Wos v. E. M. A. Ex Rel. Johnson

Background

A child born with severe birth injuries requires constant skilled care, and North Carolina’s Medicaid program paid part of her medical bills. The child and her parents sued for malpractice and settled for $2.8 million. North Carolina law authorizes the State to recover up to one-third of a beneficiary’s tort recovery to reimburse Medicaid; the trial court put one-third of the settlement into escrow while the reimbursement issue was litigated. Experts had estimated lifetime medical and care needs far above the settlement amount, and the State had reported it paid about $1.9 million for care.

Reasoning

The Court asked whether that State rule fits the federal Medicaid anti-lien law, which bars States from taking any part of a beneficiary’s recovery that is not designated as payment for medical care. The majority said North Carolina’s statute is preempted because it imposes an irrebuttable, one-size-fits-all presumption that one-third of any recovery equals medical expenses and provides no procedure to determine what portion of a lump-sum award actually pays for medical care. The Court relied on prior reasoning that where a settlement or judgment allocates medical payments, that allocation controls, and where it does not, a judicial or administrative allocation is required.

Real world impact

States may not automatically claim fixed shares of lump-sum recoveries without a means to show the share represents medical costs. Medicaid beneficiaries, states, and insurers will need judicial or administrative procedures or clearer allocations in settlements. The ruling affirms the Fourth Circuit and limits how States structure Medicaid reimbursement rules.

Dissents or concurrances

Justice Breyer concurred, giving some weight to the federal agency’s view but not enough to change the result; Chief Justice Roberts dissented, arguing the State’s rule was a reasonable, administrable solution and should be allowed.