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Smith v. United States

United States District Court, D. Oregon, Medford Division

November 6, 2018



          MARK D. CLARKE United States Magistrate Judge

         This case comes before the court on two post-trial damages issues: (1) Is Defendant United States of America ("Defendant" or "the United States") entitled to a set-off of any amounts of the award for past reasonable medical expenses? And, (2) what is the proper calculation of present value of the award for future medical expenses?[1] For the reasons below, the Defendant is not entitled to a set-off of any portion of the award for past reasonable medical expenses, and the present value of the award for future medical expenses is the amount of the original award.


         The factual background of this case is well-known to the parties, so the Court will briefly summarize the relevant facts.

         Plaintiff John Eric Smith ("Mr. Smith") suffered devastating injuries because of negligent medical treatment that failed to timely diagnose his MRSA infection. The evidence at trial showed that his past medical care resulted in $1, 847, 009.06 of reasonable medical bills, Mr. Smith was on Medicaid at the time of his injury, so he was not responsible for any out-of-pocket costs associated with those bills. The State of Oregon holds a lien for $447, 074.85, which represents the amount actually paid by the Oregon Medicaid program administered as part of the Oregon Health Plan for his medical care to date. The Oregon Health Authority oversees the Plan. The balance of the medical expenses was written off by the medical providers likely based on agreement for treating Medicaid patients. Mr. Smith will continue to need extensive medical care for the rest of his life. The court following trial entered Findings of Fact and Conclusions of Law finding in favor of Mr. Smith and awarding the following damages; $1, 847, 009.06 in past medical expenses; $3, 800, 000.00 in future medical expenses; and $7, 000, 000.00 in non-economic damages, for a total award of $12, 647, 009.06.


         I, Mr. Smith is entitled to the amount of the lien held by the State of Oregon.

         Under the Medicaid statutes, states are required to have individual Medicaid recipients assign payments from any liable third party, which were already paid for through Medicaid, to the state. 42 U.S.C. § l396a(25); § 1396k. In Oregon, ORS 659.830 and 743B.47O function to create an automatic right of assignment in such circumstances. According to the Declaration of Jose Ybarra (#92), the Oregon Health Plan paid $447, 074.85 of the total charges billed by medical providers for Mr. Smith's care, and the state has a lien in that amount. The parties, and the Court, agree that Mr. Smith is entitled to an award of past medical expenses in the amount of the lien.

         II, Is Defendant United States of America entitled to a deduction of Mr. Smith's written-off medical expenses prior to entry of judgment in this case?

         A. Medicaid

         By way of background, Medicaid is a joint state and federal program through which the federal government provides funding to states to provide medical care to qualified indigent individuals. 42 U.S.C. § 1396 et seq. The federal government is required to reimburse states for at least 50% of the costs incurred in providing patient care. § l396d(b). In Oregon, the federal government provides approximately 65% of the funding, while the state provides the remaining 35%. See Richard H. Mills Decl. (#93); Def.'s Post-Trial Mem, Ex. 1 ("West Report") at 4; 42 U.S.C. § 1396b; ORS chapter 414.

         Unlike Medicare, which is funded by specific revenues, funding for Medicaid comes from annual congressional appropriations of general revenues. 42 U.S.C. § 1396-1. In other words, workers and employers contribute to a specific Medicare fund collected through payroll taxes, held in trust, and then paid out to those individuals who contributed to the fund when they become eligible. See West Report. Medicaid, on the other hand, is not funded by a specific trust fund, and is instead considered "unfunded" because its funding comes from general revenues. Id. Awards paid under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2674, are also paid out of unfunded general revenues. U.S. v. Harue Hayashi, 282 F.2d 599, 603 (9th Cir. 1960).

         B. The collateral source rule

         The majority of states, including Oregon, have adopted some form of the collateral source rule, which provides "that if an injured party received some compensation from a source wholly independent of the tortfeasor, such compensation should not be deducted from what [the injured party] might otherwise recover from the tortfeasor," Reinan v. Pacific Motor Trucking Co.,270 Or. 208, 213 (1974); see also White v. Jitbitz,347 Or. 212, 237 (2009) ('"[t]he vast majority of courts to consider the issue' follow the common-law rule articulated in section 924 of the Restatement and permit plaintiffs to seek the reasonable value of their expenses without limitation to the amount that they pay or that third parties pay on their behalf.") (emphasis in original) (quoting Wills v. Foster,892 N.E.2d 1018, 1031 (111. 2008)). In those cases, an injured plaintiff will often get "double recovery," or a windfall, unless a third-party lien needs to be satisfied. See White, 347 Or. at 219-20. The policy rational is often that the tortfeasor should not benefit from the third-party payments. See Id. The plaintiff will also have often paid premiums for third party insurance benefits that ...

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