Supreme Court Limits State’s Share of Disabled Child’s Malpractice Settlement

The parents of a disabled North Carolina girl won a victory over the state’s subrogation interest, 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 numerous states, the court ruled that the federal Medicaid law pre-empts North Carolina’s 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.

Emily, who turned 13 last month, was born with serious disabilities and requires between 12 and 18 hours of skilled nursing every day which comes with a large price tag. At birth, Emily was 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.

The ruling means Emily’s family can keep more of a $2.8 million medical malpractice settlement.

More broadly, the court’s ruling means North Carolina, as well as states with similar laws, 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.”

Offering the opposing view, 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.”

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 is not covered by the ban on liens. 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 did not buy it.

If you or someone you know have been a victim of medical malpractice, contact the attorneys at Abraham, Watkins, Nichols, Agosto, Aziz & Stogner by calling (713) 222-7211 or 713-222-7211.