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High Court Refuses to Limit State Sources for Medicaid Clawbacks (2)

June 6, 2022, 2:21 PMUpdated: June 6, 2022, 3:55 PM

States can take money Medicaid beneficiaries win in personal injury litigation for future medical expenses to recoup payments the program made for their prior care, the U.S. Supreme Court ruled Monday.

In a 7-2 decision, the court’s majority said the Medicaid Act permits a state to seek reimbursement from settlement amounts that are allocated for future medical expenses. In delivering the court’s ruling, Justice Clarence Thomas said the plain text of the statute decided this case.

Two provisions “distinguish only between medical and nonmedical care, not between past (paid) medical care payments and future (unpaid) medical care payments,” he said.

The dispute centered on Gianinna Gallardo, who has been in a vegetative state since 2008 when she was hit by a truck getting off the school bus. Gallardo’s parents sued the truck’s owner, its driver, and the school board for past and future medical expenses, lost earnings, and other damages. The case settled for $800,000.

The Florida Agency for Healthcare Administration placed a lien on the money, claiming it was entitled to $300,000 from the portion of the settlement provided for Gallardo’s past and future medical expenses since it paid over $862,000 for her prior medical care.

States are required under the Medicaid Act to seek reimbursement from third parties that are liable for a Medicaid recipient’s care, and the money can be taken from the parts of a settlement attributable to both past and future medical expenses, the agency argued. The Florida Attorney General’s Office, which argued the case on behalf of the state health agency did not immediately respond to a request for comment.

Gallardo’s parents countered that the state can only tap into the money allocated for past expenses. In a statement to Bloomberg Law, Gallardo’s attorney said he and his clients respect the court’s decision though they are disappointed and agree with the dissent’s interpretation of the statutes.

“The decision, we believe, will harm Medicaid beneficiaries,” said Bryan Gowdy, an appellate lawyer at Creed & Gowdy PA. “We hope that Congress will consider amending the statutes.”

Disruptions Ahead

In a dissenting opinion, which Justice Stephen Breyer joined, Justice Sonia Sotomayor said the court’s holding in this case is inconsistent with the structure of the Medicaid program and warned it will cause needless unfairness and disruption.

“It holds States may reimburse themselves for medical care furnished on behalf of a beneficiary not only from the portions of the beneficiary’s settlement representing compensation for Medicaid-furnished care, but also from settlement funds that compensate the Medicaid beneficiary for future medical care for which Medicaid has not paid and might never pay,” she said.

This, Sotomayor explained, alters the balance Congress struck between preserving Medicaid’s status as payer of last resort and protecting Medicaid beneficiaries’ property and might frustrate both goals.

Medicaid beneficiaries’ incentive to bring personal injury lawsuits like this in the first place reduces as state’s rights to recover damages expand, which could cause states to recover fewer overall expenses, she reasoned.

The case is Gallardo v. Marstiller, U.S., No. 20-1263.

(Updates with reaction from plaintiff's attorney in seventh and eighth paragraphs.)

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Brent Bierman at bbierman@bloomberglaw.com; Alexis Kramer at akramer@bloomberglaw.com