The state of North Carolina sought part of a 2.8 million dollar medical malpractice recovery based on its own statute that allowed it to be reimbursed 1/3 of any settlement for Medicaid benefits. Wos v E.M.A., 568 U.S. ___ (2013) http://www.supremecourt.gov/opinions/12pdf/12-98_9ol1.pdf. In its March 20, 2013 decision, the U.S. Supreme Court found the state law unconstitutional and found the state could not assert a lien on $1.9 million in benefits it had paid when no portion of the settlement was allocated for medical expenses.
The U.S. Supreme Court addressed this issue previously and determined that the federal Medicaid anti-lien provision, 42 U.S.C. 1396p(a)(1), pre-empts a state's lien unless the settlement is designated as payment for medical care. Arkansas Dept. of Health and Human Services v Ahborn, 547 U.S. 268 (2006).
A similar challenge was asserted in Missouri in 2008 in Doran v Mo. Dept. of Social Services, 2008 WL 4151617 for placing a state lien on a worker's compensation settlement. District Judge Laphrey granted class status for "Missouri citizens who have received Medicaid and who had liens asserted and/or monies taken by the Defendants out of their third-party workers compensation settlements from August 15, 2001, where said settlements were unrelated to medical care and services, or where the liens asserted and or monies taken by the Defendants were in excess of the amount of said settlements related to medical care and services, in violation of 42 U.S.C. § 1396p(a)(1)."
The parties in E.M.A. settled due to policy limits despite evidence of future medical projected at 40 million dollars. The new case is important guidance for negotiating Medicaid liens, drafting settlements for cases that have a Medicaid lien and a warning of the potential medical costs in catastrophic cases.