Justices debate state’s right to take tort recoveries from Medicaid beneficiaries

ARGUMENT ANALYSIS

Monday’s argument in Gallardo v. Marstiller displayed a bench surprisingly divided over a relatively simple question of statutory interpretation. The topic is what to do when a state Medicaid program pays for injuries that a beneficiary suffers, if the beneficiary later recovers a settlement from a third party that caused the injury. All agree that the state can take the portion of the settlement that addresses past medical expenses. The problem, if the settlement for past medical expenses is not enough to repay the expenses already paid by Medicaid, is whether the state also can take the part of the settlement that reflects future medical expenses.

The statute’s treatment of that problem is obscure. Because Medicaid is supposed to pay for medical expenses, rather than lend money for them, the state generally cannot recover its expenses from the injured beneficiary. The statute takes a different approach, though, when a third party caused the injury and so is legally responsible to pay the beneficiary’s expenses. In that case, the state is supposed to “seek reimbursement” from the third party; the statute (in 42 U.S.C. § 1396k(a)(1)(A)) broadly assigns to the state all of the beneficiary’s rights “to payment for medical care from any third party,” a phrase that easily could include payments made for past or future medical expenses. Other provisions, though, including 42 U.S.C. 1396a(a)(25)(H), provide that the state acquires those rights only to the extent that “payment has been made under the State plan for medical assistance.” The general question is whether those provisions describe different rights of the state (with broader and narrower coverage) or a single scheme of rights all limited to medical expenses for which the state already has provided payment.

Several of the justices focused closely on the language in subsection (a)(1)(A), reaching all rights to “payment for medical care.” For example, Justice Elena Kagan (talking to counsel for the injured Giannina Gallardo) commented that it seemed more sensible to read the statute as describing the kinds of things that Medicaid covers – a “service distinction” rather than a “past/future distinction.” Justice Stephen Breyer went so far as to say that Gallardo’s problem in challenging Florida’s right to reimburse itself out of settlements allocated to future medical expenses is that the statute simply “says it can” take that money. Justice Amy Coney Barrett’s comments suggested that she shares that perspective. For those justices, the language supports Florida’s view that it is entitled to take all medical-expense recoveries, whether for past or future expenses, up to the amount that the state already has paid for past medical expenses.

As the argument progressed, though, several justices displayed increasing dissatisfaction with the broad implications of that reading. Among other things, Florida’s heavy reliance on the unadorned reference to “medical expenses” implies that the state can take a tort settlement directed at medical expenses, not only if they are future medical expenses that the state has not yet paid (and might never pay), but even if they are medical expenses not covered by Medicaid. That view was particularly unpalatable for Justice Sonia Sotomayor, who commented at one point with incredulity:

That seems extraordinary … what you’re reading into the statute, an anti-lien statute, that permits you only to get an assignment of what you have paid for. Now you’re saying the assignment … is incredibly broader than that, [that it reaches the tort recovery] whether you paid for it or not, whether you were required to pay for it or not, and [whether it is past or] future expenses, that you’re assigned the individual’s entire rights. That’s what you’re telling me?

Although not so emphatic in their disagreement, other justices sent signals that they might balk at such a broad reading. Kagan, for example, joined Sotomayor in doubting the possibility that Congress could have intended for states to recover from payments for medical expenses that Medicaid wouldn’t cover.

Breyer was not so direct, but was plainly uncomfortable with the state’s “higgledy-piggledy” reading, which he compared unfavorably to Gallardo’s request that the court interpret the provisions “consistently with the whole spirit of the thing, which is to leave the money with the Medicaid victim.” And even Justice Brett Kavanaugh pointed out that the state was unable to defend a pure reading of the statute that did not accept the importance of “context” in interpretation.

In the end, given the relatively low stakes of this case, the justices well might resolve this in discussion and issue a unanimous or near-unanimous decision. About the only thing that is clear from the argument is that Sotomayor is never going to agree with the position of the state.