WOS v. E.M.A. ET AL.
Emily M. Armstrong, daughter of Sandra and William Earl Armstrong, was born on February 25, 2000. She was seriously injured during her delivery resulting in mental retardation, cerebral palsy and several other medical conditions. Emily’s mother applied for Medicaid two months after her daughter’s birth. Since then the North Carolina state Medicaid program had paid over $1.9 million in medical expenses on Emily’s behalf. Emily’s parents and guardian sued the physicians for negligently delivering their child and won a settlement of $2.8 million. As a result, the North Carolina Department of Health and Human Services (“DHHS”) placed a lien on Emily’s settlement, looking to recover some of the money it paid for Emily’s health care services. Under the North Carolina third-party liability statutes, when a patient wins an award of medical expenses, the DHHS has the right to recover either the total amount spent on the patient’s health care, or one third of the patient’s recovery payment, which ever is less.
Emily’s parents and guardian brought suit against the DHHS, claiming that federal Medicaid law prevents the DHHS from taking her proceeds. Federal law prohibits recovery from any payments not made for past medical expenses. Since under North Carolina law a minor child is not allowed to recover for past medical expenses, Emily’s settlement could not include such expenses. The United States District Court for the Western District of North Carolina disagreed with this argument and granted summary judgment to the state.
The Armstrongs appealed, and the United States Court of Appeals for the Fourth Circuit vacated the lower court’s decision. While the appellate court agreed with the lower court that the DHHS has the right to recover from Emily’s settlement, it remanded the case because the state failed to provide a mechanism for determining what part of a settlement covers past medical expenses. Since the North Carolina statutes do not attempt to recover payment for past medical expenses, they violate federal Medicaid law.
Does federal Medicaid law prohibit North Carolina’s third-party liability statutes from mandating reimbursement of medical expenses from a patient’s lump-sum settlement?
Legal provision: Medicaid anti-lien provision
Yes. Justice Anthony M. Kennedy, writing for a 6-3 majority, affirmed the lower court. The North Carolina law is preempted by federal law to the extent that it would allow the state to recover part of a Medicaid beneficiary's tort judgment or settlement not designated for medical expenses. Arbitrarily designating one-third of a judgment as recoverable medical expenses lacks any limiting principle. If upheld, nothing could stop a state from arbitrarily designating one-half or all of a judgment as medical expenses. Calculating the actual amount of medical expenses in each case may be more difficult than the one-third rule, but similar allocation procedures are already used other circumstances, such as worker's compensation and separating compensatory and non-compensatory damages for tax purposes. Justice Stephen G. Breyer concurred, stating that he agreed with the majority because the Centers for Medicare and Medicaid Services had already reached the same conclusion.
Chief Justice John G. Roberts, Jr. dissented, arguing that no regulation or prior case law requires a specific allocation of damages recovered for medical expenses. States should be allowed more leeway to come up with a workable regulation to recoup Medicaid payments. Justice Antonin Scalia and Justice Clarence Thomas joined in the dissent.
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
ALDONA WOS, SECRETARY, NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, PETITIONER v. E. M. A., a minor, by and through her guardian ad litem, DANIEL H. JOHNSON, et al.
on writ of certiorari to the united states court of appeals for the fourth circuit
[March 20, 2013]
Justice Kennedy delivered the opinion of the Court.
A federal statute prohibits States from attaching a lien on the property of a Medicaid beneficiary to recover ben-efits paid by the State on the beneficiary’s behalf. 42 U. S. C. §1396p(a)(1). The anti-lien provision pre-empts a State’s effort to take any portion of a Medicaid beneficiary’s tort judgment or settlement not “designated as pay-ments for medical care.” Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U. S. 268, 284 (2006) . North Carolina has enacted a statute requiring that up to one-third of any damages recovered by a beneficiary for a tortious injury be paid to the State to reimburse it for pay-ments it made for medical treatment on account of the in-jury. See N. C. Gen. Stat. Ann. §108A–57 (Lexis 2011); Andrews v. Haygood, 362 N. C. 599, 604–605, 669 S. E. 2d 310, 314 (2008). The question presented is whether the North Carolina statute is compatible with the federal anti-lien provision.I
When respondent E. M. A. was born in February 2000, she suffered multiple serious birth injuries which left her deaf, blind, and unable to sit, walk, crawl, or talk. The injuries also cause her to suffer from mental retardation and a seizure disorder. She requires between 12 and 18 hours of skilled nursing care per day. She will not be able to work, live independently, or provide for her basic needs. The cost of her ongoing medical care is paid in part by the State of North Carolina’s Medicaid program.
In February 2003, E. M. A. and her parents filed a medical malpractice suit in North Carolina state court against the physician who delivered E. M. A. at birth and the hospital where she was born. The expert witnesses for E. M. A. and her parents in that proceeding estimated damages in excess of $42 million for medical and life-care expenses, loss of future earning capacity, and other assorted expenses such as architectural renovations to their home and specialized transportation equipment. App. 91–112. By far the largest part of this estimate was for “Skilled Home Care,” totaling more than $37 million over E. M. A.’s lifetime. Id., at 112. E. M. A. and her parents also sought damages for her pain and suffering and for her parents’ emotional distress. Id., at 64–65, 67–68, 72–73, 75–76. Their experts did not estimate the damages in these last two categories.
Assisted by a mediator, the parties began settlement negotiations. E. M. A. and her parents informed the North Carolina Department of Health and Human Services of the negotiations. The department had a statutory right to intervene in the malpractice suit and participate in the settlement negotiations in order to obtain reimbursement for the medical expenses it paid on E. M. A.’s behalf, up to one-third of the total recovery. See N. C. Gen. Stat. Ann. §§108A–57, 108A–59. It elected not to do so, though its representative informed E. M. A. and her parents that the State’s Medicaid program had expended $1.9 million for E. M. A.’s medical care, which it would seek to recover from any tort judgment or settlement.
In November 2006, the court approved a $2.8 million settlement. The amount, apparently, was dictated in large part by the policy limits on the defendants’ medical malpractice insurance coverage. See Brief for Respondents 5. The settlement agreement did not allocate the money among the different claims E. M. A. and her parents had advanced. In approving the settlement the court placed one-third of the $2.8 million recovery into an interest-bearing escrow account “until such time as the actual amount of the lien owed by [E. M. A.] to [the State] is con-clusively judicially determined.” App. 87.
E. M. A. and her parents then filed this action under Rev. Stat. §1979, 42 U. S. C. §1983, in the United States District Court for the Western District of North Carolina. They sought declaratory and injunctive relief, arguing that the State’s reimbursement scheme violated the Medicaid anti-lien provision, §1396p(a)(1). While that litigation was pending, the North Carolina Supreme Court con-fronted the same question in Andrews, supra. It held that the irrebuttable statutory presumption that one-third of a Medicaid beneficiary’s tort recovery is attributable to medical expenses was “a reasonable method for determining the State’s medical reimbursements.” Id., at 604, 669 S. E. 2d, at 314. The United States District Court, in the instant case, agreed. Armstrong v. Cansler, 722 F. Supp. 2d 653 (2010).
The Court of Appeals for the Fourth Circuit vacated and remanded. E. M. A. v. Cansler, 674 F. 3d 290 (2012). It concluded that North Carolina’s statutory scheme could not be reconciled with “Ahlborn’s clear holding that the general anti-lien provision in federal Medicaid law prohibits a state from recovering any portion of a settlement or judgment not attributable to medical expenses.” Id., at 310. In some cases, the court reasoned, the actual portion of a beneficiary’s tort recovery representing payment for medical care would be less than one-third. North Caro-lina’s statutory presumption that one-third of a tort recovery is attributable to medical expenses therefore must be “subject to adversarial testing” in a judicial or administrative proceeding. Id., at 311.
To resolve the conflict between the opinion of the Court of Appeals in this case and the decision of the North Carolina Supreme Court in Andrews, this Court granted certiorari. 567 U. S. ___ (2012).II
At issue is the interaction between certain provisions of the federal Medicaid statute and state law. Congress has directed States, in administering their Medicaid programs, to seek reimbursement for medical expenses incurred on behalf of beneficiaries who later recover from third-party tortfeasors. States must require beneficiaries “to assign the State any rights . . . to support (specified as support for the purpose of medical care by a court or administrative order) and to payment for medical care from any third party.” 42 U. S. C. §1396k(a)(1)(A). States receiving Medi-caid funds must also
“ha[ve] in effect laws under which, to the extent that payment has been made under the State plan for medical assistance for health care items or services furnished to an individual, the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or services.” §1396a(a)(25)(H).
A separate provision of the Medicaid statute, however, exists in some tension with these requirements. It says that, with exceptions not relevant here, “[n]o lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan.” §1396p(a)(1).
In Ahlborn, the Court addressed this tension and held that the Medicaid statute sets both a floor and a ceiling on a State’s potential share of a beneficiary’s tort recovery. Federal law requires an assignment to the State of “the right to recover that portion of a settlement that represents payments for medical care,” but it also “precludes attachment or encumbrance of the remainder of the settlement.” 547 U. S., at 282, 284. This is so because the beneficiary has a property right in the proceeds of the settlement, bringing it within the ambit of the anti-lien provision. Id., at 285. That property right is subject to the specific statutory “exception” requiring a State to seek reimbursement for medical expenses paid on the beneficiary’s behalf, but the anti-lien provision protects the beneficiary’s interest in the remainder of the settlement. Id., at 284.
A question the Court had no occasion to resolve in Ahlborn is how to determine what portion of a settlement represents payment for medical care. The parties in that case stipulated that about 6 percent of respondent Ahlborn’s tort recovery (approximately $35,600 of a $550,000 settlement) represented compensation for medical care. Id., at 274. The Court nonetheless anticipated the concern that some settlements would not include an itemized allocation. It also recognized the possibility that Medicaid beneficiaries and tortfeasors might collaborate to allocate an artificially low portion of a settlement to medical expenses. The Court noted that these problems could “be avoided either by obtaining the State’s advance agreement to an allocation or, if necessary, by submitting the matter to a court for decision.” Id., at 288.
North Carolina has attempted a different approach. Its statute provides:
“Notwithstanding any other provisions of the law, to the extent of payments under this Part, the State, or the county providing medical assistance benefits, shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of this assistance . . . . The county attorney, or an attorney retained by the county or the State or both, or an attorney retained by the beneficiary of the assistance if this attorney has actual notice of payments made under this Part shall enforce this section. Any attorney retained by the beneficiary of the assistance shall, out of the proceeds obtained on behalf of the beneficiary by settlement with, judgment against, or otherwise from a third party by reason of injury or death, distribute to the Department the amount of assistance paid by the Department on behalf of or to the beneficiary, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, but the amount paid to the Department shall not exceed one-third of the gross amount obtained or recovered.” N. C. Gen. Stat. Ann. §108A–57(a).
Before Ahlborn was decided, North Carolina and the state courts interpreted this statute to allow the State to “recover the costs of medical treatment provided . . . even when the funds received by the [beneficiary] are not reimbursement for medical expenses.” Campbell v. North Carolina Dept. of Human Resources, 153 N. C. App. 305, 307–308, 569 S. E. 2d 670, 672 (2002). See also Ezell v. Grace Hospital, Inc., 360 N. C. 529, 631 S. E. 2d 131 (2006) (per curiam). Under Ahlborn, however, this construction of the statute is at odds with the Medicaid anti-lien provision, which “precludes attachment or encumbrance” of any portion of a settlement not “designated as payments for medical care.” 547 U. S., at 284.
In response to Ahlborn, the State advanced—and the North Carolina Supreme Court in Andrews accepted— a new interpretation of its statute. Under this interpretation the statute “defines ‘the portion of the settlement that represents payment for medical expenses’ as the lesser of the State’s past medical expenditures or one-third of the plaintiff’s total recovery.” Andrews, 362 N. C., at 604, 669 S. E. 2d, at 314. In other words, when the State’s Medicaid expenditures on behalf of a beneficiary exceed one-third of the beneficiary’s tort recovery, the statute establishes a conclusive presumption that one-third of the recovery represents compensation for medical expenses. Under this reading of the statute the presumption operates even if the settlement or a jury verdict expressly allocates a lower percentage of the judgment to medical expenses. See Tr. of Oral Arg. 10, 16–17. Cf. Andrews, supra, at 602–604, 669 S. E. 2d, at 313.III A
Under the Supremacy Clause, “[w]here state and federal law ‘directly conflict,’ state law must give way.” PLIVA, Inc. v. Mensing, 564 U. S. ___, ___ (2011) (slip op., at 11). The Medicaid anti-lien provision prohibits a State from making a claim to any part of a Medicaid beneficiary’s tort recovery not “designated as payments for medical care.” Ahlborn, supra, at 284. North Carolina’s statute, therefore, is pre-empted if, and insofar as, it would operate that way.
