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From the State and Local Legal Center

States participating in Medicaid must require Medicaid beneficiaries to assign the state “any rights . . . to payment for medical care from any third party.”

In Gallardo v. MarstilleSupreme Courtr the U.S. Supreme Court held 7-2 that states may collect from third party tortfeasors settlements allocated for the cost of future (not only past) medical care. The State and Local Legal Center (SLLC) filed an amicus brief arguing for this result.

Gianinna Gallardo has been in a persistent vegetative state since she was hit by a pickup truck getting off the school bus in 2008. Florida’s Medicaid agency has paid over $800,000 for her initial medical expenses. Gallardo’s parents settled a case against multiple parties for $800,000. A little over $35,000 of the settlement was designated as compensation for past medical expenses. The parties agreed an unspecified amount may represent compensation for future medical expenses.

Florida law allows the state to recover half of a Medicaid beneficiary’s total settlement, after deducting 25% for attorney’s fee and costs. It presumes, though the presumption may be rebutted, that this amount represents the portion of the recovery for “past and future medical expenses.”

While Medicaid beneficiaries must allow the state to collect payments from tortfeasors for medical care costs, Medicaid’s “anti-lien provision” prohibits states from recovering medical payments from a beneficiary’s “property.” Gallardo argued that Florida may only collect $35,000 from the settlement because Medicaid’s anti-lien provision preempts Florida’s law to the extent it allows Florida to recover future medical expenses. 

The court, in an opinion written by Justice Clarence Thomas, disagreed. According to Thomas the “plain text” of the Medicaid Act indicates Florida may seek reimbursement from settlement amounts representing past or future medical care payments. Per the Medicaid Act, must require Medicaid beneficiaries to assign the states “any rights . . . of the individual . . . to support . . . for the purpose of medical care . . . and to payment for medical care from any third party.”

Interpreting this language, the court opined: “Nothing in this provision purports to limit a beneficiary’s assignment to ‘payment for’ past ‘medical care’ already paid for by Medicaid. To the contrary, the grant of ‘any rights . . . to payment for medical care’ most naturally covers not only rights to payment for past medical expenses, but also rights to payment for future medical expenses. The relevant distinction is thus ‘between medical and nonmedical expenses,’ not between past expenses Medicaid has paid and future expenses it has not.”

Dissenting Justices Sonia Sotomayor and Stephen Breyer criticized the majority opinion for paying “comparatively little attention” to Medicaid’s anti-lien provision. According to these Justices, “the anti-lien and anti-recovery provisions establish that acceptance of Medicaid does not render a beneficiary indebted to the state or give the state any claim to the beneficiary’s property. In other words, Medicaid is not a loan.”

The SLLC amicus brief argued that states should be able to collect payments for future medical costs from Medicaid beneficiary settlements. The brief states that due to the “the massive financial burden on States imposed by Medicaid, it is crucial that States have every option open to them to defray their costs.” 

Christopher M. Egleson, Kelly A. Eno, James R. Horner, and Cassandra Liu of Sidley Austin wrote the SLLC amicus brief which the following organizations joined:  National Conference of State Legislatures, National League of Cities, U.S. Conference of Mayor, and Government Finance Officers Association.  

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This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.