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N.C. Won’t Get Disabled Girl’s Settlement

WASHINGTON (CN) - States cannot impose liens on the lump-sum personal injury settlements of Medicaid recipients to recoup expenses, the U.S. Supreme Court ruled Wednesday.

Though federal law requires participating states to try to recoup some of the health care expenses paid to tort victims, North Carolina drew protest for its scheme to enforce that requirement when the victim wins a settlement or judgment. Its law, Section 108A-57, allows the state to assert a lien on one-third of the recipient's settlement or the state's actual expenses, whichever is lower.

In the underlying lawsuit, the parents and legal guardian of an infant who was severely disabled during delivery won a $2.8 million medical malpractice settlement.

The child, who is described in court records as E.M.A., sustained injuries during her February 2000 birth that left her legally deaf and blind, as well as mentally retarded. E.M.A. cannot walk, sit, crawl or talk. She also has a seizure disorder and requires between 12 and 18 hours of daily nursing care.

North Carolina claimed it was entitled to one-third of the $2.8 million settlement since it had paid $1.9 million in medical and health care expenses for E.M.A.

The girl's parents argued, however, that the Medicaid Act's anti-lien provision bars the state from placing a lien on their settlement.

In ruling for the secretary of the state health department, a federal judge relied heavily on precedent that upheld North Carolina's third-party liability laws.

The 4th Circuit vacated that decision, however, after taking issue with the precedential case. It ruled that North Carolina's one-third cap on the state's recovery "is in fatal conflict with federal law."

The panel's decision rested on a 3rd Circuit opinion in a similar case, and on the Supreme Court's 2006 decision in Arkansas Department of Health & Human Services v. Ahlborn, which rejected third-party liability laws in Arkansas.

After taking up the case in September 2012, a majority of the Supreme Court affirmed Wednesday.

"The Medicaid anti-lien provision prohibits a state from making a claim to any part of a Medicaid beneficiary's tort recovery not 'designated as payments for medical care,'" Justice Anthony Kennedy wrote for the court. "North Carolina's statute, there­fore, is pre-empted if, and insofar as, it would operate that way.

"And it is pre-empted for that reason. The defect in §108A-57 is that it sets forth no process for determining what portion of a beneficiary's tort recovery is attributable to medical expenses. Instead, North Carolina has picked an arbitrary number - one-third - and by statutory com­mand labeled that portion of a beneficiary's tort recovery as representing payment for medical care. Pre-emption is not a matter of semantics. A state may not evade the pre-emptive force of federal law by resorting to creative statutory interpretation or description at odds with the statute's intended operation and effect."

Kennedy added that North Carolina's argu­ment "would frustrate the Medicaid anti-lien provision in the context of tort recoveries."


"The argument lacks any limiting principle: If a state arbitrarily may designate one-third of any recovery as payment for medi­cal expenses, there is no logical reason why it could not designate half, three-quarters, or all of a tort recovery in the same way. In Ahlborn, the state of Arkansas, under this rationale, would have succeeded in claiming the full amount it sought from the beneficiary had it been more creative and less candid in describing the effect of its full­ reimbursement law."

Kennedy bemoaned the lack of evidence that the one-third allocation is "reasonable in the mine rune of cases."

"The instant case, to be sure, is not quite so clear cut; for there was no allocation of the settlement by either judicial decree or binding stipulation of the parties," according to the ruling. "But the reasoning of Ahlborn and the design of the federal statute contemplate that possibility. When the state and the beneficiary are unable to agree on an allocation, Ahlborn noted, the parties could ''submi[t] the matter to a court for decision.'

"The facts of the present case demonstrate why Ahlborn anticipated that a judicial or administrative proceeding would be necessary in that situation. Of the damages stemming from the injuries E.M.A. suffered at birth, it isapparent that a quite substantial share must be allocated to the skilled home care she will require for the rest of her life. It also may be necessary to consider how much E.M.A. and her parents could have expected to receive as compensation for their other tort claims had the suit proceeded to trial. An irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act's clear mandate that a state may not demand any portion of a beneficiary's tort recovery except the share that is attributable to medical expenses."

In a concurring opinion, Justice Stephen Breyer emphasized the fact that the court'd decision is in harmony with the conclusion of the Centers for Medicare & Medicaid Services.

"Thus, even though this case does not fall directly within a case-defined category, such as 'Chevron deference,' 'Skidmore deference,' 'Beth Israel deference,' 'Seminole Rock deference,' or deference as defined by some other case, I believe the agency, in taking a position, nonetheless retains some small but special 'power to persuade.' And I would consequently to some degree take account of, and respect, the agency's judgment.

"I cannot measure the degree of deference with the preci­sion of a mariner measuring a degree of latitude. But it is still worth noting that the agency's determination has played some role in my own decision. That is because the agency, after looking into the matter more thoroughly (perhaps after notice-and-comment rulemaking), might change its mind. Given the nature of the question and of the agency's expertise, courts, I believe, should then give weight to that new and different agency decision."

The note is striking in the context of another opinion that the court released Wednesday, one in which Breyer took no part.

In a partial dissent to the decision Decker v. Northwest Environmental Defense Center , Justice Antonin Scalia called for the court to reconsider agency deference as established with the 1945 case Bowles v. Seminole Rock & Sand Co., and the 1997 case Auer v. Robbins.

Chief Justice John Roberts and Justice Samuel Alito also conceded reconsideration of the deference principle may be appropriate in another case.

Kennedy makes no direct mention of these points in his opinion.

Roberts meanwhile concluded that neither the law nor precedent compels the majority's reading of the federal Medicaid law.

The "unfortunate consequence" of this reading is denied "flexibility to the states - and, by necessary implication, the secretary of health and human services - in resolving a policy ques­tion with broad significance for this complicated program," Roberts wrote, joined by Justices Antonin Scalia and Clarence Thomas. "In short, the result is both unnecessary and unwise. I therefore respectfully dissent."

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