U.S. Supreme Court Quotes Restatement Second of Contracts
Recently, in Gallardo v. Marstiller, No. 20-1263 (June 6, 2022), the U.S. Supreme Court quoted Restatement of the Law Second, Contracts § 321(1) in holding that 42 U.S.C. § 1396k(a)(1)(A) of the Medicaid Act permitted a State that provided Medicaid benefits to an injured person to seek reimbursement from the person’s tort-settlement payments that were allocated for future medical care.
In that case, the petitioner suffered catastrophic injuries at age 13 when a truck struck her as she was stepping off her school bus. The petitioner’s parents, acting on her behalf, filed a lawsuit against the truck’s owner and driver, as well as the school board, and received a settlement for $800,000, with $35,367.52 expressly designated as compensation for past medical expenses. Florida’s Medicaid agency paid $862,688.77 for the petitioner’s initial medical expenses and continued to pay for her medical expenses, as she remained in a persistent vegetative state. As a condition of receiving Medicaid assistance, the petitioner had assigned Florida her right to recover from third parties. Florida applied the framework set forth in its Medicaid Third-Party Liability Act in arguing in an administrative proceeding that it was entitled to recover $300,000 of the settlement, which was based on the statute’s presumption that 37.5% of the settlement represented the portion of tort recovery for past and future medical expenses. While the administrative proceeding was pending, the petitioner, acting again through her parents, sought a declaration that Florida was in violation of the Medicaid Act for trying to recover portions of the settlement compensating for future medical expenses.
The U.S. District Court for the Northern District of Florida granted summary judgment for the petitioner. The U.S. Court of Appeals for the Eleventh Circuit reversed, finding that the Medicaid Act provisions did not conflict with Florida law, because they “only prohibit a State from asserting a lien against any part of a settlement not ‘designated as payments for medical care.’” While the petitioner’s appeal was pending, the Supreme Court of Florida came to the opposite conclusion of the Eleventh Circuit in a separate matter.
The U.S. Supreme Court affirmed the decision of the Eleventh Circuit, holding that 42 U.S.C. § 1396k(a)(1)(A)—which “requires a State to condition Medicaid eligibility on a beneficiary’s assignment to the State of ‘any rights . . . to support . . . for the purpose of medical care’ and to ‘payment for medical care from any third party”’—permitted States to seek reimbursement from settlement proceeds allocated for future medical care. Associate Justice Clarence Thomas, writing for the Court, rejected the petitioner’s argument that § 1396p(a)(1) of the Medicaid Act’s anti-lien provision—which “prohibits States from recovering medical payments from a beneficiary’s ‘property”’—prevented the State from recovering settlement proceeds other than those designated for past medical care paid for by Medicaid, and preempted any state law that permitted additional recovery. The Court explained that a State could seek reimbursement from settlement proceeds representing “payment for medical care” under the plain language of § 1396k(a)(1)(A), which did not distinguish between past and future medical expenses, and “because Florida’s assignment statute ‘is expressly authorized by the terms of . . . [§]1396k(a),’ it falls squarely within the ‘exception to the anti-lien provision’ that this Court has recognized.”
In making its decision, the Court rejected the petitioner’s policy argument that the Court’s interpretation of 42 U.S.C. § 1396k(a)(1)(A) “would authorize a ‘lifetime assignment’ covering not only the rights an individual has while he is a Medicaid beneficiary but also any rights he acquires in the future when he is no longer a Medicaid beneficiary.” The Court, quoting Restatement of the Law Second, Contracts § 321(1), explained that 42 U.S.C. § 1396k(a)(1)(A) only assigned rights “of the individual,” “which is most naturally read as covering those rights ‘the individual’ possesses while on Medicaid;” furthermore, “it is blackletter law that assignments typically cover ‘only [those] rights possessed by the assignors at the time of the assignments’” “or those rights ‘expected to arise out of an existing . . . relationship.’”
Read the full opinion here.
