The Scharba decision was the first Florida federal district court opinion to address the application of Ahlborn to Florida law. Kevin Scharba was injured in an accident in March of 2006. A lawsuit was filed in state court for damages as a result of his injuries. The matter was ultimately removed to federal court. Prior to trial, the case was settled for $440,000. The settlement agreement did not contain an allocation of the damages between the various types suffered by Scharba. Medicaid provided $65,373.55 in Medicaid benefits due to the injuries suffered in the accident. They asserted a lien in that amount and did not agree to any allocation or apportionment when the case settled. Post settlement, Scharba made a motion to allocate the settlement and determine the amount of the Medicaid lien. ACHA opposed the motion. The federal district court held that ACHA was entitled to one hundred percent reimbursement based upon application of the statutory formula found in Section 409.910 of the Florida Statutes.
Scharba’s argument for reduction of the Medicaid lien was based upon Ahlborn. His position was that Ahlborn prohibited application of the statutory formula in 409.910. According to Scharba, Ahlborn necessitated a determination as to what portion of the settlement was for medical expenses which would be accomplished by comparing the full value of the case to the actual settlement amount and then reducing Medicaid’s lien by the same ratio. As evidence of the full value of the claim, Scharba presented testimony from an experienced personal injury attorney regarding the full value of the claim which was estimated at exactly two times the recovery. Accordingly, Scharba argued that the lien should be reduced by fifty percent based upon the ratio and by a second reduction of forty percent for attorney’s fees. AHCA argued that the Ahlborn decision didn’t compel the use of a “full value formula” or render the Florida statutory formula invalid. Instead, according to AHCA, the Medicaid lien must be paid in full based upon operation of the statutory formula found in Section 409.910.
In reaching its decision, the federal district court in Scharba analyzed the Ahlborn decision and distinguished the Florida statutory scheme from the Arkansas scheme. This has been a common theme amongst the Smith, Russell and Scharba decisions. In distinguishing Florida’s act, the court focused on the fact that the statutory reduction of 409.910 would not obliterate “in whole or substantial part” a personal injury recovery given the limitations in the statute. The Scharba court specifically held, citing to Russell, that where “as here, ‘there is no such stipulation and no similar basis for determining an allocation of the settlement proceeds,’ the statutory formula of § 409.910(11)(f) controls to determine the appropriate payment of AHCA’s lien from settlement proceeds.” The Florida cases post Ahlborn, according to the court, supported the court’s holding. The Scharba opinion indicates that the Florida decisions “have rejected claims that Ahlborn mandates a full value analysis and have upheld the use of the Florida statutory formula in determining the appropriate amount of settlement proceeds allocable to medical reimbursement.” The court concluded by finding that Ahlborn didn’t proscribe the use of the statutory formula in section 409.910; Ahlborn does not compel the use of the “full value formula”; the facts were “materially distinguishable” from Ahlborn and section 409.910(11)(f) controlled. Since the Medicaid lien didn’t “exceed fifty percent of the amount recovered” the court determined that “AHCA is entitled to recover the full amount of its lien pursuant to section 409.91(11)(f)(1).” Finally, the court held that the Medicaid lien amount constituted the “portion of the settlement attributable to the recovery of medical expenses incurred by AHCA.”