Supreme Court Decision Re: Medicaid Liens

No. 20–1263. Argued January 10, 2022—Decided June 6, 2022

Gianinna Gallardo suffered catastrophic injuries resulting in permanent disability when a truck struck her as she stepped off her Florida school bus. Florida’s Medicaid agency paid $862,688.77 to cover Gallardo’s initial medical expenses, and the agency continues to pay her medical expenses. Gallardo, through her parents, sued the truck’s owner and driver, as well as the Lee County School Board. She sought compensation for past medical expenses, future medical expenses, lost earnings, and other damages. That litigation resulted in a settlement for $800,000, with $35,367.52 expressly designated as compensation for past medical expenses.

The settlement did not specifically allocate any amount for future medical expenses. The Medicaid Act requires participating States to pay for certain needy individuals’ medical costs and then to make reasonable efforts to recoup those costs from liable third parties. Under Florida’s Medicaid Third-Party Liability Act, a beneficiary like Gallardo who “accept[s] medical assistance” from Medicaid “automatically assigns to the [state] agency any right” to third-party payments for medical care. Applied to Gallardo’s settlement, Florida’s statutory framework entitled the State to $300,000—i.e., 37.5% of $800,000, the percentage the statute sets as presumptively representing the portion of the tort recovery that is for “past and future medical expenses,” absent clear and convincing rebuttal evidence. §§409.910(11)(f )(1), (17)(b).

Gallardo challenged the presumptive allocation in an administrative proceeding. She also brought this lawsuit seeking a declaration that Florida was violating the Medicaid Act by trying to recover from portions of the settlement compensating for future medical expenses. The Eleventh Circuit concluded that the relevant Medicaid Act provisions do not prevent a State from seeking reimbursement from settlement monies allocated for future medical care. 963 F. 3d 1167, 1178.

Held: The Medicaid Act permits a State to seek reimbursement from settlement payments allocated for future medical care.

This decision is likely to result in some confusion when settling personal injury cases for Medicaid beneficiaries, particularly with respect to Medicaid lien reductions mandated by the Court’s previous decisions. Specific allocations of settlements, arbitration awards and trial verdicts to damages for past medical expenses will not limit the state’s claims for Medicaid reimbursement, and attorneys should use other approaches to contain Medicaid liens.

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