Friday, March 22, 2013

Medicaid - anit-lien provision - tort settlement




No. 12–98. Argued January 8, 2013—Decided March 20, 2013

The federal Medicaid statute’s anti-lien provision, 42 U. S. C. §1396p(a)(1), pre-empts a State’s effort to take any portion of a Medi­caid beneficiary’s tort judgment or settlement not “designated aspayments for medical care,” Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U. S. 268, 284. A North Carolina statute re­quires that up to one-third of any damages recovered by a beneficiaryfor a tortious injury be paid to the State to reimburse it for paymentsit made for medical treatment on account of the injury. Respondent E. M. A. was born with multiple serious birth injuriesthat require her to receive between 12 and 18 hours of skilled nursing care per day and that will prevent her from being able to work, live independently, or provide for her basic needs. North Carolina’s Med­icaid program pays part of the cost of her ongoing medical care.

E. M. A. and her parents filed a medical malpractice suit against the physician who delivered her and the hospital where she was born. They presented expert testimony estimating their damages to exceed $42 million, but they ultimately settled for $2.8 million, due in large part to insurance policy limits. The settlement did not allocate mon­ey among their various medical and nonmedical claims. In approving the settlement, the state court placed one-third of the recovery intoescrow pending a judicial determination of the amount of the lienowed by E. M. A. to the State. E. M. A. and her parents then sought declaratory and injunctive relief in Federal District Court, claimingthat the State’s reimbursement scheme violated the Medicaid anti -lien provision. While that litigation was pending, the North Carolina Supreme Court held in another case that the irrebuttable statutory one-third presumption was a reasonable method for determining the amount due the State for medical expenses. The Federal District Court, in the instant case, agreed. But the Fourth Circuit vacated and remanded, concluding that the State’s statutory scheme could not be reconciled with Ahlborn.

Held: The federal anti-lien provision pre-empts North Carolina’s irre­buttable statutory presumption that one-third of a tort recovery is at­tributable to medical expenses. Pp. 4–16.

(a) In Ahlborn, the Court held that the federal Medicaid statute sets both a floor and a ceiling on a State’s potential share of a benefi­ciary’s tort recovery. Federal law requires an assignment to the State of “the right to recover that portion of a settlement that repre­sents payments for medical care,” but also “precludes attachment or encumbrance of the remainder of the settlement.” 547 U. S., at 282, 284. Ahlborn did not, however, resolve the question of how to deter­mine what portion of a settlement represents payment for medical care. As North Carolina construes its statute, when the State’s Med­icaid expenditures exceed one-third of a beneficiary’s tort recovery, the statute establishes a conclusive presumption that one-third of the recovery represents compensation for medical expenses, even if the settlement or verdict expressly allocates a lower percentage of the judgment to medical expenses. Pp. 4–7.

(b) North Carolina’s law is pre-empted insofar as it would permit the State to take a portion of a Medicaid beneficiary’s tort judgment or settlement not designated for medical care. It directly conflicts with the federal Medicaid statute and therefore “must give way.” PLIVA, Inc. v. Mensing, 564 U. S. ___, ___. The state law has no pro­cess for determining what portion of a beneficiary’s tort recovery is attributable to medical expenses. Instead, the State has picked an arbitrary percentage and by statutory command labeled that portion of a beneficiary’s tort recovery as representing payment for medical care. A State may not evade pre-emption through creative statutory interpretation or description, “framing” its law in a way that is at odds with the statute’s intended operation and effect. National Meat Assn. v. Harris, 565 U. S. ___, ___. North Carolina’s argument, if ac­cepted, would frustrate the Medicaid anti-lien provision in the con­text of tort recoveries. It lacks any limiting principle: If a State could arbitrarily designate one-third of any recovery as payment for medi­cal expenses, it could arbitrarily designate half or all of the recovery in the same way. The State offers no evidence showing that its allo­cation is reasonable in the mine run of cases, and the law provides no mechanism for determining whether its allocation is reasonable any particular case.

No estimate of an allocation will be necessary where there has been a judicial finding or approval of an allocation between medical andnonmedical damages. In some cases, including Ahlborn, this bindingstipulation or judgment will attribute to medical expenses less thanone-third of the settlement. Yet even in these circumstances, North Carolina’s statute would permit the State to take one-third of the to­tal recovery. A conflict thus exists between North Carolina’s law and the Medicaid anti-lien provision.

This case is not as clear-cut as Ahlborn was, for here there was no such stipulation or judgment. But Ahlborn’s reasoning and the fed­eral statute’s design contemplate that possibility: They envisionedthat a judicial or administrative proceeding would be necessarywhere a beneficiary and the State are unable to agree on what por­tion of a settlement represents compensation for medical expenses.See 547 U. S., at 288. North Carolina’s irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act’s clear mandate that a State may not demand any portion of a beneficiary’s tort recovery except the share that is attributable to medical ex­penses. Pp. 7–10.

(c) None of North Carolina’s responses to this reasoning is persua­sive. Pp. 10–15. 674 F. 3d 290, affirmed.


KENNEDY, J., delivered the opinion of the Court, in which GINSBURG, BREYER, ALITO, SOTOMAYOR, and KAGAN, JJ., joined. BREYER, J., filed a concurring opinion. ROBERTS, C. J., filed a dissenting opinion, in which SCALIA and THOMAS, JJ., joined.