QUI TAM: THE FUTURE IS NOW IN PERSONAL INJURY LITIGATION
Richard Neuworth
On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 devoted principally to providing insurance coverage for prescription drugs as part of an enhanced package of benefits offered to Medicare recipients and beneficiaries. More importantly, a series of amendments were included that enabled Medicare recipients and beneficiaries and others to bring private qui tam actions on behalf of Medicare against an expanded class of entities with insurance that cause injuries or were involved in wrongdoing in all types of personal injury litigation as part of the Medicare Secondary Payer Act. The 2003 amendments are found in Title III of the legislation.
The possible private cause of action is brought on behalf of Medicare against the wrongdoing individual(s) either employed by an entity such as "a self-insured employer" or a "third-party administrator of a health insurance plan" for an employer or an "insurance carrier for an employer or an individual or all of the above seeking double the amount of medical expenses paid by Medicare.
The action arises when a liable third party makes any payment in an underlying civil action or at anytime as part of a settlement of a claim for personal injuries. The premise underlying both the Medicare Secondary Payer Act and private cause of action is that third parties may not shift the cost of medical expenses attributed to their wrongdoing from themselves to taxpayers. Medicare should remain a secondary payer if another primary plan of insurance exists to pay the medical expenses of the Medicare beneficiary or recipient.
THE CHECKERED HISTORY OF THE PRIVATE CAUSE OF ACTION
Although, private individuals have been permitted to file federal qui tam actions on behalf of Medicare for nearly twenty years, the remedy was stymied for a variety of reasons prior to the enactment of the 2003 amendments. Initially, Congress was repeatedly required to amend the statute to include important parties which had not been expressly included when the Medicare Secondary Payer Act was enacted in 1980.
In 1984, the statute was amended to authorize actions by the United States to recover payments from entities "responsible" for payment. In the late 1980s, Medicare asserted that it could also seek recovery from third-party administrators ("TPAs") of group health plans as well as the entity that bore the ultimate financial burden of the plan. However, that effort failed when the District of Columbia of Appeals ruled against Medicare in 1994. Congress was again forced to amend the statute in 1997 to allow Medicare recover against TPAs and others "required or responsible . . . to make payment."
In order to recover payment made under this title for such an item or service, the United States may bring an action against any entity that is required or responsible (directly, as a third-party administrator, or otherwise) to make payment with respect to such item or service (or any portion thereof) under a primary plan.
Beginning in 2000, Medicare asserted that it could seek recovery from employers who sponsored or contributed to third-party health insurance for their employees, relying on the "or otherwise" language of the 1997 amendment. However, several court refused to extend liability to include such self-insured corporations. One circuit court of appeal derided such an approach as turning every corporation into an insurance company subject to the provisions of the Medicare Secondary Payer Act. This 2003 decision served as a catalyst for the 2003 amendments. This development occurred when the same court rejected an amicus brief filed in the same case by Senator Charles Grassley. Senator Grassley is one of the long-standing proponents of the Medicare Secondary Payer Act that had urged expanded corporate liability. Senator Grassley and others in turn moved rapidly to overturn the decision in personally sponsoring the amendments in Title III of 2003 Medicare legislation.
However, other problems arose that necessitated further legislation in 2003. Some courts had previously held that few if any settlements of the underlying personal injury or tort action did not necessarily result in the settling entity becoming a primary payer under the terms of the statute that could be sued in a subsequent action.
Other courts had limited the private cause of action only to cases in which Medicare made a prompt payment of medical expenses.
THE 2003 AMENDMENTS
The 2003 amendments were specifically enacted to overturn the previously referenced court decisions that effectively prevented the private cause of action from becoming a useful weapon in personal injury litigation.
The italicized changes to the 2003 amendments are as follows: In 42 U.S.C. 1395y (2) was amended as follows in this subsection, the term "primary plan" means a group health plan or large group health plan to the extent that clause (i) applies, and a workmen's compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance, to the extent clause (ii) applies. An entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance or otherwise) in whole or in part.
In 42 U.S.C. 1395(y)(2)(B)(ii) A primary plan's responsibility for such payment [to Medicare] may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver or release (whether or not there is a determination or admission of liability will demonstrate a plan's responsibility to reimburse Medicare).
In Section 1395y (2) (B)(i) Reimbursement is no longer tied to anticipation of "prompt" payment because the Secretary of HHS may make conditional payments "if a primary plan has not made or cannot reasonably be expected to make payment with respect to such item or services promptly".
As part of the 2003 amendments, Congress went further and held that these amendments would apply retroactively back to the passage of the original Medicare Secondary Payer Act.
In 2005, the United States Court of Appeals for the Federal Circuit in a particularly significant decision in Telecare Corp. v. Leavitt interpreted the 2003 amendments. The Court ruled that individual corporations alone that sponsor or contribute to group health plans may be held liable based on the 2003 amendments for medical expenses that it caused to its individual employees covered by Medicare.
