Andrews v. Haygood (N.C., No. 57A07-2, Dec. 12, 2008)

North Carolina's highest court holds that the state Medicaid agency is entitled to full reimbursement for medical expenses because a state law limiting the agency's recovery from settlement proceeds comports with the U.S. Supreme Court decision in Ahlborn. Andrews v. Haygood (N.C., No. 57A07-2, Dec. 12, 2008).

Through her guardians, Katelyn Andrews sued a hospital for birth-related injuries. While the parties negotiated a settlement, Katelyn received more than $1 million in medical services paid for by the North Carolina Division of Medical Assistance (DMA), the state's Medicaid agency. After a confidential settlement had been reached and the proceeds placed in a settlement account, the DMA sought to recover the full amount it had paid for Katelyn's medical expenses.

North Carolina law limits the DMA's recovery for medical expenses to one-third of any settlement. Because the Andrews settlement totaled more than three times the DMA's expenditures, a trial court determined, and an appeal court affirmed, that the agency was entitled to recover the full amount of its medical outlays. The trustee of the settlement account appealed, arguing that pursuant to the Supreme Court's decision in Ark. Dep't of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), federal law required a judicial determination of the portion of a tort settlement that represented recovery for medical expenses. The DMA countered that judicial apportionment of the medical expenses was not required because the statutory one-third limitation complied with Ahlborn's interpretation of federal law.

The Supreme Court of North Carolina affirms and grants Medicaid full reimbursement for expenses it paid on Katelyn's behalf, finding that the legislatively enacted one-third limitation "comports with Ahlborn by providing a reasonable method for determining the State's medical reimbursements[.]"