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High Court Wrestles With Florida Medicaid Clawback Dispute

Jan. 10, 2022, 6:43 PM

The Supreme Court struggled Monday with whether a state can be reimbursed for past medical care by tapping into money won by a Medicaid beneficiary in a personal injury lawsuit for future medical expenses.

During nearly two hours of oral arguments, the justices wrestled with how broad or limiting various provisions of the Medicaid Act should be read. The provisions prohibit states from imposing a lien on a Medicaid recipient’s property to recover payments they’ve made but also allow states to recover damages from someone who injured a beneficiary.

At issue is whether the state’s recoveries are limited to the amount of money allocated in the settlement for past medical expenses.

Justice Samuel Alito asked what happens if the person who receives a personal injury settlement or damages continues to be eligible for Medicaid and continues to have bills paid by Medicaid.

“Would you say that Medicaid cannot recover for those expenses from the portion of tort recovery that was awarded for future expenses?” he asked.

Settlement of $800,000

The dispute centers on Gianinna Gallardo, who has been in a vegetative state since 2008, when she was hit by a truck at the age of 13 while getting off the school bus.

Her parents sued the truck’s owner, its driver, and the school board for past medical expenses, as well as 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, the state agency argued. Florida and several other states have laws that allow them to recover their past payments on behalf of a Medicaid beneficiary from the parts of a settlement attributable to both past and future medical expenses.

However, Gallardo’s parents say the Medicaid Act preempts that state law and only allows Florida to seek reimbursement from settlement amounts that are attributable to past medical expenses—not future ones.

The moment there’s a tort recovery, that becomes the property of Gianinna Gallardo and is protected by the anti-lien provision of the Medicaid Act, said Bryan Gowdy, an appellate lawyer with Creed & Gowdy PA who argued on behalf for Gallardo.

“Unless the state can point to an exception in one of these third-party provisions, it is protected,” he said.

The state is therefore only entitled to $35,000, which was allocated in the settlement for past medical expenses, Gallardo’s parents have argued.

‘Medicaid Has Priority’

Florida Solicitor General Henry Whitaker argued Medicaid can never be paid more than it received in benefits but can seek reimbursement not only out of what’s allocated for past medical expenses but also future medical expenses.

Justice Sonia Sotomayor, who participated in Monday’s oral arguments remotely from her chambers, seemed to take issue with that, asking what happens if the future expenses are ones Medicaid does not pay for.

“Are you saying the state can also recover money for those services?” she asked.

“Even if the beneficiary has incurred expenses out of pocket, Medicaid has priority over the recovery from those damages for all of the medical expenses,” Whitaker said.

Arguing in support of Gallardo, Vivek Suri, assistant to the solicitor general at the U.S. Department of Justice, said Florida is going after the victim of the accident, not the person who injured the victim. That prompted Justice Clarence Thomas to ask why the federal government wouldn’t just sanction Florida if it thought it was acting out of line.

The case is Gallardo v. Marstiller, U.S., No. 20-1263, argument 1/10/22.

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

To contact the editor responsible for this story: Brent Bierman at bbierman@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com

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