In the case, Telecare sponsored a prepaid health care plan for its employees through Kaiser Foundation Health Plan. One employee incurred medical expenses under the Telecare-sponsored plan and Medicare. Medicare initially paid the expenses thus triggering liability under the Medicare Secondary Payer Act.
The Court rejected Telecare's argument that its insurer, Kaiser should be held liable for the Medicare payment of medical expenses. The Court held that the entity alone can be sued based on the 2003 amendments.
Prior to Telecare, in Baxter v. United States of America, employers that did have self-insurance that included excess coverage were also covered under the Medicare Secondary Payer Act.
In Brown v. Thompson, the Fourth Circuit held that as a result of the 2003 amendments that a self-insurance arrangement would qualify as a plan under the Medicare Secondary Payer Act whether formal or informal if there was an indication to self-fund liability claims as they arise.
As a result of these important decisions, the only employers now excluded from potential liability under the private cause of action brought pursuant to the Medicare Secondary Payer Act are limited to those that employ less than 20 employees for each working day in each of 20 or more weeks in a calendar year or the preceding calendar year and/or those with no insurance or insurance arrangements that are not intended to self-fund liability claims as they arise.
TYPES OF CLAIMS
As a result of the expanded number of entities that can be sued, certain specific types of personal injury claims will become more valuable after the 2003 amendments. Nursing home and assisted living facilities that have liability insurance and cause injury to elderly residents, who invariably have Medicare coverage, would be subject to larger recoveries in cases involving just medical expenses. Medical malpractice actions could be filed by Medicare beneficiaries and recipients against employer entities and their employee physicians and possibly even third party administrators that negligently cause injury resulting in increased medical expenses paid by Medicare. Both bad faith and underinsurance actions will not be based solely on the outstanding medical expenses but twice the amount of the expenses if paid by Medicare. As a result, an initial letter to an insurer carrier whether arising out of bad faith or underinsurance should reflect the fact that a qui tam action could be brought to recover twice the medical expenses incurred in the case. Products liability and slip and fall actions will be easier to file in cases that have large medical bills despite the absence of lost wages because many Medicare recipients and beneficiaries often are not employed at the time of their injuries.
In fact, any public or private entity and their individual employees acting in the scope of their employment could be sued for all acts of negligence to the extent of their liability insurance coverage resulting in any medical expenses paid by Medicare Workers compensation cases particularly occupational diseases would no longer be governed by exclusivity provisions under state law if the employer and insurer refused to pay for medical treatment resulting in Medicare assuming liability.
IMPORTANT IMPLICATIONS OF THE 2003 AMENDMENTS
The 2003 amendments have potentially profound implications involving all types of personal injury litigation. Moreover, the sheer numbers of current and future beneficiaries highlight the importance of the private cause of action under the Medicare Secondary Payer Act. Currently, there are forty-one (41,000,000) million beneficiaries in the Medicare health care system. In five years, an additional seventy-four (74,000,000) million baby boomers will start entering the Medicare system.
The private cause of action has other important advantages presently available as contrasted with other remedies under state and federal personal injury law. The private qui tam action means literally anyone or any organization may bring the federal action against the third party wrongdoer(s) not just the victim, victim's spouse or victim's children. A recent example is an action filed by a seniors' organization currently pending against all tobacco companies filed in Massachusetts seeking recovery for all Medicare expenses paid since 1999.
The third party wrongdoer is barred from re-litigating liability issues in any subsequent action brought pursuant to the 2003 amendments if a monetary judgment has been obtained in the underlying action at trial or a finding of compensability by an administrative agency which was never appealed. However, a settlement payment probably does not mean that the underlying action cannot be re-litigated.
Qui tam federal actions brought on behalf of the United States by individuals are specifically designed to recover medical expenses and would not be subject to state evidentiary rules barring evidence of paid medical bills. Rather, the issue in the federal action is did the wrongdoer have insurance, in what amount at the time of the tortuous conduct that caused the medical expenses and has payment of money been made to the victim.
Unlike ERISA actions seeking payment of unpaid medical bills, the private remedy available to Medicare beneficiaries and recipients provides for double the amount of the medical expenses. Furthermore, the private cause of action will decided by a jury and not a federal judge.
The federal action has no express statute of limitations concerning when an appropriate action may be filed to recover medical bills paid by Medicare. One circuit court of appeal has already applied a six year statute of limitations based on the Federal False Claims Act. Furthermore, the statute of limitations is not triggered until a liable third party makes a monetary payment.
One circuit court of appeals has also held with respect to the 2003 amendments were clarifying and not substantive that would seem to open the door to actions filed prior to December 8, 2003. As a result, arguments should be unsuccessful that the amendments are ex post facto concerning actions that affect medical bills incurred prior to December 8, 2003. Instead, the only bar would be the statute of limitations.
After twenty long years, Medicare beneficiaries and recipients may finally have an effective federal cause of action to maximize their personal injury cases.