On March 19, 2013, the Supreme Court decided Wos, Secretary, N.C. Dept. of Health and Human Servs. v. E.M.A., No. 12-98, holding that the federal Medicaid statute's anti-lien provision, 42 U.S.C. §1396(p)(a)(1), which precludes a state's attempt to recover any portion of a Medicaid beneficiary's tort judgment not specifically earmarked for medical care, pre-empts North Carolina's irrebuttable presumption that one-third of a tort recovery by a Medicaid beneficiary is attributable to medical expenses.
Federal Medicaid law prohibits states from attaching a lien on the property of a Medicaid beneficiary to recover benefits paid by the state on the beneficiary's behalf. 42 U.S.C. §1396(p)(a)(1). In an earlier case, the Supreme Court held that this anti-lien provision allows a state to recover the portion of a settlement representing payments for medical care, but it precludes a state from encumbering any of the remainder of the settlement. Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U. S. 268, 284 (2006).
Wos arose when North Carolina enacted a statute creating an irrebuttable presumption that one-third of any damages recovered by a beneficiary for a tortious injury were for medical treatment on account of the injury and thus could be recovered by the State. See N. C. Gen. Stat. Ann. §108A–57 (Lexis 2011). North Carolina applied that statute to the case of E.M.A., who settled for $2.8 million a medical malpractice suit arising out of serious injuries suffered at her birth. Although the settlement agreement failed to allocate the money among E.M.A.'s different claims, the state trial court placed one-third of the amount recovered into escrow.
E.M.A. then filed this action in federal district court seeking declaratory and injunctive relief. The district court affirmed the application of North Carolina's statute, but the Fourth Circuit vacated and remanded, concluding that the state's irrebuttable presumption contradicted Ahlborn and the federal anti-lien provision.
The Supreme Court affirmed, holding that North Carolina's statute contradicts the Medicaid anti-lien provision and is therefore preempted. 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 defect in [North Carolina's statute]," held the Court, "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." North Carolina's defense of its statute, moreover, lacked "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." North Carolina had neither evidence to substantiate its claim that one-third is reasonable for all cases, nor a mechanism for determining whether it was a reasonable approximation for any particular case.
Justice Kennedy delivered the opinion of the Court, in which Justices Ginsberg, Breyer, Alito, Sotomayor, and Kagan joined. Justice Breyer filed a concurring opinion. Chief Justice Roberts filed a dissenting opinion, in which Justices Scalia and Thomas joined.