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United States Supreme Court Settles Medicaid Reimbursement Dispute for all States

Posted on Apr 08, 2013

Attorneys and clients have been battling Medicare and Medicaid for years to determine just how much the agencies should be reimbursed when injuries were caused by someone else’s negligence.

The United States Supreme Court took a position in March in the case Wos, Secretary of North Carolina Department of Health and Human Services v. E.M.A. The High Court held that the federal statute regulating Medicaid, 42 U.S.C. § 1396a(a)(25)(H), prevents the states from taking any portion of a beneficiary’s judgment or settlement monies that is not designated as payment for medical care. While Medicaid will still be reimbursed for overpayment of medical expenses, Medicaid is prevented from taking a client’s money that has been awarded for something else, like pain and suffering, emotional distress damages, or lost wages.

The United States Supreme Court has now held that the federal Medicaid statute’s anti-lien provision precludes a state from taking any portion of a Medicaid beneficiary’s tort judgment or settlement that is not designated as payment for medical care.  The Federal Medicaid statute, 42 U.S.C. § 1396a(a)(25)(H), provides that States receiving Medicaid funds must require beneficiaries to assign to the state a right of recovery for medical expenses paid by the state.  However, the federal statute precludes a state from placing any encumbrance on the remainder of the tort settlement. 42 U.S.C. § 1396p(a)(1).  The North Carolina statute in question created an irrebutable presumption that one-third of any damages recovered for a tortious injury would be paid to the state to reimburse it for payments it made for the beneficiary’s medical treatment.

E.M.A., a minor, was born with multiple birth injuries as a result of alleged malpractice.  Due to her injuries, E.M.A. cannot ever live independently, and will require nursing care for the rest of her life.  The plaintiffs presented expert testimony at trial that estimated her damages to be $42 million dollars.  E.M.A.’s parents also sued for emotional distress.   Ultimately, due to the malpractice insurance policy limit, the plaintiffs settled for $2.8 million, which was not allocated among medical and non-medical claims.  When the trial court approved the settlement, it also placed one-third of the recovery into escrow to satisfy the state’s statute for reimbursement for medical payments.  E.M.A.’s parents sought declaratory and injunctive relief in the Federal District Court, arguing that the North Carolina reimbursement statute violated the Medicaid anti-lien provision.

The Court held that North Carolina’s irrebutable presumption that one-third of plaintiff’s recovery would go to reimburse the state for medical expenses was in conflict with the Federal Medicaid statute insofar as it permitted the state to recover any portion of a plaintiff’s recovery not designated for medical care.   The Court emphasized that, absent any mechanism or procedure for determining whether the state’s assignment is reasonable in any particular case, the North Carolina statute was necessarily in conflict with the federal statute.  As such, the Court held that the Federal Medicaid statute pre-empted the North Carolina statute.

Click Here to view the full opinion (pdf).

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