Medicare qui tam: a health care bill surprise

by Walter Olson on July 17, 2009

Contacts on Capitol Hill inform me that Republicans yesterday managed to block a remarkable provision that had been slipped into the House leadership’s 794-page health care bill just before it went to a House Ways & Means markup session. If their description of the provision is accurate — and my initial reading of the language gives me no reason to think it isn’t — it sounds as if they managed to (for the moment) hold off one of the more audacious and far-reaching trial lawyer power grabs seen on Capitol Hill in a while.

For some time now the federal government has been intensifying its pursuit of what are sometimes known as “Medicare liens” against third party defendants (more). In the simplest scenario — not the only scenario, as we will see below — someone is injured in, say, a car accident, and has the resulting medical bills paid by Medicare. They then sue and successfully obtain damages from the other driver. At this point Medicare (i.e. the government) is free to demand that the beneficiary hand over some or all of the settlement to cover the cost of the health care, but under some conditions it is also free to file its own action to recover the medical outlays directly from the negligent driver (who in some circumstances might even wind up paying for the same medical bills twice). It might do this if, for example, it does not expect to get a collectible judgment from the beneficiary.

The newly added language in the Thursday morning version of the health bill (for those following along, it’s Section 1620 on pp. 713-721) would greatly expand the scope of these suits against third parties, while doing something entirely new: allow freelance lawyers to file them on behalf of the government — without asking permission — and collect rich bounties if they manage thereby to extract money from the defendants. Lawyers will recognize this as a qui tam procedure, of the sort that has led to a growing body of litigation filed by freelance bounty-hunters against universities, defense contractors and others alleged to have overcharged the government.

It gets worse. Language on p. 714 of the bill would permit the lawyers to file at least some sorts of Medicare recovery actions based on “any relevant evidence, including but not limited to relevant statistical or epidemiological evidence, or by other similarly reliable means”. This reads very much as if an attempt is being made to lay the groundwork for claims against new classes of defendants who might not be proved liable in an individual case but are responsible in a “statistical” sense. The best known such controversies are over whether suppliers of products such as alcohol, calorie-laden foods, or guns should be compelled to pay compensation for society-wide patterns of illness or injury.

A few other highlights of the provision, pending analysis by persons more familiar with Social Security and Medicare law than myself:

  • A bit of language on p. 714, I am told, would remove a significant barrier to litigation, namely a rule authorizing a lien action to be filed on behalf of Medicare only after a previous “judgment”, that is to say, only after the success of an earlier lawsuit (by the injured party) establishing responsibility for the injury.
  • Language on p. 715 would double damages in cases of “intentional tort or other intentional wrongdoing”.
  • P. 716 specifies that “any person” may bring the action, that is, it need not be a lawyer representing the injured person or any other injured person.
  • P. 717: the bounty would be a rich one, 30 percent plus expenses. P. 719 provides that even if the federal government itself intervenes and insists on taking over the lawsuit, the bounty-hunter would still get a minimum of 20 percent, perhaps as reward for winning the race to the courthouse. No one other than the federal government could oust the first-to-file lawyer from control of the action, so other private lawyers who lost the race to the courthouse would be out of luck. Page 720 specifies that the suit may be settled “notwithstanding the objections of the United States” — that is, the objections of the entity on whose behalf it was supposedly filed — if a court so agrees.
  • Medicare would have to cooperate with the private lawyers, whether or not the government joined or approved of the action, by handing over various documents useful to them.

For the moment, at least, the bullet seems to have been dodged. Some Republicans on the committee spotted the issue and raised strong protests, and by the end of the day an agreement had been reached with Democratic managers to withdraw the provision. That still provides no guarantee that it will not rear its head later in the process at some stage that proponents judge more favorable to their designs.

