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MASON v. AMERICAN TOBACCO CO.

July 25, 2002

MASON, ET AL.
V.
AMERICAN TOBACCO CO., ET AL.



The opinion of the court was delivered by: Weinstein, Senior District Judge.

MEMORANDUM ORDER AND JUDGMENT

I. Introduction

Plaintiffs bring this class action pursuant to the private cause of action provision of the Medicare as Secondary Payer ("MSP') statute. 42 U.S.C. § 1395y(b)(3)(A) (2002). They seek certification of the following proposed class:

Individuals who have received or are receiving health care services for the treatment of tobacco-related illnesses, including, but not limited to, lung cancer, heart disease, emphysema, and chronic obstructive pulmonary disease, which services have been paid for or are being paid for, by Medicare. Defendants oppose certification and move to dismiss.

The motion of certification is denied and the case is dismissed. Viability of the action and certification are intertwined and need to be considered together. See W. Gordon Dobie, Assuming the Factual Truthfulness of Plaintiffs' Complaint and the Class Certification Decision, 71 U.S.L.W. 2019 (2002); Karin S. Schwarz et al., Notes From the Cave: Some Problems in Dealing with Class Action Settlements, 163 F.R.D. 369, 382 (1995); Szabo v. Bridgeport Machines Inc., 249 F.3d 672, 674 (7th Cir.) (Easterbrook, J.), cert. denied, ___ U.S. ___, 122 S.Ct. 348, 151 L.Ed.2d 263 (Oct. 9, 2001).

The complaint is based upon an imaginative but inappropriate interpretation of an ambiguous statute. As construed by plaintiffs it would permit a qui-tam type of individual action where the entire judgement for double the medicare payments would be split between the government and the named plaintiffs; it would not support an action masquerading as one for a class. Plaintiffs' attempts to limit the statute's interpretation to cover only large corporate defendants is a limiting construction having no support in the statutory language or legislative history. As sought to be applied by plaintiffs the statute would (distort the federal-state substantive tort balance by creating a harsh (double recovery) shadow federal tort action in any case where medicare payments were made on behalf of any person injured by the delict. The language of the provision, while confusing, does not support plaintiffs' interpretation.

This action is quite different from a lien that Medicare might have after recovery by a plaintiff who was a medicare beneficiary and was injured by a mass tort. "Medicare has a right to intervene in the action against the tortfeasor and can bring or join any action against the responsible primary payor. Medicare can also pursue third parties, including attorneys, who receive payments of any sums which should be reimbursed to Medicare, a fact that would cause any prudent personal injury attorney to involve Medicare before any disbursement of settlement proceeds is made." Denekas v. Shalala, 943 F. Supp. 1073, 1080 (S.D.Iowa 1996) (internal quotations omitted); see also 42 U.S.C. § 2651 (a) (2002). The government has declined to intervene directly in this case, instead bringing all claims before Judge Kessler in the District Court for the District of Columbia. Despite the decision not to intervene directly, a representative of the government argued forcefully on plaintiffs' behalf at the hearing of July 2, 2002. See Transcript at 40-50, 55-58.

Should the court of appeals find that a valid cause of action has been stated on behalf of a class, a viable class action could be accommodated and certified under Rule 23 of the Federal Rules of Civil Procedure. Denial of certification and dismissal is not based upon any failure to come within the procedural ambit of Rule 23.

II. History of the MSP Provision

From 1965 to 1980 Medicare was the primary payer of health care costs for individuals over the age of 65. United States v. Blue Cross Blue Shield of Michigan, 859 F. Supp. 283, 286 (E.D.Mich. 1994). The Medicare Secondary Payer Act of 1980 sought to lower Medicare's expenses by making Medicare the secondary payer, after any other entity contractually obligated to pay for an individual's primary health care. HIAA v. Shalala, 23 F.3d 412, 414 (D.C.Cir. 1994).

Pursuant to the statute, Medicare is to be the secondary payer when:

[P]ayment has been made, or can reasonably be expected to be made promptly (as determined in accordance with regulations) under a workman's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.

42 U.S.C. § 1395y(b)(2)(A)(ii) (2002).

In such cases, the primary insurer is expected to pay for the services. If an entity responsible for payment fails to do so. the government can sue that entity for reimbursement of payments Medicare made. 42 U.S.C. § 1395y(b)(2)(B)(ii) (2002). In addition, the MSP statute creates a private right of action with double recovery to encourage private parties who are aware of non-payment by primary insurers f to bring actions to enforce Medicare's rights. 42 U.S.C. § 1395y(b)(3)(A) (2002). In such private suits, ...


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