The parents of a disabled North Carolina girl defeated the state on Wednesday, as the Supreme Court struck down a law allowing state officials to seize one-third of a medical malpractice settlement.
In a 6-3 ruling that affects myriad states, the court ruled that the federal Medicaid law pre-empts North Carolina’s sizable claim. Though states can take some medical malpractice money to reimburse themselves for Medicaid costs, the court said the one-third amount set in state law was unreasonable.
“The state has picked an arbitrary percentage,” Justice Anthony Kennedy said in announcing the ruling.
He described the North Carolina law as a “one-size fits all” standard.
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The ruling means the family of Taylorsville, N.C., resident Emily M. Armstrong can keep more of a $2.8 million medical malpractice settlement. Emily, who turned 13 last month, was born with serious disabilities and requires between 12 and 18 hours of skilled nursing every day.
The 16-page majority decision is also a professional victory for Raleigh-based attorney Christopher G. Browning Jr., the former North Carolina solicitor general who argued for the Armstrongs before the Supreme Court, as well as for William Bystrynski, another Raleigh-based attorney who represented the family in earlier proceedings.
“We are thrilled with the decision,” Browning said in a telephone interview. “I think it’s a great victory for the Armstrong family and for Medicaid beneficiaries in general.”
More broadly, the court’s ruling means North Carolina, as well as states with similar laws, including Florida and Georgia, must revisit how they handle reimbursements from Medicaid recipients who have won a lawsuit or reached, as the Armstrong family did, a negotiated settlement.
“(This) is a huge victory for the 62 million Americans, one out of every five, who depend on Medicaid for access to health care,” said Rochelle Bobroff of the Constitutional Accountability Center. “This ruling makes clear that the Medicaid statute . . . displaces state laws that conflict with the program.”
Underscoring the broader stakes, the liberal Constitutional Accountability Center filed one of several friend-of-the-court briefs supporting the Armstrong family. From the flip side, Texas and 10 other states filed their own briefs supporting North Carolina, and Chief Justice John Roberts Jr. agreed in his dissent that the court’s decision was “both unnecessary and unwise.”
“It has the unfortunate consequence of denying flexibility to the states . . . in resolving a policy question with broad significance for this complicated program,” Roberts wrote.
Emily was born in February 2000, at what’s now called the Catawba Valley Medical Center, in Hickory, N.C. Diagnosed with cerebral palsy following her birth by Caesarian section, she is blind, deaf and mentally retarded.
The Armstrongs sued the obstetrician, who had a history of drug abuse, as well as the medical center and others. They eventually settled, which set in motion the legal proceedings that led to the court’s decision Wednesday.
North Carolina state health officials subsequently estimated that they’d spent more than $1.9 million in Medicaid funds providing medical care for Emily. Under state law, once there was a medical malpractice settlement, they could take the lesser of either the total Medicaid spending on the patient or one-third of the court-ordered malpractice payment. Consequently, North Carolina officials asserted a lien on $933,333.33, one-third of the total settlement.
The problem is that federal law prohibits states from attaching a lien on Medicaid beneficiaries, except to recover money paying for medical care. Money for pain and suffering isn’t covered by the ban on liens. The Armstrong settlement didn’t specify how the $2.8 million was allocated.
The North Carolina state law declares that one-third of a Medicaid beneficiary’s lawsuit recovery is attributable to medical expenses, and thus vulnerable to being taken with a lien. The court didn’t buy it.
“If a state arbitrarily may designate one-third of any recovery as payment for medical expenses, there is no logical reason why it could not designate half, three-quarters or all of a tort recovery in the same way,” Kennedy wrote.
Moreover, Kennedy added, “it is apparent that a quite substantial share” of the money provided in the Armstrongs’ medical malpractice settlements will be needed to pay for the skilled home care that Emily will need, as Kennedy put it, “for the rest of her life.”