The case that expanded what Medicaid can take
For years the settled wisdom on Medicaid liens ran through Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), which held that a state could recover only from the portion of a settlement representing medical expenses, not the whole recovery. Practitioners read Ahlborn as a shield: allocate the settlement so that the medical share is small, and the lien shrinks with it. That shield got narrower in 2022, and any firm still resolving Medicaid liens on the old assumptions is leaving the plan too much room to reach.
The case is Gallardo v. Marstiller, 596 U.S. 420 (2022). In a 7-2 decision, the Supreme Court held that the federal Medicaid Act permits a state to recover from the portion of a settlement allocated to future medical expenses, not only from the portion representing past medical care the program already paid. The line the Court drew is not past versus future. It is medical versus non-medical.
What Gallardo actually decided
Gianinna Gallardo was catastrophically injured as a child and left in a persistent vegetative state. Florida's Medicaid program paid more than $860,000 for her care. Her case settled for $800,000, with only about $35,000 expressly allocated to past medical expenses and the rest unallocated or attributed to other categories, including future care. Florida sought to recover against the future-medical share. The Court agreed the state could, reasoning that the Medicaid anti-lien statute carves out settlement proceeds attributable to medical care generally, and future medical expenses are still medical expenses.
The distinction that controls a Medicaid recovery is no longer past versus future. It is medical versus non-medical, and the future-medical column is now inside the plan's reach.
Ahlborn is not dead. A state still cannot reach the non-medical components of a recovery, the pain and suffering, the lost wages, the loss of consortium. What Gallardo changed is that the future-medical column, which many practitioners used to treat as safely on the plaintiff's side of the ledger, now sits with past medicals on the recoverable side.
Why allocation is now the entire game
If the plan can reach both past and future medicals, the only thing standing between your client and a larger Medicaid recovery is how the settlement is allocated across categories. A lump-sum settlement with no allocation is the worst posture, because it invites the agency to characterize as much of it as possible as medical. The work is to build a defensible allocation that assigns realistic value to the non-medical damages, which in a serious injury case are usually the largest categories anyway.
- Get the allocation blessed. A judicially approved or stipulated allocation, supported by evidence, is far harder for the agency to disturb than a number counsel wrote on a disbursement sheet after the fact.
- Document the non-medical categories. Life-care planning, wage-loss economics, and consortium proof are not just trial tools. They are the evidentiary backbone of an allocation that keeps the medical share proportionate to the real damages.
- Know your state's process. States implement Gallardo differently, and some provide an administrative mechanism to contest the presumed allocation. Others force the fight into court. Calendar the deadline the day you learn Medicaid paid.
The set-aside question Gallardo raised
Because the plan can now reach future medicals, commentators have asked whether liability settlements will start to require Medicaid set-asides the way workers' compensation settlements do. There is still no federal mandate requiring a liability Medicaid set-aside, and the programmatic guidance remains thin. But the exposure Gallardo created is the reason the topic keeps surfacing, and prudent practitioners are at least pricing the future-medical question rather than assuming it disappears at disbursement. This is the same protect-the-net discipline that governs the rest of your liens and settlement workflow.
Coordinating the number with the case
Two coordination points matter. First, the same medical-damages proof that supports your affirmative case supports your allocation, so build it once and use it twice. In a serious injury or medical malpractice file, the life-care plan that anchors the future-medical demand is also the document the agency will scrutinize when it presses its future-medical claim. Second, resolve the allocation before you circulate the disbursement statement, not after, because a client who has seen a net number does not want to hear it move.
Gallardo did not hand Medicaid the whole settlement. It moved one column across the line and made allocation the discipline that protects the rest. Treat the non-medical damages as evidence to be proven, get the allocation approved, and the plan's expanded reach becomes a manageable line item rather than a surprise that eats the client's recovery.