In the midst of all the chaos generated by the CMS reforms, one central issue has remained constant – if a settlement results, how much money can the State get back?
In the case of Angelique McKinney, et al. v. Philadelphia Housing Authority, et al., a federal judge in the Eastern District of Pennsylvania ruled on this very issue. In McKinney, a persistent mold in public housing case, the plaintiffs reached a nearly $12,000,000 settlement with the Philadelphia Housing Authority. (As a side-note, the plaintiffs were able to get around the sovereign immunity issues usually present with the PHA by arguing that the case arose out of a “state-created danger.”) Once the settlement was reached, the Pennsylvania Department of Public Welfare claimed that they were entitled to recover the full $1,200,000 value of the medical lien.

Federal Judge Schiller rejected that argument — https://ecf.paed.uscourts.gov/doc1/15318311551. He reduced the gross award to 2/3, i.e. to $843,930.77. He then further reduced the award by 1/3 for attorneys fees and for costs. The net lien recovery for the PHA was $537,448.43. In deciding on this award, the Court stressed that the $12,000,000 settlement reflected a compromise of a disputed claim that potentially had jury value in excess of $46,000,000. The Court wrote: “This Court holds that the method of determining this figure is neither Plaintiffs’ proffered “ratio theory” nor DPW’s proposed “full lien or half the settlement” presumption. Instead, the Court has considered the risks and uncertainties Plaintiffs faced in prevailing on their underlying claim and their probability of recovering past medical expenses in particular.”

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