In Gallardo v. Marstiller the U.S. Supreme Court will decide whether the federal Medicaid Act allows a state Medicaid program to recover reimbursement for Medicaid’s payment of a beneficiary’s past medical expenses by taking funds from the beneficiary’s tort recovery that compensate for future medical expenses.

Gianinna Gallardo has been in a persistent vegetative state since she was hit by a pickup truck getting off the school bus. Florida’s Medicaid program has paid for almost $900,000 for her medical care. Her parents settled a case against multiple parties for $800,000. Per the settlement agreement, about $35,000 was for past medical expenses. The settlement also said some of its balance may represent compensation for future medical expenses. The Florida Agency for Health Care Administration (FAHCA) didn’t participate in the settlement.

The Medicaid statute requires states to enact third-party liability laws under which “the State is considered to have acquired the rights . . . to payment by any other party,” “to the extent that payment has been made under the State plan for medical assistance.”

Per Florida law if a Medicaid recipient brings a tort action against a third party that results in a settlement, FAHCA is automatically entitled to half of the recovery (after 25 percent attorney’s fees and costs), up to the total amount of medical assistance Medicaid has provided, from the settlement allocated for past and future medical expenses.   

FAHCA sought to recover not just the $35,000 specifically allocated by the parties for past medical expenses. It argued it was entitled to recover, to pay for past medical costs, the portion of the settlement representing compensation for Gallardo’s future medical expenses. The Eleventh Circuit agreed.

Gallardo argued that FAHCA could collect only the portion of the settlement allocated for past medical expenses because of the past tense of the language in the Medicaid statute: states have a right to payment from third parties “to the extent that payment has been made.” 

According to the Eleventh Circuit, this language “simply provides for what the state can get reimbursed now that it has a general assignment on all medical expenses—it can recover medical expenses it has already paid.”  “[W]hile the language of the federal Medicaid statutes clearly prohibits FAHCA from seeking reimbursement for future expenses it has not yet paid (which it is not seeking to do in this case), the language does not in any way prohibit the agency from seeking reimbursement from settlement monies for medical care allocated to future care.”

While this case was pending in the Eleventh Circuit the Florida Supreme Court reached the opposite result. It held that the federal Medicaid law authorizes FAHCA to obtain reimbursement out of personal injury settlements only from the portion of a settlement that represents past medical expenses. The entire Eleventh Circuit refused to rehear this case.

In their petition asking the U.S. Supreme Court to hear this case, Gallardo’s parents point out that Massachusetts, like Florida, allows the state Medicaid agency to collect future medical expense to pay for past Medicaid costs, while California and West Virginia do not. They note: “The question presented in this case is not limited to the few states mentioned above. Every State has passed some type of third-party recovery statute to comply with the mandates of the Medicaid Act. Unless and until this Court resolves the conflict, the States and their legislatures cannot know what federal law requires of them.”

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