Join us 1/26/22 for Webinar on US Supreme Court Medicaid Lien Case Effect on Work Comp Claims

Join us Wednesday, January 26, 2022 from 1:00 PM to 3:00 PM EST for a discussion on Gallardo v. Marstiller, as the US Supreme Court revisits reimbursement of Medicaid liens and decide whether states can recoup past medical expenses from settlement dollars allocated towards future medical expenses.

Does the federal Medicaid Act allow a State Medicaid program to recover reimbursement for Medicaid’s payment of a beneficiary’s past medical expenses by taking funds from the portion of the beneficiary’s settlement recovery that compensates for future medical expenses? That is the question presented to the United States Supreme Court in?Gallardo v. Marstiller.

Hope you can join us Wednesday, January 26, 2022 from 1:00 PM to 3:00 PM EST for a live panel discussion via webinar on the most anticipated case and perhaps one of the most significant cases to be decided by the Supreme Court regarding individuals receiving Medicaid benefits and also involved in class action, medical malpractice, no-fault, nursing home, personal injury, products liability, workers compensation, and wrongful death litigation.

Panel Discussion on Statutory Law, Prior Case Law, Oral Arguments

Our panel, made up of Medicaid law experts Rafael Gonzalez, Esq. and John Cattie, Esq. will discuss state and federal statutory law, prior case law, and the oral arguments made to the Supreme Court on Monday, January 10, 2022. It will also provide a detailed analysis of the briefs filed by both sides, as well as the various amicus curiae briefs filed by several groups with an interest in this issue, including the United States, American Association for Justice, American Academy of Physician Life Care Planners, National Conference of State Legislators, National League of Cities, US Conference of Mayors, Government Finance Officers Association, as well as 14 US States.?

Although a decision is not expected from the Court until June 2022, with over 83 million Americans receiving Medicaid benefits today, this decision stands to effect 25% of our country’s population, and immediately become one of the most significant cases to be decided by the Supreme Court regarding individuals receiving Medicaid benefits and also involved in class action, medical malpractice, no-fault, nursing home, personal injury, products liability, workers compensation, and wrongful death litigation. The panel will discuss Federal and Florida Medicaid statutory and case law, Gallardo’s position and offer of $35,367 to resolve the lien, the State of Florida’s position and claim for $300,000 reimbursement, Gallardo’s win at the Federal District Court, Florida’s win at the 11th?Circuit Appeals Court, the United States’ position on the litigation, and the oral arguments made at the?US Supreme Court.

Federal and Florida Medicaid Law

When Medicaid recipients receive a personal injury settlement compensating them for medical expenses, federal law requires that the Medicaid program be reimbursed out of those funds for any medical expenses paid by Medicaid.?42 U.S.C. §1396a(a)(25)(H).?Florida law acknowledges the requirement to seek reimbursement for medical payments it has made in its Medicaid Third-Party Liability Act. Fla. Stat.?§409.910.

Florida's Medicaid Third-Party Liability Act instructs the Florida Agency for Health Care Administration (FAHCA) to seek reimbursement from third-party benefits to the limit of legal liability and for the full amount of third-party benefits, but not in excess of the amount of medical assistance paid by Medicaid.?Fla. Stat.?§409.910(4).?Florida carries out this policy by granting FAHCA an automatic lien for the full amount of medical assistance provided by Medicaid to or on behalf of the recipient for medical care furnished as a result of any covered injury or illness for which a third party is or may be liable.?Fla. Stat.?§409.910(6)(c).?In the event the recipient of the Medicaid funds brings a tort action against a third party that results in a settlement, FAHCA is automatically entitled to half of the recovery (after 25% attorney's fees and costs), up to the total amount provided in medical assistance by Medicaid.?Fla. Stat.?§409.910(11)(f).?However,?Florida law allows the Medicaid recipient to challenge the automatic allocation.?Fla. Stat.?§409.910(17)(b).

Gallardo Offers $35,367 to Resolve Lien, State Wants $300,000

Gianinna Gallardo was grievously injured in 2008 when a pickup truck hit her after getting off her school bus. She remains to this day in a persistent vegetative state. Through the date of this litigation, Florida's Medicaid program?paid $862,688.77 for her medical care related to the injuries associated with the accident.?

Gallardo’s parents filed suit in state court on Gianinna’s behalf against the truck's owner, the truck's driver, and the school district. In 2015, the parties negotiated, and the state court approved, a settlement of that suit for a total of $800,000, covering only a small fraction of the total damages she suffered and the future costs she will face for her care.?The settlement included an allocation of $35,367.52 for past medical expenses.?It further stated that although some of the balance may represent compensation for future medical expenses Gallardo will incur in the future, no portion of the settlement was reimbursement for future medical expenses. FAHCA did not participate in or agree to the terms of the settlement.?

