Wos v. E.M.A.

• Decision Date: 20 March 2013
• Docket Number: No. 12–98.,12–98.
• Citation: 133 S.Ct. 1391,185 L.Ed.2d 471,568 U.S. 627
• Parties: Aldona WOS, Secretary, North Carolina Department of Health and Human Services, Petitioner v. E.M.A., a minor, by and through her guardian ad litem, Daniel H. JOHNSON, et al.
• Court: U.S. Supreme Court

568 U.S. 627

133 S.Ct. 1391

185 L.Ed.2d 471

Aldona WOS, Secretary, North Carolina Department of Health and Human Services, Petitioner

v.E.M.A., a minor, by and through her guardian ad litem, Daniel H. JOHNSON, et al.

No. 12–98.

Supreme Court of the United States

Argued Jan. 8, 2013.

Decided March 20, 2013.

John F. Maddrey, Solicitor General, for Petitioner.

Christopher G. Browning, Jr., Raleigh, NC, for Respondents.

Ginger D. Anders, for the United States as amicus curiae, by special leave of the Court, supporting the Respondents.

Roy Cooper, Attorney General of North Carolina, John F. Maddrey, Solicitor General, Counsel of Record, Gayl M. Manthei, Special Deputy Attorney General, Belinda A. Smith, Special Deputy Attorney General, North Carolina Department of Justice, Raleigh, NC, for Petitioner.

C. Mark Holt, William B. Bystrynski, Kirby & Holt, LLP, Raleigh, NC, Jeffrey T. Mackie, Sigmon, Clark, Mackie, Hickory, NC, Christopher Browning, Jr., Counsel of Record, C. Elizabeth Hall, Williams Mullen, Raleigh, NC, for Respondents.

Justice KENNEDY delivered the opinion of the Court.

A federal statute prohibits States from attaching a lien on the property of a Medicaid beneficiary to recover benefits paid by the State on the beneficiary's behalf. 42 U.S.C. § 1396p(a)(1). The anti-lien provision pre-empts a State's effort to take any portion of a Medicaid beneficiary's tort judgment or settlement not "designated as payments for medical care." Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 284, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006). North Carolina has enacted a statute requiring that up to one-third of any damages recovered by a beneficiary for a tortious injury be paid to the State to reimburse it for payments it made for medical treatment on account of the injury. See N.C. Gen.Stat. Ann. § 108A–57 (Lexis 2011) ; Andrews v. Haygood, 362 N.C. 599, 604–605, 669 S.E.2d 310, 314 (2008). The question presented is whether the North Carolina statute is compatible with the federal anti-lien provision.

I

When respondent E.M.A. was born in February 2000, she suffered multiple serious birth injuries which left her deaf, blind, and unable to sit, walk, crawl, or talk. The injuries also cause her to suffer from mental retardation and a seizure disorder. She requires between 12 and 18 hours of skilled nursing care per day. She will not be able to work, live independently, or provide for her basic needs. The cost of her ongoing medical care is paid in part by the State of North Carolina's Medicaid program.

In February 2003, E.M.A. and her parents filed a medical malpractice suit in North Carolina state court against the physician who delivered E.M.A. at birth and the hospital where she was born. The expert witnesses for E.M.A. and her parents in that proceeding estimated damages in excess of $42 million for medical and life-care expenses, loss of future earning capacity, and other assorted expenses such as architectural renovations to their home and specialized transportation equipment. App. 91–112. By far the largest part of this estimate was for "Skilled Home Care," totaling more than $37 million over E.M.A.'s lifetime. Id., at 112. E.M.A. and her parents also sought damages for her pain and suffering and for her parents' emotional distress. Id., at 64–65, 67–68, 72–73, 75–76. Their experts did not estimate the damages in these last two categories.

Assisted by a mediator, the parties began settlement negotiations. E.M.A. and her parents informed the North Carolina Department of Health and Human Services of the negotiations. The department had a statutory right to intervene in the malpractice suit and participate in the settlement negotiations in order to obtain reimbursement for the medical expenses it paid on E.M.A.'s behalf, up to one-third of the total recovery. See N.C. Gen.Stat. Ann. §§ 108A–57, 108A–59. It elected not to do so, though its representative informed E.M.A. and her parents that the State's Medicaid program had expended $1.9 million for E.M.A.'s medical care, which it would seek to recover from any tort judgment or settlement.

