Aldena Wos, Secretary of N.C. Dept. of Health and Human Serv. v. E.M.A.
133 S. Ct. 1391 (2015)
United States Supreme Court
This case focuses on a fundamental component of our system of federalism: preemption of state law by federal law. The doctrine of preemption determines which law the court will apply when there are conflicts between applicable state and federal laws. Federal laws trump state laws, but there are also ways in which both laws may coexist and simultaneously govern. In this case, the respondents alleged that a North Carolina law violated the anti-lien Medicaid statute, 42 U.S.C. § 1396p(a)(1), which preempts a state’s effort to take any portion of a Medicaid beneficiary tort judgment or settlement not designated as payments for medical care.
The respondents in this case, a minor child born with multiple serious birth injuries and her parents, received $1.9 million in Medicaid benefits. The state of North Carolina paid these benefits, and when the parents settled their lawsuit alleging negligence on the part of the doctor and hospital where the child was born, one-third of their $2.8 million recovery was placed into an escrow account pursuant to N.C. Gen. Stat. § 108A-57(a).
After having one-third of their settlement placed into escrow by the trial court, the parents brought suit in a U.S. district court seeking a declaratory judgment that N.C.G.S. § 108A-57violated federal law. The district court upheld the N.C. statute, however the Fourth Circuit Court of Appeals vacated the judgment and remanded the case. To resolve this conflict, the Supreme Court of the United States granted certiorari, meaning they agreed to hear the case.
Respondent E. M. A. was born with multiple serious injuries, leaving her deaf, blind, and mute, and also unable to control basic motor functions such as sitting or crawling. The injuries caused mental retardation as well as a seizure disorder, and it is clear that the respondent is not going to be able to live a normal life. Her injuries required 12-18 hours of skilled nursing care every day. E.M.A.’s parents filed a medical malpractice suit against the physician and doctor who delivered E. M. A., seeking damages for medical care, pain and suffering, and emotional distress.
N.C.G.S. § 108A-57(a) provides “Notwithstanding any other provisions of the law, to the extent of payments under this Part, the State, or the county providing medical assistance benefits, shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of this assistance . . . . distribute to the Department the amount of assistance paid by the Department on behalf of or to the beneficiary, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, but the amount paid to the Department shall not exceed one-third of the gross amount obtained or recovered.”
However, the federal anti-lien Medicaid statute, 42 U.S.C. § 1396p(a)(1) states that “no lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan.”
The Supremacy Clause provides that where state and federal law directly conflict, state law must give way. In this case, the anti-lien statute prohibits a State from making a claim to part of a Medicaid beneficiary’s tort settlement, judgment, or recovery, not designated as medical care payments, thus North Carolina’s statute was pre-empted as it would operate that way.
The Supreme Court ruled that the North Carolina Statute was barred in application by the anti-lien Medicaid Statute, and the money in escrow released to the respondents.
It is important to note that the North Carolina General Assembly acted shortly after the decision in this case by making changes to the Medicaid lien provisions of N.C.G.S. § 108A-57. Session Law 2013-74: House Bill 982 is titled “An Act to Modify the Medicaid subrogation statute in response to the United States Supreme Court decision in Wos v. E.M.A.” The changes, as codified in the statute, now read:
(a) Notwithstanding any other provisions of the law, to the extent of payments under this Part, the State shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of this assistance, or of the beneficiary’s personal representative, heirs, or the administrator or executor of the estate, against any person. A personal injury or wrongful death claim brought by a medical assistance beneficiary against a third party shall include a claim for all medical assistance payments for health care items or services furnished to the medical assistance beneficiary as a result of the injury, hereinafter referred to as the “Medicaid claim.” Any personal injury or wrongful death claim brought by a medical assistance beneficiary against a third party that does not state the Medicaid claim shall be deemed to include the Medicaid claim.
The new statute retains the limitations of one-third of the gross recovery amount or 100 percent of the payments made by Medicaid, however, the key distinction in the new statute is that the recovery is limited to any portion of a Medicaid beneficiary’s tort judgment or settlement “designated as payments for medical care” and also allows for judicial hearing in determining this amount.