On March 20 the U.S. Supreme Court held that the anti-lien provision of the federal Medicaid Act preempts a state’s right to take any portion of a Medicaid beneficiary’s tort judgment or settlement not designated as payment for medical care. The Court’s ruling in Wos v. E.M.A., effectively blocks North Carolina’s efforts to recover up to one-third of any damages a Medicaid beneficiary recovers from a third party, as reimbursement for the state’s Medicaid coverage of the beneficiary’s medical treatment. Wos v. E.M.A., U.S. Supreme Court No. 12-98, issued March 20, 2013 (Slip Opinion).
The case involves a child — E.M.A. — who was born with serious birth defects which will prevent her from being able to work or live independently. North Carolina’s Medicaid program funds part of E.M.A.’s medical care. E.M.A.’s parents settled a medical malpractice lawsuit related to her birth for $2.8 million dollars, even though expert witnesses estimated that total damages in the case exceeded $42 million dollars. The amount of the final settlement was determined in part by the treating physician and hospital’s insurance policy limits.
Notably, the settlement agreement itself did not specify whether portions of the $2.8 million proceeds were allocated for medical or non-medical damages. The trial court approved the settlement, but placed one-third of the recovery into escrow pending a determination of how much E.M.A.’s parents were required to reimburse North Carolina’s Medicaid program for the cost of her treatment, under state law. The state had informed E.M.A.’s parents that it had spent $1.9 million on E.M.A.’s medical care, and that it would seek to recover that amount, up to one-third of the total recovery of any settlement or judgment of the malpractice claim, in accordance with state law.
E.M.A. and her parents then brought suit in federal court, claiming that the state’s law pertaining to its reimbursement rights violated the federal Medicaid statute.
In today’s decision, the Supreme Court ruled that North Carolina’s law is preempted to the extent that it permits the state to “take a portion of a Medicaid beneficiary’s tort judgment or settlement not designated for medical care.” Wos at 2. The Court held that North Carolina’s law directly conflicts with the federal statute and “must give way.” Id.
The Court’s opinion states that North Carolina’s law was preempted because the state law lacks any limiting principle, and provides no mechanism for determining whether its allocation of up to one-third of the total recovery is reasonable. Id.
Justice Kennedy delivered the Court’s opinion.
Stay tuned for more detailed updates on how this decision affects the interplay between the federal Medicaid statute and state Medicaid programs.
