E.M.A. ex rel. Plyler v. Cansler, 10–1865.
Decision Date | 22 March 2012 |
Docket Number | No. 10–1865.,10–1865. |
Citation | 674 F.3d 290 |
Parties | E.M.A., a minor, by and through her Guardian ad Litem, William W. PLYLER; William Earl Armstrong; Sandra Armstrong, Plaintiffs–Appellants, v. Lanier M. CANSLER, in his official capacity as Secretary of the North Carolina Department of Health and Human Services, Defendant–Appellee. |
Court | U.S. Court of Appeals — Fourth Circuit |
OPINION TEXT STARTS HERE
Limited on Preemption Grounds
West's N.C.G.S.A. §§ 108A–57,108A–59ARGUED: William Bernard Bystrynski, Kirby & Holt, LLP, Raleigh, North Carolina, for Appellants. Belinda Anne Smith, North Carolina Department of Justice, Raleigh, North Carolina, for Appellee. ON BRIEF: C. Mark Holt, Kirby & Holt, LLP, Raleigh, North Carolina; Jeffrey T. MacKie, Sigmon, Clark, MacKie, Hutton, Hanvey & Ferrell, PA, Hickory, North Carolina, for Appellants. Roy Cooper, North Carolina Attorney General, Raleigh, North Carolina, for Appellee.
Before AGEE, DAVIS, and KEENAN, Circuit Judges.
Vacated and remanded by published opinion. Judge DAVIS wrote the opinion, in which Judge KEENAN joined. Judge AGEE wrote an opinion concurring in part, dissenting in part, and concurring in the judgment.
Under federal law, states participating in the Medicaid program are obligated (with some exceptions) to seek reimbursement from third-party tortfeasors for health care expenditures made on behalf of Medicaid beneficiaries who are tort victims. At the same time, however, states are prohibited (with some exceptions) from seeking reimbursement “from the personal property of” Medicaid beneficiaries themselves for health care expenditures made on behalf of those beneficiaries. But what if the injured Medicaid beneficiary obtains a judgment against (or enters into a settlement agreement with) the tortfeasor? Under such circumstances, what constraints are imposed as to how the state may satisfy its mandatory claim for reimbursement? In Arkansas Department of Health & Human Services v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006), the Supreme Court provided considerable guidance in resolving this tension in the Medicaid law. The instant appeal requires us to apply the teachings of Ahlborn to the Medicaid program as it is administered in North Carolina.
The minor appellant, E.M.A., sustained serious injuries at birth due to the negligence of the medical professionals who attended to her delivery. As a result of E.M.A.'s injuries, the North Carolina Department of Health and Human Services (“DHHS”), through the state Medicaid program, paid more than $1.9 million in medical and health care expenses on her behalf. Meanwhile, E.M.A., through her guardian ad litem, and her parents, Sandra and William Earl Armstrong, individually (hereafter “Appellants”), instituted a medical malpractice action in state court. In due course, they settled the action for a lump sum of approximately $2.8 million (a sum in excess of the total Medicaid expenditures of approximately $1.9 million but well below the full value of all the tort claims). The settlement agreement did not allocate separate amounts for past medical expenses and other damages.
DHHS subsequently asserted a statutory lien on the settlement proceeds pursuant to N.C. Gen.Stat. §§ 108A–57 and–59 (referred to herein as “the North Carolina third-party liability statutes”), which provide that North Carolina has a subrogation right to, and may assert a lien upon, the lesser of its actual medical expenditures or one-third of the Medicaid recipient's total recovery. Thus, under the circumstances described, where DHHS's actual medical expenditures are greater than one-third of the settlement funds, the North Carolina third-party liability statutes effect an unrebuttable presumption that the state is entitled to one-third of the total settlement proceeds recovered by E.M.A. and her parents. This amount, $933,333.33 (one-third of the $2.8 million lump-sum settlement), has been paid into the registry of the state court, where the funds have remained during the pendency of this action. The parties before us do not dispute the state's entitlement to some reimbursement from the lump-sum settlement, but they vigorously dispute the proper allocation of the portion of the settlement proceeds held in trust by the state court.
