Paying for the Past With the Future: the Scope of Medicaid Recovery for Past Medical Expenses

Gallardo v. Marstiller

No. 20-1263,
963 F.3d 1167 (11th Cir. 2020),
cert. granted, 2021 WL 2742787 (U.S. July 2, 2021).

Oral argument scheduled for January 10, 2022.

Issue: Whether the federal Medicaid Act permits a state Medicaid program to recover reimbursement for Medicaid’s payment of a beneficiary’s past medical expenses by taking funds from the portion of the beneficiary’s tort recovery that compensates for future medical expenses.

When a Medicaid recipient is injured, a state Medicaid program generally cannot impose liens on their property to recover the costs of their medical care. Petition for Writ of Certiorari, at 26, Gallardo v. Marstiller (No. 20-1263). However, if the Medicaid recipient files a lawsuit and obtains a personal injury judgment or settlement as compensation for those medical expenses, then the federal Medicaid Act requires that state Medicaid programs recover a portion of the funds. 42 U.S.C. §§ 1396a(a)(25)(H), 1396k. Every state has enacted a third-party recovery law to comply with this requirement. Petition for Writ of Certiorari, at 2, 5. It is settled law that federal law permits states to recover payments from settlements for past medical expenses. 42 U.S.C. § 1396a(a)(25)(A)-(B),(H); id. § 1396k(a)-(b). In this case, the Supreme Court will decide whether the state is permitted to collect such funds from the portion of a settlement that compensates for future medical expenses. Id. at 1.

Gianinna Gallardo was hit by a truck and severely injured after she exited her school bus in Florida. Petition for Writ of Certiorari, at 9. She remains in a persistent vegetative state. Id. In a court-approved settlement between Gallardo and the liable party, she received compensation for past medical expenses, future medical expenses, lost wages, and other damages. Id. at 10. The portion of the settlement compensating her for her past medical expenses was less than the total amount of those expenses. Id. The Florida Medicaid agency therefore sought to recover payments for medical assistance it made on Ms. Gallardo’s behalf from the portions of her settlement allocated for past and future medical expenses. Id. at 11. Florida’s third-party recovery statute expressly permits the agency to do so. Id. at 22.

Federal and state courts disagree on whether third-party recovery extends to portions of a settlement designated for future medical expenses. Id. at 16-19. Under a Florida Supreme Court decision, the state Medicaid agency cannot recover settlement payments designated for future medical care as reimbursement for past medical expenses. Giraldo v. Agency for Health Care Admin., 248 So. 3d 53, 56 (Fla. 2018). In Gallardo, however, the Eleventh Circuit ruled that the statute is broad and that states can recover from any portion of a judgment for medical expenses that a recipient receives from a tortfeasor. Gallardo v. Dudek, 963 F.3d 1167, 1176 (11th Cir. 2020). The Supreme Court will hear the case to clarify the extent of states’ authority to recover third-party reimbursement under federal Medicaid law.

WHAT’S AT STAKE

Because courts have construed the relevant provisions of the Medicaid Act and state third-party recovery laws differently, the scope of what a state Medicaid agency can recoup from a Medicaid beneficiary’s tort recovery is not clear.

States use recovered funds to cover Medicaid costs, which constitute a significant portion of state budgets. States’ ability to collect more from a Medicaid beneficiary’s tort recoveries can supplement stretched state budgets. If the Supreme Court affirms the Eleventh Circuit’s decision, states will be able to recover from settlement funds designated for both past and future medical expenses as reimbursement for past medical expenses paid by state Medicaid agencies.

If the Supreme Court reverses the decision of the Eleventh Circuit and issues an opinion following the reasoning of the Florida Supreme Court in Giraldo, Medicaid beneficiaries who receive settlement funds for medical expenses will be able to retain more of those funds. Beneficiaries’ retention of settlement funds can be devoted to future medical and other expenses not covered by Medicaid, thus contributing to the financial stability of Medicaid beneficiaries. States would only be able to collect from the funds set aside for past medical expenses. The decision may influence how injured parties approach both the litigation and settlement of tort claims.

Geron Gadd
ggadd@aarp.org

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