And it is pre-empted for that reason. The defect in §108A–57 is that it sets forth no process for determining what portion of a beneficiary’s tort recovery is attributable to medical expenses. Instead, North Carolina has picked an arbitrary number—one-third—and by statutory command labeled that portion of a beneficiary’s tort recovery as representing payment for medical care. Pre-emption is not a matter of semantics. A State may not evade the pre-emptive force of federal law by resorting to creative statutory interpretation or description at odds with the statute’s intended operation and effect.
A similar issue was presented last Term, in National Meat Assn. v. Harris, 565 U. S. ___ (2012). That case involved the pre-emptive scope of the Federal Meat Inspection Act, 21 U. S. C. §601 et seq. The Act prohibited States from imposing “ ‘[r]equirements . . . with respect to premises, facilities and operations’ ” at federally regulated slaughterhouses. National Meat Assn., 565 U. S., at ___ (slip op., at 4) (quoting §678). The State of California had enacted a law that prohibited slaughterhouses from (among other things) selling meat from nonambulatory animals for human consumption. Id., at ___ (slip op., at 5) (citing Cal. Penal Code Ann. §599f(b) (West 2010)). California sought to defend the law on the ground that it did not regulate the activities of slaughterhouses but instead restricted what type of meat could be sold in the marketplace after the animals had been butchered. 565 U. S., at ___–___ (slip op., at 9–10).
The Court rejected that argument. It recognized that if the argument were to prevail, “then any State could im-pose any regulation on slaughterhouses just by framing it as a ban on the sale of meat produced in whatever way the State disapproved. That would make a mockery of the [Act’s] preemption provision.” Id., at ___ (slip op., at 10). In a pre-emption case, the Court held, a proper analysis requires consideration of what the state law in fact does, not how the litigant might choose to describe it.
That reasoning controls here. North Carolina’s argument, if accepted, would frustrate the Medicaid anti-lien provision in the context of tort recoveries. The argument lacks any limiting principle: If a State arbitrarily may designate one-third of any recovery as payment for medical expenses, there is no logical reason why it could not designate half, three-quarters, or all of a tort recovery in the same way. In Ahlborn, the State of Arkansas, under this rationale, would have succeeded in claiming the full amount it sought from the beneficiary had it been more creative and less candid in describing the effect of its full-reimbursement law.
Here the State concedes that it would be “difficult . . . to defend” a law purporting to allocate most or all of a beneficiary’s tort recovery to medical expenses. Tr. of Oral Arg. 20. That is true; but, as a doctrinal matter, it is no easier to defend North Carolina’s across-the-board allocation of one-third of all beneficiaries’ tort recoveries to medical ex-penses. The problem is not that it is an unreasonable ap-proximation in all cases. In some cases, it may well be a fair estimate. But the State provides no evidence to substantiate its claim that the one-third allocation is reasonable in the mine run of cases. Nor does the law provide a mechanism for determining whether it is a reasonable approximation in any particular case.
In some instances, no estimate will be necessary or appropriate. When there has been a judicial finding or approval of an allocation between medical and nonmedical damages—in the form of either a jury verdict, court decree, or stipulation binding on all parties—that is the end of the matter. Ahlborn was a case of this sort. All parties (including the State of Arkansas) stipulated that approximately 6 percent of the plaintiff’s settlement represented payment for medical costs. 547 U. S., at 274. In other cases a settlement may not be reached and the judge or jury, in its findings, may make an allocation. With a stipulation or judgment under this procedure, the anti-lien provision protects from state demand the portion of a beneficiary’s tort recovery that the stipulation or judgment does not attribute to medical expenses.
North Carolina’s statute, however, operates to allow the State to take one-third of the total recovery, even if a proper stipulation or judgment attributes a smaller percentage to medical expenses. Consider the facts of Ahlborn. There, only $35,581.47 of the beneficiary’s settlement “constituted reimbursement for medical payments made.” Ibid. North Carolina’s statute, had it been applied in Ahlborn, would have allowed the State to claim $183,333.33 (one-third of the beneficiary’s $550,000 settlement). A conflict thus exists between North Carolina’s law and the Medicaid anti-lien provision.
The instant case, to be sure, is not quite so clear cut; for there was no allocation of the settlement by either judicial decree or binding stipulation of the parties. But the reasoning of Ahlborn and the design of the federal statute contemplate that possibility. When the State and the beneficiary are unable to agree on an allocation, Ahlborn noted, the parties could “submi[t] the matter to a court for decision.” Id., at 288.
The facts of the present case demonstrate why Ahlborn anticipated that a judicial or administrative proceeding would be necessary in that situation. Of the damages stemming from the injuries E. M. A. suffered at birth, it is apparent that a quite substantial share must be allocated to the skilled home care she will require for the rest of her life. See App. 112. It also may be necessary to consider how much E. M. A. and her parents could have expected to receive as compensation for their other tort claims had the suit proceeded to trial. An irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act’s clear mandate that a State may not demand any portion of a beneficiary’s tort recovery except the share that is attributable to medical expenses.B
North Carolina offers responses to this reasoning, but none is persuasive.
First, the State asserts that it is doing nothing more than what Ahlborn said it could do: “adop[t] special rules and procedures for allocating tort settlements.” 547 U. S., at 288, n. 18. This misreads Ahlborn. There the Court, citing an amicus brief, referred to judicial proceedings some States had established for allocating tort settlements where necessary for insurance or tax purposes. See Brief for Association of Trial Lawyers of America, O. T. 2005, No. 04–1506, pp. 20–21 (citing Henning v. Wineman, 306 N. W. 2d 550 (Minn. 1981), and Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 2d 263, 316 N. W. 2d 348 (1982)). Those examples illustrated the kind of “special rules and procedures for allocating tort settlements” that Ahlborn considered. The decision did not endorse irrebuttable presumptions that designate some arbitrary fraction of a tort judgment to medical expenses in all cases.
Second, North Carolina contends that its law falls within the scope of a State’s traditional authority to regulate tort actions, including the amount of damages that a party may recover. This argument begins from a correct premise: In our federal system, there is no question that States possess the “traditional authority to provide tort remedies to their citizens” as they see fit. Silkwood v. Kerr-McGee Corp., 464 U. S. 238, 248 (1984) . But North Carolina’s law is not an exercise of the State’s general authority to regulate its tort system. It does not limit tort plaintiffs’ ability to recover for certain types of nonmedical damages, and it does not say that medical damages are to be privileged above other damages in tort suits. All it seeks to do is to allocate the share of damages attributable to medical expenses in tort suits brought by Medicaid beneficiaries. A statute that singles out Medicaid beneficiaries in this manner cannot avoid compliance with the federal anti-lien provision merely by relying upon a connection to an area of traditional state regulation.
Third, North Carolina suggests that even though its allocation of one-third of a tort recovery to medical expenses may be arbitrary, other methods for allocating a recovery would be just as arbitrary. In the State’s view there is no “ascertainable ‘true value’ of [a] case that should control what portion of any settlement is subject to the State’s third-party recovery rights.” Brief for Petitioner 26–27. As explained earlier, allocations, while to some extent perhaps not precise, need not be arbitrary. See supra, at 9–10. In some cases a judgment or stipulation binding on all parties will allocate the plaintiff’s recovery across different claims. Where no such judgment or stipulation exists, a fair allocation of such a settlement may be difficult to determine. Trial judges and trial lawyers, however, can find objective benchmarks to make projections of the damages the plaintiff likely could have proved had the case gone to trial.
In the instant case, for example, the North Carolina trial court approved the settlement only after finding that it constituted “fair and just compensation” to E. M. A. and her parents for her “severe and debilitating injuries”; for “medical and life care expenses” her condition will require; and for “severe emotional distress” from her injuries. App. 82. What portion of this lump-sum settlement constitutes “fair and just compensation” for each individual claim will depend both on how likely E. M. A. and her parents would have been to prevail on the claims at trial and how much they reasonably could have expected to receive on each claim if successful, in view of damages awarded in comparable tort cases.
This relates to North Carolina’s fourth argument: that it would be “wasteful, time consuming, and costly” to hold “frequent mini-trials” in order to divide a settlement between medical and nonmedical expenses. Brief for Petitioner 28. Even if that were true, it would not relieve the State of its obligation to comply with the terms of the Medicaid anti-lien provision. And it is not true as a general proposition. States have considerable latitude to design administrative and judicial procedures to ensure a prompt and fair allocation of damages. Sixteen States and the District of Columbia provide for hearings of this sort, and there is no indication that they have proved burdensome. Brief for United States as Amicus Curiae 28– 29, and n. 7. See, e.g., Cal. Welf. & Inst. Code Ann. §14124.76(a) (West 2011); Mo. Rev. Stat. §§208.215.9–11 (2012); Tenn. Code Ann. §§71–5–117(g)–(i) (2012); In re E. B., 229 W. Va. 435, ___, 729 S. E. 2d 270, 297 (2012). Many of these States have established rebuttable presumptions and adjusted burdens of proof to ensure that speculative assessments of a plaintiff’s likely recovery do not defeat the State’s right to recover medical costs, a concern North Carolina raises. See, e.g., Haw. Rev. Stat. §346–37(h) (2011 Cum. Supp.) (rebuttable presumption of a one-third allocation); Mass. Gen. Laws, ch. 118E, §22(c) (West 2010) (rebuttable presumption of full reimbursement); Okla. Stat., Tit. 63, §5051.1(D)(1)(d) (West 2011) (rebuttable presumption of full reimbursement, “unless a more limited allocation of damages to medical expenses is shown by clear and convincing evidence”). Without holding that these rules are necessarily compliant with the federal statute, it can be concluded that they are more accurate than the procedure North Carolina has enacted.
The task of dividing a tort settlement is a familiar one. In a variety of settings, state and federal courts are called upon to separate lump-sum settlements or jury awards into categories to satisfy different claims to a portion of the moneys recovered. See supra, at 11. See also, e.g., Green v. Commissioner, 507 F. 3d 857, 867–868 (CA5 2007) (separation of compensatory from noncompensatory damages for tax purposes); Donnel v. United States, 50 Fed. Cl. 375, 386–387 (2001) (separation of employee severance bonus from other payments for tax purposes); In re Harrison, 306 B. R. 172, 182–183 (Bkrtcy. Ct. ED Tex. 2003) (separation of pain-and-suffering damages from other damages for purposes of bankruptcy exemption); Colorado Compensation Ins. Auth. v. Jones, 131 P. 3d 1074, 1077–1078 (Colo. App. 2005) (separation of economic from noneconomic damages for purposes of insurance subrogation); Spangler v. North Star Drilling Co., 552 So. 2d 673, 685 (La. App. 1989) (separation of past damages from future damages for purposes of calculating prejudgment interest). Indeed, North Carolina itself uses a judicial allocation procedure to ascertain the portion of a settlement subject to subrogation in a workers’ compensation suit. It instructs trial courts to
“consider the anticipated amount of prospective compensation the employer or workers’ compensation carrier is likely to pay to the employee in the future, the net recovery to plaintiff, the likelihood of the plaintiff prevailing at trial or on appeal, the need for finality in the litigation, and any other factors the court deems just and reasonable.” N. C. Gen. Stat. Ann. §97– 10.2(j) (Lexis 2011).
North Carolina would be on sounder footing had it adopted a similar procedure for allocating Medicaid beneficiaries’ tort recoveries. It might also consider a different one along the lines of what other States have done in Medicaid reimbursement cases.
The State thus has ample means available to allocate Medicaid beneficiaries’ tort recoveries in an efficient manner that complies with federal law. Indeed, if States are concerned that case-by-case judicial allocations will prove unwieldy, they may even be able to adopt ex ante administrative criteria for allocating medical and nonmedical expenses, provided that these criteria are backed by evidence suggesting that they are likely to yield reasonable results in the mine run of cases. What they cannot do is what North Carolina did here: adopt an arbitrary, one-size-fits-all allocation for all cases.
