In a case that could have repercussions for state governments and Medicaid recipients nationwide, the United States Supreme Court ruled 6-3 in favor of the family of a North Carolina girl who suffered birth injuries that resulted in cerebral palsy. The family sought to block the state of North Carolina from claiming one-third of a $2.8 million legal settlement received when they settled a medical malpractice lawsuit.

Emily Armstrong, the young girl at the center of the lawsuit, was born in Hickory, North Carolina in February 2000. Her mother's obstetrician, Dr. James A. Barnes, Jr., performed the delivery by cesarean section. Complications arose, leading to Emily suffering severe injuries and being diagnosed with cerebral palsy. Believing Emily's birth injury was preventable, the Armstrong family filed a medical malpractice suit against Dr. Barnes and the Catawba Valley Medical Center in 2003. Further investigations revealed that Dr. Barnes had a history of using false prescriptions to support his drug habit, and while he denied the influence of illegal drugs during Emily's birth, the doctor surrendered his North Carolina medical license in May 2000 on his own accord.

After the Armstrong family was awarded $2.8 million in a settlement, the state of North Carolina attempted to claim nearly $1 million from the total, citing a state law that creates a lien on either the total Medicaid spending on the patient or one-third of money received by Medicaid beneficiaries in medical malpractice lawsuits. The Armstrong's then claimed that the North Carolina law was in conflict with a federal law that, while allowing states to claim reimbursements for expenses already paid by Medicaid, does not allow claims on funds awarded for additional injuries, pain, and suffering. The family argued that Emily's birth injuries led to life-long pain and suffering, and expenses that far outweigh the medical expenses covered by Medicaid. The Fourth Circuit Court agreed, ruling that in this case, North Carolina's fixed rate of one-third reimbursement affected a portion of the settlement money not related to medical expenses.

In ruling in favor of the Armstrong family, the Supreme Court found that while the state should be able to claim Medicaid reimbursement from medical malpractice settlements, it should not be allowed to claim any more than that amount. Therefore, because North Carolina's statute claimed one-third of all recoveries, in cases where the Medicaid expenses were less than one-third of the money received by plaintiffs, the state was taking too much money. The Justices recommended North Carolina create a system to examine each malpractice case in turn to determine what portion of money is kept by the state for Medicaid reimbursement and what goes to the claimant for pain and suffering.

Sources:

Miami Herald, Supreme Court Case Involves Medical Malpractice Awards, Medicaid, 1-7-13

Miami Herald, Disabled Teen Wins High Court Case Over Settlement, 3-20-13