In one of the starkest examples of how plaintiffs' lawyers want
to use Congress to get rich at the expense of the American
taxpayer, an amendment that would have generated abusive Medicare
litigation on a massive scale--along with the usual huge attorneys'
fees--was recently added to the health care reform bill in the U.S.
House of Representatives. The current Medicare statute simply ensures
that Medicare is reimbursed for the medical benefits it pays when a
third party is legally responsible for a Medicare beneficiary's
injuries or medical costs. However, the tort lawyer amendment
- Allow new types of lawsuits against the makers of consumer
products (including food) for supposed injuries to Medicare
beneficiaries based on questionable statistical speculation;
- Flood the federal courts with lawsuits that circumvent state
tort law and federal requirements for class action lawsuits,
diversity jurisdiction, or amount in controversy;
- Violate the privacy of Medicare beneficiaries by making their
medical records available to tort lawyers without their permission
(or that of the government);
- Interfere with the rights of beneficiaries against third
parties responsible for their medical costs; and
- Improperly and unwisely turn the Medicare reimbursement
provision into a qui tam statute that would allow
plaintiffs' lawyers to pursue claims that Medicare does not think
are valid or proper, reducing the availability of medical treatment
for Medicare beneficiaries.
Although the amendment would be unconstitutional, it might take
years for the courts to make that determination. Fortunately, the
amendment-- Section 1620--was removed before the approval of the
health care bill in the House Ways and Means Committee on July 17,
2009, but there is nothing that precludes it from being added in
the Senate or in conference if the Senate and House pass different
versions of the proposed government health care system.
Unconstitutional and counterproductive amendments designed to
further the interest of plaintiffs' lawyers at taxpayers' expense
need to be changed or removed from all bills considered by
The proposed amendment would convert a relatively innocuous
reimbursement requirement into a revolutionary new federal
liability provision that could easily overshadow most state tort
laws and vastly increase lawsuit abuse in America--already the most
litigious nation on earth. To understand the radical and sweeping
nature of the proposed takeover of tort law, it is necessary to
explain the existing Medicare law and its roots in traditional
"Subrogation" is the legal doctrine under which one party, such
as an insurer, assumes the rights of an injured party to seek
compensation from the individual responsible for the injuries. In a
typical example, a drunk driver might injure a victim, and the
victim's automobile insurer might pay the victim's initial health
bills. The victim's automobile insurer can then assert a claim
against the drunk driver for the benefits the automobile insurer
has paid (with other payments going to the victim for pain and
suffering). Based on the theory of unjust enrichment, subrogation
ensures that victims do not recover the same benefits twice from
their insurance companies and the wrongdoers.
In 1980, Congress enacted the Medicare Secondary Payer statute
(MSP) to implement such a subrogation right, thereby preventing
Medicare beneficiaries from potentially being paid twice for the
same expenses. In doing so, the MSP also helps to reduce federal
health care costs. Pursuant to the MSP, Medicare is entitled to
reimbursement (as the "secondary payer") for medical services
provided to Medicare patients whenever payment is available from
another source: a primary payer such as "a group health plan" or
"an automobile or liability insurance policy or plan (including a
self-insured plan) or  no fault insurance." Payment by Medicare
of benefits is "conditioned on reimbursement" from the primary
Congress also amended the MSP in 2003 to provide that the
requirement to reimburse Medicare for payments it has made is
triggered by a legal judgment or an actual payment by a primary
plan to the Medicare beneficiary conditioned upon the Medicare
beneficiary's compromise, waiver, or release of a claim against the
primary plan. It is important to note, however, that the
beneficiary's right to receive payment from these other sources is
dependent on underlying state law.
To encourage beneficiaries to help Medicare collect these
reimbursements, beneficiaries are permitted to sue and collect
double damages from a "primary plan which fails to provide for
primary payment (or appropriate reimbursement)." If successful, the
beneficiary reimburses Medicare (which is subrogated to the extent
of payment made) and keeps the other half of the double damages.
However, the federal courts have correctly determined that no right
to sue under the MSP arises against a party "whose responsibility
to pay medical costs has not yet been established."
Thus, "it is necessary to establish tort liability by a [legal]
judgment or settlement before a private right of action arises
under the MSP statute." This requirement makes perfect sense,
because only the clarity and finality of such judgment or
settlement makes it fair to subject a "primary payer" to damages,
especially double damages, for not reimbursing Medicare.
