On September 13, 2006, the infant Petitioner allegedly sustained personal injury while walking through the schoolyard at Intermediate School 187 in Brooklyn, when she was struck by a student playing football under school supervision. A claim was asserted on behalf of the infant against the City of New York and the New York City Department of Education.

A representative of the New York City Comptroller offered $50,000.00 in settlement, and application was made to this Court for an order approving settlement of the infant's claim at that amount. Since it appeared, however, that the City, through its Human Resources Administration, was asserting a Medicaid lien of $2,118.00 against its own settlement, the Court questioned the reasonableness of the settlement.

Petitioners now move for an order "vacating the lien of the Department of Social Services of the City of New York," and have served both the Corporation Counsel and the Department of Social Services ("DSS".) DSS has appeared by its counsel, and opposes the motion. On the return date, the Corporation Counsel advised the Court that counsel for DSS was appearing for the City for all purposes on the motion. The City has made no objection to the manner in which the issues arising from the assertion of the Medicaid lien have been put before [*2]the Court.

Petitioners assert in an affirmation of counsel that the City's settlement offer "was in compensation for the infant-plaintiff's pain and suffering"; that "[d]uring the negotiations, there was no discussion about any medical expenses that the family incurred"; that, "no part of the settlement was attributed to past or future medical treatment"; and that the "discussion centered entirely around pain and suffering." (Attorney Affirmation,¶ ¶ 5, 9.) Petitioners also contend that a Medicaid lien is enforceable only against the proceeds of recovery from "responsible third parties," and that it would be a "miscarriage of justice" where enforcement of the lien would result in "merely shifting funds from one public coffer to another." (Reply Affirmation, ¶ ¶ 2, 3.)

The City does not dispute Petitioners' assertions about the settlement discussions, maintaining that a Medicaid lien cannot be defeated or avoided "simply by announcing that the entire settlement represents pain and suffering"; that "the Court must determine on its own what portion of the settlement is appropriately allocated to past medical expenses"; and that "[i]n this case, given how small the lien is, the Court should order the lien paid in full." (Affirmation in Opposition, second ¶ 7.) The City does not directly address the enforceability of a Medicaid lien by one City agency against settlement proceeds intended to compensate for injury caused by another City agency. Although its opposition assumes enforceability, it characterizes the Medicaid lien as a vehicle for recoupment of Medicaid payments from "responsible third parties." (Affirmation in Opposition, ¶ 4.)

It is worth noting in the first instance that neither Petitioners nor the City have addressed the enforceability of the $50,000.00 settlement in light of the dispute about the Medicaid lien. In other words, neither party is seeking to avoid the settlement if its view on the lien is not accepted.

The City asserts its lien pursuant to § 104-b of the Social Services Law. (Affirmation in Opposition, ¶ 3.) The Medicaid lien is a vehicle in service to the assignment, subrogation, and recoupment provisions of federal and state law. (See Cricchio v Pennisi, 90 NY2d 296, 305-07 [1997]; see also Arkansas Department of Health and Human Services v Ahlborn, 547 US 268 [2006].) Section 104-b was enacted "[t]o enable the public welfare official to enforce its substantive right to pursue repayment from responsible third parties" (Cricchio v Pennisi, 90 NY2d at 306), and is "an alternative to suing the responsible third party directly" (see Calvanese v Calvanese, 93 NY2d 111, 117 [1999].) "[T]he lien on settlement proceeds attaches to the property of the third party." (Cricchio v Pennisi, 90 NY2d at 307.)

In light of the purpose and function of the lien, it is, at the least, counter-intuitive that the City may enforce a lien against its own funds, where the lien is to recoup medical expenses related to the injury for which settlement is being made. (But see Witt v Triangle Steel Products Corp., 103 AD2d 742 [2d Dept 1984].) The presence of federal and state interests might provide a justification, were it not for the local "public welfare official's powers both to fix the amount of the lien and to release and discharge it" (see Calvanese v Calvanese, 93 NY2d at 121.) Indeed, in this judge's experience, Medicaid liens are regularly "waived" where the City is the settling [*3]party.

