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Argument recap: Justices mull state’s right to Medicaid claimant’s tort recoveries

Monday’s argument about Medicaid preemption in Delia v. E.M.A. showed a bench with tough questions for both sides, as the Justices considered North Carolina’s argument that its claim to reimbursement for Medicaid expenditures justifies it in taking one-third of any tort recovery a Medicaid claimant subsequently obtains.

The case involves the common fact setting in which a state first funds medical expenses under Medicaid and then the claimant subsequently recovers a settlement for the injury in private tort litigation.  In this case, for example, a child received a multi-million-dollar settlement in tort litigation against physicians for injuries sustained at the time of her birth.  Federal law permits (indeed obligates) the state to take out of any such settlement the funds attributable to the expenses previously paid under Medicaid, but prohibits the state from taking funds attributable to other injuries or expenses.

In response to those provisions (and an earlier Supreme Court decision interpreting them, Arkansas Department of Health & Human Services v. Ahlborn), North Carolina adopted a statute that creates a lien on any tort recovery equal to a fixed amount of one-third of the tort recovery (capped, of course, at the state’s total claim).  Although that arrangement doubtless saves on administrative costs, its weakness comes in a case in which medical expenses are less than one-third of the claimant’s total injury – in which case a recovery by the state of one-third of the tort settlement would give the state an inappropriately large share of the settlement.  The child and her guardian justifiably claim this is such a case, because birth-related injuries have caused the child life-long pain and suffering and quality-of-life injuries that seem to dwarf the medical expenses reimbursed by Medicaid.  The Fourth Circuit concluded that the North Carolina statute was preempted because it impermissibly took a share of the recovery that was not related to medical expenses.

From the first moment of North Carolina’s argument, Justice Sotomayor relentless challenged John Maddrey (North Carolina’s Solicitor General) to reconcile the state’s statute with Ahlborn.  In a case in which medical expenses are less than a third of the injuries, she argued, the statute seems plainly preempted.  Justice Scalia tried to suggest that the statute could be justified as defining the claimant’s property right in the recovery – so that the claimant never had a right to the money fsor the state to take away – but Maddrey was reluctant to agree.  Justice Kagan was similarly skeptical, emphasizing the ability of the tate – if it prevailed here – to push its share of the recovery up from thirty=three to sixty or ninety percent.

The Justices seemed most skeptical when Maddrey emphasized his view that even a special jury verdict defining separate recovery amounts for medical injuries and other losses would have to be reformed to give the state one-third of the recovery.  Justice Breyer in particular pressed Maddrey to justify that answer as a matter of North Carolina law.  But Maddrey was not to be swayed from his perspective that the state can define in advance a share of the recovery to which it is entitled.

That is not to say it was easy going for Christopher Browning (arguing on behalf of the injured child).  Justice Kagan pressed him hard on the administrative justifications for the statute: if the state has to spend Medicaid dollars litigating the amount of the recovery in each case there is, after all, less money to spend on Medicaid claims.  Given the inherent indeterminacy of the problem, why is it so clear, she asked, that the state can’t just avoid the administrative burden, make a rough guess, and apply it to all cases?  Similarly, the Chief Justice and Justice Breyer were deeply interested in how the determinations would work in practice.  Browning tried to emphasize that in the states that permitted claimants to justify individualized allocations the process worked smoothly, but the Chief Justice at least seemed unpersuaded.

Ginger Anders appeared for the Solicitor General (supporting the claimant).  She was greeted immediately by Justice Scalia, continuing to press his suggestion that the statute might be justified as a definition of rights in tort cases.  Anders insisted, however, that the Medicaid statute permitted a court, despite any statutory requirement, to determine what portion of a settlement was fairly attributable to medical expenses. Aside from that interchange, most of her time was spent in a debate with the Chief Justice about the administrative burden the states would incur if the Court accepted the Solicitor General’s position.

This is a case that had seemed pretty one-sided in favor of the claimant based on the briefs alone.  The oral argument suggests that at least some of the Justices are deeply concerned about the costs the Fourth Circuit’s decision imposes on states like North Carolina.  We’ll have to wait for the decision to see how the balance turns, but it still seems hard to believe the state will prevail here.


Cases: Wos v. E.M.A.

Recommended Citation: Ronald Mann, Argument recap: Justices mull state’s right to Medicaid claimant’s tort recoveries, SCOTUSblog (Jan. 11, 2013, 9:58 AM),