On June 6, 2022, the U.S. Supreme Court in Gallardo By & Through Vassallo v. Marstiller, No. 20-1263, 2022 WL 1914096 (U.S. June 6, 2022), held that the Medicaid Act allows states to seek reimbursement from settlement payments not only for past medical expenses, but also for future medical expenses. 

In Gallardo, the minor petitioner suffered catastrophic injuries resulting in permanent disability after she was hit by a truck when she was stepping off of her school bus in Florida. The petitioner’s parents brought suit against the vehicle’s owner, the driver, and the local school board. The petitioner sought compensation for past medical expenses, future medical expenses, and lost future earnings, among other damages. The case was ultimately settled for $800,000, with $35,367.52 expressly designated as compensation for past medical expenses. The settlement did not specify an amount allocated for future medical expenses. 

As explained by the Court, the Florida Medicaid agency paid $862,688.77 for the petitioner’s initial medical expenses, had continued to pay her medical expenses because of her persistent vegetative state. The federal 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. As a result, a State must require Medicaid beneficiaries to assign the State “any rights … to payment for medical care from any third party.” 42 U.S.C. § 1396k(a)(1)(A).

In addition, Florida’s Medicaid Third-Party Liability Act provides that beneficiaries like the petitioner who “accept medical assistance” from Medicaid “automatically assign[ ] to the [state] agency any right” to third-party payments for medical care. Fla. Stat. § 409.910(6)(b). Under Florida law, the State was presumptively entitled to 37.5% of the $800,000, i.e., $300,000. As provided by statute, this percentage was the presumptive portion of the tort recovery for “past and future medical expenses,” unless proven otherwise by clear and convincing rebuttal evidence. Fla. Stat. §§ 409.910(11)(f)(1), (17)(b).

The petitioner brought suit against the Florida Agency for Health Care Administration seeking a declaration that the agency was violating the Medicaid Act by attempting to recover from portions of the settlement compensating for future medical expenses. The district court granted summary judgment in the petitioner’s favor. The Eleventh Circuit reversed and found the Medicaid Act did not prohibit a State from seeking reimbursement from settlement monies allocated to future medical care. 

The Supreme Court affirmed in a 7-2 decision, concluding that the plain language of the Medicaid Act allowed Florida to seek reimbursement from settlement amounts representing “payment for medical care,” whether past or future. 42 U.S.C. § 1396k(a)(1)(A). In so doing, the Court opined that nothing in § 1396k(a)(1)(A) limited the beneficiary’s assignment to payment for past medical care. Rather, the grant of “any rights … to payment for medical care” included rights to payment for future medical expenses. The Court further concluded that the statutory context also supported Florida’s ability to seek reimbursement from settlement amounts representing past or future payments for medical care. 

The Court’s decision is incredibly significant for personal injury cases. Litigants must be aware of the potential for a Medicaid lien not just for settlement proceeds attributed to expenses for past medical care, but also future medical care. Plaintiffs and their attorneys will need to account for Medicaid’s interest in settlements where the plaintiff will require future care. It may also become more common to see set asides (similar to Medicare’s) in cases where the plaintiff is a Medicaid beneficiary. For defendants and their insurance carriers, consideration should be given to ensure any Medicaid lien for past or future medical expenses is satisfied, and that contractual obligations in any release clearly identify who is responsible for satisfying those liens.