Under the federal Medicaid Act, does a Medicaid program have authority to recover reimbursement for its payment of a beneficiary’s medical expenses by taking funds from a legal recovery which compensates for future medical expenses for that beneficiary?
This case asks the Supreme Court to determine whether, pursuant to the federal Medicaid Act, a state Medicaid program may recover reimbursement for its payment of a beneficiary’s past medical expenses by allocating funds from a portion of the participant’s settlement that compensates for future medical expenses. Florida law requires Medicaid beneficiaries to assign any rights to reimbursement for medical care from third parties to the state. In this case, Gianinna Gallardo contends that a state cannot collect reimbursement for future medical expenses from a Medicaid beneficiary’s settlement against a third party. In response, Simone Marstiller, Secretary of the Florida Agency for Health Care Administration, counters that the state may recover reimbursement for both past and future medical expenses because the Florida statute does not explicitly bar recovery for future medical care. The outcome of this case will affect how the burden of Medicaid costs is allocated between individuals and the state and federal governments.
Questions as Framed for the Court by the Parties
Whether the federal Medicaid Act provides for 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.
In 2008, Gianinna Gallardo, a 13-year-old student, was hit by a truck after exiting her school bus. Brief for Petitioner, Gianinna Gallardo, at 16. She sustained severe physical injuries and remains in a continual vegetative state. Id. Since Ms. Gallardo is a Medicaid recipient, Florida’s Agency for Health Care Administration (“AHCA”) paid a portion of her past medical expenses totaling $862,688.77. Brief for Respondent, Simone Marstiller, at 7. Ms. Gallardo’s remaining medical expenses of $21,499.30 were paid for by WellCare of Florida, a private insurer. Id. As a condition of Medicaid eligibility, Ms. Gallardo was required to assign her rights to third-party payments for medical care to AHCA—obliging her to reimburse AHCA for its contribution to her medical care with any money recovered in a lawsuit against the individuals responsible for her injuries. Id.
Ms. Gallardo’s parents (“Gallardo”) brought a lawsuit in Florida state court to recover past and future medical expenses, lost earnings, and other damages from the truck’s owner, the truck driver, and the school board. Brief for Petitioner at 16. In response, AHCA asserted a Medicaid lien for $862,688.77 against the Gallardo’s lawsuit to recover its payment for past medical expenses. Brief for Respondent at 7. The parties settled, and Gallardo was awarded $800,000. Id. $35,367.52 of this settlement was allocated toward past medical care. Id. The parties’ agreement specified that only “some portion” of the settlement acted as compensation for future medical expenses. Id. at 7–8.
When a Medicaid beneficiary recovers medical expenses from a third party, Florida law states that AHCA is entitled to 37.5% (here, $300,000) of this amount. Id. at 8. Marstiller, the Secretary of AHCA, asserted that this 37.5% portion represents recovery for all medical expenses, both past and future. Id. Gallardo petitioned the court to challenge AHCA’s entitlement to 37.5% of the $800,000 settlement. Id. In this lawsuit, Gallardo contended that the federal Medicaid Act prohibits AHCA from recovering for future medical expenses under Florida’s third-party-recovery law. Id. She argued that AHCA may only recover $35,367.52, the amount of the settlement designated as compensation for past, but not future, medical expenses. Id.
Gallardo sued AHCA in federal court and moved to hold the state court proceedings in abeyance pending this outcome. Id. at 8–9. The district court ruled in Gallardo’s favor, finding that the federal Medicaid Act prevented Florida state law from permitting AHCA to recover on its lien against Gallardo for future medical expenses. Brief for Petitioner, at 18. Simone Marstiller, the Secretary of the AHCA, appealed, and the United States Court of Appeals for the Eleventh Circuit reversed. Id. The Eleventh Circuit held that the federal Medicaid Act did not preempt AHCA from seeking reimbursement for past medical expenses from a settlement that also accounts for future medical expenses. Id. at 18–19. Additionally, the Eleventh Circuit explained that it would find that Florida’s third-party-recovery law was preempted by the federal Medicaid Act only if federal law plainly conflicted with the Medicaid Act. Brief for Respondent at 9. The court held, however, that no provision of the Medicaid Act expressly prohibited Florida’s law to permit recovery for portions of settlements accounting for both past and future medical expenses. Id.
