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Schmidt v. Bellevue Medical Center L.L.C.

United States District Court, D. Nebraska

May 21, 2018

DORAN SCHMIDT, Individually; and S.S., a minor, by and through Doran Schmidt, her natural mother and next friend; Plaintiffs,


          Laurie Smith Camp Chief United States District Judge.

         This matter is before the Court on the Motion to Determine Lien, ECF No. 362, filed by Intervenor Nebraska Department of Health and Human Services (DHHS). For the reasons stated below, the Motion will be granted consistent with this Memorandum and Order.


         S.S. was born at the Bellevue Medical Center on November 2, 2012, with severe brain damage. Plaintiffs brought suit against Defendants Bellevue Medical Center, LLC; Heather Ramsey, the treating certified nurse midwife; and The Midwife's Place, where Doran Schmidt received her prenatal care as well as care during the early stages of labor. Before trial, Plaintiffs reached a settlement with Ramsey and The Midwife's Place. On August 6, 2015, following a two-week trial, the jury returned a verdict against the Bellevue Medical Center in the amount of $17, 000, 000.00. On November 25, 2015, the Court reduced the jury verdict to $1, 750, 000.00, plus post-judgment interest, under the Nebraska Hospital-Medical Liability Act (NHMLA), Neb. Rev. Stat. § 44-2825. ECF No. 290. The United States Court of Appeals for the Eighth Circuit upheld the NHMLA's cap on damages. See generally, Schmidt v. Ramsey, 860 F.3d 1038, 1047 (8th Cir. 2017), cert. denied sub nom. S.S. ex rel. Schmidt v. Bellevue Med. Ctr. L.L.C., 138 S.Ct. 506 (2017).

         In order to pay for S.S.'s medical expenses, Schmidt received Medicaid benefits from DHHS. To date, DHHS has paid $146, 180.89 of the $413, 350.44 in billed charges. See Exhibit 4, ECF No. 363-3. DHHS now seeks full recovery of its subrogation interests.


         I. DHHS's Lien Under the Nebraska Medical Assistance Program

         DHHS administers Nebraska's Medicaid program, known as the Nebraska Medical Assistance Program (NMAP). Neb. Rev. Stat. § 68-908; see also Smalley v. Neb. Dep't of Health & Human Servs., 811 N.W.2d 246, 252 (Neb. 2012). NMAP provides joint state and federal funding of medical care for low-income Nebraskans. Neb. Rev. Stat. §§ 68-904, 905. Federal law requires states participating in Medicaid, such as Nebraska, to comply with standards and requirements imposed by federal statutes and regulations. Thorson v. Neb. Dep't of Health & Human Servs., 740 N.W.2d 27, 30 (Neb. 2007). One of the federal statutory requirements relates to third-party liability for medical expenses that might otherwise be paid by Medicaid. Under the federal statute, the state agency administering the state's Medicaid program-DHHS in Nebraska-must take all reasonable measures to ascertain the legal liability of third parties. 42 U.S.C. § 1396a(a)(25)(A). Once the liability is ascertained, states must seek reimbursement to the extent of the legal liability. 42 U.S.C. § 1396k(a)(25)(B).

         To facilitate recovery from liable third parties, states are required to pass laws, which provide a means to recover medical expenses. See, e.g., 42 U.S.C. § 1396k(a)(25)(I). In situations where a third party is liable to make payments for medical expenses on behalf of a beneficiary, states are required to have laws in place throuhg which the state is deemed to have acquired the beneficiaries' rights to those payments. 42 U.S.C. § 1396k(a)(25)(H). NMAP's provisions are set out in Neb. Rev. Stat. § 68-916. Under § 68-916, recipients of NMAP benefits assign to DHHS their rights to pursue or receive payments for medical expenses from liable third party tortfeasors.

         Under the terms of Neb. Rev. Stat. § 68-916, when Doran Schmidt applied for Medicaid benefits on behalf of S.S., she assigned her and S.S.'s rights to payments for medical expenses from a third party tortfeasor to DHHS. Before the jury determined Bellevue Medical Center's legal liability, DHHS paid $146, 180.89 for S.S.'s medical expenses. See Carnes Aff. ¶ 3, ECF No. 363-2, Page ID 8122; Itemization of Medical Treatment, ECF No. 363-3. Plaintiffs do not dispute that they were recipients of NMAP benefits, nor do they dispute that DHHS has paid $146, 180.89 in medical expenses for S.S. The judgment against Bellevue Medical Center for S.S.'s injuries established third party liability. Accordingly, under the express language of 42 U.S.C. § 1396k(b) and the provisions of the NMAP statutes, DHHS is entitled to reimbursement for the medical expenses it paid on behalf of S.S.

         II. Plaintiffs' Arguments Against the Lien

         Plaintiffs argue that principles of fairness and equity demand that DHHS's claim be reduced or completely eliminated. Plaintiffs also argue that the lien is premature. For the reasons stated below, neither of these arguments presents a basis for reducing or avoiding DHHS's lien.

         A. Equity and Fairness of the Lien

         Plaintiffs first argue that DHHS was fully reimbursed when the jury's verdict was reduced from $17, 000, 000 to the statutory limit due to the NHMLA's cap on damages. Plaintiffs reason that DHHS saved significant money by avoiding a large payout under Nebraska's Excess Liability Fund. Nebraska's Excess Liability Fund, created in conjunction with the NHMLA, provides a state-run insurance benefit to qualified health care providers. Under the statute, the Excess Liability Fund pays medical malpractice damages in excess of $500, 000 on behalf of qualifying health care providers. Neb. Rev. Stat. § 44-2832(2). Plaintiffs argue that the Excess Liability ...

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