For many, the decision reached by the Supreme Court on March 20, 2013 was a welcomed conclusion to a legal battle that spanned almost a decade. What started as a medical malpractice case ultimately spawned into what has now become a landmark case in the ongoing Medicaid debate. In 2000, an infant known as E.M.A. suffered multiple and severe injuries during her birth due to the physician’s negligence during delivery. As part of its Medicaid program, North Carolina paid for E.M.A.’s medical expenses with intentions to seek reimbursement for any recovery gained from a third party to cover E.M.A.’s medical expenses. A lawsuit was brought in 2003 for the injuries suffered and ultimately settled in 2006 for $2.8 million (despite the estimated damages in excess of $42 million for medical and life-care expenses, loss of future earning capacity, and other assorted expenses). State Medicaid, who had been covering the majority of the medical costs of E.M.A since 2000, put an immediate lien on the damages recovered and sought recovery under a state law thatcontained an irrebuttable presumption that one-third of the settlement covered medical expenses and thus was recoverable by the state. This state law was the basis for a lawsuit that went before the Supreme Court on January 8, 2013.
In its lengthy opinion issued March 20, 2013, the Supreme Court ruled that North Carolina’s recovery statute violated the Federal Medicaid statute’s anti-lien provision. In other words, the Supreme Court held that “[t]he federal anti-lien provision pre-empts North Carolina’s irrebuttable statutory presumption that one-third of a tort recovery is attributable to medical expenses.” (Full opinion offered here.) This ruling is a huge victory for Medicaid recipients nationwide who have received settlement packages and face impending Medicaid liens.
The Bottom Line
The Supreme Court’s decision is going to provide an immeasurable benefit to the millions more who will gain Medicaid coverage under the new Federal laws. This decision does not preclude State Medicaid agencies from collecting reimbursement for services provided. However, States can no longer seek unjustified and unreasonable reimbursement for Medicaid expenditures. They are now limited to only seeking reimbursement for Medicaid expenditures from the portion of a settlement that is determined to be for compensation of medical expenses. Thus, in each individual case, a breakdown must be presented to show the full value of medical expenses compensated by the settlement. The remaining portions of the settlement are not subject to such collection by the States.
This ruling ensures that individuals and families who go through such tragic events and receive compensation as a result will not have such proceeds immediately taken away from them. It allows those victims to be able to use the proceeds as intended by the settlement and plan accordingly.
The key going forward will be the definition of “medical expenses” (i.e. whether this refers to past or future). In the meantime, the notion that families can actually keep the funds recovered in these injury settlements to care for their special needs child opens up a wealth of planning opportunities to preserve and protect these proceeds.
– Adam Abramowitz, Esq