The idea being promoted here is an atrocious one. Even when it comes to garden-variety torts, there are many entirely legitimate reasons why federal managers might not decide to pursue Medicare liens from every possible defendant. To take only one example, they might have scruples about suing peripheral defendants who might be made to cough up settlement money to avoid the costs of litigation but against whom liability was doubtful. Freelance private lawyers would be free to sue everyone in sight and employ the most hardball tactics along the way. If the language about epidemiological and statistical evidence is indeed meant to pave the way for future suits against liquor, gun or cheeseburger purveyors, it represents a stealth attempt to restore via fine print a lawyerly dream that the courts have almost uniformly rejected over the past decade, as well as personally enrich lawyers with fees that could soar beyond even those of the scandalous tobacco-Medicaid litigation. Who in Congress slipped this language in, anyway — and on whose behalf?

Incidentally, this is not the first time the idea of Medicare-lien/”secondary payer” qui tam has been given an outing. In 2006 the famous Erin Brockovich lent her name and efforts to lawsuits filed by Wilkes & McHugh and another law firm pursuing the highly adventurous theory that a qui tam right to sue over tort-induced Medicare overpayments already exists, at least against hospitals. This campaign fared extremely poorly in court (see our earlier coverage here, here, and here). Last year, in a case argued by Kenneth Connor for Wilkes & McHugh, the Sixth Circuit ruled that claims brought by Wilkes’s client against dozens of hospitals were “utterly frivolous” and ordered counsel to show cause why sanctions should not be imposed for “unreasonable and vexatious” appeals (Stalley v. Methodist Healthcare, PDF; more at Jones Day site). (reposted with slight changes and bumped from an earlier post this morning) (& welcome Popehat, Coyote, Weisenthal/Business Insider, Hemingway/NRO “Corner”, For What It’s Worth, Blogs for Victory, TigerHawk, The Agitator, Colossus of Rhodey readers).

{ 8 trackbacks }

PointOfLaw Forum
07.17.09 at 11:39 am
| Popehat
07.17.09 at 11:54 am
The Colossus of Rhodey
07.18.09 at 10:12 am
Republicans stop (for now) Dems offering of audacious and far-reaching trial lawyer power grabs in Health Care Bill.
07.18.09 at 6:50 pm
Tort reform? « A Priori Concepts
07.18.09 at 7:51 pm
Now at Forbes.com: “Inside the Health Care Bill”
07.22.09 at 2:40 pm
PointOfLaw Forum
07.22.09 at 9:18 pm
Medicare Secondary Payer expansion, cont’d
08.05.09 at 9:30 am

{ 14 comments }

1 Max Kennerly 07.17.09 at 12:59 pm

Why, exactly, should the taxpayer instead of the tortfeasor be on the hook for medical costs due to the tortfeasor’s conduct? Your objection is the essence of socialism: that society as a whole, rather than the responsible individuals, should bear the cost of the individual’s conduct.

As a practical matter, the Centers for Medicare & Medicaid Services (CMS) has nowhere near the resource to find and file these lawsuits, much like how the DoJ has nowhere near the resources to root out and litigate every fraudulent claim. So why not authorize, at the very least, the injured party to serve as realtor and expend their time and energy to recover damages on behalf of the taxpayer?

2 Ken 07.17.09 at 1:15 pm

Max, by “the injured party” do you mean the person who received the Medicare treatment?

My answer to your question, by the way, is that a qui tam approach — particularly as unrestrained by the terms described in this post — is a hideously inefficient and unfair system of attempting to assign actual legal responsibility. Thanks to the utter lack of serious barriers to or consequences for filing meritless suits, it mostly serves as a mechanism to transfer money to lawyers.

3 Max Kennerly 07.17.09 at 1:59 pm

I do indeed mean the person who received the treatment and then brought the suit against the tortfeasor. Such would then sharply limit ‘relator’ status to those in the best position to know the extent of such medical expenses and the liability of the defendant. Indeed, if drafted correctly, such a procedure would allow for both the injury suit and the medical costs suit to proceed side-by-side and get neatly wrapped up together at time of verdict or settlement.

