(Editor’s note: This is an excerpt from the most recent NJSBA Insurance Law newsletter listing recent cases relevant to business and insurance law. Access to the publication is a benefit to members of the Insurance Law Section. To review the full summary, read the full issue here. [login required] If you are not a member of the section, here’s how to join. Click here to see the full list of sections. Want to join a section? Email [email protected].)In a case involving Medicaid reimbursement, the United States Supreme Court recently held that 42 U.S.C. § 1396k(a)(1)(A) permits a state to seek reimbursement from settlement payments allocated for future medical care.
In 2008, a truck struck Gianinna Gallardo as she stepped off her school bus. She suffered catastrophic injuries and remains in a persistent vegetative state. Florida’s Medicaid agency paid $860,000 to cover her initial medical expenses.
As a condition of receiving Medicaid assistance, Gallardo’s family has assigned Florida her right to recovery from third parties. Because she is permanently disabled, Medicaid continues to pay her medical expenses.
A lawsuit resulted in a settlement of $800,000 – which expressly designated roughly $35,000 as compensation for past medical expenses. The settlement also recognized that some portion of the settlement may represent compensation for future medical expenses but did not allocate any amount.
Under Florida’s statutory formula, the state was presumptively entitled to $300,000 of the plaintiff’s settlement and Gallardo’s counsel asked Florida what amount it would accept to satisfy its Medicaid lien. Florida did not respond and Gallardo’s family put $300,000 in escrow and filed suit to challenge the presumptive allocation.
States participating in Medicaid must comply with the Act’s requirements or risk losing Medicaid funding. The Medicaid Act requires a state to condition Medicaid eligibility on a beneficiary’s assignment to the state of any rights to support for the purposes of medical care and to payment for medical care from any third party. The Medicaid Act also sets a limit on a state’s efforts to recover their expenses through an “anti-lien provision” prohibiting states from recovering medical payments from a beneficiary’s “property.”
The question for the Court was whether § 1396k(a)(1)(A) permits a state to seek reimbursement from settlement payments allocated for future medical care. The Court concluded that it does. The Court rejected the plaintiff’s argument that the Medicaid Act’s anti-lien provision at § 1396p forecloses recovery from settlement amounts other than those allocated for past medical care paid for by Medicaid. The plaintiff had argued that the anti-lien provision preempts any state law that permits additional recovery but the Court disagreed noting that under § 1396k(a)(1)(A), Florida could seek reimbursement from settlement amounts representing payment for medical care past or future.
Similarly, in New Jersey, as a condition of Medicaid eligibility, a Medicaid applicant is required to assign to the state any rights to payment of medical care from any third party. Obviously, New Jersey practitioners will have to be aware of the potential for liens attaching to future costs of medical care in cases involving Medicaid eligible plaintiffs.
Brian R. Lehrer, the author, is with the law firm of Brandon J. Broderick, LLC.