High Court Wades into Medicaid Act Thicket to Decide Whether States Can Be Reimbursed from Future Medicals

High Court Wades into Medicaid Act Thicket to Decide Whether States Can Be Reimbursed from Future MedicalsThe U.S. Supreme Court heard arguments on January 10 in a Florida case that will decide whether a state can be reimbursed for past Medicaid payments from the portion of settlement money allocated for future medical expenses.  The Court’s decision in the case, Gallardo v. Marstiller, will resolve a dispute among lower courts over the statutory interpretation of separate provisions of the Medicaid Act.

Gianinna Gallardo was 13 years old in 2008 when she was hit by a truck while getting off a school bus and has been in a vegetative state since then. Her parents sued the truck’s owner, its driver and the school board for past medical expenses, as well as future medical expenses and other damages. Her case eventually settled for $800,000 and her attorney advised Florida’s Agency for Health Care Administration (AHCA) of the settlement and that $35,367 of that amount represented past medical expenses that were recoverable by the AHCA.

Medicaid had provided $862,688 in medical payments on her behalf and under Florida’s reimbursement statute, the agency would recover $323,508 in medical payments from the settlement. Ms. Gallardo’s parents sued the AHCA in federal court, asking for an injunction and a ruling that Florida’s reimbursement statute violated federal law by allowing recovery from the settlement allocated for both past and future medical expenses.

The district court ruled that pursuant to the U.S. Supreme Court’s decision in Arkansas Department of Health and Human Services, et al. v. Ahlborn, (547 U.S. 268 (2006), the AHCA may only recover its past medical payments only from monies the settlement allocated for past medical expenses. The AHCA appealed.

The U.S. Court of Appeals, 11th Circuit reversed and held that federal law does not preempt Florida’s reimbursement statute and that the language of the Medicaid statute does not prohibit the AHCA “from seeking reimbursement from settlement monies for medical care allocated to future care.”

With the 11th Court of Appeals decision in conflict with the Florida Supreme Court’s decision in Giraldo v. Agency for Health Care Admin., (248 So. 3d 53 (Fla. 2018), which ruled that the Medicaid Act preempts Florida law and prohibits the state from seeking reimbursement from settlement amounts allocated for past and future medical expenses, the Gallardos filed a writ of certiorari with U.S. Supreme Court that was granted.

Broad or Narrow? A Question of Statutory Interpretation

Both parties agree the state can take the portion of a beneficiary’s tort settlement with a third-party tortfeasor allocated for past medical expenses paid by Medicaid. The parties disagree over cases where the settlement for past medical expenses is insufficient to pay for medical care and the state seeks reimbursement from the amount allocated for future medical expenses.

When a beneficiary’s medical expenses are due to a third-party tort, the Medicaid statute requires the state to pursue reimbursement from the tortfeasor and requires (in 42 U.S.C. §1396(a)(1)(A) and 42 U.S.C. §1396k) the beneficiary to assign the state “any rights . . . to payment for medical care from any third party.” A payment-recovery provision of the Act added later, 42 U.S.C. §1396a(a)(25)(H), provides that, “to the extent that payment has been made under the State plan for medical assistance for health care items or services furnished to an individual, the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or services.”  The Gallardos relied heavily on this provision, stating in their brief that it “speaks most directly to the question presented by specifying when and to what extent a State acquires a beneficiary’s right to third-party payments.”

Florida countered that the “broad language” of 42 U.S.C. § 1396k(a)(1)(A) permits it to recover from any damages representing payment for “medical care.”  The state views the later-added 42 U.S.C. §1396a(a)(25)(H) as simply giving Medicaid an automatic right of subrogation when it makes payments, and stated in its brief that “[t]here is no good reason to think that [Congress] limited Medicaid’s authority to acquire such rights by the separate mechanism of assignment under Section 1396k.”

The nearly two hours of oral arguments began with Bryan Gowdy of the Jacksonville, Florida, firm of Creed & Gowdy, on behalf of Gallardos, telling the court that at the moment of settlement with a third-party tortfeasor, the settlement becomes the property of the beneficiary and is protected by the anti-lien provisions of the Medicaid Act. He argued that the state’s broad interpretation of the statute was “absurd” and would allow a lifetime assignment requiring third parties who are health insurers or future tortfeasors who did not cause a beneficiary’s injury to pay for the medical care Medicaid provided.

Florida’s Solicitor General Henry Whitaker argued that the state’s Medicaid plan can never recover more than the beneficiary received in medical benefits, but that it could seek reimbursement not only for the amounts in the settlement allocated for past medical benefits but also for future medical expenses as well -- even if they are medical expenses Medicaid does not cover.

Justice Sotomayor, who participated remotely from chambers, questioned Whitaker’s argument.

 “That seems extraordinary,” she said, “that what you're reading into the statute, an anti-lien statute, that permits you only to get an assignment of what you have paid for. Now you're saying the assignment under k is incredibly broader than that, whether you paid for it or not, whether you were required to pay for it or not, and future, that you're assigned the individual's entire rights. That's what you're telling me?”

Other justices seemed to agree with Justice Sotomayor that Florida’s interpretation was overly broad and not considering the “context” of the Act.

Justice Kavanaugh said “. . . I don't mean to load it by saying this word -- but a literal reading of 1396k, and the other side is saying, no, you have to read it in context with the other provisions and have it all make sense. And you say no. But then you're presented with a hypothetical, maybe the absurd hypothetical, but it is a hypothetical that's been raised, and you say, oh, well, there, don't read it literally.”

Justice Breyer saw some conflict in the state's reading of the provisions, saying “So it seems to me you're asking us to read these two provisions, higgledy-piggledy, slightly in conflict -- if not direct conflict, at least hard to make consistent -- and they're asking you, the government, to read them consistently with the whole spirit of the thing, which is leave the money with the Medicaid victim.”

Alhborn, The Elephant in the Room

Hovering in the background and mentioned occasionally by the justices was the court’s prior unanimous decision in Ahlborn, which held that the state may recover only from those portions of third-party awards allocated for medical expenses, not from portions of settlements allocated for other losses.

Justice Sotomayor asked Vivek Suri, assistant to the solicitor general at the U.S. Department of Justice, who was arguing in support of the Gallardos, “Counsel, is there any way to accept Respondent, Florida's reading, without overruling essentially Ahlborn, the reasoning of Ahlborn?”

While saying he didn’t “wish to overclaim the relevance of Ahlborn,” Mr. Suri noted that in Ahlborn the state was allowed to reach the portion of the settlement allocated for past medical expenses, “not . . . the additional portion corresponding to the future medical expenses.” He also cited a footnote in Ahlborn “where the Court reasons that it would be unfair, unjust, to allow the state to obtain a portion of the recovery that it didn't compensate for. And we think that same unfairness arises in this context.”

While some of the justices wandered away from the baseline question of statutory interpretation at times, the ruling in Ahlborn may well be the reason the anti-lien provisions of the Medicaid Act are upheld and states are prevented from acquiring lifetime assignments of a beneficiary’s right to recover for future medical expenses from a third party.

“In the end,” Ronald Mann of the website SCOTUSblog wrote, “given the relatively low stakes of this case, the justices well might resolve this in discussion and issue a unanimous or near-unanimous decision.”

 For the Court’s link to the oral arguments, click here.

For a link to the argument transcript, click here.