Appellants brought this action in federal district court against Lanier M. Cansler, in his official capacity as Secretary of DHHS, seeking declaratory and injunctive relief pursuant to 42 U.S.C. § 1983. They sought to forestall payment of the amount claimed by DHHS on the basis of the provision of the federal Medicaid law known as the “anti-lien provision,” 42 U.S.C. § 1396p. On cross-motions for summary judgment, the district court, relying in significant part on the reasoning of a majority opinion in a prior case by a divided Supreme Court of North Carolina which distinguished Ahlborn while sustaining the state statutory regime, granted summary judgment in favor of Appellee, Secretary Cansler. Appellants filed this timely appeal.
For the reasons set forth within, we disagree, respectfully, with the analysis of the Supreme Court of North Carolina, as adopted by the district court. Rather, in agreement with one of our sister circuit courts analyzing an analogous state law, we are persuaded that the unrebuttable presumption inherent in the one-third cap on the state's recovery imposed by the North Carolina third-party liability statutes is in fatal conflict with federal law. Accordingly, we vacate the judgment in favor of the Secretary and remand this action for further proceedings consistent with this opinion.
E.M.A. was born on February 25, 2000 with injuries that necessitated substantial medical treatment. As a result of the injuries she suffered at birth, E.M.A. is legally deaf and blind, and she is unable to sit, walk, crawl, or talk. Additionally, E.M.A. suffers from mental retardation and a seizure disorder. She requires between 12 and 18 hours of skilled nursing care per day. Sandra Armstrong, E.M.A.'s mother, applied for Medicaid benefits on behalf of E.M.A. on April 26, 2000. The North Carolina Medicaid program is administered by the Division of Medical Assistance (“DMA”) of DHHS pursuant to N.C. Gen.Stat. § 108A–54 and 42 U.S.C. §§ 1396–1396v. In the application for Medicaid coverage for E.M.A., Sandra Armstrong agreed
to give back to the State any and all money that is received by me or anyone listed on this application from any insurance company for payment of medical and/or hospital bills for which the Medical Assistance program has or will make payment. In addition, I agree that all medical payments or medical support paid or owed due to a court order for me or anyone listed on this application must be sent to the State to repay past or current medical expenses paid by the State. This includes insurance settlements resulting from an accident. I further agree to notify the county department of social services if I or anyone listed on this application is involved in any accident.
On February 21, 2003, E.M.A. and her parents filed a lawsuit in Catawba County Superior Court alleging claims for medical malpractice. The malpractice suit sought damages on behalf of E.M.A. for her physical and developmental injuries, lost wages, pain and suffering, and future medical expenses starting at her majority. Sandra and William Earl Armstrong sought damages for past medical expenses for E.M.A.'s care and treatment, medical expenses through E.M.A.'s eighteenth birthday, and damages for their own emotional distress.
After three years of litigation, the parties settled the medical malpractice case. Prior to consummating the settlement, Appellants were aware that DHHS had paid more than $1.9 million for the costs of E.M.A.'s medical care. Appellants contend that they gave notice of the settlement negotiations and of the mediation process to DHHS pursuant to Rule 4B of the North Carolina Rules for Mediated Settlement Conference, but no representative of DHHS ever participated in or attended the settlement discussions.1
On November 13, 2006, Judge Timothy Kincaid held a hearing in the Catawba County Superior Court to review the fairness and appropriateness of the settlement. Appellants allege they served DHHS with notice of the hearing, but no representative of DHHS appeared. The court approved the settlement, finding that it was fair and just, in the best interest of E.M.A., and in all respects reasonable and proper. The court likewise found the settlement to be fair in all respects as to Sandra and William Earl Armstrong, and that their individual claims had been resolved by the settlement, “including, but not limited to, claims for severe emotional distress and mental anguish and liability for past, present and future medical and life care expenses.” J.A. 134. Judge Kincaid noted that the plaintiffs had alleged that “[E.M.A.] suffered severe and permanent injuries and that both parents ... have incurred liability for past, present and future medical and life care expenses for treatment of [E.M.A.],” J.A. 133, and concluded that the sums set out in the Settlement Schedule were fair and just compensation for their respective claims, J.A. 135.
Notably, neither the parties to the settlement nor the court allocated the settlement funds among the distinct claims or categories of damages. To be sure, however, Judge Kincaid recognized that DHHS had asserted a lien against the proceeds of the settlement, but for reasons not addressed by the parties before us, he apparently was not asked and/or declined to adjudicate the proper amount of the DHHS lien. Rather, he found simply that “the amount of that lien needs to be determined in light of the U.S. Supreme Court decision in [ Ahlborn ],” J.A. 136, which had been decided approximately six months earlier during the pendency of the state medical malpractice litigation. Accordingly, the court ordered...
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