OPINION ANALYSIS

Justices validate states’ right to take tort recoveries from Medicaid beneficiaries

The Supreme Court on Monday resolved a narrow question of statutory interpretation under the Medicaid Act and expanded the ability of states to recoup health care costs from accident victims. The court held that a state Medicaid program seeking to reimburse itself for past medical expenses that it has paid can take from the injured party any portion of a tort settlement that is allocated to medical expenses — even the portion that reflects compensation to the injured party for future medical expenses that the state Medicaid program has not yet paid (and might never pay). Justice Clarence Thomas’ opinion for a 7-2 majority treats the case as calling for a straightforward application of the plain language of the statute.

The case, Gallardo v. Marstiller, involved a settlement of about $850,000 that Giannina Gallardo received for injuries sustained when a truck struck her as she stepped off a school bus. The settlement allocated $36,000 to past medical expenses, but no specific amount to future medical expenses. Florida’s statute includes a formula that allocates $300,000 to past and future medical expenses. The result of this case is that Florida, which has spent more than $300,000 on Gallardo’s medical care, can take $300,000 from the settlement; it is not limited to $36,000.

Thomas starts with a provision (a subsection of Section 1396k of the Medicaid Act) that obligates states that want to participate in Medicaid to condition eligibility of injured parties on their assignment to the State of “any rights … to support … for the purpose of medical care” or to “payment for medical care from any third party” (my emphasis); the state is entitled to take that portion of the settlement to recover expenses it has incurred for the injured party. Thomas emphasizes that “[n]othing in this provision purports to limit [its reach] to ‘payment for’ past ‘medical care’” and reasons, “[t]o the contrary,” that “the grant of ‘any rights … to payment for medical care’ most naturally covers not only … past … but also … future medical expenses” (emphases by Thomas). Thomas denies any oddity in taking a settlement directed at future medical expenses to compensate the state for past medical expenses. Rather, quoting an earlier case, he concludes that “[t]he relevant distinction is … ‘between medical and nonmedical expenses,’ not between past expenses Medicaid has paid and future expenses it has not.”

Thomas relies most strongly on a nearby provision of the Medicaid Act (a subsection of Section 1396a) that explicitly limits the state’s recovery in certain circumstances to medical expenses for which Medicaid has paid, excluding those expenses for which Medicaid has not yet paid. The implication for Thomas is clear. Quoting an earlier decision, he comments: “‘Had Congress intended to restrict’ [the provision in Section 1396k] to past expenses Medicaid has paid, it ‘would have done so expressly as it did in’ [Section 1396a].”

Thomas spends a few pages working through each of Gallardo’s various statutory arguments, dismissing all of them as irrelevant because they “rel[y] on other differently worded provisions.” For him, the answer to all of those arguments is that they do not involve the specific provision in Section 1396k on which the state relies here, and that none of them includes the particular form of words that Section 1396k uses, a phraseology that forces no distinction between past and future medical expenses.

Despite Thomas’ textualist focus, the dispute in Gallardo highlights two competing policy prerogatives: the need to preserve the liquidity of state Medicaid programs and the need to protect the injured beneficiaries of those programs. The ruling in favor of Florida reflects a sense that Congress might have drawn slightly different and arbitrary lines between the specific powers that states have to recover for expenses they have paid, and that the justices are better off leaving it to Congress to redraw those lines than for the court to recast them into a framework that might seem more coherent in hindsight. Justice Sonia Sotomayor’s spirited dissent (joined by Justice Stephen Breyer) reflects her perspective that it makes so little sense for a state to take a settlement directed at future medical expenses to compensate the state for past medical expenses that the statute cannot sensibly be read to force that result.