Juris Economics continues to be deployed in new and beneficial ways to help attorneys get the best results for their clients. In this edition of Juris Economics in Action, we will look at how our software can be harnessed in the setting of lien negotiations.
Medical lien negotiations can be complex and affected by a variety of factors. A problem often occurs when liability is reasonably clear and the case value is far in excess of the applicable policy limits. In these situations, the adjuster or defense attorney handling the case will usually make a policy limit offer early on. They are seeking to minimize costs by paying the policy, which has set limit, while avoiding additional costs for the continued defense in the process.
When this situation arises, clients usually want to know what they will net from the settlement. This seemingly simple answer can get quite complicated if medical care was provided as a result of the alleged negligence. We encourage everyone to consult with a knowledgeable attorney in the field of lien law as the source of the lien will impact how it can be negotiated.
Liens from Medi-Cal
Although liens are provided and maintained under various laws, we will look specifically at liens from Medi-Cal. Medi-Cal is California's Medicaid health care program. By law, the Department of Health Care Services is required to seek reimbursement for care paid on behalf of an injured party.
Medi-Cal has a variety of options available for repayment. While most of them rely on the application of set reductions or calculations, one option gives a party the opportunity to present evidence of the total value of the case versus the settlement amount. By law, Medi-Cal’s reimbursement right is limited to the portion of the settlement representing payment for medical care. This is sometimes referred to as an Ahlborn motion after the case of Arkansas Department of Health and Human Services v. Ahlborn (2006) 547 U.S. 268. It is also codified under California Welf. & Inst. Code § 14124.76.
Calculating economic impact
Juris Economics provides a cost effective way of detailing the economic impact an injury has had. With our software, lost wages, benefits, and household services can be calculated at a price point that makes sense for the attorney and client.
As an example, let’s assume there’s a car accident where the negligent driver has a $500,000 policy. The injured party, 55 years old and unemployed at the time, is broadsided and suffers a brain injury in the accident. Although able to take care of themselves, the medical records clearly document short term memory loss, lack of focus, and brain fog with past bills totaling $150,000. A mechanical engineer by trade, all parties agree the accident victim will never work again. A $500,000 offer is made at the onset of litigation. The injured party accepts the offer and wants to know how much they’ll owe Medi-Cal.
Pursuant to the contingency fee agreement, the client is aware attorneys fees are one-third of the gross award or $166,666. The lien must be paid back as well and the maximum the lien can be is $150,000. The client is informed he will net a minimum of $183,334 but that counsel thinks he will do better than that after the lien is negotiated.
Counsel logs into their Juris Economics accounts and runs a report for their client. The software has statistics on life and work-life expectancy, so they find out that the client had a 24.2 year life expectancy, and 10.9 year work life expectancy. Other statistics provided by Juris Economics track a $126,618 mean income for a mechanical engineer in the state of California. Together, this yields a total economic loss of $1,832,572. Of that, $1,338,635 is for lost wages and $493,937 is for loss of household services.
Assuming general damages are three times the value of special damages. The total value of the case is $6,986,351 with $5,497,716 for pain and suffering, $1,338635 for lost wages and household services, and $150,000 for past medical expenses. The settlement value is $500,000 represents 7.2% or $500,000/$6,986,351.
Since the settlement value represents 7.2% of the full value of the case, the $150,000 lien should be reduced by 92.8% or $139,200 to $10,800. After presenting evidence of this to Medi-Cal, a lien reduction is agreed to. The investment in one Juris Economics report allows the lien to be reduced to by $139,200.
Should you need assistance with life expectancy calculations or information, please contact Juris Economics at (858) 477-9537 or sales@juriseconomics.com
