On March 19, 2013, the U.S. Supreme Court continued to protect the rights of Medicaid beneficiaries from states that have been attempting to take disproportionate share of their tort recovery, such as a personal injury or medical malpractice settlement/award.

In Wos v. E.M.A. the U.S. Supreme Court held that the federal Medicaid statute’s anti-lien provision pre-empts a North Carolina’s statutory presumption that one-third of any tort recovery by a Medicaid beneficiary is attributable to medical expenses. This decision affirms and interprets the decision the Court made in Arkansas Dept. of Health and Human Servs. v. Ahlborn on May 1, 2006.

In Ahlborn, the Court held that a State Medicaid program’s right of recovery against a Medicaid recipient’s personal injury settlement or award is restricted to only that portion of the proceeds specifically allocated to past medical expenses. An important question, which the Court had no occasion to resolve in Ahlborn, is how to determine what portion of a settlement represents payment for medical care?

In the Wos v. E.M.A.case, a North Carolina state trial court placed one-third of a $2.8 million settlement received by a Medicaid beneficiary in escrow in order to recover the portion of a settlement representing payments for medical care. The beneficiary was a child (E.M.A.) who received the settlement in tort litigation against physicians for injuries sustained at the time of her birth.

The North Carolina state trial court acted in accordance with a North Carolina statute which created an irrebuttable presumption that one-third of any damages recovered by a beneficiary for a tortuous injury could be collected by the State because they were attributable to medical treatment.

The U.S. Supreme Court claims that States have ample means available to allocate Medicaid beneficiaries’ tort recoveries in a way that is efficient and complies with federal law, and suggests that States may even be able to adopt ex-ante administrative criteria for allocating medical and non-medical expenses, if the criteria are backed by evidence suggesting that they are likely to yield reasonable results. Given the ample means to allocate tort recovers, the Court confirmed that States cannot “adopt an arbitrary, one-size-fits-all allocation for all cases.”