Wednesday, January 16, 2008, 4:13 PM

NC COA Splits Over NC SCT Authority V. US SCT Authority

In Andrews v. Haygood, a divided COA panel held that NC's Division of Medical Assistance has an automatic lien on all settlement funds of a medicaid recipient. The COA majority based its ruling on NC precedent, while Judge Wynn, dissenting, would have held that US SCT precedent should have been considered and controlled.

In Andrews, the plaintiff was injured at birth. Her guardian sued the doctors and hospital, and a settlement was reached. The plaintiff receives medicaid benefits, and under NC statutory law, the State has an automatic lien on the settlement funds for the medicaid benefits the plaintiff receives. At issue in the appeal was whether the State's lien could reach settlement funds allocated, e.g., for pain and suffering, i.e., for something other than medical expenses.

The COA majority held yes, and relied on a 2006 NC SCT case, Ezell v. Grace Hosp., 360 N.C. 529, 631 S.E.2d 131 (2006), which reversed per curiam based on a 2005 dissent. Neither of those opinions appeared to have considered a 2006 US SCT decision in which the Court held that a statute similar to the one at issue in Andrews was preempted by federal law.

In Arkansas Dep't of Health & Human Servs. v. Ahlborn, 547 U.S. 268 (2006), the US SCT held that Arkansas statutory medicaid law, which appears to be similar to NC's, conflicted with and was preempted by federal medicaid law. The Court held that the Arkansas law allowed recovery of funds pegged for things other than medical care and that so doing fatally conflicted with federal law, which allows states to recover proceeds pegged for medical costs only.

Judge Wynn dissented in Andrews. Judge Wynn noted that the NC SCT had not addressed the preemption issue in Ahlborn, would hold that Ahlborn dictates that the State's lien on the plaintiff's funds is limited to those for medical costs, and does not appear see the NC COA as being boxed in by NC SCT precedent not addressing an issue presented by US SCT precedent.

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