The US Supreme Court Monday held by a 7-2 vote in Gallardo v. Marstiller that states can recoup settlement payments under the Medicaid Act to pay for an individual’s future medical care. Under the Medicaid act, states have the right to recover damages from liable parties who cause another’s injury if the injured party receives Medicaid assistance. The court’s ruling says that states can be reimbursed for these expenses if a settlement is made between the injured and liable parties.

The parents of Gianinna Gallardo initiated this lawsuit to seek “a declaration that Florida was violating the Medicaid Act by trying to recover from portions of the settlement compensating for future medical expenses.” Gallardo was hit by a truck when she stepped off a school bus, which resulted in “catastrophic injuries and remains in a persistent vegetative state. Florida’s Medicaid agency paid over $800,000 to cover Gallardo’s initial medical expenses after a private insurer paid over $21,000. Gallardo needed to assign “Florida her right to recover from third parties” “[a]s a condition of receiving Medicaid assistance.” Medicaid still pays for Gallardo’s medical expenses because she is permanently disabled.

The Supreme Court sided with Florida’s Medicaid program by ruling that Medicaid programs can seek tort settlement payment reimbursement for an individual’s future medical care, not just past care. The Supreme Court drew this conclusion from the text of 42 USC §1396k(a)(1)(A) since the text specifically grants states “any rights” to recover payment from a third party. The Supreme Court found there is a relevant distinction between medical and non-medical expenses, but not between past and future medical expenses.

Justice Sonia Sotomayor dissented from the ruling, with Justice Stephen Breyer joining. Justice Sotomayor said:

The Court [rules in favor of Florida’s Medicaid program] by reading one statutory provision in isolation while giving short shrift to the statutory context, the relationships between the provisions at issue, and the framework set forth in precedent. The Court’s holding is inconsistent with the structure of the Medicaid program and will cause needless unfairness and disruption.