Opinion ID: 613077
Heading Depth: 4
Heading Rank: 2

Heading: Illumination from the History of the Demonstrated Responsibility Provision

Text: If Glover leaves us in the dark, the history of the demonstrated responsibility provision is like turning on a light. Although the private cause of action has existed in the Act almost since the Act's inception, [11] the demonstrated responsibility provision is of more recent vintage. Congress added that provision in 2003 as part of an effort to address a specific situation: to enable Medicare to sue tortfeasors whose torts caused medical expenses borne by Medicare. See generally Rick Swedloff, Can't Settle, Can't Sue: How Congress Stole Tort Remedies from Medicare Beneficiaries, 41 Akron L.Rev. 557, 571-87 (2008) (providing an extensive history of the Act). In a series of cases in the early 2000s, Medicare asserted claims against the settlements that arose from individual-and mass-tort cases involving tobacco companies, drug manufacturers, and breast-implant manufacturers. See Mason v. Am. Tobacco Co., 346 F.3d 36, 39 (2d Cir.2003) (citing these cases). Essentially, Medicare had paid for some of the plaintiffs' medical expenses, so once the plaintiffs recovered their damages (which included medical expenses) from the tortfeasors, Medicare sought reimbursement. Medicare brought these lawsuits under the Medicare Secondary Payer Act by relying on an ambiguity in the Act's definition of a primary plan. [12] See, e.g., Thompson v. Goetzmann, 337 F.3d 489, 493-95 (5th Cir.2003). The Act defined a primary plan to include a self-insured plan, but at the time the Act gave no guidance as to what constituted a self-insured plan. See 42 U.S.C. § 1395y(b)(2)(A) (2001), amended by Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No. 108-173, § 301, 117 Stat.2066, 2221-22 (2003). Attempting to capitalize on this ambiguity, Medicare argued that the tortfeasors were self-insured plans because rather than purchasing liability coverage from a separate insurance carrier, the tortfeasors chose to carry their own risk of liability. See Goetzmann, 337 F.3d at 495. The federal courts, however, rejected this argument. See, e.g., Mason, 346 F.3d at 42 ([C]ourts have rejected all efforts to apply [the Act's] heavy remedy and double damages to the context of tort litigation.); Goetzmann, 337 F.3d at 496-501. Similarly, when inventive private plaintiffs filed a lawsuit against tobacco companies for their medical expenses on the same theory under the Act's private cause of action, the Second Circuit rejected it for the same reason: tortfeasors simply were not self-insured plans. See Mason, 346 F.3d at 38-43. The Second Circuit concluded its opinion, in October 2003, with an unmistakable invitation to Congress: Future amendments will be required for the statute to extend to the defendants in this action. Id. at 43. Congress accepted the invitation only two months later. In December 2003, as part of the Medicare Modernization Act (which was best known for adding a prescription drug benefit for Medicare beneficiaries), Congress amended the Medicare Secondary Payer Act to accommodate Medicare's failed litigation position. For our purposes, Congress made two important changes. First, Congress expressly defined a self-insured plan as [a]n entity that engages in a business, trade, or profession ... if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part. Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No. 108-173, § 301(b)(1), 117 Stat. at 2221-22 (codified as amended at 42 U.S.C. § 1395y(b)(2)(A)). This amendment reflected Congress's clear intention to make tortfeasors liable under the Act. Although when stripped from its context, this new statutory definition seems an odd way to create tortfeasor liability, it makes perfect sense against the legislative backdrop: Medicare's insistence in court that tortfeasors were self-insured plans. Indeed, the statutory definition of a self-insured plan mirrored the definition in a pre-existing federal regulation, to which the Fifth Circuit refused to give Chevron deference (despite Medicare's protestations) in Goetzmann, 337 F.3d at 498 & n. 25, 501-02. [13] Moreover, the limited legislative history makes clear that Congress sought specifically to abrogate those cases, like Goetzmann, that narrowly defined self-insured plan and, thus, prevented tortfeasor liability under the Act; the legislative history even mentions Goetzmann by name. See H.R.Rep. No. 108-178, pt. 2 at 189-90 (2003) (stating that the amendment sought to address [r]ecent court decisions such as Thompson v. Goetzmann  that allowed firms that self-insure for product liability ... to avoid paying Medicare for past medical payments related to the claim). The second important amendment to the Act in 2003 was the demonstrated responsibility provision. See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No. 108-173, § 301(b)(2)(A), 117 Stat. at 2222 (codified as amended at 42 U.S.C. § 1395y(b)(2)(B)(ii)). That provision states that a primary plan must reimburse Medicare only if its responsibility to pay has been demonstrated, which can occur through a judgment, settlement, or other means. 42 U.S.C. § 1395y(b)(2)(B)(ii). Isolated from the context of its inclusion, the language of this provision is baffling and cryptic. But with the benefit of knowledge of its history and the legislative backdrop, we believe that we can answer two questions that are necessary to resolve this case and place the demonstrated responsibility provision in its proper place. First, does the demonstrated responsibility provision place a limiting condition on the liability of all primary plans, or does it limit the liability only of tortfeasors? Second, does the demonstrated responsibility provision apply only to lawsuits brought by Medicare for reimbursement, or does that provision also apply to lawsuits brought by private parties under the private cause of action? We answer these questions in the next two subsections.