Supreme Court Decides Gallardo v. Marstiller

On June 6, 2022, the U.S. Supreme Court decided Gallardo v. Marstiller, No. 20-1263, holding 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 settlement payments allocated for future — and not just past — medical care.

The Medicaid Act requires States to pay certain needy individuals’ medical costs and then to make reasonable efforts to recoup those costs. In turn, Medicaid beneficiaries are required to assign the State any rights to payment for medical care from any third party. In Gallardo, all parties agreed that Florida was permitted to take the portion of a settlement that addressed past medical expenses, but disputed whether the State could also take the portion of the settlement allocated to future medical expenses.

Petitioner Gianinna Gallardo was 13 years old when she was hit by a truck while exiting a school bus and suffered catastrophic injuries that left her in a vegetative state. Though Florida’s Medicaid agency paid $862,688.77 in medical expenses, Gallardo’s parents also sought compensation from the truck’s owner and driver, as well as the school district. The litigation resulted in a settlement for $800,000, with $35,367.52 expressly designated as compensation for past medical expenses.

Under Florida’s Medicaid Third-Party Liability Act, which directs the State’s Medicaid agency to “seek reimbursement from third-party benefits to the limit of legal liability and for the full amount of third-party benefits, but not in excess of the amount of medical assistance paid by Medicaid,” Fla. Stat. § 409.910(4), the State was presumptively entitled to 37.5% of the settlement, or $300,000. Gallardo’s parents contested the automatic lien through administrative proceedings. They also filed a federal suit, seeking a declaration that Florida was violating the Medicaid Act by trying to recover from portions of the settlement compensating for future medical expenses. Florida contended that the agency was entitled to recover its past medical expenses from the portion of Ms. Gallardo’s settlement representing compensation for both past and future medical expenses. The district court granted Ms. Gallardo summary judgment, but the Eleventh Circuit reversed.

The Supreme Court affirmed by a 7–2 vote, holding that the Medicaid Act permits a State to seek reimbursement from settlement amounts that are allocated for future medical expenses. The Court explained that the plain text of 42 U.S.C. § 1396k(a)(1)(A) — which broadly assigns to the state all of the beneficiary’s rights to payment for medical care from any third party — resolves this case. It explained that nothing in § 1396k(a)(1)(A) limits a beneficiary’s assignments to payments for past medical care already paid for by Medicaid; instead, the grant of “any rights . . . to payment for medical care” most naturally covers not only rights to payment for past medical expenses, but also rights to payment for future medical expenses. The relevant distinction is not between past and future medical expenses, but rather between medical and nonmedical expenses. The Court observed that statutory context reinforces this plain-text analysis.

Justice Thomas delivered the opinion of the Court. Justice Sotomayor filed a dissenting opinion, joined by Justice Breyer.