In November 2006, the court approved a $2.8 million settlement. The amount, apparently, was dictated in large part by the policy limits on the defendants' medical malpractice insurance coverage. See Brief for Respondents 5. The settlement agreement did not allocate the money among the different claims E.M.A. and her parents had advanced. In approving the settlement the court placed one-third of the $2.8 million recovery into an interest-bearing escrow account "until such time as the actual amount of the lien owed by [E.M.A.] to [the State] is conclusively judicially determined." App. 87.

E.M.A. and her parents then filed this action under Rev. Stat. § 1979, 42 U.S.C. § 1983, in the United States District Court for the Western District of North Carolina. They sought declaratory and injunctive relief, arguing that the State's reimbursement scheme violated the Medicaid anti-lien provision, § 1396p(a)(1). While that litigation was pending, the North Carolina Supreme Court confronted the same question in Andrews, supra . It held that the irrebuttable statutory presumption that one-third of a Medicaid beneficiary's tort recovery is attributable to medical expenses was "a reasonable method for determining the State's medical reimbursements." Id., at 604, 669 S.E.2d, at 314. The United States District Court, in the instant case, agreed. Armstrong v. Cansler, 722 F.Supp.2d 653 (2010).

The Court of Appeals for the Fourth Circuit vacated and remanded. E.M.A. v. Cansler, 674 F.3d 290 (2012). It concluded that North Carolina's statutory scheme could not be reconciled with " Ahlborn 's clear holding that the general anti-lien provision in federal Medicaid law prohibits a state from recovering any portion of a settlement or judgment not attributable to medical expenses." Id., at 310. In some cases, the court reasoned, the actual portion of a beneficiary's tort recovery representing payment for medical care would be less than one-third. North Carolina's statutory presumption that one-third of a tort recovery is attributable to medical expenses therefore must be "subject to adversarial testing" in a judicial or administrative proceeding. Id., at 311.

To resolve the conflict between the opinion of the Court of Appeals in this case and the decision of the North Carolina Supreme Court in Andrews, this Court granted certiorari. 567 U.S. ––––, 133 S.Ct. 99, ––– L.Ed.2d –––– (2012).

II

At issue is the interaction between certain provisions of the federal Medicaid statute and state law. Congress has directed States, in administering their Medicaid programs, to seek reimbursement for medical expenses incurred on behalf of beneficiaries who later recover from third-party tortfeasors. States must require beneficiaries "to assign the State any rights ... to support (specified as support for the purpose of medical care by a court or administrative order) and to payment for medical care from any third party." 42 U.S.C. § 1396k(a)(1)(A). States receiving Medicaid funds must also

"ha[ve] in effect laws under which, to the extent that payment has been made under the State plan for medical assistance for health care items or services furnished to an individual, the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or services." § 1396a(a)(25)(H).

A separate provision of the Medicaid statute, however, exists in some tension with these requirements. It says that, with exceptions not relevant here, "[n]o lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan." § 1396p(a)(1).

In Ahlborn, the Court addressed this tension and held that the Medicaid statute sets both a floor and a ceiling on a State's potential share of a beneficiary's tort recovery. Federal law requires an assignment to the State of "the right to recover that portion of a settlement that represents payments for medical care," but it also "precludes attachment or encumbrance of the remainder of the settlement." 547 U.S., at 282, 284, 126 S.Ct. 1752. This is so because the beneficiary has a property right in the proceeds of the settlement, bringing it within the ambit of the anti-lien provision. Id., at 285, 126 S.Ct. 1752.

That property right is subject to the specific statutory "exception" requiring a State to seek reimbursement for medical expenses paid on the beneficiary's behalf, but the anti-lien provision protects the beneficiary's interest in the remainder of the settlement. Id., at 284, 126 S.Ct. 1752.

A question the Court had no occasion to resolve in Ahlborn is how to determine what portion of a settlement represents payment for medical care. The parties in that case stipulated that about 6 percent of respondent Ahlborn's tort recovery (approximately $35,600 of a $550,000 settlement) represented compensation for medical care. Id., at 274, 126 S.Ct. 1752. The Court nonetheless anticipated the concern that some settlements would not include an itemized allocation. It also recognized the possibility that Medicaid beneficiaries and tortfeasors might collaborate to allocate an artificially low portion of a settlement to medical expenses. The Court noted that these problems could "be avoided either by obtaining the State's advance agreement to an allocation or, if necessary, by submitting the matter to a court for decision." Id., at 288, 126 S.Ct. 1752.

North Carolina has attempted a different approach. Its statute provides:

"Notwithstanding any other provisions of the law, to the extent of payments under this Part, the State, or the county providing medical assistance benefits, shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of this assistance.... The county attorney, or an attorney retained by the county or the State or both, or an

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