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Medicaid Act may trump state reimbursement law

Medicaid Act may trump state reimbursement law

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The justices of the U.S. Supreme Court seemed divided over whether the federal Medicaid Act preempts a North Carolina law authorizing the state to recoup as much as one third of any medical malpractice jury award or settlement, regardless of how much of the award was designated for medical expenses.

During spirited oral arguments on Tuesday in Delia v. E.M.A., some justices seemed reluctant to sanction a state process in which determinations from a judge or jury are ignored.

But other justices expressed concern that requiring states to ascertain what percentage of awards and settlements account for medical expenses would be complicated and time consuming – and would open the door for medical malpractice plaintiffs to, as Justice Antonin Scalia put it, “game the system.”

The North Carolina law at issue allows the state to obtain reimbursement from any medical malpractice award to a Medicaid beneficiary. Under the law the state may obtain one third of the award or the actual amount of its Medicaid payments, whichever is less.

The case stems from a malpractice suit brought against a doctor on behalf of an infant born with multiple injuries. The suit sought payment for medical expenses for the child as well as for pain and suffering, lost wages, emotional distress and other injuries.

The case ultimately settled for $2. 8 million but there was no determination of how much was allotted for each category of damages. The court ordered that $933,333 of the settlement be paid to the state, which had paid $1.9 million for the child’s medical care.

The child’s parents sued in federal court to stop the reimbursement, arguing that the state law was preempted by the Medicaid Act.

The court dismissed the claim, finding no conflict with the federal law.

But the 4th Circuit reversed and remanded, holding that the state law was inconsistent with the federal act because it did not require the determination of the amount of medical expenses.

The Supreme Court granted the state’s petition for certiorari.

‘Statute doesn’t predict, it defines’

North Carolina Solicitor General John Maddrey argued on behalf of the state that the one-third cap on reimbursements for medical malpractice awards was necessary because “the state has to predict with certainty” the amount of such Medicaid liens.

“Life is never certain, and so I don’t even go to that issue,” responded Justice Sonia M. Sotomayor. “I go just simply to the question, how can you [know 33] percent normally is the right amount? You just picked it out of the air? You could pick 40, 50, 60 [percent].”

“The statute doesn’t predict; it defines,” Maddrey replied. “It tells the recipient how much out of recovery they must allocate to satisfy the repayment obligation.”

“What if this case is tried to a verdict and there is a special verdict and the jury says that 10 percent was medical expenses?” asked Justice Samuel Alito Jr. “The [state] statute would override that?”

Maddrey said that it would.

“Just as if the verdict had [awarded] $1 million in punitive damages when there is a statutory cap of $500,000 for punitive damages, the judge would have to conform the verdict to the applicable law,” he said.

Sotomayor noted that 16 states have laws that create a presumptive reimbursement amount that can be rebutted based on the facts of a particular case.

“Do you have any evidence that in those 16 states, where it’s only a presumption and not a fixed amount, that they are falling apart because of it?” she asked.

“I don’t have any evidence as to the specific performance in those 16 states,” Maddrey said. “That would leave 34 states that don’t have one.”

Time-consuming burden?

Christopher Browning Jr., a partner in the Raleigh, N.C., office of Williams Mullen, argued on the beneficiary’s behalf that the state law “overrides a jury verdict” and “takes one-third of a settlement or judgment regardless of the true facts of the case.”

But Scalia noted that without the law, a separate adjudication would be required for each state reimbursement.

“That is awfully time-consuming,” Scalia said. “And … I’m not sure it’s going to be very accurate.”

“I think it is very easy for states to follow that and to put in practices or procedures that result in appropriate allocation of medical expenses,” Browning replied.

“Sixteen are doing it already,” Sotomayor interjected.

Justice Stephen Breyer asked if creating an alternative system would incentivize plaintiffs’ attorneys to go to court and say, “‘Your Honor, I really want one penny and only one penny to be allocated to medical expense.’ And the defendant’s lawyer, he’s being very honest, he’ll say: ‘I didn’t care. If that’s what he wants, that’s fine with me.’”

“But it’s worse than that,” Chief Justice John G. Roberts Jr. said. “He does care, because the smaller amount [will be] fine with the tortfeasor’s lawyer because otherwise he would have to pay more.”

“It is our position that the parties simply can’t stipulate or reach an agreement that somehow deprives the state of their interest,” Browning said. “There has to be an appropriate adjudication.”

Scalia’s concerns were not assuaged.

Plaintiffs “would not sue for medical expenses simply because [they] would know that a portion, if not all of it, would go to the state,” Scalia said. “That’s gaming the system.”

Ginger Anders, assistant to the solicitor general arguing as amicus in support of the beneficiary, argued that determining a proper reimbursement amount isn’t all that complicated.

“States that have individualized determinations, which is what we think is required here, have developed a number of different procedures for doing that,” she said.

Roberts wasn’t convinced, saying such processes represent “a real, significant increase in the burden on the state under the Medicaid program.”

A decision is expected later this term.

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