Unscrupulous plaintiffs' lawyers have chafed under the
requirement that actual responsibility be established before an MSP
suit can be filed because they see the double damages provided by
the statute as a potential hen that lays golden eggs. Their
attempts to pursue such MSP suits against tobacco companies for
supposed injuries to Medicare recipients before any liability had
even been established were rebuffed in the courts, as were a series
of frivolous cases filed against hospitals.
In the hospital cases, plaintiffs alleged that hospitals had
violated the MSP statute by failing to reimburse Medicare for
expenses to treat unspecified medical errors with regard to
unspecified Medicare beneficiaries at unspecified health care
facilities owned by the defendants. The plaintiffs' lawyers
wanted the court to recognize the MSP as a qui tam
statute granting them standing to sue as private attorneys general
even though the plaintiffs were not Medicare beneficiaries who had
been specifically injured. However, the MSP is not a qui tam
statute that allows a plaintiff to sue on behalf of the United
States, and the plaintiffs did not have standing to sue--they were
acting as "self-appointed bounty hunter[s]" whose goal was to
profit at the expense of the hospitals. Consequently, their claims
were dismissed as "utterly frivolous."
The Trial Lawyers' Get-Rich-Quick
When the health care reform bill was brought before the House
Ways and Means Committee on July 16, it included a provision that
would provide trial lawyers with everything they had been denied in
the courts under the MSP, and more. Section 1620, "Enforcement of
Medicare Secondary Payer Provisions," would rewrite the MSP to
allow "[a]ny person" to bring an action under the MSP "to establish
the responsibility of an entity to make payment for all items and
services furnished to all individuals for which that entity is
alleged to be the primary plan."
In other words, any lawyer, even without the permission of the
government or the supposed Medicare beneficiaries on whose behalf
he is suing, could sue anyone who allegedly caused a Medicare
beneficiary harm. The race to the courthouse by self-appointed
bounty hunters "would be fierce as no other freelance lawyers could
oust the first-to-file lawyer. This MSP action would be on top of
any claims between the Medicare beneficiary and that defendant, and
could be pursued even if the defendant is absolved of wrongfully
injuring that beneficiary."
But it gets worse--much worse. Trial lawyers were frustrated by
the fact that MSP liability is not triggered unless there is an
actual judgment showing that a primary plan is liable or the
primary plan makes a payment to a beneficiary and then fails to
reimburse Medicare. The proposed amendment changes this
requirement, allowing an MSP case to be based on "a judgment,
opinion, or other adjudication finding facts that establish a
primary plan's responsibility for any such payment (whether or not
such finding has been appealed), by any relevant evidence,
including but not limited to relevant statistical or
epidemiological evidence or by other similarly reliable
means." The amendment also stated that a single
action could be brought against a company to establish its
responsibility for all individuals for whom the company is alleged
to be the "primary plan," thereby circumventing class action
Accordingly, the supposed factual finding could be established
in a federal court under this novel statistical theory of
liability--without securing a prior judgment under a traditional
theory of law. The amendment would convert the MSP from a
traditional reimbursement mechanism into a vehicle for bringing
mass tort suits for "statistical" health care injuries, such as
producing high-calorie foods, many of which the beneficiaries could
avoid by modifying their behavior. Lawyers and activists
could sue virtually any company that provides a product that
studies say is "bad for your health," regardless of whether any
injuries actually--instead of statistically--occurred or, in
cases where there are injuries, whether the patients or their
doctors believe the product caused the particular harms. And all of
this can be done by lawyers who do not even have a client, allowing
a true rush-to-judgment bonanza.
In a prior MSP case that trial lawyers brought (arguing for
similar legal theories), the U.S. Eleventh Circuit Court of Appeals
explained the potential scope of litigation:
First, Plaintiffs' proposed interpretation of [the MSP] would
drastically expand federal court jurisdiction by creating a federal
forum to litigate any state tort claim in which a business entity
allegedly injured a Medicare beneficiary, without regard to
diversity of citizenship or amount in controversy. Second...an
alleged tortfeasor that is sued under the MSP (instead of under
state tort law) could not contest liability without risking the
penalty of double damages: defendants would have no opportunity to
reimburse Medicare after responsibility was established but
before the penalty attached. Third...[it] would allow individuals
acting as private attorneys general to litigate the state tort
liability of a defendant towards thousands of Medicare
beneficiaries--as a predicate to showing MSP liability--without
complying with class action requirements.
