Gallardo v. Marstiller: Supreme Court Decision’s Impact on Personal Injury Settlement

The Supreme Court recently ruled 7-2 in Gallardo v. Marstiller, Secretary of the Florida Agency for Health Care, that the federal Medicaid Act does not preempt Florida’s policies dictating how the state can obtain Medicaid reimbursements from third parties and that Florida was, therefore, able to seek reimbursement from personal injury settlement payments.

Background in the Gallardo v. Marstiller case, according to the syllabus: “Petitioner Gianinna Gallardo suffered catastrophic injuries resulting in permanent disability when a truck struck her as she stepped off her Florida school bus. Florida’s Medicaid agency paid $862,688.77 to cover Gallardo’s initial medical expenses, and the agency continues to pay her medical expenses. Gallardo, through her parents, sued the truck’s owner and driver, as well as the Lee County School Board. She sought compensation for past medical expenses, future medical expenses, lost earnings, and other damages. That litigation resulted in a personal injury settlement for $800,000, with $35,367.52 expressly designated as compensation for past medical expenses. The settlement did not specifically allocate any amount for future medical expenses.”

In the 7-2 decision, the court said the state could recoup up to $300,000 of an $800,000 personal injury settlement for Gianinna Gallardo. Gallardo’s family had argued that Medicaid’s recovery should be capped at the $35,000 explicitly set aside in the settlement for past medical care. The decision can be read here.

The federal Medicaid statute forbids state Medicaid programs from placing a lien on any beneficiary’s property in most cases but also requires the programs to seek to recoup expenses from third-party settlements. Florida law states that 37.5% of a third-party settlement is presumed to be for medical expenses.

Justice Sonia Sotomayor wrote in dissent that the result was “absurd” and could discourage Medicaid recipients from seeking compensation in tort lawsuits in the future. The dissent also notes the ruling may reduce beneficiaries’ incentive to bring tort claims, may lead to states recovering fewer overall expenses, and “undercuts Congress’ choice to allow Medicaid beneficiaries to place their excess recovery funds in Special Needs Trusts, protecting their ability to pay for important expenses Medicaid will not cover.”