E.M.A. Ex Rel. Plyler v. Cansler
2012 U.S. App. LEXIS 5996
4th Cir.2012Background
- E.M.A., a medically disabled minor, received Medicaid benefits administered by North Carolina DHHS, which paid over $1.9 million for her care.
- E.M.A. and her parents settled a state medical malpractice action for about $2.8 million, unallocated among medical expenses and other damages.
- North Carolina's third-party liability framework—N.C. Gen. Stat. §§ 108A-57 (subrogation) and -59 (assignment)—creates a one-third cap on the State's recovery from a lump-sum settlement.
- A DHHS lien of $933,333.33 (one-third of the settlement) was placed in the state court registry; the parties dispute the proper allocation of this trust fund.
- The district court granted summary judgment for the Secretary, relying on Andrews v. Haygood and NC statutes; the Fourth Circuit vacated and remanded, agreeing Ahlborn requires allocation testing, not a fixed cap, absent adjudication.
- The case centers on whether federal Medicaid law (Ahlborn) requires judicial or adversarial allocation of medical expenses in unallocated settlements and whether NC statutes comply with that requirement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does NC's third-party liability scheme conflict with Ahlborn? | E.M.A. argues the one-third cap permits recovery of funds not allocated to medical expenses, violating Ahlborn. | Cansler argues NC statutes align with Ahlborn by capping recovery and abrogating common law. | No; the NC scheme, as applied, does not comply with Ahlborn and must undergo adversarial allocation on remand. |
| Is the NC assignment/subrogation statutory abrogation of common law applicable to minors? | Minor lack-of-medical-expense recovery remains under common law; statutes do not create a new right. | Statutes purport to abrogate common-law limits by assignment/subrogation language. | The majority holds the statutes abrogate the common-law rule in this context, but remand is required to determine allocation. |
| Must there be a judicial or adversarial allocation of medical expenses before reimbursement? | Ahlborn requires allocation of medical expenses in unallocated settlements; other methods are insufficient. | Ahlborn permits a statutory cap as a reasonable mechanism absent allocation. | Yes; the case must be remanded for an evidentiary hearing to determine true medical-expense allocation under Ahlborn. |
| What procedure governs the lien amount on remand? | The proper lien should reflect only past medical expenses actually allocated. | The district court should apply NC statutory cap and Allocation principles. | Remand for a hearing to determine the lien consistent with Ahlborn; the district court to determine the true medical-expense portion. |
Key Cases Cited
- Ark. Dept. of Health & Human Servs. v. Ahlborn, 547 U.S. 268 (U.S. 2006) (limits state recovery to medical-expense portion; anti-lien not violated when properly allocated)
- Andrews v. Haygood, 669 S.E.2d 310 (N.C. 2008) (state schemes upheld where allocation mechanism deemed reasonable; later viewed narrowly in Ahlborn context)
- Ezell v. Grace Hosp., Inc., 623 S.E.2d 79 (N.C. App. 2005) (statutory abrogation of common-law equity principles; later reversed on other grounds)
- Andrews v. Haygood, 362 N.C.599 (N.C. 2008) (allocation framework discussion in pre-Ahlborn context; cited for state-law approach)
- Tristani ex rel. Karnes v. Richman, 652 F.3d 360 (3d Cir. 2011) (Pennsylvania-like allocation approach post-Ahlborn)