The intent of the proposed amendment is to override this
common-sense ruling (and the rulings of the four other circuit
courts that have heard similar claims and rejected them), to expand
federal jurisdiction, to remove traditional tort law barriers to
these claims, and even to circumvent the class action restrictions
that would otherwise be applicable.
Unconstitutional Standing Problems
The proposed amendment raises a host of serious legal concerns,
the most severe of which is that allowing any random individual to
sue for damages that he alleges the federal government suffered
very likely violates constitutional standing requirements.
Article III of the Constitution defines the power of the federal
courts and authorizes them to hear only "cases" or "controversies."
In determining whether a dispute brought before the court is an
actual case or controversy, a fundamental dividing line is
standing--that is, whether an individual has "alleged such a
personal stake in the outcome of the controversy as to warrant his
invocation of federal-court jurisdiction and to justify exercise of
the court's remedial powers on his behalf."
Under the Supreme Court's well-established jurisprudence, to
demonstrate constitutional standing, the plaintiff must satisfy a
First, the plaintiff must have suffered an "injury in fact"--an
invasion of a legally protected interest which is (a) concrete and
particularized and (b) actual or imminent, not conjectural or
hypothetical. Second, there must be a causal connection between the
injury and the conduct complained of--the injury has to be
fairly...trace[able] to the challenged action of the defendant, and
not...th[e] result [of] the independent action of some third party
not before the court. Third, it must be likely, as opposed to
merely speculative, that the injury will be redressed by a
While the MSP amendment purports to permit "any person" into
court to establish the liability of any entity, it is extremely
questionable whether "any person" would satisfy the constitutional
requirements for standing. The amendment is designed to permit
speculative, conjectural, or hypothetical suits--the very type of
claims that the standing doctrine prohibits.
But it is not enough that Congress has granted these would-be
bounty hunters a right to sue: The Supreme Court has repeatedly
said that "[i]t is settled that Congress cannot erase Article III's
standing requirements by statutorily granting the right to sue to a
plaintiff who would not otherwise have standing." Indeed, the Court
has made clear that "[i]n no event...may Congress abrogate the Art.
III minimum: A plaintiff must always have suffered a distinct and
palpable injury to himself that is likely to be redressed if the
requested relief is granted."
While Congress's act of granting the litigants a bounty to bring
these lawsuits might be enough to give the party a concrete private
interest in the outcome of the litigation, it is, on its own,
insufficient to establish standing. Bounties, like statutory
authorization of attorneys' fees, or even wagering on the outcome
of a case, are not alone sufficient to confer standing because they
are interests "unrelated to injury in fact[.]"
In the context of the False Claims Act (FCA), which protects the
government against paying fraudulent claims, the Supreme Court
previously found that plaintiffs in qui tam cases have
standing to assert the injury in fact suffered by the government.
However, the putative qui tam provisions at issue here are
significantly different from those in the FCA in ways that raise
serious questions as to whether a plaintiff would likewise meet the
First and foremost, the court found that standing existed
in the context of the FCA because the party bringing the suit--the
qui tam relator--acted as an assignee of the government, who
had a right to sue because of a genuine injury in fact.
But the MSP amendment is not a case of a company submitting an
actual false claim to the government for payment which, in turn,
creates an "actual" injury in fact. Here, statistical evidence may
be used to establish liability without any evidence of actual
Indeed, the reason that the government has not pursued these
injuries on its own is because they most likely do not constitute
concrete, particularized injuries. The amendment would be an
invitation for avaricious trial lawyers to manufacture conjecture
in the hopes of creating an injury. Such claims can hardly be
considered injury in fact and would likely fail as being
"conjectural or hypothetical."
Second, in declaring that FCA qui tam relators
have standing, the Supreme Court found the history of qui
tam suits "well nigh conclusive." That history demonstrates
that there was no evidence in America of common-law qui tam
actions. There were statutes permitting qui
tam actions of two kinds: those that permitted informers who
may not have suffered injury themselves to bring suit and those
that permitted an injured party to sue for damages both on his own
and on the United States' behalf.
