin Harris, Plaintiff, v. The CITY OF NEW YORK, New York City Human Resources Administration, Casa V, New York City Health and Hospitals Corporation, North General Hospital, North General Home Attendant Corporation d/b/a North General Home Attendant Agency and Yvonne Spaulding, Defendants.

Decided: March 29, 2007

Miller & Eisenman by Michael P. Eisenman, Esq., New York, for the Plaintiff. Bamundo, Zwal & Schermerhorn, LLP by Kenneth M. Dalton, Esq., New York, for Municipal Defendants. Jeremy A. Knapp, Esq., HRA/OLA-Estates Section, New York, for Dept. of Social Services.

Plaintiff seeks an order declaring that the settlement reached in the above-captioned action pertains solely to past pain and suffering and that the New York City Department of Social Services and/or the New York City Department Human Resources Administration are precluded from satisfying any liens from any settlement funds.   The motion is granted only to the extent that the matter shall be set down for a hearing before this court to determine what portion of the settlement is deemed to be for pain and suffering and what amount is to be repaid to DSS, and is otherwise denied.


The decedent Austin Harris was badly burned in a shower in April 2002 when he was left unwatched by his home attendant, who then clothed him and left his condition to be discovered by his niece several hours later (Ord. to Show Cause, Eisenman Aff. ¶ 3).   After months of extensive and painful hospital treatments including surgical debridements and the amputation of his right leg due to ulcerations, he died on February 5, 2003, without ever returning home (Eisenman Aff. ¶ 3).   His niece, as administratrix of his estate, commenced an action in 2003 against the home attendant, her agency and hospital, and the City of New York. With a trial date of November 1, 2006, the parties entered into settlement negotiations.   According to plaintiff, the parties reached a settlement agreement wherein plaintiff would accept $1,500,000 for pain and suffering.1  This amount is one half of the potentially available insurance coverage and, as stated by the attorney for the City defendants, “represent[s] a reasonable settlement for the pain and suffering of the plaintiff's decedent without accounting for special damages such as expenses for medical care and treatment, nursing home care and other related expenses.”  (Dalton Aff. unnumbered p. 2).   The City defendants concede that a jury verdict “could have greatly exceeded the agreed upon settlement, and that the entirety of the policy limits were reasonably at risk.”  (Dalton Aff. unnumbered p. 2).

At issue is an outstanding Medicaid lien for medical expenses paid by the Department of Social Services of the City of New York (DSS) on behalf of the decedent over the course of the last ten years of his life, in the amount of $296,158.33 (Ord. to Show Cause Ex. T).  According to plaintiff, the municipal defendants requested that DSS waive this lien, but DSS has refused (Eisenman Aff. ¶ 21).2 Plaintiff therefore brings this post-settlement motion by order to show cause seeking a judicial determination as to the percentage of the settlement deemed to be for pain and suffering and what, if any amount is to made available to repay medical expenses.   She argues that the entire settlement should be designated for the pain and suffering endured by the decedent, and that DSS as well as the Human Resources Administration and the U.S. Department of Health & Human Services, Center for Medicare and Medicaid Services, should be precluded from seeking to satisfy their respective Medicaid and Medicare liens from any portion of the settlement.   By stipulation of all parties dated December 18, 2006, the portion of the instant application which sought relief regarding the non-party U.S. Department of Health and Human Services was discontinued without prejudice to the issue being addressed against such non-party in the United States District Court.   This stipulation was also signed by the federal non-party agency.

DSS argues that pursuant to Social Services Law § 104(1), DSS is a preferred creditor against the estate of the decedent, and that its right to recovery arises out of Social Services Law § 369 which provides that recovery “must be pursued” from the estate of any individual or injured person 55 years or older who received medical assistance which social services paid for (Social Services Law § 369[2] ).   At oral argument, on the record, DSS withdrew its contention that the matter should be transferred to Surrogate's Court to determine the apportionment of settlement between pain and suffering and medical expenses and other items of damages.   The parties agreed to have Supreme Court exercise concurrent jurisdiction with Surrogate's Court given the procedural history of this particular matter to determine what portion of the funds are subject to the liens.   Questions as to whom is actually a creditor or distributee, will obviously be determined by the Surrogate's Court.