Gallardo petitioned the Eleventh Circuit for a rehearing en banc, which was denied; thereafter, Gallardo filed a writ of certiorari. Gallardo v. Dudek, at 1367. The United States Supreme Court granted Gallardo certiorari on July 2, 2021.
STATE REIMBURSEMENT FOR PAST MEDICAL EXPENSES
Gallardo argues that a plain reading of the federal Medicaid Act § 1396p(a)(1) (“anti-lien”) and § 1396p(b)(1) (“anti-recovery”) provisions preclude a state from receiving compensation for past medical care. Brief for Petitioner, Gianinna Gallardo at 24. Gallardo explains that the Supreme Court in Arkansas Dept. of Health and Human Servs v. Ahlborn (“Ahlborn”) found that the anti-lien provision bans even a lien on a portion of the settlement for medical expenses. Id. at 25. Gallardo contends that the payment-recovery provision defines when a state can acquire a beneficiary’s right to a third-party’s payment for Medicaid medical expenses. Id. Gallardo interprets the statute to mean that the state acquires the beneficiary’s right to past payments that the state already paid for and covers only “health care items or services already furnished by Medicaid . . .” Id. at 26. Gallardo explains that the third-party provision, § 1396a(a)(25)(A), which allows states to seek reimbursement for past medical expenses, is limited by § 1396a(a)(25)(B) because the extent of the third-party is only “for medical assistance that ‘has been made available’ by Medicaid.” Id. at 28.
In response, Marstiller argues that the federal Medicaid Act actually requires that states have a law “giving the program a right to reimbursement” from a third party. Brief for Respondent, Simone Marstiller at 12. While Mastiller agrees that the Medicaid Act generally forbids the imposition of a lien to recover payments made to a Medicaid beneficiary, Marstiller argues that the Medicaid Act’s § 1396k and § 1396a(a)(45) provide exceptions that allow states to act as beneficiaries and receive reimbursement for medical care. Id. at 13. Marstiller argues that, under § 1396k, Medicaid can impose a lien on a tort settlement. Id. Further, Marstiller asserts that under § 1396k(a)(1)(A) an individual assigns the state “any rights to support” and “to payment from any third party.” Id. at 14. Marstiller contends that the broad language of the statute allows for payments to medical care recovery for any of the assigned patents’ support rights to the state. Id. Marstiller also argues that Congress permits States to acquire medical care damage costs through 42 U.S.C. § 1396k(a)(1)(A). Id. In addition, Marstiller argues that the language of § 1396a(a) requires states to create laws that allow an individual to assign rights to states for “third-party payments for medical care.” Id. at 15.
SCOPE OF § 1396k AND PRIORITY OF ASSIGNMENTS
Gallardo argues that Florida cannot recover under § 1396k(a)(1)(A) (the “assignment-cooperation” provision) because Florida did not actively pursue claims against the tortfeasors. Brief for Petitioner, Gianinna Gallardo at 28. Additionally, Gallardo contends that if there was ambiguity in the reading of the assignment-cooperation provision, the Court should read the payment-recovery provision to govern. Id. at 30. Gallardo instead finds that Marstiller’s reading of § 1396k(a)(1)(A) is inconsistent with the statute, which would find that the statute only entitles collection of past medical care expenses. Id. Gallardo argues that any other interpretation of the statute is incorrect because once a beneficiary recovers from a tort settlement or judgment, the beneficiary is ineligible to receive Medicaid assistance “in the future.” Id. at 31. Further, Gallardo asserts that under § 1396k(a)(1)(C) and § 1396k(b), a state can only collect on medical payments that are already made. Id.
