In WOS v. E.M.A., 568 U.S. ___ (March 20, 2013), the Supreme Court affirmed the Fourth Circuit’s ruling that North Carolina’s irrebuttable statutory presumption that 1/3 of a tort recovery was the amount due on state’s Medicaid subrogation claim was invalid under federal Medicaid anti-lien statute and the Court’s 2006 Ahlborn decision. In this case the true value of the damages was estimated to be $42 million and the victim was only able to recover $2.8 million on the malpractice claim for multiple birth injuries. The State of North Carolina sought 1/3 of the recovery. This decision fully adheres to the Court’s 2006 Ahlborn decision which authorized only 1/6 reimbursement of medical bills paid because the tort recovery was only 1/6 the true damages. In Ahlborn the parties stipulated to the value of the claim and allocation related to medical bills. Here there was no stipulation or allocation. Important language from the opinion is quoted below:
The task of dividing a tort settlement is a familiar one. In a variety of settings, state and federal courts are called upon to separate lump-sum settlements or jury awards into categories to satisfy different claims to a portion of the moneys recovered… The State thus has ample means available to allocate Medicaid beneficiaries’ tort recoveries in an efficient manner that complies with federal law. Indeed, if States are concerned that case-by-case judicial allocations will prove unwieldy, they may even be able to adopt ex ante administrative criteria for allocating medical and nonmedical expenses, provided that these criteria are backed by evidence suggesting that they are likely to yield reasonable results in the mine run of cases. What they cannot do is what North Carolina did here: adopt an arbitrary, one-size-fits-all allocation for all cases. (from pages 13-14, Slip Opinion)
The law here at issue, N. C. Gen. Stat. Ann. §108A–57, reflects North Carolina’s 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.” Ahlborn, 547 U. S., at 284. The Medicaid anti-lien provision, 42 U. S. C. §1396p(a)(1), bars that result. (from pages 15-16, Slip Opinion).