Opinion ID: 613077
Heading Depth: 3
Heading Rank: 3

Heading: The Reference Point for Double Damages under the Private Cause of Action

Text: Having concluded that Central States is liable to Bio-Medical under the Medicare Secondary Payer Act's private cause of action, we must next determine the precise amount of damages under that provision. In keeping with the rest of the Act, however, this is no easy task. The private cause of action cryptically states that damages shall be in an amount double the amount otherwise provided. Id. No part of the Act otherwise provides more specifically for these damages, so the private cause of action raises the question: What is the reference point for these double damages? There are two obvious possibilities. Either the private cause of action provides for double the amount of damages incurred by the healthcare provider (i.e., twice the value of the outstanding bills to the delinquent private insurer), or it provides for double the damages incurred by Medicare (i.e., twice the value of the conditional payments made by Medicare to cover the private insurer's failure to pay). Because Medicare usually pays healthcare providers at lower rates than do private insurers, e.g., Palmyra Park Hosp. Inc. v. Phoebe Putney Mem'l Hosp., 604 F.3d 1291, 1295 n. 3 (11th Cir.2010), twice the provider's damages typically will exceed twice Medicare's damages. Determining the proper amount of double damages requires us to consider the final piece in the jigsaw puzzle of the statutory system: Why does the Medicare Secondary Payer Act's private cause of action provide for double damages? One theory is that the Act seeks to punish private insurers that violate its prohibition of shifting costs to Medicare, and thereby to deter such future cost shifting by private insurers, as well. By punishing and deterring illegal action to combat a social ill, the Act would function much like the antitrust laws. Cf. Tex. Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 639, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981) (The very idea of treble damages [in the antitrust laws] reveals an intent to punish past, and to deter future, unlawful conduct....). This theory is probably at least part of the reason why Congress provided for double damages. But antitrust violations differ from the harm caused by violations of the Act in an important way: violations of the Act are perpetrated not against the marketplace generally, but rather against the government (specifically, against Medicare). Indeed, it is axiomatic that the Act's purpose was to protect Medicare's fiscal integrity. See, e.g., Fanning v. United States, 346 F.3d 386, 388 (3d Cir.2003). Although Medicare's fiscal integrity may be protected by deterring future cost shifting, it will be protected more directly by reimbursing Medicare for the payments it was forced to make due to private insurers' illegal conduct. This fact points to another theory for why Congress created a private right of action for double damages against private insurers: double damages provide a needed incentive for private plaintiffs to bring claims against private insurers that have shifted costs to Medicare, so that Medicare is alerted and can seek reimbursement. Healthcare providers, not the Medicare bureaucracy, are presumably in the best position to observe when private insurers have refused to pay for an insured patient's treatment due to the patient's eligibility for Medicare. [15] And providers usually suffer their own injury when private insurers refuse to pay, because providers generally are paid less by Medicare than they would be paid by private insurers. The Act turns this natural information asymmetry to Medicare's advantage. It empowers healthcare providers to sue private insurers who violate the Act. It then enables Medicare to pursue its reimbursement out of the proceeds recovered by the victorious healthcare providers. See 42 U.S.C. § 1395y(b)(2)(B)(iii). Because healthcare providers anticipate that Medicare will seek its reimbursement from the proceeds, however, they must receive a premium over the reimbursement amount to be motivated to bring these lawsuits against private insurers. After all, litigation is not free, nor is it free from risk. For a healthcare provider to bring such a lawsuit, the provider must believe that the expected value of the litigation  which equals the amount of damages the provider would win if it prevailed, discounted by the probability that it might lose, minus all legal fees and expenses  will exceed the amount that Medicare likely will take as its share. And if the damages that the provider wins if it prevails were merely equal to Medicare's share, providers would never bring these claims. [16] Accordingly, Congress enabled healthcare providers to recover double damages to motivate them to bring lawsuits that, in the end, vindicate Medicare's interests. See Manning v. Utils. Mut. Ins. Co., Inc., 254 F.3d 387, 394 (2d Cir.2001) (reasoning that the Act allow[s] for a multiplier of damages to enable the government to recover its funds while also providing a financial incentive for private citizens to bring such suits). [17] Double damages must be at least enough such that the expected value of the litigation, after subtracting Medicare's anticipated recovery, will be greater than zero. If this were the only consideration, we would hold that the reference point for double damages is the amount the private insurer would have paid, rather than the amount paid by Medicare, because the former usually exceeds the latter. But there is another important consideration: this Court has held that [w]hen Medicare is not involved in an insurance coverage dispute... that program's fiscal integrity is not threatened, and the [Medicare Secondary Payer Act] does not apply. Perry v. United Food & Commercial Workers Dist. Unions 405 & 442, 64 F.3d 238, 243 (6th Cir.1995). Although Perry involved a dispute between two private insurers (who were both primary payers over Medicare), id. at 240-41, its reasoning could be extended to an argument that the Act permits damages only to the extent that Medicare faces injury, and that Medicare's injury is limited to the amounts it pays to the provider. Under this line of reasoning, the amount otherwise provided for double damages would be the amount that Medicare stands to lose due to the primary plan's failure to pay. Due to a paucity of briefing on the law and material facts, we stop short of a holding on the proper reference point for double damages under the Act's private cause of action. Bio-Medical's appellate brief provides no argument on this issue. Moreover, although Bio-Medical indicates that it received a portion of payment from Medicare in an amount less than the approximately $210,000 it billed Central States ( see Compl. ¶¶ 21, 30), Bio-Medical does not state the amount of that payment. Nor does either party provide estimates of other helpful figures, including, for example, the likelihood that Medicare will seek reimbursement out of the proceeds of this lawsuit. For its part, Central States argues conclusorily that double damages must be limited to double the amount that Medicare pays, but it provides little authority or reasoned support. Accordingly, we remand to the district court for a determination on this issue.