Fifth, and finally, North Carolina contends that in two documents—a July 2006 memorandum and a December 2009 letter responding to an inquiry from a member of North Carolina’s congressional delegation—the federal Centers for Medicare and Medicaid Services approved of North Carolina’s statutory scheme for Medicaid reimbursement. In the State’s view, these agency pronouncements are entitled to deference. See Brief for Petitioner 33–36 (citing Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984) ).
The 2006 and 2009 documents, however, no longer re-flect the agency’s position. See Brief for United States as Amicus Curiae 8–34. And at any rate, the documents are opinion letters, not regulations with the force of law. We have held that “[i]nterpretations such as those in opinion letters—like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law—do not warrant Chevron-style deference.” Christensen v. Harris County, 529 U. S. 576, 587 (2000) . These documents are “ ‘entitled to respect’ ” in proportion to their “ ‘power to persuade.’ ” Ibid. (quoting Skidmore v. Swift & Co., 323 U. S. 134, 140 (1944) ). Insofar as the 2006 and 2009 documents approve of North Carolina’s statute, they lack persuasive force for the reasons discussed above.* * *
The law here at issue, N. C. Gen. Stat. Ann. §108A–57, reflects North Carolina’s effort to comply with federal law and secure reimbursement from third-party tortfeasors for medical expenses paid on behalf of the State’s Medicaid beneficiaries. In some circumstances, however, the statute would permit the State to take a portion of a Medicaid beneficiary’s tort judgment or settlement not “designated as payments for medical care.” Ahlborn, 547 U. S., at 284. The Medicaid anti-lien provision, 42 U. S. C. §1396p(a)(1), bars that result.
The judgment of the Court of Appeals for the Fourth Circuit is affirmed.
It is so ordered.
SUPREME COURT OF THE UNITED STATES
ALDONA WOS, SECRETARY, NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, PETITIONER v. E. M. A., a minor, by and through her guardian ad litem, DANIEL H. JOHNSON, et al.
on writ of certiorari to the united states court of appeals for the fourth circuit
[March 20, 2013]
Chief Justice Roberts, with whom Justice Scalia and Justice Thomas join, dissenting.
The State of North Carolina paid for E. M. A.’s medical expenses under its Medicaid plan. E. M. A. sued those al-leged to have caused her injuries, eventually settling for an amount that included, among other things, medical expenses already covered by North Carolina. The federal Medicaid statute requires North Carolina to recoup those expenses. But neither the Act nor the regulations issued under it tell States how to determine what portion of a third-party recovery should be attributed to medical expenses. The Court concludes that North Carolina’s law addressing that question is nonetheless preempted by the Act.
The Court’s reading of the Act, while plausible, is not compelled by the statutory text or our precedent. It has the unfortunate consequence of denying flexibility to the States—and, by necessary implication, the Secretary of Health and Human Services—in resolving a policy question with broad significance for this complicated program. In short, the result is both unnecessary and unwise. I therefore respectfully dissent.I
Medicaid is a cooperative federal-state program designed to provide medical assistance to certain needy populations. The basic idea is simple: The statute—as interpreted by the Secretary of HHS—sets out the requirements for an eligible Medicaid program. If States decide to enroll and comply with those requirements, they get federal money. If they don’t, they don’t. The federal contribution is not enough to fully fund any State’s program; States contribute anywhere from 17 to 50 percent of the costs. See 42 U. S. C. §1396d(b) (2006 ed., Supp. V). The States have considerable discretion in structuring and administering their programs, subject of course to federal law and regulations.
In practice, it’s not always so simple. The books are thick with federal regulations that States must interpret and reconcile. By my count, at least 39 federal-court opinions, including one of our own, have reiterated Judge Friendly’s observation that Medicaid law is “almost unintelligible to the uninitiated.” See Schweiker v. Gray Panthers, 453 U. S. 34, 43 (1981) (quoting Friedman v. Berger, 547 F. 2d 724, 727, n. 7 (CA2 1976)); see also 453 U. S., at 43, n. 14 (quoting the District Court’s description of Medicaid in Friedman as “an aggravated assault on the English language, resistant to attempts to understand it”). “Perhaps appreciating the complexity of what it had wrought, Congress conferred on the Secretary exceptionally broad authority to prescribe standards for applying certain sec-tions of the Act.” Schweiker, supra, at 43. But where the law and the Secretary are silent on a specific ques-tion, it is up to the States—sometimes informally advised by the federal Centers for Medicare and Medicaid Services—to make sense of it all in running their programs.
The relevant provisions here require that North Carolina (1) pay for certain people’s medical care, (2) make reasonable efforts to recoup from liable third parties (such as tortfeasors and insurers) any medical expenses it paid, and (3) not recoup such payments by imposing a lien on the beneficiary’s property. See ante, at 4–5; see also 42 U. S. C. §1396a(a)(25)(B) (2006 ed.). To comply, North Carolina pays for a beneficiary’s medical expenses on the condition that any such expenses the beneficiary recovers from third parties will go towards repaying the State. See N. C. Gen. Stat. Ann. §108A–59(a) (Lexis 2011).
The difficulty, however, is that tort victims seldom seek only medical expenses. Take this case: E. M. A. and her parents sought damages not only for medical expenses, but for lost income, pain and suffering, and other things, and ended up settling all these claims for a lump sum of $2.8 million. Such a situation poses the question of how much North Carolina can recoup—indeed, under federal law, must recoup—from a lump sum that reflects more than just medical expenses.
This puts North Carolina in a tight spot. If it fails to recover what it must, it violates federal law. If it takes a beneficiary’s property beyond medical expenses, it violates federal law. Trying to navigate between these competing requirements—with no interpretive guidance from the Secretary of HHS—North Carolina elected to resolve the problem by laying out ground rules in advance, conditioning a beneficiary’s right to recover from third parties on the beneficiary’s willingness to fully repay the State, or, at a minimum, define one-third of her damages as “medical expenses,” whichever is less. N. C. Gen. Stat. Ann. §§108A–59(a); 108A–57(a); see also Andrews v. Haygood, 362 N. C. 599, 603–604, 669 S. E. 2d 310, 313–314 (2008).II
The Court states that “[t]he problem” with North Carolina’s designation—actual expenses or one-third of the recovery, whichever is less—“is not that it is an unreasonable approximation in all cases,” and acknowledges that “[i]n some cases, it may well be a fair estimate.” Ante, at 9. According to the Court, however, because North Carolina’s law provides no “mechanism for determining whether it is a reasonable approximation in any particular case,” ibid., (emphasis added), it “directly conflict[s]” with the “clear mandate” of the federal Medicaid statute, and is therefore preempted. Ante, at 7 (quoting PLIVA, Inc. v. Mensing, 564 U. S. __, __ (2011) (slip op., at 11) (internal quotation marks omitted)), 10. This reflects a basic policy judgment: that segregating medical expenses from a lump-sum recovery must be done on a case-specific, after-the-fact basis, rather than pursuant to a general rule spelled out in advance.
The problem is that the Court can point to no statutory or regulatory requirement, much less an unambiguous one, requiring such an approach. The federal statute, which provides that States must recoup medical expenses owed by third parties, and which prevents States from placing a lien on a beneficiary’s property, says nothing about how to comply with these two requirements in the event of a settlement. See ante, at 1 (Breyer, J., concurring) (“The statute is silent on the question”).
Nor does our case law. As the Court acknowledges, our decision in Arkansas Dept. of Health and Human Servs. v. Ahlborn, was an easy one. 547 U. S. 268 (2006) . There, the underlying tort suit settled for $550,000, and the Medicaid beneficiary and the State of Arkansas stipulated that only $35,581.47 of the settlement represented medical expenses. The State nonetheless claimed it “was entitled to a lien in the amount of $215,645.30”—i.e., the total amount paid by the State for the beneficiary’s health care. Id., at 274. The question was whether the State could demand this money in light of its stipulation that only $35,581.47 reflected medical expenses. The answer, of course, was no. The State is only entitled to recover medical expenses; nothing else. So when Arkansas contended that it was entitled to money the beneficiary had received for something other than medical expenses, we had no trouble rejecting that argument. That proposition—that States may not take money that is unrelated to medical expenses—does not help answer the question here: May a State condition Medicaid benefits on a beneficiary agreeing to define one-third of a tort recovery as reflecting “medical expenses”?
The Court recognizes that Ahlborn “had no occasion to resolve” the question “how to determine what portion of a settlement represents payment for medical care,” ante, at 5, but then promptly proceeds as if Ahlborn had done just that. The Court quotes Ahlborn for the proposition that a State may not claim any portion of a tort recovery “not ‘designated as payments for medical care,’ ” and then faults North Carolina’s law because it “sets forth no process for determining what portion” is “attributable to med-ical expenses.” Ante, at 6, 7 (quoting 547 U. S., at 284), 7. Ahlborn spoke of “designated” amounts because, as noted, there was a stipulated designation in that case. What to do when there is no such stipulation—when it’s not clear “what portion of a settlement represents payment for medical care”—is a different question. The Court assumes the answer must be the same: that the settlement must be parsed in every case, so that there is an actual, after-the-fact designation in every case. If the parties do not agree on one, as they did in Ahlborn, there must be a process in place for reaching a case-specific attribution.
The nature of the “process” contemplated by the majority is unclear, but it must involve an effort to determine what claims would have succeeded had there been a trial, what the damages would have been for the separate claims, and so on—the very sort of inquiries settlement is intended to obviate. The Court talks of addressing these concerns through “rebuttable presumptions and adjusted burdens of proof to ensure that speculative assessments of a plaintiff’s likely recovery do not defeat the State’s right to recover medical costs,” but ominously declines to give any assurance “that these rules are necessarily compliant with the federal statute.” Ante, at 13.
Nothing in Ahlborn requires all this, and North Caro-lina has taken a different approach. It has adjusted its tort law to account for its obligations under federal Medicaid law by requiring that beneficiaries pay the State back in full or designate one-third of any recovery as “medical ex-penses,” whichever is less. This approach allows bene-ficiaries to obtain settlements, “meet[s] concerns about settlement manipulation,” Ahlborn, supra, at 288, n. 18, complies with the statutory obligation that States make reasonable efforts to recover medical expenses from liable third parties, and guarantees that the beneficiary will never have to give back more than she has already received from the State.
There’s nothing unusual about such an approach. States define the contours of their own tort law all the time, setting rules about who may recover in particular circumstances, what claims may be alleged, which parties are liable, what defenses may be asserted, what damages are recoverable, and so on. Doing so does not amount to imposing a lien on any property to which an individual has a vested right under state tort law. The Court says North Carolina cannot rely on its “traditional authority to regulate tort actions” because its rule in this case is not an exercise of its “general authority.” Ante, at 11. The Court cites no support for this vague new limitation on a State’s power to define tort remedies under state law, and I am aware of none.
In fact, federal law says nothing about how States must define the recovery available to a Medicaid beneficiary suing a third party. That silence is a good indication that Congress did not mean to strip States of their traditional authority to regulate torts. See Wyeth v. Levine, 555 U. S. 555, 565 (2009) (“[I]n all pre-emption cases, and particularly in those in which Congress has legislated in a field which the States have traditionally occupied, we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress” (internal quotation marks and ellipses omitted)). The closest the Medicaid Act gets to this topic is its requirement that States have “in effect laws under which . . . the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or services.” See 42 U. S. C. §1396(a)(25)(H). That Congress has said nothing else about what recovery a State must allow, though clearly aware of the traditional power of States to regulate recoveries under private law, should be worth something. Cf. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141 –167 (1989) (“The case for federal pre-emption is particularly weak where Congress has indicated its awareness of the operation of state law in a field of federal interest, and has nonetheless decided to stand by both concepts and to tolerate whatever tension there [is] between them” (internal quotation marks omitted)).
The majority nonetheless dismisses North Carolina’s solution as an arbitrary “one-size-fits-all” approach, ante, at 10, that has no “logical” endpoint; one that, if accepted, could permit States to “designate half, three-quarters, or all of a tort recovery in the same way.” Ante, at 8, 9. This is an age-old objection to any line-drawing, to which Justice Holmes provided a familiar response: “Neither are we troubled by the question where to draw the line. That is the question in pretty much everything worth arguing in the law.” Irwin v. Gavit, 268 U. S. 161, 168 (1925) . Whatever the case “as a doctrinal matter,” it is in fact “easier to defend North Carolina’s” one-third designation than the Court’s hypothetical where a State allocates all of a recovery to medical expenses. Ante, at 9. In addition, the majority’s hobgoblin is less frightening when we remember that North Carolina never takes back more than what it paid for such expenses.
