Colorado’s third-party liability statute provides that the lien “shall
be in an amount that shall be the fullest extent allowed by federal law
as applicable in this state, but not to exceed the amount of the medical
assistance provided.” C.R.S. § 25.5-4-301(5)(a). The problem
is when the settlement or jury verdict does not specify how much of the
total award was allocated to medical expenses, as opposed to other damages,
such as lost wages, impairment of quality of life, and pain and suffering.
If the settlement or verdict fails to adequately apportion the medical
damages, the task is left to the courts.
See State Dep’t of Health Care Policy & Fin. v. S.P., 356 P.3d 1033, 1036 (Colo. Ct. App. 2015). Up until June 2015, the courts
used several different analyses based upon any reasonable means to determine
such allocations. This changed with the Colorado Court of Appeals’
State Dep’t of Health Care Policy & Fin. v. S.P., 356 P.3d 1033 (Colo. Ct. App. 2015).
S.P., the plaintiff reached a global settlement in her personal injury case
that did not allocate the amount of the settlement for medical expenses.
Id. at 1037. The parties agreed upon the total value of the case, but a dispute
then arose regarding the amount that the State Department was entitled
to as its Medicaid lien.
Id. The Denver District Court then created the following formula, which the
Colorado Court of Appeals affirmed:
Amount paid by Medicaid ÷total value of case × 100 = X % of
medical expenses to total value
X % × gross settlement amount = gross repayment lien amount
Lien amount – attorneys’ fees reduction* = net repayment amount
*Per C.R.S. § 25.5-4-301(5)(d), up to 25% of the lien may be reduced
as contribution to attorneys’ fees. Attorneys’ fees reduction
= lien amount – (25% × lien amount).
Id. at 1038-1039.
In other words, the Court first determined the percentage of the total
value of the case that can be allocated to medical expenses. That percentage
times the gross settlement amount determines the gross repayment lien
amount that the State Department is entitled to. Reducing the lien amount
by the State Department’s contribution to attorneys’ fees
gives the total net amount that the State Department is entitled to recover.
Following this formula will enable you to use a reasonable means to calculate
a proportional allocation of the amount that Medicaid will be entitled
to collect from your settlement proceeds. Such calculations are complex,
and if you have questions, give us a call to speak with an experienced
attorney to ensure that you are not giving away more of your subrogation
rights than you should be.