United States Supreme Court Issues Opinion that State Law Concerning State's Claim to Portion of Medicaid Beneficiary's Settlement is Preempted by Federal Law

In Wos v. EMA, the U.S. Supreme Court held that the anti-lien provision in federal Medicaid law preempts a State’s claim to any portion of a Medicaid beneficiary’s tort judgment or settlement that is not designated as payment for medical care. Wos v. EMA, 2013 U.S. LEXIS 2372 (U.S. Mar. 20, 2013).

In this case, the parents of a 13-year-old girl (EMA) settled her claim against physicians for injuries sustained at the time of her birth. The case settled for $2.8 million, but the settlement did not specify which portion of that amount was meant to cover EMA’s medical expenses, some of which were paid by the North Carolina Medicaid program. The trial court approved the settlement and placed one-third of the settlement proceeds into an escrow account pending a judicial determination of the amount of the lien owed by EMA to the North Carolina Medicaid program, pursuant to N.C. Gen. Stat. § 108A-57(a). EMA and her parents sought declaratory and injunctive relief, arguing that the State’s reimbursement scheme violated the Medicaid anti-lien provision. Id.

The statute at issue created an irrebuttable presumption that one-third of a Medicaid beneficiary’s tort recovery was attributable to medical expenses. The Court pointed out that if a State "arbitrarily may designate one-third of any recovery as payment for medical expenses, there is no logical reason why it could not designate half, three-quarters, or all of a tort recovery in the same way."  The Court stated that the North Carolina statute reflected its "effort to comply with federal law and secure reimbursement from third-party tortfeasors for medical expenses paid on behalf of the State’s Medicaid beneficiaries. In some circumstances, however, the statute would permit the State to take a portion of a Medicaid beneficiary’s tort judgment or settlement not ‘designated as payments for medical care.’" Id.

Accordingly, the Supreme Court affirmed the Fourth Circuit’s conclusion that the statute was preempted, as it impermissibly took a share of the recovery that was not related to medical expenses. Id.