By Larry Jones
December 17, 2012

The U.S. Conference of Mayors signed onto an amicus curiae brief filed by State and Local Legal Center (SLLC) in a U.S. Supreme Court case involving the question of whether Medicaid preempts a state statute. The specific issue the Court will decide in Delia v. E.M.A. is whether a North Carolina statute allowing the state to recover one-third of a Medicaid recipient’s settlement from a tortfeasor is preempted by Medicaid’s anti-lien provision.

This case matters in general to mayors because all levels of government have an interest in the sustainability of the Medicaid system. More than 40 cities with combined city-county government, cities will have already paid for at least part of the Medicaid costs of someone injured by the fault of another person. As the facts of Delia v. E.M.A illustrate, those costs can be substantial. North Carolina’s statute allows the state to recoup a set amount of money from a Medicaid recipient’s tort settlement that doesn’t fully reimburse the state for its Medicaid costs and still leaves the Medicaid recipient with a significant portion of his or her tort settlement.

E.M.A. was injured at birth. Her parents settled a medical malpractice claim for $2.8 million that didn’t allocate separate amounts for medical expenses and other damages. North Carolina, which had paid over $1.9 million in medical expenses on E.M.A.’s behalf, sought to recover one-third of the settlement. A state statute allows North Carolina to recover the lesser of actual medical expenses or one-third of a Medicaid recipient’s total tort settlement.

Medicaid prohibits states from asserting liens against Medicaid recipients except for medical expenses recovered from tortfeasors. In 2006, in Arkansas Department of Health and Human Services v. Ahlborn, the U.S. Supreme Court struck down an Arkansas statute that allowed the state to recover all of the costs it paid on behalf of a Medicaid recipient regardless of whether that amount exceeded the medical expenses portion of a settlement. In Ahlborn, unlike this case, the parties had allocated the settlement between medical expenses and other damages. So in this case the Supreme Court must decide whether and how Ahlborn applies to unallocated settlements.

The SLLC’s brief argues that Medicaid is a huge expense for states and that Medicaid grants states substantial discretion in how they pursue recovery from tortfeasors. The brief points out North Carolina’s statute encourages parties to allocate settlements and avoids states having to participate in burdensome settlement discussions or post'settlement allocation hearings. The brief also argues that allowing Medicaid recipients to keep two-thirds of their tort settlement is reasonable and fair.

At least eight states have statutory caps on Medicaid recovery from tortfeasors: Connecticut, Florida, Georgia, Hawaii, Michigan, Minnesota, Ohio, and Iowa. All of the Big Seven organizations (in addition to the Conference of Mayors, the National Governors’ Association, National Conference of State Legislatures, Council of State Governments, National League of Cities, National Association of Counties and the International City Management Association) signed onto the SLLC›s brief along with the Government Finance Officers Association and New York City, the third biggest Medicaid spender in the United States. Oral argument will be heard in this case on January 8, 2013. The Supreme Court will issue an opinion in this case by June 30, 2013.