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It’s a good thing: U.S. Supreme Court limits states’ ability to seize Medicaid recipients’ tort recoveries

It’s a good thing: U.S. Supreme Court limits states’ ability to seize Medicaid recipients’ tort recoveries

By Leslie Brueckner, Senior Attorney

It’s not every day that the U.S. Supreme Court issues a ruling that’s good news for personal injury victims. But yesterday was one of those days. And it’s a ruling that could even bode well for our ERISA case soon to be decided by the high court.

Wos v. E.M.A. came down 6-3, with Justice Kennedy writing for the majority. The case involves the right of injured Medicaid recipients to hold onto compensation they receive from the person who caused their injury. Under the federal Medicaid statute, a participating state has the right to recover its “medical expenses” from an injury victim who recovers damages from a third party. North Carolina, however, passed a statute that gave it the right to seize a full one-third of any Medicaid recipient’s recovery. That’s problematic because, in many cases, that one-third exceeds the portion of the injury victim’s recovery that is actually allocable to medical expenses, resulting in the state getting more money than Congress said it could have. And the injury victim can be left worse off.

The Supreme Court yesterday rightfully rejected North Carolina’s statute as “arbitrary” and contrary to the Medicaid statute, and ordered the State to figure out a way to limit its reimbursement to actual medical expenses.

This is a great result in and of itself, but it could also mean good things for our ERISA case U.S. Airways v. McCutchen, which should be decided any day now.

In McCutchen, the ERISA plan that paid our client’s medical expenses sued him for 100 percent reimbursement of his limited tort recovery — an amount that, as in Wos v. E.M.A., greatly exceeded the portion of the recovery allocable to medical expenses. In E.M.A., North Carolina made a bunch of arguments about why this result is defensible as a matter of law in the Medicaid context, none of which has any application to McCutchen (which involves a different statute).

Martha StewartBut in E.M.A., North Carolina relied heavily on a policy argument that was made in McCutchen: that determining what portion of a tort victim’s recovery is actually allocable to medical expenses would be “wasteful, time consuming, and costly.” In a portion of the opinion that made my heart jump a little, the Supreme Court flatly rejected that argument, noting that the proper allocation of damages is often easily resolved by stipulation between the parties or by spelling out the allocation in a settlement. Barring that, the Court observed that sixteen states and the District of Columbia provide for hearings to determine the proper allocation of damages and, the Court said (drum roll please), “there is no indication that [those hearings] have proved burdensome.”

Let’s hope the Court takes the same view in McCutchen. If it does, we might actually have two pro-injury-victim rulings from the high court in a single term. And that, as Martha Stewart might say, would be a VERY good thing.