In the case of the MSP amendment, however, not only does the
party not have an injury, but he also does not have any insider
information of the kind ordinarily associated with informer
statutes. While the absence of such insider information would not
necessarily prohibit the federal government from assigning its
rights arising from an actual injury (if such an injury exists),
this break with the historical precedent of qui tam--which
is itself seen as an exceptional case of standing--would likely
make the courts skeptical at best regarding the constitutional
standing of would-be bounty hunters to sue on the government's
Given the lack of a concrete or particularized injury to assign
and the break from historical precedent in the assignment of such
claims, the MSP amendment raises grave questions as to whether
those who would bring suit have the requisite standing to proceed.
In the authors' opinion, the MSP's purported grant of standing to
"any person" would be unconstitutional.
Other Policy Dangers
Apart from the proposed amendment's obvious constitutional
problems, other legal and policy implications are
equally alarming. For example, the federal government would be
forced to provide these "bounty hunters" with all medical records
held by the administrator of the Centers for Medicare and Medicaid
Services "containing encounter-level information with regard to
diagnoses, treatments, and costs...and any other relevant
information." Thus, the private medical records of
Medicare beneficiaries would be provided to such bounty hunters
without the permission of the beneficiaries and even if the
beneficiaries (or the federal government) specifically
The statistical theory of liability would bring its own
nightmares. Since it would be so much easier to prove theoretical
injuries in federal court than it would be to prove real ones, the
traditional safeguards of state tort laws (developed over hundreds
of years) would be abandoned. This is because MSP lawsuits could be
based on what essentially amounts to a disparate impact theory. As
one commentator has said, this theory would allow claims against
defendants "who might not be found liable in an individual case but
are responsible in a 'statistical sense.'"
Who are the defendants that trial lawyers want to target for
"society-wide patterns of illness or injury?" Every company
that supplies "bad" products ranging from fast food to alcohol to
soda to guns would be the targets of lawsuits.
In other words, this is a legal recipe for mass class action
lawsuits that will not require actual evidence of causation and
that will virtually eliminate affirmative defenses such as
assumption of risk or contribution to harm. Companies could end up
paying huge settlements for MSP cases based purely on nonscientific
studies produced by activist groups and questionable statistical
findings even though they could not be found liable for the actual
injuries of individual Medicare beneficiaries under traditional
legal theories. This amendment changes the entire nature of the MSP
statute from one that simply reimburses the government for existing
liabilities to one that creates entirely new theories of
And what good is a lawyer's earmark if it does not increase his
bounty? Section 1620 adds a provision (on top of the already
existing double damages) that provides the bounty hunter with a 30
percent bonus plus "the actual costs that person incurred to
prosecute the action." Even if the government intervenes, the
bounty hunter will receive at least an additional 20 percent plus
expenses. The double damages provision is expanded
to apply not just in the cases where a primary plan does not make a
reimbursement as required, but in all cases where the primary payer
(under the almost nonexistent evidentiary standard implemented by
the amendment) engaged in "an intentional tort or other intentional
wrongdoing." Bounty hunter lawyers could even settle a
case supposedly filed on behalf of the United States
"notwithstanding the objections of the United States" if the court
approves the settlement.
Finally, this provision would have the perverse effect of making
health care in this country worse. There are many drugs and medical
devices whose overall benefits to a large population of patients
override the adverse reactions or side effects of a small number of
users. This amendment would allow tort lawsuits to be filed on
behalf of Medicare even if Medicare knowingly pays for prescription
drugs or medical devices with "inherent risks [and side effects and
complications] which are an accepted part of the health care
system."  This could have a devastating effect on
the availability of a vast array of treatments for Medicare
Fortunately, before Section 1620 could be approved by the Ways
and Means Committee as part of the overall health care bill, it was
removed, but there is little doubt that this
amendment will surface again, perhaps as soon as the Senate begins
its deliberations on the health care bill.
All of these proposed changes in the MSP would stand the
"statute on its head." In fact, the financial bonanza
represented by such provisions is exactly the type of temptation
that led to the imprisonment of leading members of the trial bar
like William Lerach and Dickie Scruggs for paying bribes to
plaintiffs and judges in lucrative mass litigation cases. It
seems unwise--and contrary to the purpose of the original
statute--to base legislation on such provisions. Furthermore, faced
with the potential of such damages, many companies would be forced
to settle even frivolous cases to avoid the potential of huge
damage awards whose costs would be passed on to consumers.
