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Rick Swedloff

Abstract

In this article, I show that, as amended, the MSP will likely have unforeseen consequences to the tort system. I start by reviewing the history of Medicare and the forces that led Congress to enact and amend the MSP. With illustration from the classic economic model of litigation, I then show that, not surprisingly, the MSP – as written – makes it more difficult for Medicare beneficiaries to bring and settle individual tort claims. What may be less obvious is that this amendment may have a profound impact in the area of mass tort litigation. If individual parties to a mass tort cannot settle, plaintiffs’ attorneys, who make the litigation decisions in mass torts, may determine that it is not lucrative to include Medicare beneficiaries in mass tort litigation or to bring mass tort litigation at all. This could have several consequences. First, and most obviously, if certain plaintiffs cannot bring claims, they will not be appropriately compensated for their harms. Moreover, if tortfeasors are not made to pay for their tortious conduct, they will not internalize the harms caused and will not take the proper amount of precaution to protect against future harms. Further, if there are no mass tort actions, the Secretary will not have access to the discovery done by private litigation against these mass tort defendants. As such, the Secretary may have a harder time collecting Medicare’s conditional outlays from truly tortious parties. Lastly, I offer a simple means to rectify this complex problem: force the Secretary to use the clear statutory right of subrogation against tortfeasors. Subrogation will not fundamentally change Medicare’s ability to recover its costs from an alleged tortfeasor, but will alleviate the disincentives to settlement in the tort setting.

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