Medicaid is a jointly funded federal and state program that pays for necessary medical care for qualifying indigent persons (see, 42 USC § 1396 et seq.;   Social Services Law § 363 et seq.).   Congress has mandated that Medicaid be a “payer of last resort” (see, Arkansas Department of Health & Human Services v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 1767, 126 S.Ct. 1752, 164 L.Ed.2d 459 [2006] [citing S.Rep. No. 99-146, p. 313 (1985) ] ).   As such, states are required to take “all reasonable measures to ascertain the legal liability of third parties ․ to pay for care and services available under the plan,' and seek reimbursement from them (42 USC § 1396a [a][25][A],[B] ).”  (Calvanese v. Calvanese, 93 N.Y.2d 111, 116, 688 N.Y.S.2d 479, 710 N.E.2d 1079 [1999] ).   Among the obligations of Medicaid recipients in New York includes their assignment to the State of the right to seek reimbursement from any third party up to the amount of medical assistance paid (Social Services Law § 366[4][h] [1];  18 NYCRR 360-7.4[a][4] ).   The local social services district is subrogated, to the extent of its expenditures for medical care furnished, to any rights a Medicaid recipient may have to third-party reimbursement (Social Services Law § 367-a[2][b];  18 NYCRR 360-7.4[a] [6] ).   DSS obtains “all the rights that the recipient has as against the third party to recover for medical expenses, including the ability to immediately pursue those claims against the third party” (Cricchio v. Pennisi, 90 N.Y.2d 296, 307, 660 N.Y.S.2d 679, 683 N.E.2d 301 [1997] ).

 Under New York Social Services Law § 104-b, DSS may, as an alternative to suing the responsible third party directly, place a lien on the personal injury suits brought by Medicaid recipients against the responsible parties, and the lien will attach to any verdict, judgment, award, or settlement, and continue until discharged by the local public welfare official (Social Services Law § 104-b[3], [7] ).   Until recently, New York's decisional law had held that DSS has broad authority to pursue the amount of third-party reimbursements to which it is entitled as well as to enforce any liens (see, Gold v. United Health Services Hosps., Inc., 95 N.Y.2d 683, 723 N.Y.S.2d 117, 746 N.E.2d 172 [2001] ), and that the entire amount of a personal injury settlement was available to satisfy a Medicaid lien and not just the portion of the settlement specifically allocated to past medical expenses (see Calvanese v. Calvanese, 93 N.Y.2d 111, 688 N.Y.S.2d 479, 710 N.E.2d 1079 [1999];  Cricchio v. Pennisi, 90 N.Y.2d 296, 660 N.Y.S.2d 679, 683 N.E.2d 301 [1997] ).   However, in May 2006, the United States Supreme Court issued Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459, which squarely held that the “anti-lien” provision found in 42 USC § 1396p(a) bars states from imposing liens against the property of Medicaid recipients prior to their deaths, and that the statutory exception to that provision, permitting states to enforce statutory liens on settlements, judgments, or awards of monies to Medicaid recipients, is restricted to the portion of the settlement, judgment, or award that represents reimbursement for actual medical costs received prior to the recipient's death (42 USC §§ 1396a [a][25] and 1396k[a] ).

In Ahlborn, the Arkansas state Medicaid program paid over $200,000 in medical expenses following the plaintiff's car accident.   Plaintiff brought suit in state court against two alleged tortfeasors for personal injury damages including medical costs, pain and suffering, lost earnings, and lost future earnings, and settled out of court for a lump sum of $550,000.00, without the state's participation.   The state then sought to enforce its Medicaid lien.   The trial court held that the state was entitled to be reimbursed for the entire amount of Medicaid expenses paid out.   This ruling was reversed on appeal and the United States Supreme Court affirmed.   The Supreme Court held that the lien asserted by the state for the entire amount of medical expenses violated the anti-lien law as it required depletion of non-medical expense compensation.   The Court noted with apparent approval that the parties had, in order to facilitate the trial court's resolution of the legal questions, stipulated as to the value of the claim and the percentage of that sum which was represented by the settlement figure, and the suggested figure representing the proportion of the total that should be allocated as repayment of medical expenses was thus less than $36,000.00 (126 S.Ct. at 1757-1758).   Notably, the state agency conceded that had a jury or judge allocated a sum for medical payment out of a larger award, the agency would have been entitled to reimburse itself only from the portion so allocated, even if the amount were smaller than the total amount of the Medicaid expenses (126 S.Ct. at 1762, n. 11).

A few published decisions from New York courts have already addressed Ahlborn's meaning.   In Lugo v. Beth Israel Med. Ctr., 13 Misc.3d 681, 819 N.Y.S.2d 892 (Sup.Ct., N.Y. County 2006), where a medical malpractice action settled for $3,500,000.00, and the DSS lien for $47,349.00 was challenged in the course of determining the infants compromise order, the court held that pre-Ahlborn rulings suggesting that DSS could “automatically” recoup its lien from the entire settlement proceeds, were implicitly overruled (13 Misc.3d at 686, 819 N.Y.S.2d 892).  Lugo holds that pursuant to Ahlborn, the court has the power to allocate settlement proceeds and to hold hearings to determine the value of the case, the items of damages and settlement proceeds, to release settlement funds to the plaintiffs, or hold disputed amounts in escrow until a final determination is reached concerning the amount to be reimbursed to DSS, as needed (13 Misc.3d at 688-690, 819 N.Y.S.2d 892).