Marstiller responds that Medicaid should receive priority in reimbursement because Congress designated Medicaid to receive payments on behalf of a beneficiary to preserve Medicaid funds for others. Id. at 39-40. Marstiller contends that the history of the Medicaid Act indicates that an individual can assign a state their right to past and future medical care payments. Id. at 25. Marstiller explains that § 1396k(a)(1)(A), which requires states to have a third-party liability provision, should not be read “subordinate” to or “atextually” limited by other third-party provisions like § 1396a(a)(25). Id. Marstiller also points to legislative intent and argues that Congress, in 1968, asked states to include third-party liability provisions in Medicaid plans to both “ascertain” third-party liability and find avenues to collect reimbursement. Id. Thus, Marstiller argues that when Congress enacted § 1396k, it defined § 1396a(a)(25)(A) to require States to ensure that third parties were responsible for “any medical care rendered to Medicaid patients . . .” Id. at 27. Marstiller concludes that presently, § 1396k grants States the right to acquire rights assigned to it by beneficiaries to receive payment from third parties. Id. Marstiller further argues that Congress has subsequently expanded state authority to acquire rights through beneficiary assignment with the addition of § 1396a(a)(45) and 1396a(a)(25)(H). Id. at 27–28. Marstiller contends that § 1396a(a)(25)(H) ensures that a “payment right” can arise through subrogation. Id. at 29.
SCOPE OF RECOVERY
Gallardo explains that the state cannot collect on medical care that is not yet furnished, under § 1396a(a)(A)(25)(H) (the “payment-recovery” provision). Id. at 32. Gallardo argues that Florida’s reading of the assignment-cooperation provision is flawed when taken in the context of the third-party liability provision and payment-recovery provision because Florida found no temporal limitation. Id. Gallardo asserts that Florida’s reading is flawed because the assignment-cooperation provision cannot require a beneficiary to assign reimbursement rights to expenses that have not happened and may never occur. Id. at 33. Thus, Gallardo emphasizes the payment-recovery provision because it is applicable to the state’s right to a third-party payment, and given its more recent enactment, should hold precedence over any other provision. Id. at 34. Gallardo finds that the Ahlborn would resolve any ambiguity if a plain reading of the statute did not suffice. Id.
Additionally, Gallardo contends that Ahlborn stands for the proposition that the statute does not permit states to recover on anything beyond medical expenses. Id. Gallardo also argues that the Eleventh Court mistakenly decided on the assignment-cooperation provision. Id. at 36. Gallardo asserts that this case is about whether a state can recover fees under a federal statute. Id. Second, Gallardo argues that the presumption is inapplicable to this case because the federal statute preempts state law no matter how the issue is explained because the statute presents a minimum amount of damages a state can recover. Id. Gallardo contends that Ahlborn and Wos v. EMA apply here and compel the Supreme Court to not apply the presumption against preemption because neither case applied presumption. Id.
Marstiller finds that the Supreme Court in Ahlborn held that the State could only recover for “payments of medical care.” Brief for Respondent, Simone Marstiller at 15–16. Thus, Marstiller argues that Gallardo’s interpretation of § 1396k to only allow for the collection of past medical care payments is flawed because there is no timing requirement in the statute. Id. at 18. Second, Marstiller asserts that Gallardo’s argument that § 1396k(a)(1)(C) does not require identification of “parties liable for future medical care” is flawed because Medicaid plans should identify future liable parties. 18. Third, Marstiller contends that Gallardo’s argument is not applicable to § 1396k because the petitioner’s guardians had settled the case. Id. at 19. Marstiller argues that in Ahlborn, the Court found that in § 1396k, Medicaid can recover by “imposing a lien on a tort recovery obtained.” Id. Further, Marstiller asserts that Gallardo transferred her rights to receive medical care payments to Medicaid. Id. at 20. Additionally, Marstiller reads Ahlborn to allow Medicaid to receive payments for “tort damages that are medical expenses,” including payments from the beneficiary’s own costs of care. Id. Further, Marstiller argues that Gallardo’s reliance on Ahlborn to cover only past medical costs comes from the argument of the state’s understanding of the Gallardo’s formulation of how much the State could receive. Id.
Marstiller agrees with the Eleventh Circuit that § 1396a(a)(25)(H) is not read over § 1396k. Id. at 30. Marstiller instead argues that the Court should reaffirm the Eleventh Circuit’s deference under the presumption against preemption to Florida law if any ambiguity were found in Florida’s right to reimbursement. Id. at 45. Marstiller contends that Gallardo’s reading of Florida’s third-party-recovery law as against § 1396k and § 1396a(a)(25)(H) and Medicaid’s anti-lien provision would preempt state law. Id. at 46. Marstiller argues that the Court disfavors preemption when a state law and federal statute coexist to implement similar goals or “within a complementary framework.” Id. Marstiller further argues that § 1396k and § 1396a(a)(25)(H) do not have a preemptive effect against Florida law because the two sections require states to comply with requirements to receive Medicaid funds. Id. at 47.
