Medicaid Recipient Entitled to Challenge Automatic Claim by State for Share of Settlement

???The 4th Circuit Court of Appeals ruled that when a personal injury settlement does not include an allocation of past medical expenses, a Medicaid recipient is entitled to an adversarial proceeding to challenge the state’s automatic claim for receipt of one-third of the settlement.


E.M.A. v. Cansler (4th Cir., No. 10-1865, March 22, 2012).

Facts.  E.M.A. was seriously injured during her birth and immediately began receiving Medicaid benefits.  When she was six years old, her representatives settled a medical malpractice action against her doctors for $2.8 million.  By the time the settlement was complete, the North Carolina Department of Health and Human Services (DHHS) had provided E.M.A. with approximately $1.9 million in medical care benefits.  Pursuant to state law, DHHS is entitled to collect up to one-third of the settlement as reimbursement for past medical expenses, so DHHS asserted a lien in the amount of $933,333.33 against E.M.A.

Procedural History.  The representatives of E.M.A. filed a suit in federal court seeking a declaratory judgment and an injunction preventing DHHS from asserting its claim against the settlement funds.  E.M.A. argued that because North Carolina common law prevents a minor from asserting a cause of action for past medical expenses, none of the settlement proceeds could be attributed to her past medical expenses.  In the alternative, E.M.A. claimed that the state could not recover one-third of her settlement because caselaw necessitates a proportional analysis of the settlement to determine the proper amount of the lien.  The district court granted summary judgment in favor of DHHS, relying on a previous North Carolina Supreme Court decision upholding the one-third allocation.  E.M.A. appealed.

Court’s Decision.  After dismissing E.M.A.’s common law argument, the 4th Circuit Court of Appeals reversed the district court and remanded the case for a hearing that will allow E.M.A. to rebut the one-third presumption.  The court specified that “on remand, the district court must determine the true value of the case in allocating medical expenses,” but caselaw “does not mandate such a ‘proportional analysis’ . . . the sum certain allocable to medical expenses must be determined by way of a fair and impartial adversarial procedure that affords the Medicaid beneficiary an opportunity to rebut the statutory presumption in favor of the state.”