In Matter of Estate of Ramirez, 14 Misc.3d 480, 826 N.Y.S.2d 553 (Surr. Ct., Bronx County 2006), a decision relied upon by DSS herein, the Surrogate's Court held that Ahlborn's ruling pertained solely to limit the state's rights to recover from Medicaid recipients' tort actions, but does not limit any right to recover from the estates of Medicaid recipients.  Ramirez was a proceeding to compromise a wrongful death action and to discontinue a personal injury action.   The decedent's tort settlement did not include any recovery for medical expenses which had been paid for by the defendant's no-fault insurer.   DSS sought recovery for other medical costs expended over the previous ten years based not on a lien pursuant to Social Services Law §§ 366(4)(h)(1) and 104-b, which Ahlborn addressed and limited, but pursuant to Social Services Law § 369(2).  Section 369(2)(b)(ii) of the Social Services Law, the “counterpart” to 42 USC § 1396p[b][1][B], states in pertinent part that, “recoveries [of medical assistance] must be pursued ․ (B) from the estate of an individual who was fifty-five years of age or older when he or she received such assistance.”   The Ramirez court observed that DSS was required by statute to assert its claim against the decedent's estate under Social Services Law § 369(2)(b)(i)(B) regardless if the assets arose from a personal injury recovery, a lottery, or other source (Ramirez, 14 Misc.3d at 483, 826 N.Y.S.2d 553).

DSS, in relying on Ramirez, argues that it properly seeks to collect from his estate the amounts paid out by Medicaid on his behalf over the course of ten years, as mandated by section 369 of the Social Services Law. Section 369 accords with the federal provision 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.”   (42 USC § 1396p[a][1] ).   DSS further argues that neither Ahlborn nor Lugo is controlling, and that Social Services Law § 369 places no limitation on its right herein to recover all Medicaid expenses provided, rather than a proportionate share (Knapp Aff. in Opp. ¶ 10).

 It is has been held that it is for the court to determine the extent to which a personal injury settlement addresses the claim for past medical expenses, and the determination “is not foreclosed by the form of the settlement documents or the language used by the attorneys in the settlement stipulation, if that form and language do not truly reflect the consideration of the settlement, or are chosen merely as a means to defeat DSS' recovery” (Simmons v. Aiken, 100 A.D.2d 769, 770, 474 N.Y.S.2d 41 [1st Dept.1984] [holding that “the court may properly consider whether the pleadings and bill of particulars asserted a claim for medical expenses, whether the settlement reserved or released such claims, and perhaps what role the fact and size of the medical expenses played in the settlement.”] ).   Although plaintiff argues that she settled the litigation with the defendants on the basis that the entire award was to be considered for pain and suffering, and the defendants concede that they could have faced much greater financial liability had a trial been held, this does not address the issue of the status of DSS as a preferred creditor.   Furthermore, the court cannot conduct a full Lugo-type analysis on the extant record.   DSS properly brings its claim, however the amount it will collect is subject to the court's determination.   A hearing is ordered to determine the percentage of the settlement that is for pain and suffering and what amount is to be paid to DSS to reimburse it for medical expenses paid (see, McClenahan v. Farber, 247 A.D.2d 449, 668 N.Y.S.2d 689 [2d Dept.1998] [holding that trial court should have conducted a hearing to determine if any portion of the settlement of the infant plaintiff's claim was intended to cover past reimbursed medical expenses] ).   It is

ORDERED that the motion is granted to the extent that the issue of the percentage of the settlement in the above-captioned matter to be deemed to be for pain and suffering and the amount of the settlement proceeds to be made available to repay medical expenses is set down for a framed-issue hearing on the Lugo factors before it on May 16, 2006 at 2 p.m. in Room 289, 80 Centre St., New York, N.Y. 10013.

This constitutes the decision and order of the court.


1.   Plaintiff originally demanded $3,000,000, while defendants offered $950,000 (Eisenman Aff. ¶¶ 18, 19).

2.   A second lien in the amount of $165,471.92, reflecting amounts spent on medical treatment following the accident, will apparently not be pursued by Medicare (Ord. to Show Cause Ex. S;  see Eisenman Aff. ¶¶ 32, 33).


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