As most Medicaid recipients know, at the end of that recipient's life, Medicaid will be allowed to recover against their estate in repayment for Medicaid's expenditures on their care. Medicaid is also allowed to demand reimbursement when a Medicaid recipient is awarded damages in a medical malpractice suit.
Until March of 2013, North Carolina's Department of Health and Human Services (DHHS) had been enforcing North Carolina state law that enabled DHHS to automatically recover the lesser of either: a) full reimbursement of Medicaid's expenses; or b) one-third of the total medical malpractice award, regardless of how much was designated for medical expenses.
However, in March of 2013, the U.S. Supreme Court ruled in a case involving a young girl who was awarded $2.8 million in medical malpractice settlement, that the federal Medicaid Act preempts this North Carolina state law. As a result, North Carolina (and all other states) can no longer demand "any portion of a beneficiary's tort recovery except the share that is attributable to medical expenses," Justice Anthony Kennedy. The Court made clear that determining the appropriate amount of reimbursement should be done on a case by case basis, and that states will no longer be able automatically take as recompense one-third of a medical malpractice award. States are now considering setting up administrative processes by which to review each case and make individual determinations.