Business Law

Gallardo v. Marstiller, 596 U.S. __, No. 20–1263, 2022 WL 1914096 (June 6, 2022)

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State-law formula for allocating tort settlement funds between past and future medical expenses not preempted by the Medicaid Act.

Petitioner Gianna Gallardo was hit by a truck , suffering catastrophic injuries that placed her in a persistent vegetative state. Medicaid paid for her medical care. Gallardo sued the truck driver and others in Florida for medical expenses and other damages. She settled her claims in an agreement that expressly allocated $35,368 as compensation for past medical expenses, but allocated nothing for future medical expenses. Under a statutory formula for seeking reimbursement for Medicaid expenses from beneficiaries’ tort recoveries, Florida’s Medicaid agency was entitled to $300,000 of the settlement as the presumptive portion compensating Gallardo for past and future medical expenses. Gallardo unsuccessfully challenged this presumptive allocation in an administrative proceeding, arguing the state could seek reimbursement only from the $35,368 allocated to past medical expenses. Gallardo then sued in federal court seeking a declaration that Florida’s statutory scheme was preempted by the Medicaid Act’s anti-lien provision.

The district court granted summary judgment for Gallardo, but the Eleventh Circuit reversed, holding that Florida’s statute did not conflict with the Medicaid Act. The Eleventh Circuit explained that Medicaid’s anti-lien provision prohibits states from asserting liens against portions of a settlement not “designated as payment for medical care,” but does not prohibit states from recovering from the portion of a settlement allocated to future medical expenses. Meanwhile, the Florida Supreme Court came to the opposite conclusion. See Giraldo v. Agency for Health Care Admin., 248 So.3d 53 (Fla. 2018).  The U.S. Supreme Court granted certiorari to resolve this split of authority.

In a 7-2 decision, the Supreme Court sided with the Eleventh Circuit. The majority relied on the plain text of the Act’s assignment provision, 42 U.S.C. § 1396k(a)(1)(A), which requires states “to acquire from each Medicaid beneficiary an assignment of ‘any rights … of the individual … to support … for the purpose of medical care … and to payment for medical care from any third party.” The majority reasoned that this provision plainly allows states to seek reimbursement from future medical expense allocations because it conditions eligibility on assignment of “any rights” of the beneficiary “to payment for medical care from any third party,” without limiting the assignment to payments for past medical care. Because Florida’s statutory allocation presumption is consistent with the Medicaid Act’s assignments provision, it falls within the exception to the Act’s anti-lien provision for liens against funds in which the beneficiary has no property right, which the Court recognized in Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268 (2006). The Court rejected Gallardo’s argument that this interpretation of the assignment provision conflicted with the Act’s more limited third-party liability provision, holding instead that the provisions complement each other. While the former provides a broad contractual right to recover all third-party payments for medical care, the latter provides a narrow statutory right to recover third party medical expense payments when the contractual assignment might fail. The Court also rejected Gallardo’s argument that a broad construction of § 1396k(a)(1)(A) improperly authorizes a lifelong assignment of all rights to recover medical expenses regardless whether the individual remains a Medicaid beneficiary; the Court explained that the provision applies only to rights the individual possesses while on Medicaid.

The dissenting justices construed the § 1396k(a)(1)(A) assignment provision as limited to payments for past medical expenses, in harmony with the Act’s third-party liability, cooperation, insurer acceptance, and acquisition  provisions. The dissent argued that the majority had read the assignment provision in isolation, displacing the general asset-protective rule established by the anti-lien and anti-recovery provisions. The majority’s interpretation of the Act was thus inconsistent with the structure of the Medicaid program as a whole, and would cause unfairness and disruption.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, who are partners at the appellate firm Horvitz & Levy LLP, and is republished with permission.

For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or

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