Supreme Court Strikes Down North Carolina Medicaid Lien Rule

by Steve Williams on June 10, 2013

Medicaid provides assistance at the state level to those individuals who lack sufficient liquid assets to pay their medical bills. If a Medicaid recipient’s need for medical care arises from injury caused by a third party, the state may recover a portion of any subsequent judgment the person obtains from that third party in a lawsuit. Federal law, however, prohibits states from placing a lien on a third-party judgment beyond that portion of the award intended to pay a victim’s medical costs.

In March of this year, the United States Supreme Court addressed the question of how a state may determine what percent of a tort award is related to medical expenses. The decision involved a 13-year-old girl born with multiple birth injuries. She will require constant nursing care for the rest of her life. The State of North Carolina’s Medicaid program presently pays for part of her care.

The parents filed a medical malpractice lawsuit against the physician who delivered the child (who is never named in public records). In 2006, a state court approved a $2.8 million settlement. The settlement itself did not apportion damages for medical care versus other claims, such as pain and suffering. Under North Carolina law, the state’s Medicaid program can seek up to one-third of a damage award as reimbursement for medical expenses paid. Here, the state said it had already paid $1.9 million of the child’s medical bills, for which it would file a lien against the settlement.

Limits On “One Size Fits All” Recovery Rules

The child’s parents asked a federal court to declare the North Carolina law void under federal Medicaid law. While their case was pending, the North Carolina Supreme Court, ruling in a separate case, upheld the state’s one-third recovery rule. The federal court hearing the child’s case agreed with the state supreme court, but the federal Fourth Circuit Court of Appeals in Richmond agreed with the parents that federal law prevented North Carolina from making a blanket presumption it was entitled to one-third of the settlement award.

The Supreme Court agreed with the Fourth Circuit. Justice Anthony M. Kennedy, writing for a six-justice majority, said that under federal law–including a prior Supreme Court decision–a state could not “arbitrarily” assign itself a percentage of a tort award. A case-by-case analysis was necessary to determine what part of a given award should be allocated to the reimbursement of medical expenses. In some cases, Justice Kennedy said, this will be relatively easy, as a jury or settlement agreement may specify a percentage. Other cases will require a specific judicial determination. But a state legislature cannot simply step in and decree a percentage for all cases.

Three justices disagreed. Chief Justice John G. Roberts, Jr., in a dissenting opinion, said the Court should not wade into a “policy question” that is best left to the states and the Department of Health and Human Services, which oversees Medicaid, to decide. The chief justice noted that North Carolina was simply trying to reconcile conflicting federal mandates–on the one hand, it must try to recoup medical expenses, while on the other, it cannot take a beneficiary’s property beyond said expenses–without any meaningful guidance from federal regulators.

The chief justice may bemoan the lack of “flexibility” states now have in asserting Medicaid liens. But for victims of medical malpractice and other personal injury claims, the Supreme Court’s decision helps protect their damage awards from arbitrary seizure by the state.

About the Author

Steve Williams is a legal blog writer for Hoffman, Larin and Agnetti PA, South Florida’s premier personal injury lawyers.  We offer personal attention and make sure that you understand the precise nature of your case and the legal principles involved.  If you are looking for a personal injury attorney in Key West, look no further than Hoffman, Larin and Agnetti PA.

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