ALLOCATING THE BURDEN OF MEDICAID COSTS
The American Association for Justice (“AAJ”) and the Florida Justice Association (“FJA”), in support of Gallardo, assert that Marstiller’s interpretation increases Medicaid’s future expenses. See Brief of Amici Curiae AAJ and FJA, in Support of Petitioner at 14. AAJ and FJA contend that most Medicaid beneficiaries who bring lawsuits and settle would no longer qualify for Medicaid if they were allowed to receive their full allocation of settlement money. Id. AAJ and FJA argue that by permitting beneficiaries to recover less settlement money, Marstiller’s approach keeps more individuals on Medicaid, thereby increasing the Medicaid program’s future expenses. Id. AAJ and FJA also note that Medicaid disqualification likewise absolves the Medicaid program from compensating the beneficiary for other types of expenses that it otherwise would have, such as doctor’s visits, preexisting injuries, or new illnesses. Id. at 16. Furthermore, AAJ and FJA assert that Marstiller’s position reduces reimbursement to the Medicaid program by discouraging beneficiaries from settling their cases in the hope that they could recover more money by going to trial. Id. at 17–18.
The National Conference of State Legislatures, the National League of Cities, the U.S. Conference of Mayors, and the Government Finance Officers Association (collectively “NSCL, et al.”), in support of Marstiller, counter that the rising cost of Medicaid expenses imposes a substantial burden on states, thereby justifying Marstiller’s approach. See Brief of Amici Curiae NCSL, et al., in Support of Respondent at 3. NSCL, et al. note that while the federal government contributes a large amount to Medicaid’s funding, states are still responsible for up to 50% of Medicaid costs. Id. at 4. NSCL, et al. contend that to account for this immense financial burden, states should exercise every option possible to recuperate costs. Id. at 5. Accordingly, NSCL et al. argues that the Supreme Court should permit states to utilize money apportioned for future medical expenses to pay for Medicaid expenses that have already been incurred to help offset the Medicaid program’s considerable financial burden. Id. at 6.
BALANCING CONFLICTS BETWEEN STATE AND FEDERAL INTERESTS
The United States, in support of Gallardo, acknowledges that states have a compelling interest in guaranteeing that Medicaid beneficiaries do not manipulate the terms of a settlement to decrease the amount of money that the state may receive. See Brief of Amicus Curiae United States at 29. However, the United States contends that states already have appropriate mechanisms in place to protect this interest in reimbursement without infringing upon the federal Medicaid Act’s terms. Id. For example, the United States asserts that a state can safeguard its interest by intervening in the Medicaid beneficiary’s litigation against a third party prior to finalization of any settlement. Id. Alternatively, the United States argues that a state could decide to intervene during the settlement stage by requiring either advance notice from the beneficiary of any settlement negotiations or advance consent to any apportionment of damages. Id. at 30. Furthermore, the United States notes that the state could instead hold an administrative or judicial hearing to determine the adequate apportionment of the settlement’s award. Id.
NSCL, et al., in support of Marstiller, asserts that the federal Medicaid Act and Florida’s statutory scheme do not conflict because the Medicaid Act gives states several options for reimbursement that include future expenses. See Brief of Amici Curiae NSCL, et al. at 6. NSCL, et al. notes that the Medicaid Act compels beneficiaries to assign “any” rights to payment for medical care from third parties to the state and contends that the word “any” includes both past and future medical expenses. Id. Furthermore, NSCL, et al. argues that the Florida statute does not contain any express language insinuating that Congress intended to limit the assignment of payments for medical care solely to “past” medical expenditures. Id. at 9. Accordingly, NSCL, et al. argues that deference should be given to the state’s financial interest in reimbursement, given a lack of explicit language forbidding compensation for future medical expenses. Id.
- David McGuffey, Medicaid Liens Revisited: Gallardo v. Marstiller, Ez Elder Law (Dec. 7, 2021).
- Geron Gadd, Paying for the Past With the Future: the Scope of Medicaid Recovery for Past Medical Expenses, AARP Foundation (Sept. 20, 2021).
- Jim Sams, Medicaid Recovery Case Before Supreme Court May Drive Up Settlement Costs, Claims Journal (Dec. 6, 2021).