The reasons for drawing a bright line, as North Carolina has, are obvious and familiar. See generally Scalia, The Rule of Law as a Law of Rules, 56 U. Chi. L. Rev. 1175 (1989). Bright lines provide clear notice; here that means beneficiaries know exactly where they stand with respect to reimbursing the State as they negotiate settlements with third parties. Such clear rules are easy, cheap, and administrable—laudable qualities in the context of a vast and intricate program. The Court’s approach, on the other end, requires the time of lawyers and judges, and that time costs money—money better spent on providing health care to the needy. Or so the State, responsible for administering its program, could conclude, and nothing in the statute, regulations, or our precedent says otherwise.
The majority points out that nearly one-third of the States conduct hearings of the sort it contemplates. Ante, at 13. Good for them. The whole point of our federal system is that different States may reach different judgments about how to run their own different programs. Such flexibility is particularly important in this context, where Medicaid spending is the largest component of most state budgets. The Court also notes that, in other areas, courts have undertaken the work of “separat[ing] lump-sum settlements or jury awards into categories to satisfy different claims.” Ibid. My point is not that the work required by the Court cannot be done—just that it has not been required by Congress or the Secretary.
On that note, it’s bad enough that the Court finds the State’s reasonable effort to reconcile its competing obligations preempted. What is doubly unfortunate is that the Court’s analysis necessarily implies that the Secretary’s hands are also tied. The Medicaid Act is Spending Clause legislation, and such legislation is binding on States only insofar as it is “unambiguous.” See Pennhurst State School and Hospital v. Halderman, 451 U. S. 1, 17 (1981) . In addition, the anti-lien provision only precludes North Carolina’s law if, as the Court acknowledges, there is a “direct conflict” between the two. Ante, at 7 (quoting PLIVA, Inc., 564 U. S., at ___ (slip op., at 11) (internal quotation marks omitted). The Court says—wrongly, I believe—that there is. Ante, at 10 (“An irrebuttable, one-size-fits-all statutory presumption is incompatible with the Medicaid Act’s clear mandate that a State may not demand any portion of a beneficiary’s tort recovery except the share that is attributable to medical expenses” (emphasis added)). But if North Carolina’s approach directly conflicts with an unambiguous, clear mandate in the Act—such that any presumption against preemption is overcome, see Wyeth, supra, at 565, n. 3—it’s hard to see how the Secretary could adopt a similar approach. See Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 –843 (1984) (“If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress”).
The concurrence wishes this were not so, see ante, at 4 (“today’s decision does not freeze the Court’s present interpretation of the statute permanently into law”), but fails to acknowledge the express rationale of the Court’s opinion. There is no other way to read the majority opinion than as foreclosing what the concurrence would like to leave open.
Or is there? In exactly two sentences, the Court seems to falter and lose the courage of its conviction that a State must have a process in place for an individual allocation of medical expenses in every case. The Court views the problem with North Carolina’s law as being that “the State provides no evidence to substantiate its claim that the one-third allocation is reasonable in the mine run of cases.” Ante, at 9. That thought does not resurface until five pages later—and only then—when the Court says that States “may even be able to adopt ex ante administrative criteria for allocating medical and nonmedical expenses, provided these criteria are backed by evidence suggesting that they are likely to yield reasonable results in the mine run of cases.” Ante, at 14.
I am not sure whether this is a concession that individualized hearings may not be required after all, but if it is, it is flatly contrary to the rest of the opinion. It is also quite odd to suggest that the problem with North Caro-lina’s law would go away if only the State provided some sort of study substantiating the idea that one-third was a good approximation in most cases. North Carolina is not a federal agency, whose actions are subject to review under the Administrative Procedure Act’s “substantial evidence” test. See 5 U. S. C. §706(2)(E). We have never before, in a preemption case, put the burden on the State to compile an evidentiary record supporting its legislative determination. The burden is, of course, on those challenging the law. See Pharmaceutical Research and Mfrs. of America v. Walsh, 538 U. S. 644 –662 (2003) (plurality opinion) (“We start . . . with a presumption that the state statute is valid, and ask whether petitioner has shouldered the burden of overcoming that presumption” (citation omitted)). We have said that, as a general matter, “Congress is not obligated, when enacting its statutes, to make a record of the type that an administrative agency or court does to accommodate judicial review.” Turner Broadcasting System, Inc. v. FCC, 520 U. S. 180, 213 (1997) (internal quotation marks omitted). Sovereign States should be accorded no less deference.
Keep in mind that the basis for all this is a federal law that prohibits liens for medical assistance, but says nothing about how medical and nonmedical expenses are to be allocated. It is hard enough to figure out what the Medicaid Act means by what it says; we should not read so much into its silence.
Ultimately, it is a basic policy judgment whether the Medicaid program is best served in this instance by post hoc individualized determinations, or whether the issue may be addressed in advance, through a general rule, as North Carolina has done here. See ante, at 1–2 (Breyer, J., concurring) (“any of several different answers to the question would seem reasonable”). The Court can point to nothing that delegates to it the prerogative to make that judgment. Rather, States and the Secretary—working together—should be afforded the leeway to make their joint venture a workable one.
Because North Carolina’s law does not conflict with federal law, I would let it be. I respectfully dissent.
SUPREME COURT OF THE UNITED STATES
ALDONA WOS, SECRETARY, NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, PETITIONER v. E. M. A., a minor, by and through her guardian ad litem, DANIEL H. JOHNSON, et al.
on writ of certiorari to the united states court of appeals for the fourth circuit
[March 20, 2013]
Justice Breyer, concurring.
I join the Court’s opinion with one qualification: My concurrence in the Court’s views rests in part upon the fact that the federal agency that administers the Medicaid statute, known as the Centers for Medicare & Medicaid Services, has reached the same conclusion.
The question before us is how to measure what share of a judgment or settlement of an accident victim’s lawsuit represents payment (or reimbursement) for health care items (or services) for which a State has already paid on behalf of the victim. The statute is silent on the question. It simply says that a State may recover the amount of “payment” that the State has made on behalf of the victim “for medical assistance for health care items or services” from funds that “any other party” has paid “for such health care items or services.” 42 U. S. C. §1396a(a)(25)(H). Moreover, the question focuses upon a comparatively minor matter of statutory detail, not a major issue of far-reaching statutory policy. It concerns everyday administration. It calls for expertise of a kind that the administering agency is more likely than a court to possess. And any of several different answers to the question would seem reasonable. Under these circumstances, normally we should find that Congress delegated to the agency authority to fill the statutory gap, and we should uphold the agency’s conclusion as long as it is reasonable. See Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 844 (1984) .
Here, however, the agency did not engage in rulemaking procedures, it did not carefully consider differing points of view of those affected, it did not set forth its views in a manual intended for widespread use, nor has it in any other way announced an interpretation that Congress would have “intended . . . to carry the force of law.” United States v. Mead Corp., 533 U. S. 218, 221 (2001) . Indeed, the agency does not claim that it exercised any delegated legislative power.
Neither do the documents in which the agency set forth its position (a memorandum and a letter) have much “ ‘power to persuade.’ ” Christensen v. Harris County, 529 U. S. 576, 587 (2000) (quoting Skidmore v. Swift & Co., 323 U. S. 134, 140 (1944) ). Their reasoning is skimpy. And the conclusion now advanced by the agency represents a radical departure from the agency’s previous position. See App. to Pet. for Cert. 129a, 141a–142a. Thus, the Solicitor General does not ask us to defer to the agency’s views—and understandably so.
Nonetheless, the Administrative Procedure Act is not the tax code. And cases that seek to determine whether Congress intended courts to give weight to agency views provide rules of thumb, general principles meant to guide interpretation, not rigid rules that narrowly confine it. They seek to advance Congress’ intent as embodied in particular statutory schemes by helping courts to determine whether, and how, Congress intended those courts to respect an agency’s expertise when reasonably exercised in particular cases. They seek to allocate the law-interpreting function between court and agency in a way likely to work best within any particular statutory scheme. But they do not purport to do more than that. In particular, they do not set forth all-encompassing absolute rules, impervious to nuance and admitting of no exceptions. Felix Frankfurter’s observation, made many years ago, remains valid today: “The problems subsumed by . . . ‘administrative discretion’ . . . must be related to . . . the particular interest . . . as to which ‘administrative discretion’ is exercised.” The Task of Administrative Law, 75 U. Pa. L. Rev. 614, 619–620 (1927). That is to say, “the standard doctrines of administrative law . . . should not be taken too rigidly.” Jaffe, Administrative Law: Burden of Proof and Scope of Review, 79 Harv. L. Rev. 914, 918 (1966).
Thus, even though this case does not fall directly within a case-defined category, such as “Chevron deference,” “Skidmore deference,” “Beth Israel deference,” “Seminole Rock deference,” or deference as defined by some other case, I believe the agency, in taking a position, nonetheless retains some small but special “power to persuade.” Skidmore, supra, at 140. See generally Eskridge & Baer, The Continuum of Deference: Supreme Court Treatment of Agency Statutory Interpretations from Chevron to Hamdan, 96 Geo. L. J. 1083 (2008). And I would consequently to some degree take account of, and respect, the agency’s judgment.
I cannot measure the degree of deference with the precision of a mariner measuring a degree of latitude. But it is still worth noting that the agency’s determination has played some role in my own decision. That is because the agency, after looking into the matter more thoroughly (perhaps after notice-and-comment rulemaking), might change its mind. Given the nature of the question and of the agency’s expertise, courts, I believe, should then give weight to that new and different agency decision. Cf. National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967 –986 (2005). In my view, today’s decision does not freeze the Court’s present interpretation of the statute permanently into law.
With that understanding, I join the Court’s opinion.
ORAL ARGUMENT OF JOHN F. MADDREY ON BEHALF OF THE PETITIONER
Chief Justice John G. Roberts: We will hear argument next in Case 12-98, Delia v. E.M.A.--
John F. Maddrey: Mr. Chief Justice and may it please the Court:
The Medicaid Act requires States to take reasonable measures to seek reimbursement from liable third parties and that States require recipients to assign their rights for -- to payment for medical care.
The Act does not direct how a State must determine what portion of a recipient's third-party recovery is properly attributable to past medical expenses.
North Carolina's procedure establishes--
Justice Sonia Sotomayor: How do you know that ex ante?
John F. Maddrey: --Excuse me?
Justice Sonia Sotomayor: How could you ever know that ex ante?
I mean, without looking at the individual facts of the case, the 30 percent is going to be underinclusive in some circumstances, overinclusive in others.
So how do you deal with our holding that you are not entitled to the overinclusive portion?
John F. Maddrey: Justice Sotomayor, the answer to that depends on whether the State has to predict with certainty the amount--
Justice Sonia Sotomayor: Life is never certain, and so I don't even go to that issue.
I go just simply to the question, how can you, ex ante, predict -- particularly with a statute that wasn't based on any empirical data -- that 30 percent normally is the right amount?
You just picked it out of the air?
You could pick 40, 50, 60.
How do we draw the line?
John F. Maddrey: --Your Honor, the -- the statute doesn't predict; it defines.
It tells the recipient how much out of recovery they must allocate to satisfy the repayment obligation.
If it were a prediction, that would make it a presumption and you would have to defend it as such.
But here the statute defines the portion that the State, as a condition of extending the Medicaid benefits, tells the recipient they must allocate--
Justice Antonin Scalia: They must allocate?
Is the State saying, You do not own that 30 percent of the recovery, so you never get a property right in it, so that there's never any problem about asserting a lien against it?
I thought that's what's going on here.
And I think that's sort of disguised by talking about allocation.
I thought the State is saying, As to 30 percent of the recovery, you have no property right in it.
Is it not saying that?
Am I wrong?
John F. Maddrey: --Your Honor, the State is saying that as to the amount of Medicaid benefits provided, the State has the right of recovery.
And it says that of any third party--
Justice Antonin Scalia: Maybe you didn't hear my -- my question.
My question is: Is the State saying that you have no property right in the 30 percent?
John F. Maddrey: --The State has the right to recover that portion.
Justice Antonin Scalia: Let me ask my question again.
Is the State saying that you have no property right in the 30 percent?
I think that can be answered yes or no.
John F. Maddrey: And -- yes, Your Honor, the position would be there is no property right in that -- in that percentage that the State has conditioned the extension of benefits on.
