Opinion ID: 613077
Heading Depth: 4
Heading Rank: 4

Heading: The Demonstrated Responsibility Provision Limits Only Lawsuits Brought by Medicare

Text: The demonstrated responsibility provision applies only to lawsuits brought by Medicare, not lawsuits brought by private parties under the Act's private cause of action. No fewer than five reasons militate in favor of this conclusion. First, and most importantly, the provision's text places a condition only on when primary plans must reimburse Medicare; it does not mention when plans must pay private parties. See 42 U.S.C. § 1395y(b)(2)(B)(ii). Second, the structure of the Act suggests that the provision is limited to the reimbursement of Medicare. Congress placed the provision within subparagraph (2)(B), which governs the relationship between Medicare and primary plans. See id. § 1395y(b)(2)(B). Nowhere does subparagraph (2)(B) mention private parties, which are considered elsewhere, in paragraph (3), see id. § 1395y(b)(3)(A). Third, the legislative history suggests the same. In the public law that added the demonstrated responsibility provision, the provision appeared under a heading entitled clarifying amendments to conditional payment provisions. Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No. 108-173, § 301(b), 117 Stat. at 2221-22. Only Medicare can make conditional payments. And both of the other two amendments added under this heading (including the one that permitted tortfeasor liability) governed Medicare's ability to seek reimbursement. See id. § 301(b)(1), (3), 117 Stat. at 2221-22 (codified as amended at 42 U.S.C. § 1395y(b)(2)(A), (B)(iii)). Fourth, as discussed above, the predominant legislative backdrop was Medicare's (not private parties') failed attempts to bring lawsuits against tortfeasors. Fifth, attempting to apply the demonstrated responsibility provision to lawsuits brought by private parties essentially relegates the private cause of action to a super-judgment enforcement mechanism, and no plausible explanation exists for why Congress would have sought to limit it in that way. We believe it is important to note that under our theory of the Medicare Secondary Payer Act, the ultimate result reached in the Glover case  dismissing a lawsuit brought by private parties against tortfeasors under the Act's private cause of action, 459 F.3d at 1308-10  was correct, although not for so broad a reason as the language in Glover states. Motivating the decision in Glover were concerns that a contrary holding (1) 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 and, similarly, (2) would undermine class action requirements. Id. at 1309. Our approach avoids those potential pitfalls. We believe that when Congress amended the Act in 2003 to permit lawsuits against tortfeasors and to add the demonstrated responsibility provision, Congress intended to permit lawsuits against tortfeasors only by Medicare, and not lawsuits against tortfeasors by private parties. Thus, the plaintiffs' case in Glover should have failed not because the defendant's responsibility to pay had not been previously demonstrated, but rather because the Act does not permit a private cause of action (as opposed to one brought by Medicare) in tort. Due to widespread confusion about the demonstrated responsibility provision in the federal courts, we believe it is worth mentioning the several district court cases that erroneously applied the provision in reliance on Glover (some of which were from within our circuit). In some of the district court cases, the plaintiffs  arguing that the Act was a qui tam statute  were uninjured individuals who attempted to sue tobacco companies or health systems on behalf of the United States, and the courts of appeals held dismissal appropriate, but on another ground: those plaintiffs lacked Article III standing. See, e.g., Nat'l Comm. to Preserve Soc. Sec. & Medicare v. Philip Morris USA Inc., 601 F.Supp.2d 505, 509 (E.D.N.Y.2009), vacated and remanded, 395 Fed.Appx. 772 (2d Cir.2010); Stalley v. Erlanger Health Sys., Nos. 1:06-CV-194, 2:06-CV-216, 2:06-CV-217, 2:06-CV-265, 3:06-CV-359, 2007 WL 672301, at -6 (E.D.Tenn. Feb. 28, 2007), aff'd on other grounds, Stalley v. Methodist Healthcare, 517 F.3d 911 (6th Cir.2008). In other district court cases, the district courts extended the Glover language even further  by applying the demonstrated responsibility provision to the traditional insurance context, rather than merely to lawsuits against alleged tortfeasors, to prevent lawsuits by healthcare providers against private insurers. See Nat'l Renal Alliance, LLC v. Blue Cross & Blue Shield of Ga., Inc., 598 F.Supp.2d 1344, 1354 n. 5 (N.D.Ga.2009); Fresenius Med. Care Holdings, Inc. v. Brooks Food Grp., Inc., Civil Action No. 3:07CV14-H, 2007 WL 2480251, at -8 (W.D.N.C. Aug. 28, 2007). All of these cases applied the demonstrated responsibility provision beyond its proper scope. This holding provides an independent reason for why the demonstrated responsibility provision does not preclude this lawsuit by Bio-Medical against Central States. Bio-Medical sued Central States under the Act's private cause of action. And the demonstrated responsibility provision places a condition that must be fulfilled only before primary plans (specifically, tortfeasors) must reimburse Medicare, not before they must pay private parties. Accordingly, that provision does not apply in this case, and Bio-Medical's lawsuit under the private cause of action can proceed. The district court erred in holding otherwise.