Medicaid enrollees must share lawsuit awards with states, Supreme Court rules

By Maya Goldman / June 6, 2022

States can seek reimbursement for future medical expenses from Medicaid beneficiaries' injury settlements, the Supreme Court decided in a 7-2 opinion issued Monday.

Justice Clarence Thomas penned the majority opinion, which asserts that federal Medicaid law allows states to collect private settlement funds for medical expenses and doesn't expressly limit that to previously paid bills.

Chief Justice John Roberts and Justices Samuel Alito, Elena Kagan, Neil Gorsuch, Brett Kavanaugh, and Amy Coney Barrett joined Thomas. Justices Stephen Breyer and Sonia Sotomayor dissented.

No part of the relevant Medicaid law limits what a state agency can recoup to past payments, according to the majority opinion.

"To the contrary, 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," Thomas wrote.

The plaintiff in the case is the family of a young Florida woman named Giannina Gallardo and the defendant is the Florida Agency for Health Care Administration, which manages the state's Medicaid program.

Gallardo has been in a vegetative state since a truck hit her while she exited a school bus in 2008. On her behalf, Gallardo's parents won an $800,000 settlement after suing the truck's owner and driver, as well as the school board. More than $35,000 of the settlement was earmarked to the state for medical expenses incurred prior to the settlement.

Florida argued it should receive $300,000 for medical treatments Medicaid covered before and after the settlement, based on a state law that entitles Florida to such funds. Under that statute, the state may claim up to half of a Medicaid beneficiary's award, after 25% is deducted for legal expenses, to pay for all related medical costs.

A U.S. district judge decided in favor of the Gallardo family, ruling that Medicaid should only be able to recover settlement funds related to medical expenses that predated the settlement award. The Florida Supreme Court also sided with the Gallardos. But the U.S. Court of Appeals for the 11th Circuit reversed the decision, and the U.S. Supreme Court upheld that judgment.

Even though Medicaid programs generally can't seek reimbursement through possession of beneficiaries' property due to an anti-lien policy, enrollees give states their rights to payment for medical care from third parties, including via private settlements.

"The relevant distinction is thus 'between medical and nonmedical expenses…not between past expenses Medicaid has paid and future expenses it has not," the Supreme Court opinion says.

Sotomayor and Breyer disagreed that the exception to the Medicaid anti-lien policy includes all medical expenses.

"The court's holding is inconsistent with the structure of the Medicaid program and will cause needless unfairness and disruption," Sotomayor wrote in dissent.

If a patient's financial situation changes and they become able to pay for their medical bills, that person doesn't have to repay Medicaid for previous expenses, Sotomayor wrote. "Congress may wish to intercede to address any disruption that ensues from today's decision, but under a proper reading of the [Medicare and Medicaid Act of 1965], such intervention would have been unnecessary."