U.S. Circuit Court rules Medicaid may recover past and future medical expenses for treatment related to underlying claim

The U.S. Circuit Court of Appeals recently ruled that Medicaid may seek to recover payments it made for an eligible recipient’s treatment from the settlement agreement that released both past and future medical care ― Gallardo v. Dudek, 2020 U.S. App. LEXIS 19928. The 11th Circuit used the U.S. Supreme Court’s decision in Arkansas Dept. of Health and Human Svcs. v. Ahlborn, 547 U.S. 268 (2006) in reaching the Gallardo decision. 

Claim Summary

 In 2008, then 13-year-old Gianinna Gallardo was struck by a truck after getting off of a school bus, leaving her in a persistent vegetative state and unable to care for herself in any manner. Her parents filed a lawsuit against the driver of the truck, the school bus driver and the school district. 

Settlement 

The case eventually settled for $800,000, or about 4% of the case’s $20 million value. Because Medicaid had made $862,688.77 in medical payments for Gianinna’s treatment, Medicaid attached a lien for this amount to her settlement. Her attorney advised Florida’s Medicaid agency of the settlement and that $35,367.52 of the settlement represented past medical expenses that Medicaid paid. 

Under Fla. Stat. § 409.910(11)(f), an automatic lien attaches when a Medicaid recipient secures a third-party tort settlement where Medicaid is entitled to half of the recovery (after 25% attorney’s fees and costs), up to the total amount provided in medical assistance by Medicaid. In addition, Florida’s Medicaid Third-Party Liability Act instructs Medicaid 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.”

Ms. Gallardo’s counsel placed $300,000 into a trust account and filed suit to determine the amount owed to Florida Medicaid. The 11th Circuit used the Ahlborn decision in their interpretation and ruling. In Ahlborn, the U.S. Supreme Court limited the state Medicaid program to that portion of the settlement attributed to medical damages. The Gallardo decision interpreted this to mean both past and future medical expenses and ruled the parties’ allocation of the $35,367.52 for “past medical expenses” does not bind the state Medicaid program’s recovery efforts. The 11th Circuit court stated when the parties do not seek Medicaid’s input on the settlement allocation for medical expenses, Florida’s statutory allocation formula, Fla. Stat. § 409.910(17)(b), is applicable and not preempted by federal Medicaid law. 

Impact and Application 

The outcome of Gallardo seems to provide Medicaid programs a larger portion of settlement proceeds from which to recover and obtain reimbursement. The 11th Circuit includes Florida, Alabama, and Georgia. However, Medicaid recovery rights are applicable in every state and automatic Medicaid liens cannot be ignored and must be factored into the overall case value. Resolution by the parties is recommended prior to disbursement of settlement funds. 

Optum Settlement Solutions is able to assist in identifying and analyzing Medicaid liens for relatedness and/or payment. For further information, contact Lavonya Chapman, Associate General Counsel of Optum Settlement Solutions at lavonya.chapman@optum.com.