It is neither necessary nor prudent here, however, to resolve whether as a general matter the City may enforce the lien under such circumstances. The parties do not brief the question, and it is too important a question to be resolved without briefing. It is not necessary in any event for the question to be resolved in order that the Court determine whether the lien claimed here may be enforced against the City's settlement proceeds.

In Arkansas Department of Health and Human Services v Ahlborn (547 US 268), the U.S. Supreme Court "held that the anti-lien' provision found in [the federal Medicaid statute] bars states from imposing liens against the property of Medicaid recipients prior to their deaths, and that the statutory exception to the provision, permitting states to enforce statutory liens on settlements, judgments, or awards of monies to Medicaid recipients, is restricted to that portion of the settlement, judgment, or award that represents reimbursement for actual medical costs received prior to the recipient's death." (Harris v City of New York, 16 Misc 3d 674, 677-78 [Sup Ct, NY County 2007].) The Corporation Counsel has recognized this, stating that "HRA will collect the funds ["expended for Medicaid benefits on plaintiff's behalf"] only against that portion of the settlement amount that represents past medical costs." (See Letter, Office of the City of New York Law Department, dated May 25, 2006 to Judge John G. Koeltl, U.S. District Court for the Southern District of New York in the case of Sanchez v City of New York, quoted in Chambers v Jain, 15 Misc 3d 1120 [A], 2007 NY Slip Op 50776 [U], * 4- * 5 [Sup Ct, Queens County].)

Where "the portion of the settlement costs that represents past medical costs" is disputed, the Court must make a "fair allocation." (See Lugo v Beth Israel Med. Ctr., 13 Misc 3d 681, 688-89 [Sup Ct, NY County 2006].) "[A] Medicaid lien may not be effectively nullified by the mere expedient of the plaintiff['s] attorney announcing that the settlement relates to pain and suffering only." (Carpenter v Saltone Corp., 276 AD2d 202, 211 [2d Dept 2000].) But DSS is not "automatically guarantee[d] at least the partial reimbursement for its medical expenses regardless of the surrounding circumstances." (See Pang v Maimonides Med. Ctr.-Maimonides Hosp., 127 AD2d 641, 642 [2d Dept 1987].)

"[F]or a legitimate reason, a settlement of a personal injury action [may] include[ ] no compromise of the claim based on past medical expenses." (See Carpenter v Saltone Corp., 276 AD2d at 211; see also Lyke v Ira Davenport Mem. Hosp., 222 AD2d 1049, 1049 [4th Dept 1995]; Applegrad v Maimonides Med. Ctr., 156 Misc 2d 809, 811-12 [Sup Ct, Kings County 1992], aff'd 213 AD2d 438 [2d Dept 1995]; Temple v Doran, 181 Misc 2d 637, 639-40 [Sup Ct, Cortland County 1999].) Where appropriate, a court may make that determination without a hearing. (See Lyke v Ira Davenport Mem. Hosp., 222 AD2d at 1049-50.)

Here, the City submits no affidavit or affirmation from the representative who negotiated the settlement with Petitioners' attorney, nor does it present any other evidence to dispute Petitioners' contention that no portion of the settlement represents past medical costs. Where, as here, the City is both the holder of the lien and the settling tortfeasor, there is little risk of a [*4]"scheme by the parties to frustrate the lien asserted by the department for its expenditures" or that "the settlement [might be] consciously structured in such a manner as to deprive the department of reimbursement" (see Pang v Maimonides Med. Ctr.-Maimonides Hosp., 127 AD2d at 642.) One would expect, moreover, that where the City intended to reduce the amount provided to compensate the plaintiff for the injury it caused by the amount of expenses incurred in treating the injury, the City would have expressly so qualified its offer.

To the extent, therefore, that the City of New York asserts a Medicaid lien against its own settlement of Petitioners' claim, the lien is vacated.

January 15, 2008___________________

Jack M. Battaglia

Justice, Supreme Court