Supreme Court Hears Case About How Much a State Can Recover in Medicaid Payments

If you are injured due to medical malpractice or because of another person's negligence and you receive care through your state's Medicaid program, the state has a legal right to recover funds from your personal injury settlement or award that it used to pay for your care. The U.S. Supreme Court recently heard oral arguments in a case that questions just how much money a state can actually recover when it comes time to collect its Medicaid lien.

The case, Delia v. E.M.A., has the potential to affect anyone who is injured and receives government assistance with medical care because the Court's decision will impact exactly how much money a state can take from someone's personal injury settlement or award.

The case centers around Emily Armstrong, a young North Carolina resident who was injured at birth by a doctor who later surrendered his medical license due to problems with drugs. Emily's future medical costs are going to be astronomical, but because the doctor who injured her no longer practices medicine, Emily did not stand much of a chance of recovering anything close to the full amount of money that would compensate her for her injuries, so she chose to settle her medical malpractice lawsuit against the doctor for $2.8 million.

At this point, the state of North Carolina stepped in and asserted a claim against Emily's settlement because the state had already paid close to $2 million for Emily's care through the Medicaid program. Since it wouldn't be fair for the state to gobble up an injured persons entire settlement, a North Carolina state law says that the state can only recover the actual amount of money that it spent on Emily's care or one-third of her settlement, whichever is less. So, for example, under the North Carolina law, if the state had spent $10,000 on Emily's care, it would have claimed only $10,000 as its share of her settlement. But in this case, the state's costs were much higher, so it demanded a full one-third share of Emily's settlement for Medicaid reimbursement.

However, the state's Medicaid recovery law bumped up against a 2006 U.S. Supreme Court decision, Arkansas Department of Health and Human Services, et al. v. Ahlborn, in which the Court determined that states can only recover their costs from the portion of a Medicaid recipient's settlement that is specifically allocated to medical expenses, leaving the remaining settlement funds (that typically represent lost wages and pain and suffering) untouched.

Because Emily's settlement did not specify how much of the $2.8 million represented past and future medical expenses, Emily reasoned that the state could not simply claim one-third of her settlement, and that there would have to be a judicial hearing or an agreement between the parties to determine the amount of her settlement that could be attributed to medical expenses. The parties ended up in federal district court, where the state initially prevailed. However, the 4th Circuit Court of Appeals overturned the lower court's decision and found that Emily had a right to a hearing so that she could dispute the state's claim to one-third of her settlement. The state then appealed to the U.S. Supreme Court.

Tough Questions from Justices

In oral arguments before the Court in early January, the state faced tough questions from the Justices about how it came up with its one-third Medicaid recovery number. Several justices, including Justice Breyer, were concerned about what would happen if a judge or a jury determined that only a small portion of a settlement was related to medical expenses and the state claimed one-third, despite the Supreme Court's prior ruling saying that it could recover only against medical expenses. The more conservative justices, including Chief Justice Roberts and Justice Scalia, raised the potential for abuse if the parties in a suit decided to settle and claimed that none of the settlement was related to medical expenses. Justice Scalia also worried about the additional burden that courts would face if they have to hold hearings to determine how every settlement should be allocated.

It's impossible to predict the outcome of the case given the back-and-forth nature of the argument, although in an argument preview SCOTUSblog contributor Ronald Mann said that North Carolina's arguments are "surprisingly thin" and he believes that the Court will affirm the 4th Circuit. A decision could come any time between now and June. In the meantime, you can read a helpful summary of the case in the Miami Herald and you can find the transcript of the argument before the High Court here.

Article Last Modified: 01/16/2013