While Gallardo's personal injury suit was pending,?FAHCA attached a lien for $862,688.77 on her pending cause of action and any future settlement of it. When the suit settled for $800,000, Gallardo's counsel asked the state how much it would accept in satisfaction of its lien, given that the settlement included only $35,367.52 specifically allocated by the parties for past medical expenses. When there was no response, per Florida law, Gallardo put $300,000 (25% from the $800,000 settlement for attorney's fees ($200,000), then half of the remaining $600,000, thereby equaling $300,000)?into a trust account?and commenced an administrative action to challenge that amount.?

Gallardo Wins in District Court, But Appeals Court Disagrees?

Gallardo sued the Secretary?of FAHCA in US District Court under 42 U.S.C.?§1983,?seeking a declaration that, under federal law, Florida was not entitled to reimbursement from anything more than the portion of the settlement representing compensation for past medical expenses. In other words, Gallardo argued the cap on Florida's reimbursement?was $35,367.52. Gallardo also argued that Florida’s Medicaid law was preempted by federal Medicaid law.?

The US District Court agreed, granting Gallardo's motion for summary judgment and denying FAHCA's. It found that federal Medicaid law,?42 U.S.C. §1396, preempted Fla. Stat.?§409.910?and it enjoined FAHCA from "seeking reimbursement of past Medicaid payments from portions of a recipient's recovery that represents future medical expenses."?Gallardo ex rel. Vasallo v. Dudek, 263 F.Supp.3d 1247 (USDC N.D. Fla. 2017).

While the appeal of that decision was pending in the 11th?Circuit Court of Appeals, in a separate case with similar facts, the Florida Supreme Court held that federal Medicaid law?authorizes the state to obtain reimbursement out of personal injury settlements only from the portion of a settlement that represents past medical expenses.?Giraldo v. Agency for Health Care Administration, 248 So.3rd?53 (Fla. 2018).?When that decision became final, Gallardo moved the 11th?Circuit Court of Appeals to dismiss her appeal because the question of Medicaid lien reimbursement from future medical expenses was now moot per state law.?

The 11th?Circuit Court of Appeals however disagreed with Gallardo. Instead, the court concluded that since the issue of Medicaid liens is a question of federal law, the federal appeals court was not bound by the Florida Supreme Court's interpretations of federal law.?The court also found the parties' unilateral allocation of?$35,367.52?did not bind FAHCA. The court further concluded that the federal Medicaid law does not preempt FAHCA's practice of seeking reimbursement from portions of a settlement that represent all medical expenses, both past and future medical expenses.?Gallardo by and through Vassallo v. Dudek, 963 F.3d 1167 (USCA 11th?Cir. June 26, 2020), 977 F.3d 1366 (USCA 11th?Cir. October 20, 2020).

US Supreme Court Grants Certiorari

Gallardo filed a Petition for Writ of Certiorari with the United States Supreme Court on March 9, 2021 arguing the 11th?Circuit’s decision directly conflicts with the Florida Supreme Court’s decision on the same issue and further deepens a conflict among federal courts of appeals and state courts of last resort. As a result, Gallardo asked the Supreme Court to resolve this conflict and the uncertainty created by the ongoing conflict, as the issue and question presented arise frequently inside and outside of litigation.

The petition was granted on July 2, 2021. As a result, Petitioner Gallardo filed her Brief on September 15, 2021, arguing the Medicaid Act’s plain text limits a state to the portion of a beneficiary’s recovery that represents a payment for past medical care. Gallardo furthered argued that the prior United States Supreme Court decision on?Ahlborn?reinforces what the statutory text makes clear, that States are limited to reimbursement from that portion of the settlement which is allocated for past medical care, not future medical care.?

On November 15, 2021, Respondent Marstiller filed her Brief arguing that the Medicaid Act permits the state to recover third party payments for both past and future medical care.??The state argues that the history and structure of the Medicaid Act confirms states may obtain the assignment of rights payments for both past and future medical care.??In other words, Medicaid’s role as the payer of last resort supports permitting the program to recover costs from all medical damages, not just those unilaterally allocated toward past medical expenses.

At Oral Arguments, Different Interpretations of Different Sections of the Medicaid Act

The court scheduled oral arguments for Monday, January 10, 2022. For almost two hours that day, the justices wrestled with how broad or limiting various provisions of the Medicaid Act should be read. All justices agreed that the Medicaid Act generally prohibits 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 the tortfeasor, the individual or corporate entity who injured the beneficiary.?At issue in Gallardo then is whether the state’s recoveries are limited to the amount of money allocated in the settlement for past medical expenses, or whether the state can recoup monies from settlement funds allocated for future medicals, and whether Medicaid can continue to recoup payments made throughout the time period the beneficiary remains eligible for Medicaid.

What if Beneficiary Remains Eligible for Medicaid Post Settlement?

One of the most interesting questions asked throughout oral arguments was by Justice Samuel Alito, who 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? Can Medicaid continue to seek reimbursement of those ongoing and continuing medical payments??The moment there’s a tort recovery, that becomes the property of the Medicaid beneficiary and such settlement funds are 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. The state is therefore only entitled to $35,000, which was allocated in the settlement for past medical expenses, Gallardo’s parents argued.

