This Report summarizes opinions issued on June 6 and 8, 2022 (Part I); and cases granted review on June 6, 2022 (Part II).

Opinion: Gallardo v. Marstiller, 20-1263

Gallardo v. Marstiller, 20-1263.  In a 7-2 decision, the Court held that the Medicaid Act permits states to seek reimbursement from settlement payments allocated for future medical care, not just past medical care. Petitioner Gianinna Gallardo has been in a persistent vegetative state since 2008, when a truck struck the then-13-year-old after stepping off a school bus. Medicaid covered more than $860,000 of Gallardo’s initial medical expenses, and continues to pay for her care.  Gallardo settled with liable third parties for $800,000, with the agreement designating $35,367.52 as compensation for past medical expenses and providing that an unspecified portion of the remaining funds are intended for future medical care.  Florida sought to recover $300,000 (37.5% of $800,000) of the settlement funds, the percentage a Florida statute sets as presumptively representing the portion of the tort recovery that is for “past and future medical expenses,” absent clear and convincing rebuttal evidence. Gallardo (among other things) filed a lawsuit in federal district court seeking a declaration that Florida was violating the Medicaid Act by trying to recover from portions of the settlement compensating for future medical expenses. The district court granted summary judgment in Gallardo’s favor, but the Eleventh Circuit reversed, ruling that the assignment provision in Florida’s Medicaid Third-Party Liability Act does not conflict with the anti-lien provision in the federal Medicaid Act.  In an opinion by Justice Thomas, the Court affirmed the Eleventh Circuit.

The Medicaid Act requires administering states to take “reasonable measures” to recoup medical costs from liable third parties. To assist states in that effort, the Act contains an assignment provision requiring beneficiaries like Gallardo to assign to the state “any rights . . . to payment for medical care from any third party.” 42 U.S.C. §1396k(a)(1)(A). “The Medicaid Act also sets a limit on States’ efforts to recover their expenses” in an “anti-lien provision” prohibiting states from recovering medical payments from a beneficiary’s “property. §1396p(a)(1).  In Arkansas Department of Health and Human Services v. Ahlborn, 547 U. S. 268, 284 (2006), the Court recognized an exception to the anti-lien provision and permitted states to “seek reimbursement from the portion of a settlement designated for . . . ‘medical care.’” Here, the Court determined that “the plain meaning of §1396k(a)(1)(A), informed by statutory context,” supports Florida’s recovery of settlement proceeds allotted to future medical expenditures and falls within the exception to the anti-lien provision.

The assignment provision, §1396k(a)(1)(A), requires a Medicaid beneficiary to assign to the state “any rights . . . of the individual . . . to support . . . for the purpose of medical care” and to “payment for medical care from any third party.” The Court ruled that that provision has a broad meaning because precedent dictates that the word “any” has an “expansive meaning,” and because “[n]othing in this provision purports to limit a beneficiary’s assignment to ‘payment for’ past ‘medical care’ already paid for by Medicaid.” The Court also explained that the “relevant distinction” in §1396k(a)(1)(A) is not between past and future expenses, but rather between medical and nonmedical expenses. The Court found that the statutory context reinforced its conclusion given references in the Act to medical care and medical support without distinctions between past or future payments.  While the Court did find limiting language in §1396a(a)(25)(H), which requires states to enact laws granting automatic rights to certain third-party payments to reimburse for medical services “furnished to an individual,” the Court concluded that language showed Congress could have narrowed the scope of §1396k(a)(1)(A) if it had intended to do so.

The Court disagreed with Gallardo’s argument that the prefatory language in §1396k(a)(1)(A), providing that “the ‘purpose’ of the assignment provision is to ‘assis[t] in the collection of . . . payments for medical care owed to recipients of medical assistance under the State plan,’” limits the state to past payments. The Court construed that language to specify to whom the third-party payments are owed (e.g., recipients of medical assistance) and not the purpose for which the payments are made. Gallardo also argued that under Ahlborn, §§1396k(a)(1)(A) and 1396a(a)(25)(H) (which contains the limiting language) “’reiterate’, ’reinforc[e],’ and ’ech[o]’ each other.” The Court replied that “Ahlborn was clear that these two provisions ‘ech[o]’ or ‘reinforc[e]’ each other insofar as they both involve ‘recovery of payments for medical care,’ and not ‘payment for, for example, lost wages.’” The Court also dismissed Gallardo’s “fairness” argument based on a footnote in Ahlborn stating that it would be “absurd and fundamentally unjust” to allow a state agency to “share in damages for which it has provided no compensation.” The Court responded that “[a]lthough Ahlborn noted possible unfairness if States were given ‘absolute priority’ to collect from the entirety of a tort settlement, our holding there was dictated by the Medicaid Act’s ‘text,’ not by our sense of fairness.” Nor was the Court persuaded by Gallardo’s claim that allowing recovery for future expenses “would authorize a ‘lifetime assignment’”; the assignment would be limited to rights while the individual is on Medicaid.

Justice Sotomayor dissented, joined by Justice Breyer. They described the majority opinion as “inconsistent with the structure of the Medicaid program” and agreed with Gallardo’s “fairness” argument.  The dissent would interpret the Medicaid Act’s anti-lien provision together with the anti-recovery provision in §1396p(b)(1) (“[n]o adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan may be made”). Read together, the dissent argued, the 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. In other words, Medicaid is not a loan.” The dissent also invoked “Ahlborn’s repeated recognition of the relationships between” the Act’s third-party liability, acquisition, and assignment provisions, which they argued “cannot be squared with” Florida’s interpretation, “which would sever the provisions” and disregard limitations placed on the assignment provision. The dissent additionally viewed Medicaid as “an insurance statute” and argued that “Ahlborn’s discussion of the unfairness that would ensue from a State’s ‘shar[ing] in damages for which it has provided no compensation,’ tracks background principles of insurance law,” and limits recovery to expenses already paid. In the end, the dissent believed the majority’s “atomizing interpretation” was inconsistent with Ahlborn’s view of the Act “as a cohesive whole” and “Congress’ sense of fairness, as codified in the Act’s anti-lien and anti-recovery provision.”