Supreme Court to Decide If Medicaid Can Recoup Lien From Future Medicals

SCOTUS Accepts Certiorari on Medicaid Case to Decide if States Can Recoup Third Party Liability Lien From Settlement Proceeds Allocated for Future Medicals

Rafael Gonzalez, Esq. Cattie & Gonzalez, PLLC

As the country’s only national law firm with a focus on Medicare and Medicaid secondary payer compliance, one of our goals is to keep all of our current and potential clients updated on the latest news and events regarding Medicare and Medicaid. Whether state or federal statutory amendments, regulatory changes, administrative proposals, or case law, our intent is to keep you abreast of the most important and significant items happening in the Medicare and Medicaid space. We believe?Gallardo v. Marstiller?is one of those cases, one of those events.?

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 tort recovery that compensates for future medical expenses? That is the question presented to the United States Supreme Court (SCOTUS) in?Gallardo v. Marstiller, perhaps one of the most significant cases to be decided by the SCOTUS 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 outcome will likely mean a difference of tens or hundreds of thousands of dollars for parties resolving insurance claims involving an injured Medicaid beneficiary.

Oral argument has been set for Monday, January 10, 2022. Between now and then, Cattie & Gonzalez will provide you with updates, latest news, and a detailed analysis of the briefs and arguments made by the petitioner (Gallardo) and respondent (Marstiller), as well as the various amicus curiae briefs filed by several groups with an interest in this issue, including the United States of America, 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 fourteen (14) states. After oral arguments, we will summarize remarks, questions, and comments made by the parties and the justices. And after 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.

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, Schedules Oral Argument.

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 SCOTUS 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 SCOTUS decision in?Ahlbornreinforces 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.

Oral argument has been set for Monday, January 10, 2022. Between now and then, it is our intent to provide you with a detailed analysis of the briefs and arguments made 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 states.?

With over 81 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 United States 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. To stay informed and updated, you may visit Cattie & Gonzalez at?www.cattielaw.com, and sign up for our blog and newsletter, or follow us on LinkedIn and Twitter.

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, and YouTube, or reach him at [email protected], 844.546.3500, or www.cattielaw.com.