Justice Sonia Sotomayor: Now, how does it have the right to announce that in a FELA case or in a Jones Act case where those injured parties, they have a property right in their protection but this statute applies to that recovery as well?
John F. Maddrey: If those -- if those litigants are Medicaid recipients, it applies to them as a condition of having received the State Medicaid benefits.
Justice Sonia Sotomayor: So they can deny a litigant a property right in that recovery?
John F. Maddrey: As a--
Justice Sonia Sotomayor: I don't know how you can go in and ask for something you don't own.
I don't know how the plaintiff can go in and litigate a case if they don't have a property interest that they can then assign to someone else.
I've never heard of such a thing, how they would have standing to sue on your behalf if they have no property interest in the recovery.
John F. Maddrey: --Your Honor, I'm -- I'm confused by the question.
Justice Sonia Sotomayor: How do you sue for something you have no property interest in?
John F. Maddrey: --I don't know how you'd sue for something you don't have a property interest in, Your Honor.
Justice Sonia Sotomayor: So go back to Justice Scalia's question.
John F. Maddrey: The inner--
Justice Sonia Sotomayor: There has to be some interest in the 30 percent by the plaintiff.
John F. Maddrey: --The -- the 30 percent attaches upon the recovery from a third party.
The -- the cause of action is for whatever sources of injury that individual would have.
To the extent the recovery is for medical expenses previously paid for by Medicaid, that's what the State's interest could--
Justice Sonia Sotomayor: Could I just clarify one point?
Does this rule preclude parties, as we said in Ahlborn, from stipulating to a settlement at all?
John F. Maddrey: --No, Your Honor.
Justice Sonia Sotomayor: Your brief is not clear on that.
They can still stipulate.
It's only if after the stipulation, it hasn't been allocated that you can recover?
John F. Maddrey: Your Honor, the stipulation must include the State as a party to it for it to be binding.
Justice Sonia Sotomayor: So what you're basically now saying is that there can never be a stipulation.
John F. Maddrey: --There could be an advance agreement, Your Honor, but--
Justice Sonia Sotomayor: You're saying that the parties cannot enter into a stipulation.
John F. Maddrey: --If the parties are private litigants, a plaintiff and a defendant in a medical malpractice action, their -- their stipulation doesn't bind the State.
All parties to this case agree that--
Justice Antonin Scalia: You can bind the parties for other purposes, I assume.
There are other purposes for which the distinction between pain and suffering and medical expenses might make a difference, right?
What if the parties agreed that it's 50/50?
Would the State take 50 percent then, or is the State still limited to 30?
John F. Maddrey: --Your Honor, the statutory percentage applies in that situation as well.
The 33 percent cap would apply.
Justice Antonin Scalia: Okay.
John F. Maddrey: Again, the State's interest is the amount of the Medicaid benefits it provided, capped at 33 percent of the recovery.
Justice Elena Kagan: General, how do you come up with 33?
Why not 10 or 60 or 90?
Why -- how did you come up with the number?
John F. Maddrey: The North Carolina General Assembly first enacted it as it relates to Medicaid in 1988.
It reflects a legislative history in North Carolina going back to 1935 with a -- a statutory lien applicable to medical providers in -- in civil actions.
It became specifically applicable to Medicaid scenario in the 1988 provision.
Justice Samuel Alito: What if this case is tried to a verdict and there is a special verdict and the jury says that 10 percent was medical expenses?
The statute would override that?
John F. Maddrey: Your Honor, I believe the judge imposing judgment following that jury verdict would have to conform the verdict to the law.
Just as if the verdict had said, there was 100 -- excuse me, $1 million in punitive damages when there is a statutory cap of $500,000 for punitive damages, the judge would have to conform the verdict to the applicable law.
Justice Samuel Alito: What's the difference between that case and Ahlborn, where you have -- where the State has agreed that a certain amount is attributable for medical expenses, and then this hypothetical that the jury has determined that a certain amount constitutes medical expenses?
What's the difference between those two?
John F. Maddrey: In the jury verdict scenario, the State's not a party to that and didn't commit to the -- to the portion that -- that was attributable to medical expenses.
The jury doesn't have any authority to countervene the statute, to enter a verdict in violation of -- of the statutory requirement.
And here the statute tells the Medicaid recipient in advance how much of any recovery, whether that be from a settlement or a verdict, has to be allocated and paid back to the State.
Justice Samuel Alito: Isn't the reasoning of Ahlborn that when we know to a certainty how much the medical expenses were and what -- what part of the judgment this represents or the settlement represents medical expenses, then only that much can be assigned to the government?
And I don't see the difference between that and the verdict situation.
John F. Maddrey: The verdict situation would depend upon what -- would be in the hands of the parties to the lawsuit, what evidence was presented, what -- what theories were advanced.
The State would not have any control over that.
It would be--
Chief Justice John G. Roberts: Well, but it can -- it can participate in that process, can't it?
Its money's at issue?
John F. Maddrey: --The State can initiate a lawsuit on behalf of its -- its medical claim by virtue of the subrogation and the assignment of the right.
It could participate in advance or it could participate afterwards.
But that doesn't come without costs, because, of course, if the State participates on its own in advance, it would be for the full amount of the medical payments.
Justice Elena Kagan: I'm sorry.
John F. Maddrey: --here 1.9 million, and the 33 percent cap would have no application.
That applies only to amounts recovered by a recipient from a third party.
Justice Elena Kagan: General, you were -- you were telling me a little bit about the history of this statute.
But why 30?
Is there any indication of why the State picked 30?
John F. Maddrey: Your Honor, historically 33 percent or three times the medicals was the -- the rule of thumb used in tort actions that -- that parties used that as the methodology, the way to come up with a value to the case, with the theory being 33 percent for the medicals, 33 percent for attorneys' fees and 33 percent to the victim.
That was the underlying--
Justice Elena Kagan: If that's where it comes from, then it does relate to a kind of estimate, doesn't it?
John F. Maddrey: --Historically it does.
It's been the policy of the State of North Carolina for almost a century, as I referenced the lien statutes that apply generally to -- to tort actions, to civil recoveries, to protect the providers of medical services, and those cases date back to 1935.
Justice Stephen G. Breyer: Can I ask you a somewhat technical -- and I appreciate your paying attention because it's hard for me to keep all this in my mind.
It's my understanding of North Carolina, everyone accepts the rule and North Carolina agrees that if you in -- in North Carolina advance to the victim $50,000 in medical expenses -- now, you're never going to get more than that back and you don't want more than that back.
Now, the victim and the tortfeasor enter into a settlement and you have a rule and the rule is you will never get more than 50,000 or 33 percent, whichever is less.
That's the rule, whichever is less.
So if the settlement is for $100,000, you are not going to take more than 33, so you have advanced 50.
So you have basically three situations.
The first situation is where a judge has said, you know what, I find that only $10,000 of this settlement is for medical expenses.
In that case you take $10,000, no more.
Is that right?
John F. Maddrey: No, Your Honor.
Justice Stephen G. Breyer: Oh.
I got the impression that if there was a judicial -- there are three situations: One is there is a judicial finding that only 10 percent was medical.
And the second is the situation where they stipulate that only 10 percent is for medical, and the third situation is this situation, namely there is no stipulation and there is no judicial finding.
So my thought, which is wrong I guess, is if the judge says it's 10 percent you won't take more than 10 percent, but if in fact it's a stipulation of 10 percent North Carolina courts have not yet decided that, and this is a case where there is no stipulation and no judicial finding.
Now you're telling me I have that wrong.
So you explain what the North Carolina is on that, because I think it makes quite a difference.
John F. Maddrey: Your Honor, the statute applies to settlements or judgments received by a Medicaid recipient from a third party.
Justice Stephen G. Breyer: I know, but in the settlement they stipulate that 10 percent is for medical and the rest for pain and suffering.
Now, I thought North Carolina courts have not yet decided whether North Carolina -- which would like more than 10 percent -- can get it.
Is that true or not true?
John F. Maddrey: That is not true, Your Honor.
Justice Stephen G. Breyer: They have decided?
John F. Maddrey: The North Carolina Supreme Court in the Andrews case said--
Justice Stephen G. Breyer: Said.
John F. Maddrey: --said that the key point in Ahlborn was the stipulation--
Justice Stephen G. Breyer: It has nothing to do with Ahlborn.
Ahlborn we all agree says you cannot get more than medical, the medical expense, okay?
The question here is how to figure that.
So I thought that one way to figure it -- I will just be repeating myself.
One way to figure it is how much of this $100,000 settlement is attributable to medical expenses as a judge would say.
Now, you're telling me there is a case in North Carolina which says if the judge himself says that 10 percent of the settlement is for medical, that's not what California -- that doesn't matter according to North Carolina law, and I'd like the name of the case, the State case that says that.
John F. Maddrey: --Your Honor, I'm not aware of any such case.
Justice Stephen G. Breyer: Okay.
So we don't know the answer to that.
We know what you would like, but we don't know the answer.
Justice Antonin Scalia: Don't you think the statute may -- may give you the answer?
"Any attorney retained by the beneficiary shall out of the proceeds obtained on behalf of the beneficiary by settlement with, judgment against, or otherwise from a third party by reason of injury or death distribute to the department the amount of assistance paid by the department on behalf of. "
"up to 33 percent. "
It applies to judgments as well as to settlements.
Justice Ruth Bader Ginsburg: You answered the question with respect to jury verdicts.
I suppose it would be no different if it 's the judge that found the 10 percent rather than the jury.
John F. Maddrey: I would agree, Justice Ginsburg.
Justice Sonia Sotomayor: I didn't hear Justice Ginsburg's question.
Justice Ruth Bader Ginsburg: The question that Justice Breyer was asking about the 10 percent has already been answered because we were told that if a jury allocated 10 percent to medicals, it would not make any difference, the statute entitles the State to 30 percent.
Justice Sonia Sotomayor: Basically you are saying the judge would be required to give you your one-third regardless of what the jury said.
John F. Maddrey: --Exactly.
As we said, he would either have to conform the jury verdict to the--
Justice Sonia Sotomayor: So all those States that have jury verdicts, special verdicts that require a certain amount, they could avoid that by just simply passing this law and avoid the anti-lien statute that way?
John F. Maddrey: --Your Honor, it would -- it would depend how the State could rationally defend their statute under their experience as consistent with their jurisprudence.
Of course, tort law being primarily the province of--
Justice Sonia Sotomayor: 16 States already have something close to a presumption of a percentage.
Do you have any evidence that in those 16 States where it's only a presumption and not a fixed amount, that they are falling apart because of it?
John F. Maddrey: --Your Honor, I don't have any evidence as to the specific performance in those 16 States.
That would leave 34 States that don't have one.
It would also would raise the question of how many of those States -- I believe the 16 States were the ones that had some sort of procedure, some post-settlement either hearing or trial to allocate--
Justice Sonia Sotomayor: In the absence of this statute, what did your State do beforehand?
John F. Maddrey: --This statute dates back to 1988.
Prior to 1988 I don't know how from the 1965 effective date of Medicaid how things were handled.
But certainly for the last--
Justice Elena Kagan: General, on your theory am I correct that the North Carolina legislature could amend this statute tomorrow to make it two-thirds?
John F. Maddrey: --Certainly a statute could be amended.
Whether it could be defended under -- under the circumstances--
Justice Elena Kagan: But that's what I mean.
I mean, on your theory it seems not to matter whether this statute says one-third or two-thirds.
And I'm asking whether that's correct.
John F. Maddrey: --Two-part answer, Your Honor.
As to the anti-lien provision of the Medicaid Act, if the statute defines the amount of medicals as 230 -- excuse me -- two-thirds, that would present the same analysis under the anti-lien provision of the Medicaid Act.
The difference would be whether the State could show a rational basis in its tort law, in its jurisprudence.
Justice Elena Kagan: I guess I'm not sure I got that.
In other words, I'm assuming an amendment that just all it does is it changes one-third to two-thirds.
And so your theory it seems to me would work the exact same way.
Then you say: Well, you need a rational basis for doing that.
But I thought you told me that the one-third really doesn't have anything to do with an estimate of how much is medical and how much is not medical.
So it seems that you would have the same basis to say two-thirds as you do to say one-third.
Am I wrong about that?
John F. Maddrey: I would say, Justice Kagan, the reason it's not the same is that it would treat Medicaid recipients decidedly differently than other tort litigants in North Carolina.
