CHARLESTON — A state Supreme Court justice has warned that a recent ruling will cost West Virginia taxpayers millions of dollars, prompting Gov. Earl Ray Tomblin to ask the Legislature to revamp the way Medicaid recovers some of its spending.

Legislation introduced on the governor’s behalf this session would apply when Medicaid recipients or their survivors stand to receive damage awards or court settlements. Medicaid provides health coverage mostly to the blind, disabled and low-income children. The program’s rising health care costs place increasing pressure on the state general revenue budget.

The bill would require notice to the Department of Health and Human Resources of a lawsuit, claim or settlement offer. The department, which oversees Medicaid, would then become a party in the case. Any damage award or settlement must specify the amount meant to cover past medical expenses. The department would then receive at least some of that amount. The bill would also require that the department approve a settlement’s terms, or else a judge must hold a hearing to resolve the impasse.

Tomblin’s measure responds both to a June ruling from a divided Supreme Court, and a dissent to that decision from Justice Menis Ketchum. The case involves a child born in 2005 with severe brain damage, and a resulting medical malpractice lawsuit that was settled for $3.6 million.

The child’s mother had promptly enrolled him in West Virginia’s Medicaid program upon moving to Hancock County from Ohio, where he was born, in 2007. The program then sought to recover at least half of the more than $557,100 it had spent on the child’s care by the time the malpractice case settled in late 2009. The mother objected. Her lawyers argued that as the $3.6 million reflected a fraction of the true value of the child’s case, which they estimated at $25.3 million, Medicaid should only receive a similar percentage. A judge agreed in 2010, limiting the program’s recovery to $79,000.

Supreme Court rulings do not identify minors or their families, instead using initials or partial names. The June opinion written by Chief Justice Brent Benjamin largely upheld that judge’s findings, while increasing Medicaid’s recovery amount to $96,000. Justice Margaret Workman partly agreed and partly disagreed in the case. Ketchum, meanwhile, blasted the outcome.

“As a result of the majority holding, West Virginia’s taxpayers will not be reimbursed for the millions of dollars a year it pays on the medical bills of Medicaid recipients,” his dissent said. “Settlements paid by insurance companies to Medicaid recipients will be kept by the recipients and West Virginia will keep paying their medical bills.”

Ketchum’s key concern: Benjamin’s decision wrongly concludes that West Virginia cannot recover money for future medical expenses.

Medicaid continues to pay for 16 hours of nursing care for the Hancock County child. His mother estimates that most of his case’s true value, around $19.1 million, reflects future medical costs. She also expects that Medicaid will provide that future medical care, as the settlement was placed in a trust fund that does not count against his eligibility. But she balked at allowing the program to receive any money for future costs. The circuit judge and the Supreme Court both agreed.

“There is no question that (the department) may only be reimbursed for its past medical expenses,” Benjamin wrote.

Ketchum argues that this finding misreads a U.S. Supreme Court opinion addressing Medicaid recoveries.

“West Virginia’s taxpayers will be paying, through Medicaid, plaintiff’s future medical bills that will total more than $19 million dollars,” Ketchum wrote. “The plaintiff will be able to use the millions put in the special needs trust as a supplement to enhance quality of life.”

Tomblin’s bill reflects Ketchum’s recommendations for responding to the decision. It also adopts the process outlined by Benjamin in the majority ruling for resolving disputes over settlement terms. While focusing on recovering past medical expenses, the governor’s proposal also mandates that any settlement or damage award identify a specific amount for covering future expenses as well.

“”We’re trying to update the statute, to put it in compliance with (the decision),” said Peter Markham, Tomblin’s chief lawyer. “We’re also trying to address some of Justice Ketchum’s concerns, that DHHR is properly compensated for past medical expenses.”