Supreme Court permits Florida Medicaid to seek reimbursement from settlement amounts representing payment of past or future medical care

June 24, 2022 · Medicare Insights Team

On June 6, 2022, the Supreme Court ruled 7-2 in Gallardo v. Marstiller that Florida Medicaid was permitted reimbursement from a settlement involving a permanently disabled woman. The woman, Ms. Gallardo, was involved in a catastrophic injury when she was hit by a truck while exiting a school bus. Florida Medicaid previously paid $862,688.77 in medical expenses and was expected to continue paying for future medical expenses related to this incident.

In addition, Ms. Gallardo sued the truck’s owner, driver and the school board and obtained a settlement of $800,000. Of the settlement amount, $35,367.52 was specifically earmarked for past medical expenses. The settlement also recognized that “some portion of the settlement may represent compensation for future medical expenses,” but there was not a specific amount for future medical expenses designated.

Under Fla. Stat. §409.910(4), Florida Medicaid then initiated action for a $300,000 reimbursement for both past and future medical expenses. Under Fla. Stat. §409.910(4), a beneficiary automatically assigns the state a right to third-party payments for medical care when it accepts medical assistance. This lien for the full amount of medical assistance provided attaches automatically to any settlements related to the injury that necessitated the Medicaid medical assistance. From that point, a statutory formula determined the $300,000 recovery amount for Florida Medicaid.

Gallardo argued that the Medicaid Act’s anti-lien provision (§1396p) does not permit Florida to seek reimbursement for settlement amounts representing future medical expenses. The Supreme Court disagreed and held the text of 42 U.S.C. §1396k(a)(1)(A) provided an anti-lien exception for medical care, past or future. Justice Thomas authored the opinion that said, “the grant of ‘any rights . . . to payment for medical care’ most naturally covers not only rights to payment for past medical expenses, but also rights to payment for future medical expenses. §1396k(a)(1)(A); see United States v. Gonzales, 520 U. S. 1, 5. The relevant distinction is thus ‘between medical and nonmedical expenses,’ Wos v. E. M. A., 568 U. S. 627, 641, not between past and future medical expenses.”

Analysis and takeaways regarding Medicaid and settlements

The Medicaid Act requires state plans to comply with §1396k and describes that provision as imposing a mandatory assignment of rights of payment for medical support and other medical care owed to recipients. Section 1396a(a)(25)(H) requires States to enact laws granting themselves automatic rights to certain third-party payments.

What this means is that all states have laws regarding the right to seek reimbursement from third parties in the context of Medicaid beneficiaries. Those laws may not look identical on a state-by-state basis, but they should be reviewed and considered when settling tort claims with a third party involving an injury that involves beneficiary treatment covered by Medicaid.

Designating the settlement for medical expenses (past or future) matters. In this case, $35,367.52 was specifically designated for past medical but there was no specific amount designated for future medical expenses. It is possible that if the settlement was crafted differently, there could be a different amount that Florida was entitled to that was less than $300,000 (37.5% of the $800,000 settlement). The fact that the settlement document recognized that “some portion of the settlement may represent compensation for future medical expenses,” opened the door for Florida to seek reimbursement of their percentage from the entire amount of settlement rather than the $35,367.52. While this case was specific to Florida’s laws, it very well could have had the same result in many other states with similar laws. Consulting with an attorney familiar with the state’s Medicaid laws and rights to recovery at the time of settlement could potentially limit the state’s recovery by crafting the settlement language and designation for settlement dollars.

Optum is prepared to assist with navigating Medicare- and Medicaid-related conditional payments or liens. We offer Medicaid lien verification services to help determine if there is a Medicaid interest to be considered prior to settlement. In addition, Optum offers a full suite of MSP Compliance services:

To ensure consistency in Section 111 reporting data
For the resolution of conditional payments with Medicare, Medicare Advantage Plans, Part D Plans
To handle Medicare Set-Aside needs involving future medical care

For additional information, please contact Optum MSP Compliance Counsel, Michael Flower at Michael.flower@optum.com (p)813-627-2406