Given the 1935 history of the allocation of -- of tort settlements and the liens in favor of the providers of medical care that preexist the North Carolina Medicaid statute, if you then change the Medicaid statute--
Justice Elena Kagan: But you're saying there's a kind of side constraint, that Medicaid recipients have to be treated like others, but then presumably, the State could change everybody's?
John F. Maddrey: --I -- I believe that would be the case, yes.
The -- the question would be whether there was any disparate treatment, any singling out of -- of a Medicaid recipient.
And certainly, we've demonstrated that under the -- the North Carolina experience, that is not the case.
Justice Ruth Bader Ginsburg: I thought -- I thought your brief says that at some point, if it gets too high, you do have a problem under these anti-lien provisions of Medicaid?
John F. Maddrey: I -- I believe, Your Honor, in response to the 90 percent or 100 percent scenario or hypothetical, I would certainly posit it would be difficult for a State to defend--
Justice Antonin Scalia: Why?
I don't understand that.
You see, I think the only way you can defend it is that -- is that the recipient never -- never had a property right.
Once -- once recovery is given to the recipient, the recovery does not belong to the recipient.
And if that's true for 33 percent, it can be true for 100 percent.
Has there ever been any litigation since 1935 about takings problems, with -- with the State requiring 33 percent to go to the medical provider, even though it may well be that less or more of that amount went to medical damages?
John F. Maddrey: --Your Honor, under the general lien statutes in Chapter 44 of the North Carolina general statutes, Sections 49 and 50 are the two provisions that we cite.
I'm not aware of any takings-related challenges to those laws.
I am aware of State supreme court opinions saying that the attorney had to distribute proceeds in accordance with the statute.
Justice Stephen G. Breyer: Can I go back for a second?
Because I want to show you where I got my perhaps mistaken idea from.
There is a case called Andrews.
And there is a statement in Andrews, which is a South -- North Carolina case -- which says in certain circumstances, although the statute says just what Justice Scalia says, the lawyer sits there, he takes one-third and pays it to the State.
Then this case has this sentence in it:
"Ahlborn controls when there has been a prior determination or stipulation as to the medical expense portion of a plaintiff's settlement. "
"In those cases, the State may not receive reimbursement in excess of the portion so designated. "
Now, having read that sentence, I thought the law of North Carolina was that this statute does not apply, and that when, in fact, the jury or the judge finds that only 10 percent was for medical expenses, the State cannot take more than 10 percent.
And the same is true of a stipulation.
That's what those words seem to say to me.
Now you're telling me that I'm not reading those words correctly, the case of Andrews does not affect our case here, and that you -- that the law of North Carolina is that you get one-third.
Now, what is it?
Do you see why I am confused?
John F. Maddrey: Yes, Your Honor.
I will try -- try, if I can, to explain what I believe to be the source of the confusion is.
The stipulation in Ahlborn referenced in the Andrews decision was between the Medicaid recipient and the State of Arkansas, the lienholder.
It came in the Federal court action to challenge Arkansas's imposition of its lien.
Justice Stephen G. Breyer: I see.
John F. Maddrey: Therefore, there was a stipulation binding the State, the lienholder, that controlled in Ahlborn.
Justice Stephen G. Breyer: You say a prior determination or stipulation.
I took prior determination to mean a determination by a judge or a jury.
What does it mean, if it doesn't mean that?
John F. Maddrey: I think later in the Andrews decision, you will see a reference to the parties certainly had the opportunity to negotiate with the State a lesser amount than -- that the amount of the statutory lien.
That would be -- that would be the prior determination, I believe.
Justice Sonia Sotomayor: Am I correct that what you believe and what the courts have been doing in your State, the lower courts, is that they won't approve a settlement that doesn't have the one-third, and they won't enter a judgment that doesn't have the one-third?
Is that correct?
John F. Maddrey: Your Honor, when there's a lump sum settlement in -- in these, the court directs the attorney for the recipient to enforce the statute to protect the State--
Justice Sonia Sotomayor: So I'm right.
They just won't accept the private stipulation that doesn't do that, and they won't enter into a judgment that doesn't do that, correct?
John F. Maddrey: --Here, the State court ordered the $933,000--
Justice Sonia Sotomayor: Just answer my question.
John F. Maddrey: --Yes, Your Honor.
Justice Sonia Sotomayor: All right.
Going back to Justice Alito's.
The jury says it's less or more or whatever of -- of the settlement as medical expenses, it doesn't matter what they say, the court can't enter a judgment for that amount, they have to enter a judgment for either the one-third or the full medical expenses.
John F. Maddrey: They have to enter a judgment, yes, Your Honor.
Justice Sonia Sotomayor: And that's what they have been doing.
John F. Maddrey: Yes, Your Honor.
And that is the rationale behind the statute that the jury, nor the judge, can enter a judgment that's not in conformity with the statute.
Justice Samuel Alito: Could I ask you how often this comes up in North Carolina?
Do you have any figures where you have a dispute of this nature, during the course of a year?
John F. Maddrey: Your Honor, I've tried in the briefs to indicate the dollar amounts involved.
The numbers of cases are in the hundreds, it's my understanding, because typically they involve third-party payments, not just for medical malpractice cases, but insurance coverage and other situations that trigger the repayment obligation.
Justice Anthony Kennedy: I don't want to take up too much time talking about Andrews, but it seems to me that what the North Carolina Supreme Court said in Andrews is that in those States where there is a prior determination, that controls, but North Carolina is entitled to adopt a different procedure and have a one-third across-the-board rule.
That's the way I read it.
John F. Maddrey: Well, certainly, that--
Justice Anthony Kennedy: Does that accord with your understanding?
John F. Maddrey: --Your Honor, I think they were saying two things.
Other States have different procedures--
Justice Anthony Kennedy: Yes.
John F. Maddrey: --and that in North Carolina, this is the rule, and that the prior determination also could include an action involving binding the State of North Carolina.
Justice Sonia Sotomayor: I know that was argued before.
But I read Ahlborn very carefully, and I don't see it.
I read the amici briefs that reference different procedures, and not one of them referenced the North Carolina procedure.
So, I know that was argued before.
You didn't argue it in your brief here, and I assume you didn't because you did what I did, which was to read Ahlborn carefully and read what it cited, and I don't see it cited.
John F. Maddrey: I'm sorry.
I don't know--
Justice Sonia Sotomayor: I don't see the North Carolina procedure referenced in Ahlborn as something that States could do.
It wasn't referenced directly in the -- in the opinion, and it wasn't referenced indirectly by the amici.
The amici were talking about substantially different procedures.
John F. Maddrey: --Your Honor, the holding in Ahlborn said you can't go beyond the amount represented -- that represents repayment for medicals.
It didn't say how a State has to or could determine that, and that's the question that's presented.
Justice Sonia Sotomayor: But my point is, Justice Kennedy's question was that somehow in that opinion, we approved the North Carolina system.
John F. Maddrey: Your Honor, I think--
Justice Sonia Sotomayor: Is there a direct reference to North Carolina's system--
John F. Maddrey: --Absolutely--
Justice Sonia Sotomayor: --in that or in any of the amici brief that talked about different State rules?
John F. Maddrey: --Not that I'm aware of.
If there are no further questions, Your Honor, I would like to reserve the remainder of my time for rebuttal.
Chief Justice John G. Roberts: Thank you, counsel.
ORAL ARGUMENT OF CHRISTOPHER G. BROWNING, JR., ON BEHALF OF THE RESPONDENTS
Christopher G. Browning Jr: Mr. Chief Justice, and may it please the Court:
The -- General Maddrey has steadfastly argued that the North Carolina statute overrides a jury verdict.
I think his argument is well-grounded, given the language of the statute, but that illustrates the very problem here, that this statute takes one-third of a settlement or judgment regardless of the true facts of the case.
And that is problematic under Ahlborn.
Justice Kagan, you had asked Mr. -- General Maddrey about the basis for the North Carolina statute.
General Maddrey had referred to it being a rule of thumb of three times medicals.
But if you actually turn to the Fourth Circuit's decision, which is based on the briefs that were filed in the Fourth Circuit, in the petition at page 20A, the rule of thumb is actually three times specials, which of course is different than three times medicals, because special damages would include things like lost wages and various other things.
Justice Elena Kagan: Mr. Browning, let me give you a different rationale for this statute.
It's different than the one the State suggests, but it would go something like this:
There is an allocation that has to be made.
In making allocations there are two ways of doing it.
We can do it case-by-case, individualized decisionmaking; or we can use some bright-line rules.
And the advantage of bright-line rules is that they are cheap and efficient and sometimes they are not more inaccurate than individualized decisionmaking, because in individualized decisionmaking you can maker errors, too.
So this is a reasonable way to make an allocation decision.
And nothing that we said in Ahlborn suggests that a State needs to use case-by case decisionmaking rather than bright-line rules to make the allocation that it needs to make between medical and nonmedical damages.
What about that?
Christopher G. Browning Jr: Well, Your Honor, I would turn to the language of the Ahlborn decision which makes clear that States cannot lay claim to more than a portion of a settlement or judgment that represents payment for medical care or medical expenses.
When you have--
Justice Antonin Scalia: Yes, but that doesn't answer the question.
I mean that portion, according to North Carolina, is one-third.
Christopher G. Browning Jr: --It is the State saying it is one-third even though there is no basis and even though you have cases like this where it's clearly not one-third--
Justice Antonin Scalia: Yes, but what the State says is the law.
I mean, the State says one-third is for medical.
Christopher G. Browning Jr: --Your Honor, if that is all North Carolina had to do, of course, the Ahlborn decision would have been dramatically different if Arkansas had simply enacted a cap of 100 percent or 50 percent or 40 percent, because in the Ahlborn decision, the State of Arkansas was only seeking to recover 39 percent of the tort settlement.
And under North Carolina's theory, if Arkansas had simply been bright enough to implement a cap, the Ahlborn decision would have been completely different.
And that makes absolutely no sense.
I think the Ahlborn decision indicates that there has to be a process in order to fairly and appropriately determine the amount that the State may--
Justice Antonin Scalia: So you need, ultimately you need an adjudication.
You have to leave it either to a jury to decide what percentage of the total award is medical expenses or have a separate proceeding.
Let's say where there has been a settlement, you need a separate proceeding to decide how much of it is really for medical.
You know, they may say 10 percent is, but who believes that?
You need a proceeding.
That is awfully time-consuming.
And as Justice Kagan suggests, I'm not sure it's going to be very accurate.
I don't think a jury determination is going to be -- is going to be accurate on that score.
And I don't know how you go about determining how much of a settlement is attributable to medical expenses versus other things, especially when the settlement itself says only 10 percent is medical expenses.
Christopher G. Browning Jr: --Well, Justice Scalia, I think it is very easy for states to follow that and to put in practices or procedures that result in appropriate allocation of medical expenses.
Justice Antonin Scalia: How do you do that?
Christopher G. Browning Jr: Yes.
There are a variety of ways that States can do it.
Justice Sonia Sotomayor: 16 are doing it already.
Christopher G. Browning Jr: Absolutely.
16 and the District of Columbia have a process for appropriate adjudication.
Moreover, it is perfectly appropriate if a State wants to have a presumption.
The problem is it can't be an irrebuttable presumption.
Justice Stephen G. Breyer: How does it work?
Because I would imagine at the negotiation you have the victim's lawyer and the tortfeasor's lawyer and the tortfeasor's lawyer is interested that the bottom line number be as low as possible and the victim's number, that it be as high as possible.
And the victim's lawyer in fact would like as little as possible to be allocated to a source which is going to take that money away from him.
So they can reach agreement.
What they will do is say 1 penny is for medical expenses and everything else is for pain and suffering, and that's very good for the victim.
And it's irrelevant to the tortfeasor.
So when you see that on a piece of paper, what is it you are going to do?
What kind of proceeding are you going to have?
It's a proceeding about a proceeding.
It's a proceeding about the settlement negotiation.
What's it going to look like?
What does it look like in the 16 States?
We will have a plaintiff's lawyer testify.
He will say, Your Honor, I really wanted 1 penny and only 1 penny to be allocated to pain and -- to medical expense.
And the defendant's lawyer, he's being very honest, he'll say: I didn't care; if that's what he wants, that's fine with me.
Chief Justice John G. Roberts: Well, but it's worse than that.
He does care, because the smaller amount means that the victim is going to actually get to keep more and that's all the victim's lawyer is concerned about, and that's fine with the tortfeasor's lawyer because otherwise he would have to pay more.
