Opinion ID: 780848
Heading Depth: 2
Heading Rank: 2

Heading: Does the 1999 Amendment to the Medicaid Act Bar Plaintiff's Claims?

Text: 20 Even if Pennsylvania had recovered the Tobacco Settlement funds under an assignment from Medicaid recipients, we would still find that plaintiffs have failed to state a claim for which relief could be granted. In a rider to a 1999 appropriations bill, Congress amended the Medicaid Act by promulgating what is now § 1396b(d)(3)(B)(i) and (ii) and renumbering § 1396b(d)(3) as § 1396b(d)(3)(A). In this amendment, Congress absolved the states from any potential liability to the federal government or to Medicaid recipients for any part of the Tobacco Settlement funds by explicitly giving to the States the authority to use the Tobacco Settlement funds for any purpose the States deemed appropriate. Plaintiffs' arguments to the contrary cannot overcome the plain meaning of the language of that amendment. Thus, even if § 1396k(b) applied to the Tobacco Settlement funds, the 1999 amendment would absolve the Commonwealth of its obligation to share its recovery with the plaintiffs. The amended Act now reads: 21 (A) The pro rata share to which the United States is equitably entitled, as determined by the Secretary, of the net amount recovered during any quarter by the State or any political subdivision thereof with respect to medical assistance furnished under the State plan shall be considered an overpayment to be adjusted under this subsection. 22 (B)(i) Subparagraph (A) and paragraph (2)(B) shall not apply to any amount recovered or paid to a State as part of the comprehensive settlement of November 1998 between manufacturers of tobacco products, as defined in section 5702(d) of Title 26 [26 U.S.C.A. § 5702(d)], and State Attorneys General, or as part of any individual State settlement or judgment reached in litigation initiated or pursued by a State against one or more such manufacturers. 23 (ii) Except as provided in subsection (i)(19), a State may use amounts recovered or paid to the State as part of a comprehensive or individual settlement, or a judgment, described in clause (i) for any expenditures determined appropriate by the State. 2 24 These provisions outline the federal government's response to the Tobacco Settlement. Subsection (A) provides that, in most cases, when a State recovers funds spent on Medicaid expenses, the federal government is entitled to its share. Subsections (B)(i) and (ii) directly address the Tobacco Settlement funds. Subsection (B)(i) waives the federal entitlement to a share of the Tobacco Settlement. Subsection (B)(ii) expressly grants the states the authority to use the Tobacco Settlement funds for any expenditures determined appropriate by the State. The meaning of the above language is plain. It allows the States to refuse to compensate Medicaid recipients as otherwise would be required by 42 U.S.C. § 1396k(b). As we set out above, many of our sister circuits agree. See Cardenas, 311 F.3d at 939-40; Strawser, 290 F.3d at 730-31; Greenless, 277 F.3d at 608; Tyler, 280 F.3d at 123; Harris, 264 F.3d at 1295. 25 Plaintiffs advance several arguments in an attempt to overcome this plain language. First, they contend that, while subsection (B)(ii) permits the States to use the federal share of the Tobacco Settlement for any appropriate expenditure, that permission does not extend to the share of Medicaid beneficiaries. To support this contention, plaintiffs argue that subsection (B)(ii) refers only to the sums described in subsection (B)(i) — sums which they contend include only the federal share. Unfortunately for the plaintiffs, the amount recovered as stated in subsection (B)(ii) is not merely a reference to the federal share which is the subject of subsection (B)(i). There is no language in subsection (B)(ii) containing such a limitation. There is reference in subsection (B)(ii) to subsection (B)(i) but the pertinent language is in the phrase a comprehensive or individual settlement, or a judgment, described in clause (i); this constitutes a specific reference to the Tobacco Settlement and its progeny as set out in subsection (B)(i). See Strawser, 290 F.3d at 731. As such, it does not limit the use of the amounts recovered. 26 Plaintiffs also argue that the plain meaning of subsection (B)(ii) is contradicted by the legislative history of the enactment. They claim that once Congress decided to let the States keep the federal share, the debate surrounding the enactment of subsection (B)(ii) then focussed on whether to attach conditions on the use of the federal share. Subsection (B)(ii), they claim, merely makes explicit that Congress decided not to do so. Although this point was raised in the debate, plaintiffs' argument skips over other equally significant parts of the debate. 27 In fact, the legislative history indicates that Congress was not entirely convinced that Medicaid even covered the Tobacco Settlement and that § 1396b(d)(3)(B)(ii) was passed to remove doubt and to avoid costly litigation — litigation like the case before us. See Harris, 264 F.3d at 1294-95 (setting forth significant portions of the floor debate). Thus, despite plaintiffs' contentions, the legislative history also supports the plain meaning of § 1396b(d)(3)(B)(ii) — that it allows states to use the Tobacco Settlement funds for any purpose they deem appropriate. 28 In addition, plaintiffs argue that applying the plain meaning of § 1396b(d)(3)(B)(ii) contradicts several canons of interpretation: (1) statutes should be read to avoid surplusage, TRW Inc. v. Andrews, 534 U.S. 19, 24, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001); (2) implied repeals are disfavored, United States v. United Continental Tuna Corp., 425 U.S. 164, 168, 96 S.Ct. 1319, 47 L.Ed.2d 653 (1976); and (3) retroactive application is disfavored, I.N.S. v. St. Cyr, 533 U.S. 289, 121 S.Ct. 2271, 150 L.Ed.2d 347 (2001). None of these canons is applicable here. 29 Deciding whether a statute is retroactive is primarily a question of legislative intent, see DeSousa v. Reno, 190 F.3d 175, 186 (3d Cir.1999). Here, subsection (B)(i) specifically states that it applies to any amount received under the Tobacco Settlement. We conclude that this reference to any amount includes funds received prior to the passage of the amendment. For that reason, the amendment is clearly retroactive. 30 As to implied repeal, plaintiffs argue that the plain meaning of § (B)(ii) should be ignored because it would implicitly repeal § 1396k(b). Subsection (B)(ii), however, does not repeal § 1396k(b). It applies only to the Tobacco Settlement funds and applies to those funds explicitly. For that reason, § 1396k(b), as it applies to the usual action to recover Medicaid costs from a third party, continues in effect. 31 We also reject plaintiffs' argument that the plain meaning of subsection (B)(ii) makes the rest of the 1999 amendment superfluous. Plaintiffs argue that if subsection (B)(ii) means what it says, then that subsection in and of itself gives up the federal share of recovery. Subsection (B)(i) is therefore meaningless. Plaintiffs assert that statutes should be read to avoid surplusage. See TRW Inc. v. Andrews, 534 U.S. at 24, 122 S.Ct. 441. This argument fails, however, because the plain meaning of subsection B(ii) does not make subsection B(i) meaningless. If Congress had enacted subsection (B)(ii) without subsection (B)(i), the language of the amendment would have been ambiguous. The question of whether the federal government had given up its share of the recovery would not have been expressly dealt with. That ambiguity might eventually have been resolved in favor of releasing the federal share. We should not, however, mistake for surplusage Congress's attempts to clarify its intent. 32 We conclude, therefore, that § 1396b(d)(3)(B)(ii) explicitly allows the States to use the Tobacco Settlement funds for any appropriate expenditure and, as a result, that Medicaid beneficiaries have no claim to those funds.