Wednesday, March 20, 2013

State Can't Automatically Collect Portion of Malpractice Settlement of Medicaid Recipient

The Supreme Court ruled today that a state can't automatically take a set portion of a Medicaid recipient's medical malpractice damage award in order to recoup medical expenses that it already paid.  The ruling still allows states to recoup medical expenses from Medicaid recipients' malpractice damage awards, but they can't do it by setting an arbitrary fixed portion of a damage award; instead, they have to do it case-by-case, with more precision.

The ruling is a victory for Medicaid recipients who recieve malpractice awards.  It means that states can't try to take more than their fair share of an award in an effort to achieve administrative efficiency (in determining the amount of actual medical expenses paid).

The case, Wos v. EMA, arose after the parents of minor EMA sued doctors and others for medical expenses, other expenses, and pain and suffering resulting from serious and permanent injuries that EMA suffered at birth.  The parties settled for $2.8 million, but did not designate a portion of the settlement as reimbursement for medical expenses.  

Because EMA received a portion of her medical care through North Carolina's Medicaid program, the state sought to recoup medical expenses it paid through Medicaid.  North Carolina's statute says that up to one-third of any damages recovered by a beneficiary for a tortious injury be paid to the state to reimburse it for payments it made for medical treatment on account of the injury.  The North Carolina Supreme Court ruled that the one-third portion was "a reasonable method for determining the State's medical reimbursements."  This interpretation could allow the state to collect less than its past medical expenditures, if those expenditures exceeded one-third of the total recovery.  But it also could allow the state to collect more than its past medical expenses, if, as here, those expenditures were less than one-third of the recovery.

The federal Medicaid Act allows, indeed requires, a state to recoup medical expenses from a Medicaid recipient's damage award.  But the Act's anti-lien provision preempts a state's effort to take any portion of an award not "designated as payment for medical care."  

The problem of determining reimbursable expenses is most acute when, as here, a settlement doesn't designate the portion attributable to medical expenses.  In that case, as in this case, the state uses the one-third portion as a default--and recoups (at least potentially) more than its actual medical expenses.  (Here the state court that approved the settlement set aside one-third of the settlement in escrow for payment to the state "until such time as the actual amount of the lien owed by [EMA] to [the state] is conclusively judicially determined."  EMA's parents then sued in federal court.  While the suit was pending, the North Carolina Supreme Court ruled that the one-third portion was "a reasonable method for determining the State's medical reimbursements.")

The Court ruled that the federal anti-lien provision preempted North Carolina's statute.  Justice Kennedy wrote the opinion, joined by Justices Ginsburg, Breyer, Alito, Sotomayor, and Kagan.  He said that North Carolina's one-third figure conflicted with the anti-lien provision, because it allowed the state to recoup more than its actual medical expenses, even when those expenses were designated as part of the award:  

North Carolina's statute, however, operates to allow the State to take one-third of the total recovery, even if a proper stipulation or judgment attributes a smaller percentage to medical expenses.

Op. at 9-10.

Justice Kennedy said that North Carolina gave no limiting principle, and by its reckoning it could have set a much higher portion as its default--thus recouping much more than actual medical expenses paid. 

Justice Breyer concurred, emphasizing that the Centers for Medicare & Medicaid reached the same conclusion as the Court--and that the Court owed some deference to the Centers' judgment.  Justice Breyer also said that the Centers could change their position, and that the Court's "decision does not freeze the Court's present interpretation of the statute permanently into law."

Chief Justice Roberts dissented, joined by Justices Scalia and Thomas.  Chief Justice Roberts said that the federal Medicaid Act doesn't specify how states must determine actual medical expenses, even though it requires them to recoup those expenses.  In particular, he said that the Act doesn't specify a case-by-case, after-the-fact determination, as the majority does here; instead, it's flexible enough to allow states to adopt different approaches (like North Carolina's).  Chief Justice Roberts would leave it up to the Centers and the states to experiment with different ways of determining actual medical expenses.


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