Breaking News

Opinion recap: Justices reject North Carolina’s lien on Medicaid claimant’s tort recoveries

The Court’s decision Wednesday in Wos v. E.M.A. (formerly known as Delia v. E.M.A.) confirmed the Court’s previous vigor in protecting the rights of Medicaid claimants from states hoping to close budget shortfalls by taking an excessive share of the tort recoveries their claimants obtain in litigation.

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 Dep’t 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.

Writing for a majority of six, Justice Kennedy affirmed the Fourth Circuit’s conclusion.  Much of the opinion broadly proclaims that the federal statute sets both a “floor” and a “ceiling” for what the state can take from Medicaid claimants: the state must take the share of any tort recoveries attributable to Medicaid-paid expenses, but it is forbidden to take any more. Because this statute takes one-third  of all recoveries, it takes more in any case in which the reimbursed expenses are less than one-third of the total injuries.

The state’s claims of administrative convenience were dismissed out of hand; presumably one reason they carried so little weight was the poor facts of the case the state chose to litigate in the Supreme Court – one in which a “fair” share (if there is such a thing) doubtless would have been far less than ten percent of the recovery.  Another telling fact against the state’s claims of administrative necessity is the presence in a third of the states of more flexible procedures that permit hearings to establish the appropriate share of recovery.  Against that factual setting and backdrop of administrative practice, the state’s procedures look unnecessarily harsh, not to say greedy.

To be sure, the closing pages of the opinion leave open the possibility that the Court might approve procedures that give the state more flexibility: a rebuttable presumption that a particular percentage is appropriate, or perhaps even an administratively determined percentage based on an evidentiary record of typical shares of recoveries. By the end, then, it seems that pretty much the only thing the Court is sure to condemn is a process that sets an arbitrarily high percentage, with no evidence to justify it, and makes that percentage conclusive.

One other note of jurisprudential interest involves the Justices’ continuing dance around the legal relevance of agency positions taken only in the course of appellate litigation.  Here, Justice Breyer, in a concurrence speaking only for himself, explains that his decision in the case does depend on the agency’s position that North Carolina’s statute is preempted.  He acknowledges that the agency’s view would not qualify for deference under Chevron, Skidmore, Beth Israel, or Seminole Rock, but quoting Justice Frankfurter finds it relevant in his view.

Plain English Summary: North Carolina wanted to take one-third of all the money Medicaid claimants get in suits against doctors and hospitals.   The Supreme Court rejected North Carolina’s fixed rule.  The Justices told North Carolina to set up a process that decides in each case how much of the money is for medical expenses (which the state gets) and how much is for other things like pain and suffering (which the claimant gets to keep).

Cases: Wos v. E.M.A.

Recommended Citation: Ronald Mann, Opinion recap: Justices reject North Carolina’s lien on Medicaid claimant’s tort recoveries, SCOTUSblog (Mar. 22, 2013, 7:47 AM),