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Traffic accident involving Florida girl leads to Medicaid-reimbursement dispute

Monday’s argument in Gallardo v. Marstiller presents a straightforward question of statutory interpretation, addressing whether a state Medicaid program can take funds a Medicaid beneficiary receives in a tort settlement from a third party that injured the beneficiary. Specifically, when the state has paid past medical expenses of the beneficiary, but the tort settlement compensates the beneficiary for both past and future medical expenses, can the state take the portion of the settlement attributable to those future medical expenses to compensate itself for the payments it already has made for past expenses?

As these things go, the statutory problem is relatively straightforward. The framework starts with the general rule that the state cannot do anything to recoup Medicaid payments from the beneficiary – it can neither impose a lien on the property of the beneficiary nor otherwise sue to recover them. The major exception to that rule – the topic of Gallardo – comes when the beneficiary’s medical expenses arise from a tort suffered at the hands of a third party. In that case, the Medicaid statute obligates the state to “seek reimbursement” from the person who committed the tort, and it requires (in 42 U.S.C. § 1396k(a)(1)(A)) the beneficiary to assign to the state “any rights … to payment for medical care from any third party.” Another provision (42 U.S.C. § 1396a(a)(25)(H)) explains that whenever “payment has been made under the State plan for medical assistance … where a third party has a legal liability to make payment for such assistance,” the state acquires the rights to those payments.

The case involves interpreting these two provisions in the common situation in which a present tort settlement includes compensation for past and future expenses – past expenses that the state’s Medicaid plan already has paid and future expenses that it has not yet paid. If the amount of the settlement provides less than full payment of expenses (which is typical), then the settlement will not be enough to pay all of the beneficiary’s costs. Prior Supreme Court decisions have made clear that the state is entitled only to the portion of the settlement attributable to medical expenses. This case will determine how those provisions apply specifically to future medical expenses.

The Medicaid patient in the case, Gianinna Gallardo, was 13 when she was hit by a pickup truck after getting off a school bus in 2008. She suffered catastrophic injuries and remains in a persistent vegetative state. Florida’s Medicaid program paid more than $862,000 for her medical care. Gallardo’s parents sued on her behalf, naming the truck’s driver, the truck’s owner, and the school board, and they received a settlement of $800,000 (about $35,000 of which was allocated for past medical expenses). The question now is how much of the total settlement Florida can recover.

Gallardo’s lawyers argue that Florida is not entitled to the portion of the settlement that is meant for future medical expenses, because it makes no sense for Medicaid to take reimbursement for expenses that it has not paid. They rely heavily on a reference in subsection (a)(25)(H) that limits the state’s recovery to payments for “health care items or services” for which “payment has been made under the State plan.” The federal government (which administers the Medicaid program) strongly supports that position.

Florida, by contrast, points to the explicit statement in subsection (a)(1)(A) assigning to the state any “payment for medical care from any third party.” Because a payment for future medical care plainly is a “payment for medical care,” Florida argues it is well within its rights in taking that money, at least to the point necessary to compensate it for the payments it already has made.

Florida argues that the Medicaid statute gives the state two separate and overlapping rights: the right to an assignment of rights to payment, which is more broadly worded to cover future expenses (in (a)(1)(A)); and the right to subrogation to recover payments it already has made, more narrowly worded and limited to past expenses (in (a)(25)(H)). That one should be broader than the other is not surprising in a statute as complex and heavily amended as Medicaid. Gallardo and the federal government, in contrast, find it illogical to read the provisions as so substantively different, insisting that a “holistic” reading of the statute would give both provisions the same, narrower, substantive coverage.

I would put this low on the list of cases likely to drive the justices into fierce disagreement, and high on the list of cases likely to be resolved quickly. Both sides have at least a colorable textual argument, and the justices likely will see the background dynamics as similarly balanced – between the state’s pressing budgetary concerns and the plight of injured Medicaid patients. Perhaps the argument will shed some light on a likely resolution.

Recommended Citation: Ronald Mann, Traffic accident involving Florida girl leads to Medicaid-reimbursement dispute, SCOTUSblog (Jan. 9, 2022, 1:13 PM),