Supreme Court Rules in Favor of Florida Medicaid in Settlement Dispute

WASHINGTON — The U.S. Supreme Court ruled 7-2 on Monday in favor of Florida’s Medicaid program in a dispute over how much money the state can take from an accident victim’s private settlement to recover the costs of their care.

Gianinna Gallardo was just 13 when she was struck by a truck shortly after she stepped off her Florida school bus.

Florida’s Medicaid agency paid $862,688.77 to cover Gallardo’s initial medical expenses, and the agency continues to pay her medical expenses. 

While this was going on, Gallardo, through her parents, sued the truck’s owner and driver, as well as the Lee County School Board.

According to the Supreme Court’s summary of the case, Gallardo sought compensation for past medical expenses, future medical expenses, lost earnings, and other damages. That litigation resulted in a settlement for $800,000, with $35,367.52 expressly designated as compensation for past medical expenses

The settlement did not specifically allocate any amount for future medical expenses.

The Medicaid Act requires participating states to pay for certain needy individuals’ medical costs and then to make reasonable efforts to recoup those costs from liable third parties. 

Under Florida’s Medicaid Third-Party Liability Act, the court said, “a beneficiary like Gallardo who ‘’accept[s] medical assistance’ from Medicaid ‘automatically assigns to the [state] agency any right’ to third-party payments for medical care.” 

Applied to Gallardo’s settlement, Florida’s statutory framework entitled the state to $300,000— 37.5% of $800,000, the percentage the statute sets as presumptively representing the portion of the settlement compensating for future medical expenses. 

On review, the 11th U.S. Circuit Court of Appeals held the relevant Medicaid Act provisions do not prevent a state from seeking reimbursement from settlement monies allocated for future medical care. 

Gallardo argued that the Medicaid Act’s anti-lien provision — which prohibits states from recovering medical payments from a beneficiary’s ‘property,’ forecloses recovery from settlement amounts other than those allocated for past medical care paid for by Medicaid. 

But in a ruling written by Justice Clarence Thomas, the court majority held that the provision does not apply to state laws “expressly authorized by the terms of… the Medicaid Act.” 

In a dissent, Justice Sonia Sotomayor said “the court’s atomizing interpretation has little to commend it, particularly when contrasted with the consistent, administrable scheme Congress crafted. 

“The court’s reading also undercuts Congress’ choice to allow Medicaid beneficiaries to place their excess recovery funds in Special Needs Trusts, protecting their ability to pay for important expenses Medicaid will not cover.”

In short, she said, the majority’s holding “is inconsistent with the structure of the Medicaid program and will cause needless unfairness and disruption.”

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