Gallardo v. Marstiller, 142 S. Ct. 1751 (2022) and Its Impact on Medicaid Reimbursement from Settlement Funds Related to Medical Care
October 20, 2022
On June 6, 2022, the United States Supreme Court issued a ruling that could substantially impact personal injury settlements involving Medicaid. Specifically, the ruling permits the use of “clawback” statutes to obtain reimbursement of Medicaid expenses from settlement funds related to medical care – regardless of whether the settlement is structured to limit the funds allocated to previous medical expenses.
The ruling can reduce the amount a plaintiff recovers as Medicaid agencies seek reimbursement for prior medical expenses from any settlement funds related to medical care – even those funds specifically allocated for future care not yet provided.
In Gallardo v. Marstiller, 142 S. Ct. 1751 (2022), Plaintiff suffered injuries and permanent disability after being hit by a truck when getting off a school bus. She sought compensation for past medical expenses, future medical expenses, lost earnings, and other damages. Plaintiff subsequently recovered $800k in a court-approved settlement that was structured to expressly designate only $35k for the satisfaction of past medical expenses. While the settlement made no express allocation for on-going treatment, it noted that “some portion of the settlement may represent compensation for future medical expenses.”
Florida’s Medicaid agency already paid over $862k for Plaintiff’s initial medical expenses. As reimbursement, Florida’s statutory framework entitled the State to 37.5% of the settlement ($300k) – presumptively representing the portion of the recovery that is for “past and future medical expenses.” However, Plaintiff argued that such a recovery violated the Federal Medicaid Act that prohibits states from recovering medical payments from a beneficiary’s “property” – that is, from settlement amounts other than those allocated for medical care paid for by Medicaid. Therefore, Florida’s reimbursement should be limited to the $35k expressly designated as past medical expenses in the settlement.
The Supreme Court, in a 7-2 ruling, disagreed with Plaintiff, holding that the Federal Medicaid Act only prohibits a state from seeking settlement funds outside the scope of “medical care.” The Court held that the relevant distinction is “between medical and nonmedical expenses, not between past expenses Medicaid has paid and future expenses it has not.”
As such, despite the settlement structure only allocating $35k to past medical expenses, the Court allowed Florida to recover the full statutory amount. In this case, “some portion” of the total $800k settlement represented compensation for future medical expenses. Thus, the settlement fell within the statutory scope of funds the Florida Medicaid agency could seek as related to “medical care.” The fact that the money was allocated for future expenses as opposed to expenses already paid by Medicaid was immaterial.
On its face, Gallardo gives ammunition to state Medicaid agencies to recover its expenses paid – even where settlement documentation may be specifically structured to limit reimbursement. In cases where Medicaid avails itself of this ruling, a plaintiff could see less of their settlement money because state clawback statutes recover from any amount of the settlement that could be used for medical expenses, past or future.
Gallardo’s overall impact is yet to be seen. Some believe that reduced recoveries create less incentive to sue, while others fear that the prospect of reduced recoveries will result in larger settlement demands and a global push to increase settlement values to ensure there are adequate funds available to both satisfy Medicaid and “justly” compensate the plaintiffs.
Finally, in Mass Tort litigation, Gallardo could impact settlements with living plaintiffs where Medicaid previously paid for their medical expenses – but only if it is shown that some portion of the settlement not already allocated to past medical expenses is otherwise allocated to future/other medical expenses.
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This Legal Update is intended to keep readers current on developments in the law. It is not intended to be legal advice. If you have any questions, please contact Harrison Kaplan at 617.342.6893 or firstname.lastname@example.org, or any of our Mass Tort Litigation attorneys at Eckert Seamans with whom you have been working.