Justice Stephen G. Breyer: Exactly.
So what does it look like?
Chief Justice John G. Roberts: Sorry to--
Christopher G. Browning Jr: Mr. Chief Justice, if I first can turn to your point and then respond to Justice Breyer's question.
Justice Stephen G. Breyer: It's the same point.
Chief Justice John G. Roberts: --It's the same point.
Christopher G. Browning Jr: Well, let me say this at the outset: That first of all, it is our position that the parties simply can't stipulate or reach an agreement that somehow deprives the State of their interest.
There has to be an appropriate adjudication.
It's worked well in the States that have implemented this process.
Justice Stephen G. Breyer: How does it work in those States?
Christopher G. Browning Jr: Yes, Your Honor, and Justice Breyer, I don't think it's all of that complicated.
Justice Antonin Scalia: I don't understand.
What do you adjudicate?
What is the issue in the adjudication?
How much of the award should have been allocated to medical expenses, or how much of the award was in fact allocated to medical expenses?
Which is the issue?
Christopher G. Browning Jr: What should be adjudicated--
Justice Antonin Scalia: It seems to me it should be the latter, shouldn't it?
Christopher G. Browning Jr: --What should be adjudicated consistent with the Ahlborn decision is the portion of the settlement that represents payment for medical expenses.
And that, that is--
Justice Antonin Scalia: That's right.
How much was allocated, right?
It doesn't matter what ought to have been.
The issue is what proportion did the parties in fact allocate to medical expenses, right?
Christopher G. Browning Jr: --Your Honor, I don't think--
Justice Antonin Scalia: And they say 1 penny.
How are you going to contradict that?
Christopher G. Browning Jr: --We would not assert that the parties' subjective belief is necessarily binding.
Justice Antonin Scalia: No, no.
Justice Stephen G. Breyer: But I am asking the same question.
There are 16 States that have this procedure.
How does it work?
Christopher G. Browning Jr: Yes, and in most of those--
Justice Stephen G. Breyer: I don't want to know that they have it.
I want to know how it works.
We have put the problem as to why it seems it might not work too well, and now I would like you to tell us how it really works.
Christopher G. Browning Jr: --How it really works in those States is the States will generally negotiate with the State Medicaid agency and come to a fair allocation without the necessity for a judicial determination that's appropriate.
Chief Justice John G. Roberts: What about fair?
Justice Sonia Sotomayor: Is that because they know they are going to be subject to a hearing if they don't reach an agreement?
Christopher G. Browning Jr: Yes.
Justice Sonia Sotomayor: So there is an inducement for them to do what this State didn't do.
Christopher G. Browning Jr: Correct, Your Honor.
Justice Sonia Sotomayor: When told to come in, they ignored it.
In those States, States know they are going to increase potentially their costs, so they come in more often.
Christopher G. Browning Jr: Exactly, Justice Sotomayor.
Chief Justice John G. Roberts: Exactly what?
Christopher G. Browning Jr: It levels the playing field so that there is an incentive on both sides to come to an appropriate allocation.
Justice Samuel Alito: Well, how is this allocation not happening?
Chief Justice John G. Roberts: I was going to say, how do we know what's fair and appropriate?
You come in -- let's say you have $20,000 in medical expenses and a claim for pain and suffering.
And they come in and they recover a million dollars, right?
So what's appropriate in that case?
The other side will say: Well, we settled on a million dollars, pain and suffering was really 20 million and we came down to a million.
So what's fair allocation in the case of the medical expenses?
It seems to be an entirely artificial judgment.
To the extent it's not, it depends on the views of the two parties negotiating and I thought we established that that is entirely subject to manipulation.
Christopher G. Browning Jr: Your Honor, it is a process that the courts can determine based upon the experience of the judge, who generally would be very experienced in the valuation of cases, can make an appropriate decision, and can consider all the facts, the equities--
Justice Sonia Sotomayor: Counsel, do judges do this in non-Medicaid cases regularly?
Christopher G. Browning Jr: --Oh, absolutely.
They do it in North Carolina in the context of workers' compensation liens, having to come up with an appropriate allocation, and there the court has--
Justice Sonia Sotomayor: Let's deal with what appears to be many of my colleagues' gut instinct, okay?
This is -- it costs too much, it's too burdensome.
We've already answered why not, but in the end, they don't believe you could ever figure out the number.
That's really their bottom line, that this number's artificial no matter what you do, so you might as well just throw a label on it, reasonable or not, and leave it alone.
How do you answer that argument, because that's the essence of their -- of their belief--
Christopher G. Browning Jr: --Your Honor--
Justice Sonia Sotomayor: --that this bottom line allocation is always going to be wrong somehow.
Chief Justice John G. Roberts: It's -- it's a little better than that, but go ahead and answer.
Christopher G. Browning Jr: --Justice Sotomayor, the -- the concern, of course, is that -- forgive me, I've lost my train of thought here, Mr. Chief Justice.
Justice Samuel Alito: Well, this is what I envision happening, if the -- if the parties can't -- if the State and the -- and the recipient of the -- of Medicaid assistance can't come to an agreement.
Basically, you have to make an estimate of what the damages would have been if the case had been tried and then you determine that the medical portion of the damages would have been 15 percent and so you reduce, then you take the amount of the settlement, and the amount of the settlement that is attributable to the medical expenses is 15 percent.
That would be what I would envision.
Is that not correct?
Christopher G. Browning Jr: Your Honor, that is -- that is certainly an approach similar to Ahlborn, a proportionality sort of review.
You -- you -- you look at how much you're able to recover versus the amount -- the amount of the total claim versus the amount of the settlement and you come to an appropriate--
Justice Samuel Alito: That seems very -- that seems really very complicated.
Christopher G. Browning Jr: --Well--
Justice Samuel Alito: How can a judge -- where the case is settled and the judge doesn't really know anything about the proof, how is a judge going to be in a position really to do that?
Christopher G. Browning Jr: --Your Honor, it is a matter of the parties coming forward, presenting evidence as to the damages in the case, perhaps an explanation as to why the case settled for less than full value, and the court using their experience to determine is this appropriate, should there be any reductions and of course--
Justice Ruth Bader Ginsburg: Is that -- is that what happens?
You said you -- that in North Carolina for workers' compensation -- for settlements that are subject to workers' compensation liens, you have this type of system.
Christopher G. Browning Jr: --Yes, in the context of third-party liability.
Justice Ruth Bader Ginsburg: How does it work for workers' compensation recoveries that have the same thing, they -- they owe the State for the medical.
Christopher G. Browning Jr: Yes, Your Honor.
The -- the statute -- the North Carolina statute directs in -- in that lien situation for the court to consider the likelihood that the plaintiff would have actually recovered on the claim, and various other factors that the court deems appropriate and it puts it in the discretion of the court.
What we're saying here is that Ahlborn requires that there must be a determination of the portion of the settlement that represents payment for medical--
Justice Sonia Sotomayor: Counsel, in those proceedings, are witnesses called or is it usually done on papers?
Christopher G. Browning Jr: --It's usually done in a fairly expedited process, yes, Your Honor.
Justice Antonin Scalia: --You know, putting -- putting it in the discretion of the court, as you say is done in the workmen' compensation, is quite different from what you're proposing here.
That seems to me quite workable, you know.
The -- the court hears the evidence and he decides how much should be reimbursed within -- within the court's discretion.
But here, you're -- you're asking a court to decide how much of a recovery or how much of a settlement was attributable to -- to the medical portion.
Christopher G. Browning Jr: I think it needs to be--
Justice Antonin Scalia: That's a totally different question.
Christopher G. Browning Jr: --Justice Scalia, I think it's an objective determination.
I don't think the parties can skew it one way because of the way they structured the settlement just because -- just as the State can't skew it the other way because they have an arbitrary number, whether it be 100 percent, 90 percent, 75 percent, it doesn't allow for the fact that--
Chief Justice John G. Roberts: You've said several times that the way you do this is based on the judge's experience and so on with -- with the cases.
And I think what your -- your friend on the other side is saying is that's pretty much what's going on here except over time -- I mean, would it be all right if over time the judge says, well, typically, sometimes it's 25 percent, sometimes it's 35 percent, over time, it's sort of 33 percent.
And so we're going to have that as an absolute rule so that we don't have to go through these proceedings every time just to make sure that it's 30 percent rather than 33 percent.
What's -- I guess it's Justice Kagan's question -- what's wrong with the bright-line rule here?
Christopher G. Browning Jr: --There would be nothing wrong with a rule that creates a presumption.
What is the problem is, you have cases that are on the extremes like this case where you have absolutely horrendous injuries and a physician who doesn't have the financial wherewithal to pay for the extent of the damages that he caused.
Here, EMA's guardian had no option but to settle the case for the available funds of $2.8 million.
But that is a far cry from how anyone would objectively evaluate--
Justice Stephen G. Breyer: So you're -- you're satisfied with the presumption.
Is there any law here that gives you a leg-up?
I mean, is this like Chevron or Skidmore or something like that?
Christopher G. Browning Jr: --Your Honor, I certainly think in this case the fact that the United States Department of Health and Human Services has filed an amicus brief that points out that this sort of ill rebuttable presumption, this sort of--
Justice Stephen G. Breyer: I know that's their position.
But my question is, does the law mean that when we decide this case, I see you have a reasonable point, they have a reasonable point, that if both points are reasonable, you get the benefit of some kind of legal presumption like Chevron, Skidmore, et cetera.
Maybe you can think of another one, I don't know.
Do you or don't you?
Christopher G. Browning Jr: --Your Honor, I think it would be appropriate to give Chevron deference to the arguments of the United States--
Chief Justice John G. Roberts: Well, we're dealing with a North Carolina statute.
Don't they get deference along the same lines?
Christopher G. Browning Jr: --No, Your Honor.
I don't think -- the starting point has to be the Federal statute, Medicaid's anti-lien provision, which is very clear that no lien may be imposed.
Chief Justice John G. Roberts: Well, it can't be very clear because CMS took the opposite position before this case, right?
Christopher G. Browning Jr: I don't think that they took the opposite position.
With regard to the letter that was sent to Congressman Coble that that was a -- an employee who was not within a policymaking decision, who has to field thousands of these sort of requests for information coming into CMS.
So I don't think we can put a whole lot of credence on that particular letter that has been expressly disavowed by the secretary and the director of CMS.
Justice Samuel Alito: Could I ask you a question on this different point?
Could the -- suppose the North Carolina legislature passed a statute that says something like the following:
"In any tort action in which an item of damages sought is medical expenses, the plaintiff may not recover for any other item of damages until the full amount of the medical expenses is satisfied. "
Now, then they're just restructuring their tort law.
Would there be a problem with that?
Christopher G. Browning Jr: Your Honor, I think in the case of the anti-lien provision, that that would effectively circumvent the anti-lien provision and allow by the backdoor what we would contend would not be -- the State could not do directly.
So yes, I do see potential problems with that.
Obviously, it would be different than the scenario that we have here, but it does -- the starting point has to be the anti-lien provision, which is no lien may be imposed.
This Court in Ahlborn assumed without deciding that there would be an implied exception to that statute.
But that -- that exception is very limited.
It has to be in the context of, as this Court recognized, a State can only lay claim to that portion of the settlement that represents payment for medical care.
So until you have--
Justice Samuel Alito: Does Federal law -- did Federal law require your client to seek compensation for medical expenses?
Christopher G. Browning Jr: --No, Your Honor, I don't believe that there is a requirement that Medicaid beneficiaries would have to file a suit and try to recover medical expenses.
Justice Samuel Alito: So you could have -- could you have filed suit and disclaimed any -- any claim for medical expenses, you only want to be compensated for other things?
Christopher G. Browning Jr: If -- first of all, there would be some medical expenses that wouldn't be Medicaid, medical expenses that were incurred by the family.
But moreover, even in that scenario, I think given the language of the North Carolina statute, the State would still be seeking one-third.
So, if one were to take that route, it would be an extremely treacherous route that you be -- would be not being able to -- to get full -- full recovery from the defendant but still having to be paying a third to the State of North Carolina.
Justice Antonin Scalia: But it would be the defendant who's -- who's -- who's jiggering the system, I mean, not suing for the medical portion simply because the defendant knows that at least some of that portion, if not all of it, would -- would go -- would go to the State.
So, in a situation such as yours where the total recovery is -- is not going to suffice to cover both pain and suffering and medical expenses, it'd be very intelligent to do what Justice Alito proposed.
