In a case involving a Florida student hit by a truck after stepping off her school bus, leaving her in a vegetative state, the U.S. Supreme Court on Monday ruled that federal Medicaid law allows a state to seek reimbursement from a settlement the student’s parents reached with the school board and other defendants.
The justices ruled 7-2 against Gianinna Gallardo, who was 13 years old in 2008 when she exited her school bus and was struck by a pickup truck. She has been on life support ever since. Her parents sued the Lee County, Fla., school district as well as the truck’s owner and the driver.
The parties reached a settlement of $800,000 in 2015, even though her suit sought as much as $20 million in damages for past and future medical expenses and future earnings.
Florida’s Medicaid program, which was not a party to the settlement, paid some $862,000 for Gallardo’s medical care. The state placed a lien on the settlement, and under Florida law, it was entitled to recover 37.5 percent of the amount for medical expenses, or about $300,000 of the settlement amount.
Gallardo’s family challenged Florida’s actions in federal court, arguing that the state was entitled to reimbursement for only a relatively small amount—$35,000—from the settlement that covered the girl’s past medical expenses.
A federal district court ruled for the family. But the U.S. Court of Appeals for the 11th Circuit, in Atlanta, ruled for the state, holding that the federal Medicaid Act permits state programs to seek reimbursement of third-party payments for both past and future medical expenses. The Florida Supreme Court, in a separate case, had reached the opposite conclusion.
The U.S. Supreme Court, in its June 6 decision in Gallardo v. Marstiller, affirmed the 11th Circuit court and ruled for Florida.
In a dry opinion for the majority, Justice Clarence Thomas said that “Medicaid requires participating states to pay for certain needy individuals’ medical costs and then to make reasonable efforts to recoup those costs from liable third parties.”
Under a plain reading of federal Medicaid law, he said, “Florida may seek reimbursement from settlement amounts representing ‘payment for medical care,’ past or future.”
Chief Justice John G. Roberts Jr. and Justices Samuel A. Alito Jr., Elena Kagan, Neil M. Gorsuch, Brett M. Kavanaugh, and Amy Coney Barrett joined Thomas’s opinion.
Justice Sonia Sotomayor, in a dissent joined by Justice Stephen G. Breyer, said the majority read one Medicaid Act provision in isolation and gave “short shrift” to a larger context of the statute.
“The court’s holding is inconsistent with the structure of the Medicaid program and will cause needless unfairness and disruption,” Sotomayor said.
She noted that Gallardo “has continued to receive Medicaid benefits, despite the proceeds from her tort settlement, because those proceeds were transferred into a congressionally authorized Special Needs Trust, a narrow exception to Medicaid’s asset limits.”
The majority decision undercuts Congress’s choice to allow such special needs trusts, Sotomayor said, and lawmakers may need to act to prevent any “disruption” to that option.
