Seniors Group Sues Big Tobacco To Recover Money for Medicare
By ZACHARY A. GOLDFARB
Staff Reporter of THE WALL STREET JOURNAL
August 5, 2005; Page B4
WASHINGTON -- A conservative seniors group filed suit against big U.S. tobacco companies, seeking to recover billions of dollars spent on smoking-related diseases by Medicare, the federal health-insurance program for the elderly.
The case relies on a little-known but recently strengthened provision of Medicare law that allows someone to sue on behalf of Medicare when it pays medical expenses that another party had a legal obligation to cover -- for example, when a corporate health plan has agreed to cover the expenses, or when a business or other party injured the Medicare beneficiary and is liable. If the suit prevails, Medicare collects the damages and the party bringing the suit is eligible for an equal amount. One reason for the provision is that the government doesn't have the resources to prosecute every case.
The lawsuit is the first national action since the Medicare as Second Payer statute was strengthened in 2003. The statute was conceived in the 1980s by the Reagan administration, and the 2003 amendment clarified that if a business or other group injures a Medicare beneficiary, it must be the first payer for medical expenses. Medicare picks up the tab as second payer only if the first payer cannot cover the full expense. The law also seemed to expand the criteria for proving liability for an injury, though that has been disputed. "If someone offers a product or service that injures people and drives up Medicare's costs, Medicare deserves a fair chance to fight back," the amendment's sponsor, Sen. Charles Grassley (R., Iowa), said yesterday.
By taking the action, United Seniors Association Inc., a free-market group that has supported initiatives backed by the pharmaceutical and energy industries, is looking to open the door to a flood of suits against the industry. The group says it would like to reclaim at least $60 billion it estimates Medicare has spent on treatment for smoking-related diseases in the past five years, the statute of limitations on the law.
"Our motivation is one of taxpayer protection," said Charles Jarvis, the group's chairman and chief executive. "Considering how badly the taxpayers have been injured financially, we believe the responsible parties -- the tobacco companies -- should be reimbursing the taxpayer to the greatest amount possible under the law."
Seeking to prove that tobacco companies are liable, the suit, filed in U.S. District Court in Boston, draws a link between nicotine addiction and smoking-related diseases such as lung cancer and emphysema. It argues that "addiction is the key...[to] the prolonged use of cigarettes that commonly causes these diseases," and that the defendants hid the addictive nature of their products and sought to enhance their addictiveness. The suit concludes: "The Medicare beneficiaries who have suffered from or are suffering from diseases attributable to smoking the defendants' cigarettes did not consent to being exposed to the addictive properties of the defendants' cigarettes."
The suit names Philip Morris USA, a subsidiary of Altria Group; Lorillard Tobacco Co.; Liggett Group Inc.; and R.J. Reynolds Tobacco Co. and two of its subsidiaries. An Altria lawyer said he thought the case would be dismissed, and David Howard, an R.J. Reynolds spokesman, said, "Virtually all courts have rejected third-party health-care reimbursement claims, and in the rulings they've stated that they lack standing to sue because claims by the third parties are too remote from any alleged injury." Lorillard and Liggett declined to comment.
Yesterday's suit doesn't seeking to recover Medicare payments in Florida, where a similar suit has been filed. Last week, the plaintiffs in the Florida case -- two individuals -- were dealt a setback when a judge dismissed it, ruling that liability has to be proven in other cases first. The plaintiffs are appealing.
In 1998, the tobacco industry settled for more than $200 billion with most states for claims related to Medicaid, the health-insurance program for the poor and disabled. Since then, the industry has launched a counteroffensive in the courts. The number of suits against Altria, for example, has fallen roughly 60% in the past five years, and the federal government has had a rocky time in its current attempt to prosecute the companies on civil racketeering charges. That and other cases still loom. |
