Wos v. E. M. A. Ex Rel. Johnson
The Supreme Court struck down North Carolina's rule that automatically treated one-third of any Medicaid beneficiary's injury settlement as payment for medical expenses, ruling that this rigid formula conflicts with a federal law barring states from grabbing money from an injury settlement beyond what actually covers medical care.
The decision means states must find some way to connect the amount they seek to actual medical costs rather than relying on a flat, unchallengeable percentage, which could require new hearings or procedures in the many states that use similar reimbursement formulas.
“A State may not evade the preemptive force of federal law by resorting to creative statutory interpretation or description at odds with the statute’s intended operation and effect.”
Explaining why North Carolina couldn't dodge federal preemption through creative labeling of its formula.
How it got here: A federal trial court sided with the state; the Fourth Circuit vacated, conflicting with a North Carolina Supreme Court ruling, so the Supreme Court took the case to resolve the split.
The Case in Depth
What happened
E.M.A. was born with severe, permanent injuries from a botched delivery, requiring round-the-clock nursing care for life. North Carolina's Medicaid program paid part of her medical bills. She and her parents sued the doctor and hospital, seeking over $42 million but settling for $2.8 million, limited largely by the defendants' insurance coverage. The settlement did not divide the money among her medical and non-medical claims.
The question before the Court
Can a state automatically claim one-third of a Medicaid beneficiary's injury settlement as reimbursement for medical costs, even without proof that much was really for medical care?
The Court's answer
No — the Court ruled that North Carolina's law is preempted because it lets the state take one-third of a settlement even when a smaller share (or none) actually represents medical costs. Federal Medicaid law bars states from placing any claim on the part of a settlement that isn't genuinely payment for medical care, and North Carolina's flat one-third rule had no way to test whether that assumption was accurate in any given case.
The Court explained that a state can only recover money that is actually tied to medical expenses, whether determined by a judge, a jury, or an agreement between the parties. Because North Carolina's law applied the same one-third figure regardless of the real facts, it created an unavoidable conflict with the federal anti-lien protection, even though the Court left room for states to design fairer procedures, including reasonable presumptions backed by evidence.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Medicaid beneficiaries who are badly injured and settle lawsuits against those responsible could keep a larger share of their compensation for non-medical losses like lost wages or pain and suffering. States that automatically claimed a flat share of settlements must now develop fairer, evidence-based ways to calculate their reimbursement, which could mean more hearings, more litigation costs, or new legislation in many states.
What changes now
The ruling is a final decision on the merits, affirming the Fourth Circuit. North Carolina must devise a new process — such as judicial or administrative hearings, or evidence-based presumptions — to determine what portion of a Medicaid beneficiary's settlement is genuinely for medical expenses, rather than automatically claiming one-third. Other states with similar flat-percentage reimbursement laws may face challenges to their own schemes as a result.
What this does not decide
The Court did not decide exactly what procedures states must use going forward, and did not say whether rebuttable presumptions or evidence-based formulas used by other states are lawful. It left open whether states could adopt reasonable ex ante rules if backed by evidence they generally produce accurate results.
Concurrences and dissents
Concurrence — Justice Breyer
Justice Breyer joined the majority but stressed that his agreement rested partly on the fact that the federal Medicaid agency had reached the same conclusion. He explained that this was normally the kind of gap-filling question courts should defer to agency expertise on, but the agency's own explanations here were too thin and inconsistent to deserve full deference. He emphasized that today's ruling does not permanently lock in this interpretation if the agency later adopts a well-reasoned, different view.
Dissent — Justice Roberts
“The Court’s reading of the Act, while plausible, is not compelled by the statutory text or our precedent.”Roberts' central objection that the majority's interpretation wasn't required by the law.
Chief Justice Roberts argued that nothing in the federal Medicaid statute or in the Court's earlier Ahlborn decision required states to make individualized, case-by-case determinations of medical expenses rather than using a general rule set in advance. He viewed North Carolina's one-third cap as a reasonable, administrable solution to a genuine dilemma the state faced, and warned the ruling improperly ties the hands of both states and the federal Medicaid agency in resolving this policy question. He would have upheld the North Carolina law.
How the Court got there
The legal reasoning, step by step
- The Court applied ordinary conflict preemption principles: when a state law directly clashes with a federal statute, the federal law wins and the state law cannot be enforced as written.
- Under the Court's earlier decision interpreting the Medicaid anti-lien law, a state may only recover the portion of a settlement that genuinely represents payment for medical expenses; it cannot touch money meant for other losses like lost income or pain and suffering.
- The Court found that North Carolina's law didn't actually try to identify the real medical-expense portion of a settlement — instead it simply declared, by fixed formula, that one-third of any recovery counts as medical expenses, regardless of the truth in any specific case.
- The Court reasoned that this kind of arbitrary labeling has no logical stopping point: if a state can call one-third 'medical expenses' without evidence, nothing would stop it from calling half or all of a settlement medical expenses the same way.
- Because the North Carolina rule would sometimes let the state grab money that a judge, jury, or binding agreement had already identified as non-medical, the Court concluded it directly conflicted with the federal rule and could not stand.
- The Court noted that states remain free to create fair procedures — including reasonable, evidence-backed presumptions — for making this allocation, but a rigid, unrebuttable formula does not meet that standard.
Doctrinal impact
Cases affected by this decision
Reaffirms Ahlborn (547 U. S. 268)
The Court relied on and extended Ahlborn's rule that states can only claim the medical-expense share of a settlement.