U.S. Department of Justice Sues Plaintiff Attorneys,
Corporate Defendants, and Insurers to Recover
Medicare Payments Six Years After Case Settles

On December 1, 2009, the U.S. Department of Justice filed suit
against a group of plaintiff attorneys, corporate defendants, and
insurers to recover conditional Medicare payments and double
damages in a case that settled six years earlier in September of 2003.
While this action came as a surprise to some, the complaint is consistent with
the government's increasing efforts to bolster the shaky fiscal viability of the Medicare system.

On September 10, 2003, the Circuit Court of Etowah County, Alabama, entered an order approving a settlement in the matter of Sabrina Abernathy, et al v. Monsanto Company et al. While the settlement agreement included a fair amount of logistical detail, its essential elements provided that the plaintiffs would release the defendants in exchange for a global amount of $300 Million, which included the extinguishment of any liability against Monsanto Company, Pharmacia Corporation, and Solutia Inc. relating to the manufacture, use, release, or disposal of polychlorinated biphenyls (PCBs) at the Anniston plant owned by the defendants. Approximately 907 of the settling plaintiffs were Medicare beneficiaries, and they received these settlement proceeds for damages that included compensation for medical expenses related to their exposure to PCBs manufactured at the defendant’s plant. The U.S., through the Centers for Medicare and Medicaid Services (CMS), made conditional payments on behalf of these Medicare beneficiaries for illness and injuries related to the incident and released in the settlement. The defendants, defendant’s insurers, plaintiffs or plaintiff’s counsel never made any payments to CMS as reimbursement for Medicare conditional payments made on behalf of the approximately 907 Medicare beneficiaries.

Based on 42 U.S.C. §1395y(b)(2), the Medicare Secondary Payer (MSP) statute and related regulations, the U.S. sued plaintiff’s counsel, corporate defendants Monsanto, Solutia, and Pharmacia, as well as defendant insurers Travelers and AIG for failure to comply with the MSP statute. In its several counts, the U.S. alleged that each of these defendants knew or should have known that one or more of the plaintiffs were Medicare eligible individuals on whose behalf the U.S. was entitled to recover any Medicare conditional payments that had been made. The U.S. further alleged that neither plaintiff's counsel, the corporate defendants, nor the defendant insurers ascertained whether any settling plaintiff was a Medicare beneficiary, nor did anyone identify the amounts owing to the U.S. as reimbursement for Medicare conditional payments, prior to making payment according to the terms of the settlement agreement. In addition to seeking reimbursement for all conditional payments made on behalf of the settling plaintiffs, including interest, the U.S. is also making demand for double damages because it was necessary to initiate legal action against the named defendants. Last, the U.S. requests declaratory relief by asking the Court to require the defendants to give CMS notice of all future payments to Medicare beneficiaries pursuant to 42 CFR §411.25 and to ensure that appropriate payment be made to the U.S. before any future settlement payment is made to any plaintiff.

While the high dollar value of this case can no doubt be credited with garnering the government's time and attention, it nonetheless underscores the importance of properly considering Medicare's interests and the increased determination of the government to enforce the long-standing MSP statutes even in a settlement that occurred six years earlier.

The full text of the complaint, which was filed in the District Court for the Northern District of Alabama, Eastern Division, can be viewed by Clicking Here.