The proposed amendment--Section 1620--is bad public policy that
would increase health care costs and endanger the health and
privacy of Medicare beneficiaries. It should not be revived either
in the U.S. Senate or in committee.
Edwin Meese III is Ronald Reagan Distinguished
Fellow in Public Policy in and Chairman of, and Hans A.
von Spakovsky is a Senior Legal Fellow in, the Center for Legal
and Judicial Studies at The Heritage Foundation.
America's Affordable Health Choices Act of
2009, H.R. 3200, 111th Cong. (2009).
U.S.C. § 1395y(b)(2)(A); See also Cochran v. United
State Health Care Fin. Admin., 291 F.3d 775 (11th Cir. 2002).
U.S.C. § 1395y(b)(2)(B)(ii).
Glover v. Liggett Group, Inc., 459 F.3d 1304,
1306 (11th Cir. 2006).
Graham v. Farm Bureau Insurance Co., 2007 WL
891895 (W.D.Mich 2007) (citations omitted).
See e.g., Stalley v. Methodist
Healthcare, 517 F.3d 911 (6th Cir. 2008).
Qui tam is from a Latin phrase meaning
"he who brings a case on behalf of our lord the King, as well as
for himself." See Memorandum from the U.S. Department of
Justice on False Claims Act Cases: Government Intervention in Qui
Tam (Whistleblower) Suits, available at http://www.usdoj.gov
/usao/pae/Documents/fcaprocess2.pdf; see also Hans A.
von Spakovsky and Brian W. Walsh, Correcting False Claims About
the New False Claims Act Legislation, Heritage FoundationLegal
Memorandum No. 42, July 2, 2009, available at http://www.heritage.org/research/legalissues/lm0042.cfm.
Stalley, 517 F.3d at 919.
Phil Goldberg, Kudos to Congress for
Saying "No" to Renewed Attempts to Turn MSP Act Into New Vehicle
for Litigation Abuse, inBNA's Medicare Report (July 24,
America's Affordable Health Choices Act of
2009, Chairman's Amendment in the Nature of a Substitute to H.R.
3200 § 1620(1)(D) (emphasis added).
If such claims were brought by the
beneficiaries under state law, they normally would be barred under
traditional state law by defenses such as "contributory negligence"
and "assumption of risk."
Glover, 459 F.3d at 1309.
Warth v. Seldin, 422 U.S. 490, 498-99 (1975)
(internal quotation omitted).
Lujan v. Defenders of Wildlife, 504 U.S. 555,
560-61 (1992) (internal quotations omitted).
Raines v. Byrd, 521 U.S. 811, 820 n.3 (1997) (citing Gladstone,
Realtors v. Village of Bellwood, 441 U.S. 91, 100 (1979)).
Gladstone Realtors, 441 U.S. at 100
(1979) (internal quotation omitted).
Vermont Agency of Natural Resources v. United
States ex rel. Stevens, 529 U.S. 765, 772 (2000).
See Lujan, 504 U.S. at 560-61.
Vermont Agency of Natural Resources,
529 U.S. at 777.
In addition to these constitutionally
relevant distinctions, there are policy distinctions suggesting
that qui tam may be appropriate in whistleblower cases,
which provide a remedy for individuals working for corrupt bosses
or for being asked to participate in corrupt practices, but
inappropriate here, where the lawyers bringing the actions have no
Beyond the Art. III standing problems, the
MSP amendment raises substantial Art. II and constitutional federal
America's Affordable Health Choices Act of
2009, Chairman's Amendment in the Nature of a Substitute to H.R.
3200 § 1620(3)(A)(iv).
America's Affordable Health Choices Act of 2009, Chairman's
Amendment in the Nature of a Substitute to H.R. 3200 §
Phil Goldberg, supra note 11.
A similar effort was tried in the Senate
Finance Committee in 2007. See Phil Goldberg, supra note
Graham, 2007 WL 891895.
Quin Hillyer, How the Mighty Lerach Has
Fallen: Power Lawyer to Prisoner, Washington Examiner, August
17, 2008; Jack Elliott, Jr., Year in Review: Top Tort Lawyer
Jailed for Bribery, Associated Press, Dec. 29, 2008.