Let me point out that for years state governments have been imposing liens on personal injury settlements and verdicts, despite Medicare’s own anti-lien provisions. (There’s currently litigation over this issue.) These are, again, costs borne by society (and attempted to be recouped against the injured party) due to someone else’s malfeasance.

I’d like to hear what system you have in mind that’s more efficient and fair than the qui tam approach, which has done a remarkable job of both outsourcing work to private parties and of encouraging whistleblowing by persons aware of false claims. Do you think a large government bureaucracy should be established to recover these sums? How would that be “efficient” or “fair?” They would barely have any information on where to start, much less the resources to pursue these costs.

4 Robert 07.17.09 at 6:54 pm

Is the Thursday morning version of the bill available online?

5 Walter Olson 07.17.09 at 7:13 pm

I don’t have the means to post PDFs. I am happy to send along the bill to someone who does (it’s a big file, as can be imagined), but it’s likely that someone has already posted it, so finding a URL for that would save the trouble.

6 Georg Felis 07.18.09 at 12:09 am

So, unlike what Max thinks, if this monster had blundered thru to become law, the *first* lawyer to file on behalf of the legions of diabetes sufferers blaming the manufacturer of Corn Sweeteners for their condition could possibly be in line to collect fees that the tobacco lawyers could only dream about, right? Then the suits against the oil companies for diesel particles in the atmosphere causing asthma, fast food companies for fatty foods, and so on ad nausum. Ick.
Keep up the good work, and keep stomping these turkeys.

If Bob is injured, and sues, and collects, thats law.
If Bob is injured, and somebody he has never seen in his life sues and collects for him, and sends the money collected to somebody else Bob has never heard of, then that’s a travesty.

7 Max Kennerly 07.18.09 at 9:57 am

Georg – that’s an objection solely to who should have standing, one I sympathize with. Qui tam ‘relator’ standing is sharply limited to actual whistleblowers, and there’s good reason to limit standing here as well.

So why not permit Bob to bring the suit? Bob was the one injured and treated, the one who knows the details about the liability and costs, the one who was forced to utilize the public services due to someone else’s malfeasance.

8 Paul W Dennis 07.18.09 at 10:31 am

It would seem to me one way to control any sort of qui tam adventure would be to make it subject to a strict “loser pays” rule. If one of these little adventures misfires (probably by chasing a non-culpable deep pocket) let them make the wrongly pursued target pocket deeper by assessing all fees and costs plus penalties and interest and suspend the offenders right to litigate until the judgment is paid

If the problem for Medicare is resources, then staff up medicare properly or forget about it. The only honest and ethical bounty hunter ever was Palladin (in Have Gun, Will Travel) and he was a ficticious character . Most are “Dog – The Bounty Hunter” and allowing them to serve as the enforcer of Medicare liens is beyond repulsive

p.s – while I disagree with much of what Kennerly says, he does have a very interesting blog

9 Chris Gullen 07.18.09 at 11:27 am

Personal injury practitioners see many cases in which Medicare (i.e. taxpayers) has paid for medical care of injured parties whose treatment should have been paid by existing health, workers’ compensation or other insurance policies or self-insured plans. Likewise there are many cases in which Medicare has paid for treatment of injuries for which a tortfeasor is eventually found to have been responsible.

Existing federal law (Medicare Secondary Payer statute) requires those primary insurance/self-insurance plans and responsible tortfeasors to reimburse Medicare once it is established that they did owe payment for the treatment, but the reality is that reimbursement is often not made.

The MSP statute currently provides for a private right of action (not limited to the Medicare beneficiary) against the primary payer to recover twice the amount paid out by Medicare and, according to the 1st Circuit at least, the party suing for and recovering the double damages does not have to share the bounty with Uncle Sam.

With the current double damages right of action on the books, is there a need for a new qui tam cause of action?

