Supreme Court Strikes Down N.C.'s Medicaid Lien Law Allocating One-Third to Medical Expenses

The United States Supreme Court upholds a decision by the 4th Circuit Court of Appeals striking down a North Carolina statute that imposes a mandatory Medicaid lien on up to one-third of a recovery, ruling that it violates Medicaid’s anti-lien provision by setting "forth no process for determining what portion of a beneficiary's tort recovery is attributable to medical expenses." Wos v. E.M.A. (U.S., No. 12-98, March 20, 2013).

Under North Carolina law, the state is entitled to a lien on a Medicaid recipient's tort recovery for the lesser of the total cost of medical services provided or one-third of the recovery. Emily Armstrong settled a medical malpractice suit for $2.8 million against the doctor who delivered her -- far less than the cost of her future care. The parties did not stipulate what portion of the settlement represented payment for past or future medical expenses. The state, having already spent close to $2 million for Emily's care, asserted its lien for one-third of the settlement.

Emily objected, claiming that the mandatory lien on one-third of the settlement violated the Supreme Court's decision in Arkansas Department of Health and Human Services, et al. v. Ahlborn that limited the state's recovery from a Medicaid recipient to the funds she received as compensation for medical expenses. A federal district court granted summary judgment in favor of the state, but the 4th Circuit Court of Appeals reversed the district court and remanded the case for a hearing that would allow Emily to rebut the state's one-third presumption. The state appealed to the U.S. Supreme Court.

In an opinion written by Justice Kennedy and joined by Justices Ginsburg, Alito, Sotomayor, Kagan and Breyer (who filed a concurrence), the Supreme Court upholds the 4th Circuit's decision, ruling that the Medicaid statute’s anti-lien provision preempts North Carolina’s effort to take any part of a judgment or settlement not specifically designated for medical care.  The Court finds that "[a]n irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act's clear mandate that a State may not demand any portion of a beneficiary's tort recovery except the share that is attributable to medical expenses." 

The Court does not lay out a formula for how states and litigants might determine medical expenses when there is no specific allocation in a settlement or award, explaining that "[i]n some instances, no estimate will be necessary or appropriate.  Where there has been a judicial finding or approval of an allocation between medical and nonmedical damages--in the form of either a jury verdict, court decree, or stipulation binding on all parties--that is the end of the matter . . . In other cases a settlement may not be reached and the judge or jury, in its findings, may make an allocation. With a stipulation or judgment under this procedure, the anti-lien provision protects from state demand the portion of a beneficiary's tort recovery that the stipulation or judgment does not attribute to medical expenses. . . When the State and the beneficiary are unable to agree on an allocation, Ahlborn noted, the parties could ‘submi[t] the matter to a court for decision.’ "

To read the full text of the Court's decision, along with Justice Breyer's concurrence and Chief Justice Roberts' dissent that was joined by Justices Scalia and Thomas, go to:

For an in-depth summary and analysis of the E.M.A. decision by Florida attorney Jason D. Lazarus, click here.

For an earlier article on the oral arguments in the case, click here.


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