By Terry Baynes
(Reuters) - The U.S. Supreme Court on Wednesday struck down
a North Carolina law that allowed state officials to seize
one-third of a medical malpractice settlement paid to a Medicaid
At a time when many states are expanding their Medicaid
programs under the Affordable Care Act, the high court's
decision restricts how states can tap into Medicaid
beneficiaries' lawsuit winnings and settlements to recover the
state's medical expenditures.
In the case, Wos v. EMA, North Carolina claimed over
$900,000 of a legal settlement won by the parents of a
13-year-old girl born with serious injuries that left her unable
to live or work independently. The parents of the girl, who is
identified in the lawsuit only as EMA, sued the delivery doctor
and hospital for medical malpractice.
The case settled for $2.8 million, the insurance policy
limit of the defendant physician, even though the suit had
requested damages of $42 million. The settlement did not
indicate what part of the $2.8 million was meant to cover EMA's
medical expenses, which were paid, in part, by Medicaid.
North Carolina claimed over $900,000 of that amount under a
law that allows the state to recover one-third of any legal
verdict or settlement as a reimbursement for the state's
Medicaid costs. EMA's family sued the state, arguing that the
amount was disproportionately large and violated the federal
Medicaid law, which limits a state's recovery to medical
The U.S. District Court for the Western District of North
Carolina found the state's method for determining its
reimbursement was reasonable, but the 4th U.S. Circuit Court of
Appeal in Richmond, Virginia, disagreed in 2012.
The Supreme Court upheld the 4th Circuit's ruling in a 6-3
opinion, finding that North Carolina's law conflicted with the
federal law's requirement that a state not claim more than what
it paid for medical expenses, known as the anti-lien provision.
"The State provides no evidence to substantiate its claim
that the one-third allocation is reasonable in the mine run of
cases," Justice Anthony Kennedy wrote for the majority.
If a state could designate one-third of any recovery as
being for medical expenses, it could "arbitrarily designate half
or all of the recovery in the same way," he added. North
Carolina's "one-size-fits-all statutory presumption" was
incompatible with the federal Medicaid law, he concluded.
The North Carolina Department of Justice declined to comment
on the decision.
A SIGNIFICANT WIN
Texas and 10 other states had supported North Carolina in an
amicus brief, arguing that the federal Medicaid law was an
agreement between the federal government and the states, and did
not provide Medicaid beneficiaries with a legal claim.
The federal Medicaid Act requires states to recoup their
medical expenses from beneficiaries' tort winnings. It does not
specify what percentage of tort winnings should be allocated as
medical expenses if the verdict or settlement does not say.
Several states, including North Carolina, Florida and Ohio,
have laws that allow the states to recover a fixed percentage of
the tort recoveries for Medicaid costs. Sixteen other states and
the District of Columbia conduct administrative hearings on a
case-by-case basis to determine what percentage of the verdict
or settlement was for medical costs. The majority of the
justices supported the case-specific hearing approach.
Three justices from the court's conservative wing dissented,
siding with North Carolina.
"States define the contours of their own tort law all the
time, setting rules about who may recover in particular
circumstances," Chief Justice John Roberts wrote, joined by
Justices Clarence Thomas and Antonin Scalia. He said there was
no evidence Congress ever intended to strip states of their
right to regulate tort recoveries.
Christopher Browning, a lawyer for EMA and her parents, said
the North Carolina statute had made it difficult for parties to
settle lawsuits, knowing that some of the money for pain and
suffering or other injuries would be collected by the state's
Advocates for Medicaid beneficiaries also called the ruling
a significant win, given the expanded role of state Medicaid
programs under the Affordable Care Act.
"This decision upholds the right of people who rely on
Medicaid for their health insurance to go into court if the
state is ignoring the requirements of the federal statute," said
Rochelle Bobroff, a lawyer with the Constitutional
Accountability Center who submitted an amicus brief on behalf of
the American Association of Retired Persons.
The case is Wos v. EMA, U.S. Supreme Court, No. 12-98.
For North Carolina: John Maddrey of the North Carolina
Department of Justice.
For EMA: Christopher Browning of Williams Mullen.
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