The Supreme Court of the United States (SCOTUS) heard oral arguments on January 8, 2013 regarding an interesting Medicaid reimbursement case. After a person’s death, Medicaid (Medi-Cal in California) will often attempt to recover some of the medical expenses spent on behalf of the Medicaid beneficiary from the estate. In a lesser known cost recovery method, Medicaid may also attempt to recover from individuals who receive large awards from medical malpractice cases.
The case, Delia v. E.M.A. focuses on a family who suffered malpractice at the hands of a North Carolina obstetrician. Due to complications during a cesarean section in 2000, the newborn child suffered severe injuries resulting in cerebral palsy. The parents, on behalf of their injured daughter, sued the physician and won a $2.8 million settlement to cover the ongoing medical expenses for their daughter, their own emotional distress, and past medical expenses. As a result of their malpractice award, the state immediately calculated all the Medicaid funds they spent and came up with a figure exceeding $1.9 million. The North Carolina statute at issue allows the state to claim the full amount of medical expenses paid or 1/3 of a medical malpractice award, whichever is lower. As a result, the state put a lien of over $900,000 on the award, which is the subject of the dispute.
As in many SCOTUS cases, a number of parties have submitted arguments on behalf of each side. On North Carolina’s side are a number of other states concerned about their ability to collect against medical malpractice awards. On the family’s side, AARP has joined the cause on behalf of their many elderly Medicaid recipients. The Obama administration has also joined the family’s side setting the stage for a state and federal showdown. California has not joined either side.
Although the distinctions made in the case and the discussions regarding whether the state laws are consistent with federal laws are fairly complex, the primary issue boils down to this: If, as a Medicaid recipient, you receive a medical malpractice settlement which covers past and future medical costs, lost wages and other claimed damages, how much of the settlement may the state claim for itself? If the state may only claim the amount allocated in the settlement to past medical expenses, then you might manipulate your settlement to avoid reimbursing the state. If the state sets a blanket amount as it did here (up to 1/3), then the state may take money that is not allowed to be used to reimburse the state.
Many states will likely respond with new legislation regarding obtaining malpractice settlement funds once SCOTUS reaches a decision several months from now. Anyone currently considering negotiating a medical malpractice settlement ought to discuss the potential impact of this case with their attorney. Additionally, Medi-Cal beneficiaries should plan against Medi-Cal recovery from their estate. By engaging counsel who knows and understands Medicaid, you can effectively protect more of your assets for the benefit of your family, even if you require long term care!
Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things… FREE REPORT: This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.