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Supreme Court opens future medical expenses to states in Medicaid snarl

The majority hinged their ruling on statutory language while the two dissenting justices urged a wider focus.

WASHINGTON (CN) — Expecting that it will have to cover the future medical care of a teen left permanently brain damaged in a car accident, Florida is entitled to the proceeds of the teen’s settlement, the U.S. Supreme Court ruled Monday. 

The 7-2 decision authored by Justice Clarence Thomas affirms that the Medicaid Act allows a state to get reimbursement from settlement payments allocated for future medical care. 

Justice Sonia Sotomayor — joined by Justice Stephen Breyer — wrote a dissent saying the ruling focuses on one provision of the law while ignoring the statutory context, the relationships between the provisions in the case, and the framework established in the court’s precedent. 

“The Court’s holding is inconsistent with the structure of the Medicaid program and will cause needless unfairness and disruption,” Sotomayor wrote. 

The Medicaid reimbursement case centered around Gianinna Gallardo who has been in a coma since 2008. Thirteen years old at the time, Gallardo was hit by a truck after her school bus drove her back home. Her extensive injuries racked up over $900,000 in medical expenses, $862,688 of which Medicaid covered with the additional sum falling to a private insurer. 

After suing the truck owner, driver and school board for damages, Gallardo’s parents reached an $800,000 settlement. When the Florida state health agency got wind of the settlement, it put a lien against Gallardo’s cause of action for the portion the agency paid for her past medical expenses. 

Because Gallardo’s settlement covered past and future medical expenses, however, it was unclear what the state was entitled to recover. A federal judge initially sided with the parents, finding that the state violated Gallardo’s rights under the Medicaid Act, but the 11th Circuit reversed. 

During Supreme Court oral argument in January, the justices were critical on both sides and appeared cautious over making a ruling that would create a broad new precedent. There was disagreement between lawyers from the Justice Department and Florida’s attorney general's office over how many states could be affected by a ruling in the case. 

The high court’s ruling relies on the text of the Medicaid Act, which Thomas said decides the case. Thomas wrote the statute doesn’t limit the state to payments for past medical care because it grants the state “any rights … to payment for medical care” covering both past and future medical expenses.  

“To the contrary, the grant of ‘any rights . . . to payment for medical care’ most naturally covers not only rights to payment for past medical expenses, but also rights to payment for future medical expenses,” the Bush appointee wrote. “The relevant distinction is thus ‘between medical and nonmedical expenses,’ not between past expenses Medicaid has paid and future expenses it has not.” 

But the dissent claims this reading of the text “leads to unfair and absurd results.” 

“Neither party even suggests this reading of the statute,” Sotomayor wrote. “That is because it is anything but natural, especially under the interpretive approach the Court uses today.” 

Thomas said, if Congress wanted to create a distinction between the medical expenses available to states seeking reimbursement, it would have and has done so in other circumstances. He pointed to another area of the Medicaid Act in which Congress explicitly did this related to third-party payments. 

Sotomayor called the majority’s reasoning “statutory hodgepodge” compared with “the reasonable scheme Congress actually crafted.” She said the act allows states to claim settlements that have gone toward medical care but not other compensation to the beneficiary because it would allow the state agency to be reimbursed for something it did not provide. 

“Today, however, the Court permits exactly that,” the Obama appointee wrote. “It holds that States may reimburse themselves for medical care furnished on behalf of a beneficiary not only from the portions of the beneficiary’s settlement representing compensation for Medicaid-furnished care, but also from settlement funds that compensate the Medicaid beneficiary for future medical care for which Medicaid has not paid and might never pay.” 

The dissent chides the majority opinion for giving little attention to the anti-lien provision that Sotomayor said is a central requirement of the act. Sotomayor also notes the act’s anti-recovery provisions. 

“Together, the anti-lien and anti-recovery provisions establish that acceptance of Medicaid does not render a beneficiary indebted to the State or give the State any claim to the beneficiary’s property,” Sotomayor wrote. “In other words, Medicaid is not a loan. If a Medicaid beneficiary’s financial circumstances change and a beneficiary gains the ability to pay for his or her own medical expenses, the beneficiary is not obligated to repay the State for past expenses, no matter the magnitude of the change in circumstances.” 

Bryan Gowdy, an attorney for Gallardo’s parents with the firm Creed & Gowdy, said the ruling could harm Medicaid beneficiaries. 

“We respect the Court’s decision, though we are disappointed and agree with Justice Sotomayor’s interpretation of the statutes,” Gowdy said in an email. “The decision, we believe, will harm Medicaid beneficiaries. We hope that Congress will consider amending the statutes.” 

Florida State Solicitor General Henry Whitaker did not immediately respond to requests for comments regarding the court’s ruling.

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