United States Supreme Court Decides that Florida Medicaid can Recover Liens out of Amounts Allocated in Settlement for both Past and Future Medical
In a surprising ruling issued earlier this week on June 6, 2022, the United States Supreme Court ruled 7-2 Monday against a woman in a vegetative state, thereby allowing Florida to recover hundreds of thousands of dollars in settlement funds earmarked for the woman’s medical care following a catastrophic injury when she was a child.
Petitioner Gianinna Gallardo suffered catastrophic injuries resulting in permanent disability when a truck struck her as she stepped off her Florida school bus. Florida Medicaid paid $862,688.77 to cover Gallardo’s initial medical expenses, and it was alleged that Florida Medicaid continues to pay her medical expenses. Gallardo, through her parents, sued the truck’s owner and driver, as well as the Lee County School Board. She sought compensation for past medical expenses, future medical expenses, lost earnings, and other damages.
That litigation resulted in a settlement for $800,000, with $35,367.52 expressly designated as compensation for past medical expenses. The settlement did not specifically allocate any amount for future medical expenses. The Medicaid Act requires participating States to pay for certain needy individuals’ medical costs and then to make reasonable efforts to recoup those costs from liable third parties. 42 U. S. C. §1396k(a)(1)(A).
Under Florida’s Medicaid Third-Party Liability Act, a beneficiary like Gallardo who “accept[s] medical assistance” from Medicaid “automatically assigns to the [state] agency any right” to third-party payments for medical care. Fla. Stat. §409.910(6)(b). Applied to Gallardo’s settlement, Florida’s statutory framework entitled the State to $300,000—i.e., 37.5% of $800,000, the percentage the statute sets as presumptively representing the portion of the tort recovery that is for “past and future medical expenses,” absent clear and convincing rebuttal evidence. §§409.910(11)(f)(1), (17)(b). Gallardo challenged the presumptive allocation in an administrative proceeding.
She also brought this lawsuit seeking a declaration that Florida was violating the Medicaid Act by trying to recover from portions of the settlement compensating for future medical expenses. The Eleventh Circuit concluded that the relevant Medicaid Act provisions do not prevent a State from seeking reimbursement from settlement monies allocated for future medical care. 963 F. 3d 1167, 1178. Ultimately, the United States Supreme Court held that the Medicaid Act permits a State to seek reimbursement from settlement payments allocated for future medical care.
Gallardo argued that the Medicaid Act’s anti-lien provision—which prohibits States from recovering medical payments from a beneficiary’s “property,” §1396p(a)(1)—forecloses recovery from settlement amounts other than those allocated for past medical care paid for by Medicaid. However, the U.S. Supreme Court noted that it previously has held that the provision does not apply to state laws “expressly authorized by the terms of §§1396a(a)(25) and1396k(a)” of the Medicaid Act. Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U. S. 268, 284.
Here, Florida’s Medicaid Third-Party Liability Act—under which Florida may seek reimbursement from settlement amounts representing “payment for medical care,” past or future—“is expressly authorized by the terms of . . . [§]1396k(a)” and thus falls squarely within the “exception to the anti-lien provision” that this Court has recognized. Ibid. The plain text of §1396k(a)(1)(A) decides this case. Nothing in §1396k(a)(1)(A) limits a beneficiary’s assignment to payments for past “medical care” already paid for by Medicaid. To the contrary, the grant of “any rights . . . to payment for medical care” most naturally covers not only rights to payment for past medical expenses, but also rights to payment for future medical expenses. §1396k(a)(1)(A); see United States v. Gonzales, 520 U. S. 1, 5. The relevant distinction is thus “between medical and nonmedical expenses,” not between past and future medical expenses. See Wos v. E.M.A., 568 U.S. 627, 641 (2013).
It is interesting to dive into both the majority and dissenting opinions here. Justice Clarence Thomas wrote for the 7-member majority and explained that the Medicaid statute already contemplates the situation at hand. “Rather than permit the State to recover from a beneficiary’s entire settlement, the statute entitles Florida to half a beneficiary’s total recovery,” Thomas explained, noting that attorney’s fees and costs are already deducted from the recoverable amount. This, the court found, creates a presumption that a portion of the tort recovery that is for “past and future medical expenses.”
According to Thomas, the case is conclusively decided by “[t]he plain text” of the applicable Medicaid statute. He reasoned that while the statute does distinguish between settlement funds paid for medical versus non-medical expenses, it makes no similar distinction between payments for past versus future medical care. Thomas dismissed the family’s argument by concluding that it rests on a misreading of the statute.
Justice Sonia Sotomayor penned a 15-page dissent. She opined that the statute’s language acknowledges that it would be “fundamentally unjust” for a state agency to “share in damages for which it has provided no compensation.” Despite what the statute sought to avoid, most of the high court “permits exactly that,” according to the justice. Framing the issue rather bluntly, Sotomayor said that the Court now allows states to “reimburse themselves” not just from past Medicaid payouts, but also “for future medical care for which Medicaid has not paid and might never pay.” Such a system, continued the justice, “is inconsistent with the structure of the Medicaid program and will cause needless unfairness and disruption.”
Sanderson Firm Commentary: This decision was surprising, but as it is now a final decision, what is the practical application of this decision to settlements involving Medicaid beneficiaries? At first glance, with Florida Medicaid seeking recovery of a Medicaid beneficiary’s future medical, it might seem that Medicaid Set-Asides might be a thing of the future. It seems that Medicaid is now looking to protect its future interest in avoiding payment where a primary payer is available. This is something we will have to keep an eye on.
Because Medicaid’s ability to recover liens is generally specifically governed by each state’s individual Third Party Liability laws, there is no “cookie cutter” best way to limit Medicaid’s recovery from a nationwide perspective. This is different from Medicare’s recovery abilities, which is governed by the Federal Medicare Secondary Payer Act (MSP). Each settlement with Medicaid beneficiaries should be looked at on an individual basis prior to settling a claim with someone on Medicaid and settling parties should work with an expert to determine the best approach depending on the state’s Medicaid Third Party Liability Laws.
Contact me with questions on this case and/or to learn about our Medicaid lien solutions at Heather@sandersoncomp.com.