Florida Solicitor General Henry Whitaker argued Medicaid can never be paid more than the beneficiary received in benefits but can seek reimbursement not only out of what’s allocated for past medical expenses but also what may be allocated for future medical expenses. The state also argued it could continue to seek reimbursement of Medicaid payments in the future if the beneficiary remained eligible for benefits.?Justice Sonia Sotomayor seemed to take issue with that expansive reading of the statute, asking what happens if the future expenses are ones Medicaid does not pay for, or will never pay for. The state argued it would still be entitled to reimbursement.

The United States Agrees with Gallardo’s Interpretation of Statute

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, why not go after the person who injured the victim, or his/her insurer? 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. He suggested the Federal government should stop payment to Florida to make its point that Florida may be incorrectly interpreting the Medicaid Act and failing to appropriately recover Medicaid payments.

Florida Argues Reimbursement Entitlement Under 42 USC 1396k

The State of Florida relied heavily through oral arguments on a specific provision of the Medicaid Act, which arguably does not limit the state’s right to recoupment. The state argued?that?it is allowed to seek reimbursement from the third party pursuant to 42 U.S.C. § 1396k(a)(1)(A), which broadly assigns to the state all of the beneficiary’s rights to “payment for medical care from any third party,” a phrase the state argues could easily include payments made for past or future medical expenses.?

Several of the justices focused closely on the language in subsection k(a)(1)(A), interpreting the language as possibly giving states all rights to “payment for medical care.” For example, Justice Elena Kagan commented that it seemed more sensible to read the statute as describing the kinds of things that Medicaid covers – a “service distinction” rather than a “past/future distinction.” Justice Stephen Breyer went so far as to say that Gallardo’s problem in challenging Florida’s right to reimburse itself out of settlements allocated to future medical expenses is that the statute simply “says it can” take that money. Justice Amy Coney Barrett’s comments suggested that she shares that perspective. For those justices, the language supports Florida’s view that it is entitled to take all medical-expense recoveries, whether for past or future expenses.

As the argument progressed however and the justices better understood the differences between these provisions and the state’s interpretation, several justices displayed increasing dissatisfaction with the broad implications of the state’s reading. Florida’s argument implies that the state can take a tort settlement directed at medical expenses, not only if they are future medical expenses that the state has not yet paid (and might never pay), but even if they are medical expenses not covered by Medicaid. That view was particularly unpalatable for Justice Sonia Sotomayor, who found the state’s interpretation extraordinarily far reaching.

Other justices indicated their disagreement with such a broad reading too. Justice Kagan, for example, joined Justice Sotomayor in doubting the possibility that Congress could have intended for states to recover from payments for medical expenses that Medicaid wouldn’t cover. Justice Breyer was uncomfortable with the state’s expansive reading of the statutory provision. He seemed to prefer Gallardo’s request that the court interpret the provisions consistent with the whole spirit of the anti-lien statute, which is to leave the money with the Medicaid victim. Justice Kavanaugh pointed out that the state was unable to defend a pure reading of the statute.

Gallardo Argues Reimbursement Limited Under 42 USC 1396aH

Gallardo on the other hand relied on other provisions, including 42 U.S.C. 1396a(a)(25)(H), which provides that the state acquires those rights “only to the extent that payment has been made under the State plan for medical assistance,”?allowing Gallardo to argue that reimbursement is limited to those specific dollars allocated for past medical treatment in the body of the parties’ settlement agreement. Therefore, as oral arguments continued, the general question became whether those provisions describe different rights of the state (with broader and narrower coverage) or a single scheme of rights all limited to medical expenses for which the state already has provided payment.

Conclusion

With over 81 million Americans receiving Medicaid benefits today, costing us close to $700 billion, this decision stands to effect 25% of our country’s population, and immediately become one of the most significant cases to be decided by the United States Supreme Court regarding individuals receiving Medicaid benefits and also involved in class action, mass tort, medical malpractice, no-fault, nursing home, personal injury, products liability, workers compensation, and wrongful death litigation.?

Although we do not anticipate a decision until May or June of 2022, as soon as an opinion is published and a decision is made by the court, we will break it down for you and provide you with an explanation of what it means to plaintiffs and defendants involved in litigation with Medicaid recipients. In the interim, to stay informed and updated, you may visit us at www.cattielaw.com to sign up for our blog and newsletter.

About Rafael Gonzalez, Esq.

Rafael is a partner in?Cattie & Gonzalez, PLLC,?a national law firm focusing its practice on federal Medicare/Medicaid secondary payer compliance and legal issues. In addition to assisting clients with Medicare mandatory reporting, conditional payments, and set asides issues, he helps clients with Medicaid third party liability liens and Medicaid special needs trusts issues. He has over 35 years experience in?the liability, no-fault,?and work comp insurance industry.?You can connect with him on?LinkedIn,?Twitter,?Facebook,?Instagram and?YouTube, or reach him at [email protected] or 844.546.3500.