On Monday, the Supreme Court – back on its regular schedule — returns to the very complex task of trying to make sense of the widely varied and sometimes conflicting parts of the nation’s healthcare system. The task has always been harder because of America’s century-old fear of “socialized medicine.” That fear has led the nation to turn to an array of alternatives to the more direct approach, say, of Sweden’s universal, free medical service.
Tomorrow’s focus for the Court is on the interaction between two of those alternatives: the Medicaid program, which provides government-funded medical services for the poor and for some who are disabled, and the separate legal system in which private individuals file lawsuits to seek compensation for treatment of personal injuries caused by some other person or entity.
Of those two systems, Medicaid is far newer, enacted in 1965. Private lawsuits for injuries to an individual caused by someone else have been around since the 11th Century, part of the origins of the “common law” that developed after the Norman Conquest of England. (In America, that system is still known as “tort law,” using the French word for “wrong” or “wronged.” “Torts,” by the way, is a course taught to every first-year law student.)
Both of those approaches to covering medical costs are huge. Medicaid is the nation’s largest health plan, with 76.3 million enrolled in a system of federal-state partnership that provides more than $600 billion of spending a year — about 20 percent of all payments for personal medical service. Personal injury lawsuits are filed in the hundreds of thousands each year, a predictable response by many of the estimated 31 million Americans annually who require medical treatment for personal injuries. The verdicts or settlements in such cases can reach six figures or more (as in this case).
The interaction of the two systems will be the subject of a single hearing the Supreme Court will hold tomorrow morning.
The case: Gallardo v. Marstiller. Starting at 10 a.m., the “live” audio (no video) will be broadcast at Quick Links on the Supreme Court’s homepage – supremecourt.gov. – and can also be heard at c-span.org/supremecourt and C-Span Now App. It is scheduled for 70 minutes.
Background: On November 19, 2008, 13-year-old Gianinna Gallardo was coming home from school in Lee County, Fla. As she stepped off the school bus, she was hit by a pickup truck; she suffered severe and permanent injuries. While she survived, she has since been in a persistent vegetative state, unable to care for herself. Florida’s Medicaid program, run by the state Agency for Health Care Administration, has paid $862,688.77 for Gianinna’s medical expenses so far.
Federal law imposes conditions on a state agency in return for the federal government paying a significant part of the state’s Medicaid costs. Two conditions are at issue in this case: one bars the state from demanding reimbursement directly from the person whose medical expenses it has covered, but a second provides that the state must seek reimbursement if a “third party” is found to have caused the medical problem and has paid compensation (often, in a verdict or settlement of a personal injury lawsuit).
What the Supreme Court must sort out in the Gallardo case is how those two conditions work in practice. The girl’s parents went to state court, suing the driver and the owner of the truck along with the Lee County School Board for the “tort” of wrongly causing her injuries. The case was ultimately settled for $800,000. The state agency was notified of this result, and it demanded reimbursement. Under state Medicaid law, the state was entitled to 37.5 percent of such a compensation award – that is $300,000 – but that amount can be challenged in state court.
The parents pursued that challenge. Meanwhile, the parents also went to federal court, arguing that federal law only allowed the state to recover what it spent for past medical expenses. The parents contended that only about $35,000 (4 percent) of the settlement they had won was for those expenses; the remainder was for future medical costs and other expenses resulting from the harm done to their daughter and to the family.
A federal trial judge ruled for the parents, concluding that the state was legally entitled only to reimbursement for prior medical payments, the only expenses it had actually covered under Medicaid.
A federal appeals court (Eleventh Circuit) disagreed, ruling that federal law allowed the state to seek recovery from all of a settlement amount, without any distinction between past and future medical expenses. Thus, it said, federal law did not displace (constitutionally, did not “preempt”) the state law authorizing recovery of at least $300,000 if that amount is not successfully challenged in a state court.
What was at issue in this case, the appeals court said, is the state’s traditional authority “to provide tort remedies for Florida citizens,” including the state’s authority to share in a portion of an award in a personal injury lawsuit. Congress had not overridden that authority, the court added, because it would have had to do so by “clear and manifest purpose.” That was not done by Congress in the Medicaid Act, it said.
That ruling meant that this dispute case would make its way back to state court, where the Gallardo parents could resume their challenge to the state’s formula for a $300,000 reimbursement. The parents instead appealed to the Supreme Court, putting further proceedings in state court on hold. The U.S. Justice Department is supporting them, arguing that Medicaid law allows states to recover only those payments they have actually made.
Lower courts are divided on how to interpret the Medicaid Act clauses at issue. In fact, Florida’s state Supreme Court has ruled in the same way that the Justice Department reads those provisions; Florida is one of the states within the jurisdiction of the federal appeals court that ruled against the Gallardo family challenge. (The appeals court is not bound by the state court interpretation of federal law.)
The question before the Court: Does the federal Medicaid Act allow a state to seek reimbursement for the medical expenses it paid only in an amount representing past expenses it actually covered, not for expenses it did not pay?
Significance: While the Gallardos’ appeal on its surface is only a dispute about the meaning of two clauses in the Medicaid law, their case reached the Court as its new conservative majority is in the process of moving aggressively to restore power to state governments, in part by narrowing the scope of powers of federal laws and agencies.
That, basically, is a process that focuses on how the U.S. Constitution divides governing power between the national branches and between the federal and state levels. (Indeed, the process was on display just last Friday, as the Court held a lengthy hearing on the Biden Administration’s sweeping vaccination orders as a way to deal with the Covid-19 pandemic.)
One tool that the majority has been using is to insist that claims of federal authority must be based on clear and definite statements by Congress supporting what the federal government has sought to do.
In this case, that approach could mean that the majority might find that the Medicaid Act does not speak plainly enough if it is interpreted – as the Justice Department does – to put significant limits on states’ authority to seek reimbursement from court verdicts against third parties who have caused the injuries for which Medicaid finances treatment.
The lower appeals court made that very point in finding that the Act does not clearly preempt the Florida law that, in this case, could allow the state to recover $300,000 rather than only about a tenth of that amount.
And the Justices have been asked specifically, in legal briefs by Florida and 14 other states supporting it, to show respect for the state law giving Florida’s health agency wider opportunity to get reimbursed for its Medicaid outlays.
Another limiting approach that the conservative majority of the Court might employ in this case is a finding that the Constitution’s Spending Clause – the source of Congress’s authority for the Medicaid program – does not allow federal officials to use spending as a tool to limit what state governments may do under their own laws while carrying out a federal program.
In the Gallardo case, and in similar cases in which personal injury lawsuits have been pursued, the position taken by Florida in this case could give its own agencies wider power to decide how to divide up the sums awarded in its courts. The result, of course, could narrow the scope of those victories for the individuals or families who won their cases.
The Court on Tuesday continues its hearings this week, with two cases on the scope of the federal government’s power to hold in detention non-citizens who are awaiting deportation to their home countries. Those cases will be discussed in this space on Monday.