NC State Law May Violate Federal Medicaid Law

The U.S. Supreme Court heard oral arguments January 8, 2013, as to whether the federal Medicaid Act trumps North Carolina‘s Medicaid seizure law.  As of now, when a plaintiff wins a medical malpractice lawsuit, the State is authorized to recoup up to 1/3 of any jury award or settlement or the actual amount of Medicaid payments (whichever is less), regardless of how much of the award was designated for medical expenses.

The underlying case is Delia v. E.M.A.

The Facts: Emily M. Armstrong was born on February 25, 2000. She was seriously injured during her delivery resulting in mental retardation, cerebral palsy and several other medical conditions. Two months after Emily was born, Emily’s parents, Sandra and William Earl Armstrong applied for Medicaid. From Emily’s birth until her untimely death, Medicaid paid over $1.9 million in medical expenses on Emily’s behalf.  Emily’s parents and guardian sued the physicians who delivered her and settled for $2.8 million.  DHHS immediately placed a lien on the settlement money.

The Legal Issue: Whether N.C. Gen. Stat. § 108A-57 is preempted by the Medicaid Act’s anti-lien provision, 42 U.S.C. §§ 1396a(a)(25), 1396k(a),

The Legal Issue in English:  The Federal law prohibits recovery from any payments not made for past medical expenses. In other words, if the jury or settlement does not specify which portion of the settlement or award was reimbursement of medical expenses, then Medicaid cannot recoup any money.  In North Carolina a minor child is not allowed to recover for past medical expenses.  Therefore, in Emily’s case, none of the monies was designated as past medical expenses. Thus….Medicaid (under the federal law) cannot be reimbursed for the expenses paid out for  Emily. Which law wins? Federal or State?

Once the case was settled, the NC Court ordered that $933,333 of the settlement must be paid to the state.

Emily’s parents sued NC DHHS in the U.S. District Court for the Western District of North Carolina, saying that federal law prevents the State from any reimbursement.

The North Carolina U.S. District Court for the Western District of North Carolina granted summary judgment in favor of the State, saying the State law trumps federal law.  Emily’s parents appealed.

The United States Court of Appeals for the Fourth Circuit vacated the lower court’s decision. However, the appellate court held that DHHS had the right to recoup a portion of Emily’s settlement, but it remanded the case because the State failed to provide an itemization of how much of the settlement was designated as past medical expenses.

The Supreme Court of the United States granted the State’s petition for certiorari.  John Maddrey argued on behalf of the State. Christopher Browning, Jr., argued on behalf of Emily’s parents.

Now we wait….Does the North Carolina law allowing the State to take 1/3 of a settlement, if the money was not designated as past medical expenses, violate federal Medicaid law disallowing the states from taking money from a settlement unless the settlement money was designated  as past medical expenses.

The question that has to be answered, not saying that it can be answered, is: When the insurance company for the physicians settled with Emily’s parents, were they paying for past medical expenses? Or were they paying for Emily’s parents’ loss of child, mental anguish and pain and suffering?

Guess we need another trial to determine that issue.

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on January 25, 2013, in Division of Medical Assistance, Federal Law, Medicaid, Medicaid Appeals, Medicaid Recipients, Medicaid Recoupment, Medical Malpractice, NC DHHS, North Carolina, US Supreme Court and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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