$57 Million Verdict for 22,000 Home-Care Workers Cheated by Washington State

Starting in 2003, Washington DSHS applied what it called the 'shared living rule': any home-care provider who lived with the Medicaid client they served had 15 percent of their authorized care hours stripped out before payment was calculated. The theory was that live-in providers would already be doing household tasks like cooking and laundry, so those hours did not deserve separate compensation. Live-out providers doing identical work were paid in full.

The rule affected roughly 22,000 providers statewide. State courts ruled as early as 2005 that the shared living rule violated federal Medicaid law, and the Washington Supreme Court confirmed that finding in 2007. Even so, DSHS kept applying the reduction until June 2008, continuing to short-change providers for years after the legal basis for the rule had collapsed.

Darrell Cochran and Michael Pfau brought a class action on behalf of the provider class, filing suit in 2007 in Thurston County Superior Court. The case went to a three-week jury trial in December 2010. Plaintiffs argued that DSHS breached its implied duty of good faith and fair dealing by using its discretionary control over the care-assessment process to set hours in a way that systematically underpaid providers under their contracts.

On December 20, 2010, the jury returned a verdict of $57,123,794.50 in favor of the provider class. The trial judge later added $38.6 million in prejudgment interest, bringing the total award to roughly $95.8 million. DSHS appealed.

In a 5-4 decision issued April 3, 2014, the Washington Supreme Court upheld the $57 million damages verdict and the jury's breach-of-good-faith finding but reversed the prejudgment interest award on the ground that the damages could not be calculated with sufficient certainty during the period at issue. The court also ordered DSHS to pay post-judgment interest of approximately $22 million, producing a final recovery in the range of $79 million for the class. The $57 million trial verdict itself was never disturbed.