SCOTUS Rules States May Seek Recovery from Settlement Payments Allocated for Future Medical Expenses

ABSTRACT: The issue before the Court was whether the Medicaid Act allows a state Medicaid agency to recover reimbursement for Medicaid payments of a beneficiary's past medical expenses by imposing a lien against the portion of the beneficiary's tort recovery that compensates for future medical expenses. The Supreme Court held that the Medicaid Act permits a state to seek reimbursement from settlement payments allocated for future medical care.

Factual and Procedural Background

In November 2008, Gianinna Gallardo, a 13-year-old student, was struck by a pickup truck after getting off a school bus. She suffered devastating injuries that left her in a permanent vegetative state. Florida’s Medicaid agency paid $862,688.77 towards Gallardo’s medical expenses and continues to pay her medical expenses. Gallardo’s family brought suit against the owner and driver of the truck and the school board, eventually settling for $800,000. The settlement allocated $35,367.52 for past medical expenses without expressly designating any amount for future medical expenses.

The Medicaid Act requires recipients of state-approved Medicaid assistance to assign the state any rights to payment for medical care from any third party. 42 U. S. C. §1396k(a)(1)(A). Accordingly, Florida enacted Medicaid Third-Party Liability Act requiring Medicaid recipients to automatically assign any right to third-party payments for medical care to the state’s Medicaid agency. Fla. Stat. Ann. §409.910(6)(b) (West). Specifically, the Florida statute allows the state to recoup medical payments from the beneficiary’s tort recovery against liable third parties allocated as “past and future medical expenses.” Fla. Stat. Ann. §§409.910(11)(f)(1), (17)(b) (West).

Florida filed a lien against the settlement, and under the statutory formula, the state was entitled to $300,000 of Gallardo’s settlement. Gallardo challenged Florida’s presumptive allocation and sought a declaratory judgment alleging that the state violated the anti-lien provision of the Medicaid Act, § 1396k(a)(1)(A), by attempting to recoup from settlement portions allocated for future medical expenses. The U.S. District Court for the Northern District of Florida agreed and granted Gallardo’s summary judgment, concluding that the Medicaid Act prohibited the states from seeking reimbursement from portions of the settlement allocated for future medical expenses. See Gallardo v. Dudeck, 263 F. Supp. 3d 1247, 1260 (2017). However, the Eleventh Circuit reversed the lower court decision, holding that the Medicaid Act only prohibits a state from imposing a lien against settlement portions not allocated for medical expenses. Gallardo v. Dudeck, 963 F. 3d 1167, 1176 (2020).

The Holding

In a 7-2 opinon, SCOTUS affirmed the Eleventh Circuit’s decision, holding that the plain language of the Medicaid Act permits a state to seek reimbursement from portions of a tort award allocated for future medical care. Justice Thomas, writing for the majority, concluded that the broad language of § 1396k(a)(1)(A) naturally covered both past and future medical expenses. Gallardo v. Marstiller, No. 20-1263, slip op. at 3 (Jun. 6, 2022). The Court reasoned that the lack of scope-defining language that is present in §§ 1396a(a)(25)(A) and (B)—provisions enacted prior to §1396k(a)(1)(A)—is proof that Congress did not intend to limit recovery of medical expenses under the provision at issue to only portions allocated for past medical care. Id.

The Court also opined that Gallardo mistakenly relied upon its holding in Arkansas Dept. of Health and Human Servs. v. Ahlborn that the anti-lien provision bars a state’s assertion of a lien against a beneficiary’s property beyond the portion of a settlement representing payments for medical care. See 547 U. S. 268, 285 (2006). The Court noted that Ahlborn is distinguishable in that it held that a state is prohibited from imposing a lien against non-medical expenses, as opposed to medical expenses.

Justice Sotomayor dissented, joined by Justice Breyer, arguing that the interpretation of the Medicaid provisions is “a symmetrical and coherent regulatory scheme.” Id. at 8 (quoting FDT v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000)). The dissent, criticizing the majority opinion as an implausible workaround, expressed concerns that the holding could discourage Medicaid recipients from seeking compensation in tort lawsuits in the future.

Implications

The parties involved in tort liability actions must now be keenly aware of any applicable Medicaid recovery statute(s) similar to that of Florida. In such jurisdictions, the parties must consider the state’s potential attempt to recoup past and future medical expenses from portions of settlement monies allocated for medical care.

* Ryan Sim, Summer Law Clerk, assisted in the research and drafting of this post. Sim is a rising 3L student at Washington University School of Law in St. Louis.