10 Jeff Hall 07.18.09 at 6:05 pm

The worst part of this idea isn’t that it is going to cost the economy a bundle. In the process of transferring money from defendants to lawyers, these qui tam schemes would force thousands of old and sick people to spend a lot of time in court and giving depositions.

11 Meredith 07.19.09 at 4:59 pm

“Who in Congress slipped this language in, anyway — and on whose behalf?”

Anyone checked Chris Dodd’s whereabouts when it got slipped in?
Chris Dodd + stimulus legislation = AIG Bonuses
Chris Dodd + his housing bill = Payment Card and Third Party Network Information Reporting

12 Max 07.20.09 at 1:51 am

If we’re going to treat the government’s right to sue as a profit center, wouldn’t the most efficient approach be to auction it off? Then you wouldn’t have a wasteful “race”.

13 LexisTexas 07.20.09 at 2:03 am

[S]uch a procedure would allow for both the injury suit and the medical costs suit to proceed side-by-side and get neatly wrapped up together at time of verdict or settlement.

But medical expenses would have been included as actual damages in Plaintiff’s original suit, so, presumably this provision would apply where Defendant had plead damages only for non-medical, or where they were not specified.
I agree that qui tam is a fair, even surprisingly market-oriented, approach to reimbursement of Medicare debts on behalf of the government (as opposed to expecting government attorneys to do it). So, the bill’s only unique expansion is to allow private attorneys do the collection work.
Fine, but they would still be limited to collecting from the successful Plaintiff–collateral estoppel and one-judgment rule would preclude Defendant or even his insuror from paying twice.
As far as attempting to expand liability by statistical analysis out to entire industries—good luck. No amount of Federal legislation is going to change the meaning of “proximate” cause.

14 joe 07.23.09 at 3:32 pm

“[S]uch a procedure would allow for both the injury suit and the medical costs suit to proceed side-by-side and get neatly wrapped up together at time of verdict or settlement.

But medical expenses would have been included as actual damages in Plaintiff’s original suit, so, presumably this provision would apply where Defendant had plead damages only for non-medical, or where they were not specified.
I agree that qui tam is a fair, even surprisingly market-oriented, approach to reimbursement of Medicare debts on behalf of the government (as opposed to expecting government attorneys to do it). So, the bill’s only unique expansion is to allow private attorneys do the collection work.
Fine, but they would still be limited to collecting from the successful Plaintiff–collateral estoppel and one-judgment rule would preclude Defendant or even his insuror from paying twice.
As far as attempting to expand liability by statistical analysis out to entire industries—good luck. No amount of Federal legislation is going to change the meaning of “proximate” cause.”

The above is wrong in a crucial point you may have to pay twice. The statute already in place means that medicare or medicaid can get their money from plaintiff, plaintiff’s lawyer, defendant or even defendants lawer. Yes defendants have to pay twice potentially under the current law if the lien isnt satisfied. That is why when cases are settled the plt and lawyer get the money they have to sign a release and also agree to defend and indemnify the defendant, defendants insurer and attorney from any future lien actions. only way the defendant gets some peace. Otherwise why bother to settle because Plaintiff will blow off the lien and you -defendant may get sued by the Feds/state. Basically the current laws are so onerous that it makes cases harder to settle. But when you do settle Medicare Medicaid do get paid because the attorneys on both sides are on the hook potentially. Often the payment Feds/State accept is not in full. They agree to take a reduced amount- because the underlying claim is in fact disputed and compromised. Plt: you were negligent! Pay me a million Dft: No I wasn’t. And you can’t prove causation anyway see you at trial. Plt: Thats going to be expensive and time consuming how about 100,000. Dft: Up yours -how about I don’t report you to the bar for a frivilous lawsuit in return for a dimissal. Plt: . . . $50,000. Dft: . . . 25,000 and that’s it cause it will cost me that much to try it. Plt: Done. Plt to Govt – I only got 25 k on this case – lucky to get that will you take 5,000 on the medical bills lien for 200,000? Govt.: Sure.

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