What Does the Gallardo v. Marstiller Decision Mean for Medicaid Recovery?

The Supreme Court released its opinion in Gallardo v. Marstiller on June 6, 2022. Many commentators suggest the Supreme Court decision in Gallardo will change the way Medicaid recovery works forever. We have seen comments that Ahlborn allocations are now impossible. We have seen comments that this case means Medicaid Set-Asides exist now. And, we have seen comments that Medicare Set-Asides are greatly damaged by this holding.

 

MASSIVE disagrees with many of these comments.

 

First, Ahlborn allocations can still work. Justice Thomas’s main point is that Medicaid can recover for its lien from the portion of the case also designated as future medicals. We believe this “can recover” comment is nuanced because Florida’s statute specifically discusses such recovery at 2022 Fl. Stat. Ch. 409.910(17)(b). We believe other states must enact statutes indicating future medicals are part of their recovery for past payments. Otherwise, this point is not a concern.

 

Even where states allow for repayment of Medicaid liens through both past and future medical portions of the allocation, using Ahlborn with Medicaid’s participation – whether formally or informally – should still succeed. Gallardo attempted to circumvent Medicaid.

 

Second, this case does not create Medicaid Set-Asides. Nowhere does Justice Thomas state that Medicaid may not pay in the future. Nor does he state that settlement dollars are to be paid to Medicaid for future expenses. Thomas, citing the Florida Statute, clearly states that the assignment for the lien is limited to “the full amount of medical assistance provided” – this looks like it is saying paid now, not later.

 

Third, Medicare Set-Asides are not greatly affected. We believe they can be treated as normal, of course, with proper planning. Where a specific allocation occurs, and Medicaid is part of the resolution process for the case (meaning, you don’t circumvent its existing administrative processes), the MSA should be off-limits to Medicaid. The Florida law also has some specific comments about federal law preempting state law.

 

Best practices under Gallardo start with an open line to Medicaid. If Medicaid agrees to a reduced amount, there is no need to worry, because it has already agreed. At worst, this decision means Medicaid has a small amount of additional leverage when fighting for its reimbursement or lien. Regardless, we feel MSAs are not greatly affected if you spend appropriate time balancing with Medicaid and other liens.