SCOTUS Rules States Can Seek Reimbursement from Settlement Money Allocated for Future Medical Expenses

In a 7-2 vote, the U.S. Supreme Court affirms that the Medicaid Act allows states to seek reimbursement from tort settlement amounts allocated for future medical expenses, agreeing with Florida and disagreeing with arguments that the state’s reimbursement formula violates federal law. In Gallardo v. Marstiller (U.S., No. 20—1263, June 6, 2022).

The Medicaid Act requires states to make a reasonable effort to recover medical expenses paid under their plans from any tort settlement with a third party that has liability for the person’s medical care and expenses. In Gallardo, all parties agreed Florida was allowed to recover from settlement amounts allocated for past medical expenses, but disagreed on whether the state’s lien extended to any allocation for future medical expenses.

Gianinna Gallardo suffered catastrophic injuries at age 13 when as she was getting off a school bus and was hit by a truck. Her parents sued the truck’s owner, its driver, and the school board. The case settled for $800,000, with $35,367.52 designated for past medical expenses.

Under Florida’s Medicaid Third-Party Liability Act, the state was presumptively entitled to 37.5 percent of the full amount of a third-party recovery, or $300,000. Gallardo’s parents contested the statutory lien and filed a federal suit, arguing that Florida was violating the Medicaid Act by seeking to recover from the settlement amount awarded for future medical expenses.

The district court granted Gallardo summary judgment, ruling the Supreme Court’s decision in Arkansas Department of Health and Human Services, et al, v. Ahlborn, 547 U.S. 268 (2006), allowed Florida to recover only from the allocation in the settlement for past medical expenses.

The Eleventh Circuit reversed, and the Supreme Court granted Gallardo’s writ of certiorari.

The Supreme Court affirms, holding that the Medicaid Act permits a state to seek reimbursement from settlement payments allocated for future medical care. The Court explains the case is conclusively decided by “the plain text” of 42 U.S.C. §1396(a)(1)(A), which broadly assigns any of the beneficiary’s rights to payment for medical care from any third party to the state. Those rights include, the Court states, not only the rights to payment for past medical expenses, but also rights to payment for future medical expenses.

A 15-page dissent written by Justice Sonia Sotomayor argues that the majority’s decision would “lead to absurd results,” allowing states to be reimbursed for future medical care that their Medicaid plans have “not paid and might never pay.”

Read the full opinion.