Medicaid Liens Revisited: Gallardo v. Marstiller

A new Medicaid lien case is pending in the U.S. Supreme Court. The question presented is “[w]hether the federal Medicaid Act provides for a state Medicaid program to recover reimbursement for Medicaid’s payment of a beneficiary’s past medical expenses by taking funds from the portion of the beneficiary’s tort recovery that compensates for future medical expenses.” The case originated in Florida, moving to the Eleventh Circuit with Petition for Certiorari being filed on March 9, 2021. Oral argument is currently scheduled for January 10, 2022.

This case revisits the issue presented in Arkansas Dep’t of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), namely, how far can States go in recovering funds when Medicaid pays an injured party’s medical expenses and the injured party later recovers funds from the tortfeasor? Here, the guardians of an injured child filed suit in the North District of Florida seeking an injunction preventing Florida from recovering past medical expenses from funds allocated in a settlement toward payment of future medical expenses. The District Court granted Plaintiff’s motion for summary judgment and Florida appealed that decision to the 11th Circuit. In Gallardo v. Dudek, 963 F.3d 1167 (11th Cir. 2000), the Court of Appeals framed the issue as:

whether the Florida Agency for Health Care Administration (“FAHCA”), when it has not consented to the settlement agreement in a personal injury lawsuit between the injured person and a third party, is limited to recovering the expenses it has paid only from amounts of a third-party recovery representing compensation for past medical expenses or whether it can also recover from those amounts that may be compensation for future medical expenses.

The 11th Circuit reversed the District court, finding that Florida’s statutory scheme of recovering Medicaid expenses is not preempted by federal law.

Florida law grants it’s Medicaid agency an automatic lien for the full amount of medical assistance paid on behalf of the recipient. Consistent with Wos v. E.M.A. ex rel. Johnson, 568 U.S. 627, 133 S.Ct. 1391, 185 L.Ed.2d 471 (2013), the Medicaid recipient may challenge Florida’s allocation. A Florida Medicaid recipient who receives a personal injury settlement or judgment may challenge the amount FAHCA is claiming under that formula in the following way. Within 60 days of receiving the settlement proceeds, the Medicaid recipient must place the full amount of FAHCA’s entitlement in an interest-bearing trust account. Id. § 409.910(17)(a). Then, within 21 days the recipient must file a petition with the state Division of Administrative Hearings. Id. § 409.910(17)(b). In that administrative proceeding, “the recipient must prove, by clear and convincing evidence, that the portion of the total recovery which should be allocated as past and future medical expenses is less than the amount calculated by the agency.

Of note, while the 11th Circuit appeal was pending, the Florida Supreme Court decided Giraldo v. Agency for Health Care Admin., 248 So. 3d 53, 56 (Fla. 2018), where it ruled the Medicaid agency may only recover funds from the portion of a settlement that represents past medical expenses.

The 11th Circuit rejected outright the argument that a settlement allocation is binding on the State. Further, it distinguished Florida’s procedure (with a rebuttable presumption regarding allocation) from the North Carolina procedure in Wos (with an irrebuttable presumption).”Unlike North Carolina, which imposed an irrebuttable formulaic allocation, Florida “provide[s] a mechanism for determining whether” its formulaic allocation is a reasonable approximation of a recipient’s medical expenses. See Wos, 568 U.S. at 637, 133 S.Ct. 1391. Under the Florida Medicaid Third-Party Liability Act,

a recipient … may contest the amount designated as recovered medical expense damages payable to the agency pursuant to the formula specified in paragraph (11)(f) by filing a petition … with the Division of Administrative Hearings…. In order to successfully challenge the amount designated as recovered medical expenses, the recipient must prove, by clear and convincing evidence, that the portion of the total recovery which should be allocated as past and future medical expenses is less than the amount calculated by the agency pursuant to the formula set forth in paragraph (11)(f).”

The Court concluded that Florida’s approach to “threading the needle” did not directly conflict with federal third-party reimbursement requirements.

On appeal various parties filed briefs. Among them was a Brief of Amici Curiae States of Utah, Ohio and 12 Other States in Support of Respondent. There the States urged the Supreme Court to affirm the Eleventh Circuit, but said “[i]n answering that question, however, the Court must be careful not to inadvertently resolve another. That second question is this: Does federal law empower Medicaid recipients to sue for an injunction barring a State from reimbursing itself from the portion of a tort settlement set aside for future care?” The States essentially argued that Plaintiffs should not have been allowed to bring their suit in the first place. We believe this position should be rejected since a motion to dismiss the appeal (meaning Florida opposed the motion) was rejected after Giraldo v. Agency for Health Care Admin., 248 So. 3d 53 was decided.

A brief filed by the American Association for Justice argues that Florida’s allocation scheme presumes that Medicaid will continue paying medical expenses and allows it to take a disproportionate share of the recovery. They argued that a Medicaid recipient loses Medicaid upon receipt of the settlement and that:

A tort victim can stay on Medicaid if the injury renders them disabled and if they transfer all of the settlement money received into a statutorily exempted trust account, commonly called a Special Needs Trust.

In our view, the problem with the Florida scheme isn’t the rebuttable presumption. Arguably, the presumption is consistent with Wos. Instead, the problem is the evidentiary standard, to wit: clear and convincing evidence. “‘Clear and convincing’ is a more stringent standard than ‘preponderating’ and requires a greater quantum and a high quality of proof in plaintiff’s favor.” See In re Estate of Burton, 265 Ga. 122 (1995). The Medicaid recipient already has the burden of proof by virtue of the presumption, so we believe requiring clear and convincing evidence (as opposed to the preponderance of evidence standard used in most civil cases) gives the State an unfair advantage. Stay tuned for a decision sometime after January 10, 2022.

Update: Gallardo decided