On September 25, 2012, the U.S. Supreme Court granted certiorari in E.M.A. ex rel. Plyler v. Cansler, a recent decision from the Fourth Circuit addressing the State of North Carolina’s right to reimbursement of a Medicaid recipient’s settlement proceeds.
The plaintiffs in E.M.A. were the parents of a minor child who sustained serious injuries at birth due to the negligence of the medical professionals who attended to her delivery. The North Carolina Department of Health and Human Services (DHHS), through the State’s Medicaid program, paid more than $1.9 million in medical expenses on behalf of the minor child. Meanwhile, the plaintiffs filed a medical malpractice action that settled for a lump sum of $2.8 million. DHHS asserted a statutory lien on the settlement proceeds pursuant to North Carolina’s third-party liability statutes, which provided that the State could assert a lien on the lesser of actual medical expenditures or one-third of the Medicaid recipient’s total recovery. Because DHHS’s actual medical expenditures of $1.9 million exceeded one-third of the minor child’s $2.8 million recovery, the third-party liability statutes created an unrebuttable presumption that the State was entitled to reimbursement of $933,333.33 (one-third of $2.8 million).
The plaintiffs then brought an action in federal district court asserting that North Carolina’s third-party liability statutes violated federal Medicaid anti-lien provisions, which prohibit states from placing liens against a Medicaid recipient except for payments for medical care. The plaintiffs argued that the one-third cap allowed DHHS to assert a lien on settlement funds that were paid in lieu of damages for claims other than for medical expenses. The district court, relying on a North Carolina Supreme Court case, Andrews v. Haygood, granted summary judgment in favor of the State, thereby entitling the State to $933,333.33. The plaintiffs appealed, and the Fourth Circuit reversed.
The Fourth Circuit scrutinized Andrews, as well as a recent U.S. Supreme Court case, Arkansas Dept. of Health & Human Services v. Ahlborn, which attempted to resolve this tension between federal anti-lien provisions and state third-party liability statutes. Ahlborn held that a state cannot, without violating federal anti-lien provisions, place a lien on any property that does not constitute reimbursement for medical expenses. But both the district court and the Andrews court narrowly interpreted Ahlborn, limiting its application to settlements that specifically allocated proceeds and identified a sum certain for medical expenses, unlike the unallocated lump sum settlement at issue in E.M.A.
The Fourth Circuit, however, disagreed with this “crabbed application” distinguishing between lump sum and specifically allocated settlements. Instead, the Fourth Circuit concluded that Ahlborn clearly held that federal anti-lien provisions prohibit a state from recovering any portion of a settlement or judgment not attributable to medical expenses. Consequently, the Fourth Circuit held that North Carolina’s third-party liability statutes failed to comport with federal Medicaid law as interpreted by the U.S. Supreme Court in Ahlborn because the State’s one-third cap inherently raised an unrebuttable presumption in favor of the State that medical expenses equaled one-third of a lump sum settlement. The issue presently before the U.S. Supreme Court is whether E.M.A. was correct in so holding.
This granting of certiorari is significant because there is currently a divide between those states that have amended their laws post-Ahlborn, and those that continue to impose a cap or allow full recovery for Medicaid reimbursements. For example, in contrast to its previous cap of one-half of recovery, California now limits recovery to the portion of the award specifically representing payment for medical expenses. But Florida, Georgia, Hawaii, Iowa, and North Carolina have yet to amend their laws post-Ahlborn. Should the U.S. Supreme Court uphold E.M.A.’s interpretation of Ahlborn, states may enact laws providing for specific damages allocations, require that cases be settled with the consent of the state, require mandatory joinder of a state when a Medicaid lien is at issue, or simply become more involved in underlying tort litigation in order to influence the amount allocated to medical expenses in settlement.
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