And that seems to me a real, I don't know, gaming -- gaming of the system.
Christopher G. Browning Jr: I don't think it would be a gaming of the system, Justice Scalia, if the State, based upon the statute, based upon its previous directives would expect the Medicaid beneficiary to seek recovery of those claims and to remit one-third to the State.
Thank you, Your Honor.
Chief Justice John G. Roberts: Thank you, counsel.
ORAL ARGUMENT OF GINGER D. ANDERS FOR UNITED STATES, AS AMICUS CURIAE, SUPPORTING THE RESPONDENTS
Ginger D. Anders: Mr. Chief Justice, and may it please the Court:
To start with the types of procedures that States may use to allocate medical damages, I think the States have a broad range of discretion to determine what should be an appropriate allocation.
Justice Sonia Sotomayor: Could you move the microphone so it's a little closer to you?
Ginger D. Anders: --Sorry.
Justice Sonia Sotomayor: Thank you.
Ginger D. Anders: Is this better?
Chief Justice John G. Roberts: Yes.
Ginger D. Anders: So the States are not determining, they're not trying to reconstruct what the plaintiff's and the defendant's intent was in entering into the settlement.
Often, there will be no shared intent.
What -- what the States are doing is determining what the appropriate allocation should be.
And the States that have individualized determinations, which is what we think is required here, have developed a number of different procedures for doing that.
For instance, a district court in Pennsylvania, in McKinney--
Justice Antonin Scalia: Excuse me.
I have a -- I have a theoretical problem right at the outset.
I mean, what the statute forbids is asserting a lien on recovery that is for medical expenses.
And you're telling me that the States aren't even trying to find out what portion of the recovery was for medical expenses.
They're looking to determine what proportion should have been for medical expenses.
How does that tie in with the -- with the prohibition of the lien?
Ginger D. Anders: --Well, I think this Court established in Ahlborn that the beneficiary and the State, they respectively have interests in the settlement that arises from the fact that in the tort case the plaintiff has asserted claims for medical damages and for nonmedical damages.
And so Ahlborn establishes that we need to divide the two in order to determine what the State may recover.
Ahlborn also establishes that the beneficiary has an interest in the settlement that arises from her nonmedical claims that can be allocated away by an allocation method, such as one that gives -- that says that 100 percent of the settlement must always be allocated to -- to medical damages.
Justice Antonin Scalia: So -- so you're saying that the State can, in making this determination, in fact take away from a plaintiff who has recovered a -- a greater amount in medical expenses, or a lesser amount in medical expenses, can take -- take away that by determining how much should have been allocated to medical expenses, right?
Ginger D. Anders: The State does have some discretion to determine what the appropriate--
Justice Antonin Scalia: So you're messing up the lien law anyway, no matter which way you play it.
Ginger D. Anders: --Well, I think Ahlborn establishes that we have to make some kind of division of the settlement, and when the parties haven't done it, there's no jury determination.
We don't know ahead of time before the allocation has been done what precisely the amount the medical damages should be.
But we do know, because the plaintiff, the beneficiary, has asserted nonmedical claims and she has compromised them, we do know that she has an interest in the settlement that arises from her nonmedical claims.
So for instance, you can imagine the situation in which a plaintiff has a claim that is 10 percent medical damages and 90 percent lost -- past lost wages.
So they're both equally concrete.
In that situation, when the plaintiff settles for pennies on the dollar, I think we would have serious questions about whether a one-third allocation to medical damages in that case would be appropriate.
But without an individualized determination, there would be no way to know whether this is a case in which the -- the blanket rule that the State has is actually overestimating the amount that should be appropriately allocated to medical damages.
Justice Sonia Sotomayor: Ms. Anders, could you please finish your response, when you said various States do various things.
Could you describe some of them?
Ginger D. Anders: Certainly.
So for instance, in McKinney v. Philadelphia Housing Authority, a district court case in Pennsylvania, what the court did was it said: We have the settlement; we know how much the past medical damages were because we know what the medical bills were; and we can -- we can assume that the jury, had this case gone to trial, would have awarded 100 percent of the medical damages because they were provable and because there weren't disputes about that.
And so the court then said: I'm going to then apply a discount rate for the uncertainty that the defendant would have been held liable at all.
Chief Justice John G. Roberts: Is that a reasonable -- this is the Federal district court?
Ginger D. Anders: That was the Federal district court.
Chief Justice John G. Roberts: So it's not a State procedure.
Ginger D. Anders: Pennsylvania law.
That case happened to be in Federal court.
Pennsylvania law provided a rebuttable presumption, and so the court determined--
Chief Justice John G. Roberts: What if -- what if the other -- the parties I guess are coming in and saying, well, that's not how juries work.
They don't care that this measure of damages is particularly calculable.
They come to a general view.
You've got medical expenses, you've got pain and suffering.
They make a judgment about that.
Would that be a good argument to make?
Ginger D. Anders: --I think the Court could take that into account in allocating, yes, some--
Chief Justice John G. Roberts: So how would it take it into account?
You said, well, because the medical expenses are readily calculable, we assume that that's what the jury meant first, and then the other stuff is extra so the State can get it.
But maybe sometimes they just come to a -- a total figure and they don't care how it's allocated.
You say, well, that's an argument they can make.
Well, what's a judge supposed to do in a particular case?
Ginger D. Anders: --Well, I -- this is positing a situation in which there's been a settlement rather than a jury determination.
So I think that the -- the court that's doing the allocating has some discretion here.
And so one thing it can do is say I'm going to essentially prioritize medical damages, because I think juries usually will award them.
But a State could also provide that the inquiry should be more equitable and open-ended.
So, for instance, Illinois and Missouri have provided simply that -- that the court shall make an equitable allocation.
It can take into account the fact that the -- that the plaintiff may receive a double recovery.
Justice Ruth Bader Ginsburg: Do you agree -- do you agree that the only flaw in the North Carolina statute is that it's a fixed amount, and that if it were a rebuttable presumption it would be okay?
If the North Carolina law says 30 percent is the cap, but in a particular case you can show that that's not a fair allocation?
Ginger D. Anders: That's absolutely right.
And -- and to return to one of Justice Kagan's earlier questions, I think a one-third allocation may be in the mine run of cases a reasonable presumption.
But there will be some cases, like my 90 percent, 10 percent example, where it isn't a reasonable allocation.
Justice Elena Kagan: And in those rebuttal presumption States, can both sides come in and try to rebut it?
So the individual beneficiary can try to rebut it, but the States could as well?
Or is it just a right for the beneficiary to try to rebut the presumption?
Ginger D. Anders: I think in those States, it's just a right for the beneficiary to try to rebut the presumption.
Some of those States start with a rebuttable presumption of full reimbursement.
So -- so the presumption starts at the full amount that the State paid.
Chief Justice John G. Roberts: So this is a real, significant increase in the burden on the State under the Medicaid program.
You're saying yes, you can try to recover recovery from third-party tortfeasors, but if you do that you've got to set up this apparatus where everybody can come in and you've got to prove what the allocation was and all that.
So -- I mean some -- 34 States haven't done that, right?
Ginger D. Anders: I think what's more significant for our purposes is that 16 States plus D.C. have, and--
Chief Justice John G. Roberts: Well, yes, for your purposes.
But I'm interested in my purposes.
And I'm trying to figure out whether or not that's a significant financial burden on the State -- if they're going to go about trying to recover this money, that they've got to provide some apparatus, administrative, judicial, whatever, to make a calculation that I still don't understand what it's addressed to.
And not only that, but even if you do know what it's addressed to, you just take into account all these things and come up with an equitable.
Ginger D. Anders: --I don't think that these States have found that it's a significant administrative burden.
One reason is that once the allocation rules are in place, it's our understanding that most of these cases settle.
The beneficiary and the State agree as to what the allocation is, so this doesn't go to a hearing in the first place.
But even -- even when there are hearings, I think States can take significant measures to lessen the burden.
Justice Sonia Sotomayor: How many States have North Carolina's rule?
Do you know?
Ginger D. Anders: --There are -- there are five other States like North Carolina that have an irrebuttable presumption with a cap.
There are 10 others that have an irrebuttable presumption, we think, of full reimbursement.
But I should caveat that by saying that we simply don't know in those States what they do, what their practices are.
Justice Stephen G. Breyer: Why isn't -- the missing part here -- maybe I just missed it -- we're interpreting a statute, and the part that trumps the lien provision is the part that says the State is entitled to payment that has been made for medical assistance for health care items -- and some other similar language is in the statute.
They think their one-third rule is a good way of measuring that.
You think that the one-third rule as a rebuttable presumption is a better way of measuring that.
Now normally, or often, I would see government arguments like that where they'd say: And by the way, we're interpreting very technical language in our statute, and Chevron and/or Skidmore means that you should give us particular weight.
Is that part of your argument here, and if it isn't, why isn't it?
Ginger D. Anders: Well, we think that -- the position reflected in our brief is HHS's considered position, and we do think that it's -- it is persuasive.
Now, HHS presumably could regulate, it could go through notice and comment rulemaking and establish rules--
Justice Stephen G. Breyer: My impression is that you get Chevron deference on the basis of whether Congress -- and there's a lot of rules and so forth, that--
Ginger D. Anders: --We haven't claimed Chevron deference.
Justice Stephen G. Breyer: --you haven't claimed it.
And I -- so that puzzles me -- and I don't--
Ginger D. Anders: --there aren't regulations on this.
Justice Stephen G. Breyer: --I'm not -- you argue what you want to argue, but I -- this is awfully technical language.
It's a minor interstitial claim.
Justice Antonin Scalia: I'm not sure that HHS has -- has authority over how a State recovers.
I don't see that it's part of the administration of the statute committed to HHS.
So, I, you know, I admire you're not citing Chevron.
Ginger D. Anders: Well, HHS has -- the statute requires the States to -- to enact reasonable measures for recovery.
HHS thinks that a measure that circumvents the anti-lien provision like North Carolina's wouldn't be a reasonable measure, but there aren't regulations on that subject.
Chief Justice John G. Roberts: Thank you, counsel.
General Maddrey, you have three minutes remaining.
REBUTTAL ARGUMENT OF JOHN F. MADDREY ON BEHALF OF THE PETITIONER
John F. Maddrey: We have heard a lot about what a State could or maybe should do, but what must a State do under the Medicaid Act to fulfill its obligations?
The Fourth Circuit and respondents and apparently the United States say they have to have a post-settlement trial, I guess a trial to settle the settlement.
And that, while an available option, is not a mandatory requirement under anything that I can see in the Medicaid Act.
Justice Elena Kagan: Well, General, how about this, and I am having a little bit of trouble here because I think a State could come in, or I think there is a reasonable argument that a State could come in and say, you know, we've made an estimate, and here's our best estimate, and we don't think there is a need for an individualized decisionmaking on top of that.
But as I understand your argument, that is not what you are saying.
You are making a very different kind of argument, suggesting that you can take this number any place, no matter what the relationship between the number and the actual allocation that cases -- that allocation of medical and nonmedical damages in the real world.
So if that's the case, what do I do?
John F. Maddrey: Your Honor, the statute -- North Carolina's statute defines the amount that must be included for the repayment by the Medicaid recipient.
It's not guessing after the fact, but instead providing in advance, the recipe as to how to put the settlement together.
It tells the parties what they have to do.
And that makes it a bright-line rule, which I think you need to compare to the alternative, which is this -- this, what the Fourth Circuit called a true value hearing after the fact, after the settlement, how did -- how did they get there?
Is it what they did or what they should have done or what they could have done?
In this case you've got a $42 million damage claim settled for 2.8 million--
Justice Sonia Sotomayor: So how do -- what do we do with the Federal statute that says, You are not entitled to a lien of any amount that is greater than your medical expenses?
And using the Solicitor General's Office example, everybody knows that the true value of medical expenses in a particular case was only 10 percent, you are still getting 30 percent.
How do we -- how do we honor the terms of the Federal statute?
John F. Maddrey: --Because the State statute says the State never recovers more than its actual medical expenses.
If in that hypothetical the medical expenses were 100,000 or 10 percent, the North Carolina statute would say North Carolina gets up to one-third of the settlement but never more than they paid.
So by definition it can't be for something that was not medicals.
And that's the bright-line rule that the North Carolina statute creates.
Chief Justice John G. Roberts: Thank you, counsel.
The case is submitted.