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The Supreme Court chamber in the Minnesota State Capitol in St. Paul. (File photo: Kevin Featherly)

Medical assistance payment not a collateral source

The term “pursuant to” decided the outcome of a personal injury case at the Supreme Court and thus, in the words of the dissent, provided a windfall to the injured plaintiff.

The court said that the collateral source statute, Minn. Stat. § 548.251, subdivision 1(2), did not encompass discounts negotiated and paid by managed-care organizations under Minnesota’s Prepaid Medical Assistance Plan because those are “payments made pursuant to the United States Social Security Act” and therefore are not deducted from the jury’s damages award.

The court was divided in the case, Getz v. Peace, with the majority opinion written by Justice Margaret Chutich. Chief Justice Lorie Gildea dissented, joined by Justice Barry Anderson. `

“[T]he only reasonable interpretation of ‘payments made pursuant to the United States Social Security Act’ is one that includes negotiated discounts by managed-care organizations contracting with Minnesota’s Medical Assistance program,” Chutich wrote.

Attorney Scott Wilson of Minneapolis, who appealed the case, said that “pursuant to” has a well-settled meaning and the statute was read in accordance with the medical assistance laws. He also noted that approximately 70% to 80% of medical assistance claims are paid through private providers and that about a third of personal injury claims in the state are affected by Medicaid or Medicare. “This case was a long hard fight,” he said.

He also said that where there is a collateral source for payment of damages, someone will benefit and the public policy has been that it will be the plaintiff. “It’s not a windfall in either direction. It’s a policy choice,” he said.

There are “islands” in the law where a plaintiff can receive a full recovery, Wilson said. “I don’t feel bad about standing on that island with my client.”

Defense attorney Daniel Bellig of Mankato, said that the court’s broad reading of the term “pursuant to” led the court to allow a windfall under a statute clearly intended to prevent one. He found it “bizarre” to think that the Legislature intended that outcome.

Managed care discounts

The plaintiff was injured when her car struck a school bus that failed to yield at an intersection. The plaintiff was a medical-assistance enrollee, and her medical expenses were covered by two managed-care organizations that contracted with Minnesota’s Prepaid Medical Assistance Plan under Minnesota’s Medicaid program. She was awarded about $224,998 in past medical expenses—the amount her providers charged.

Two managed-care organizations, UCare and Medica, under a contract with the state, negotiated the costs down to $45,979. The District Court then reduced the $224,998 award to $45,979. The Court of Appeals reversed according to the collateral source statute (see sidebar). The Supreme Court affirmed the Court of Appeals.

Pursuant to

The Supreme Court proceeded to analyze the phrase “pursuant to.” The parties did not dispute that the phrase was not ambiguous, that negotiated discounts were payments or that Medical Assistance is part of the Social Security Act.

The defense did contend that the government did not obtain or authorize the discounts and that “pursuant to” is not broad enough to encompass payments merely incentivized by or incidental to the Social Security Act, but the court disagreed.

The court first considered the nature and extent to which the statute modifies the common law. Collateral sources had no impact on the responsibility of tortfeasors at common law, the court noted. The policy was that tortfeasors should not benefit from a plaintiff’s other source of compensation. But in 1986 the Legislature enacted the collateral-source statute to prevent some double recoveries.

The court strictly construed the law because it is a partial abrogation of the common law but construed the Social Security Act exception broadly because it is consistent with the common-law rule. The term “pursuant to” has been defined by the court previously as in compliance with, in accordance with, as authorized by and under.

The court also said that the phrase “pursuant to” is followed by a broad reference to a statute that is also broad.

“Because the reference is to an expansive Act, the proper analysis is not a restrictive one of what the Act requires, but whether the payment here—the negotiated discounts— were payments made “under,” “in accordance with,” “in compliance with” or in “carrying out” the Social Security Act. A brief analysis of the United States Social Security Act shows that they are,” Chutich wrote. (Emphasis by court.)

The Medical Assistance program is designed to function under the Social Security Act by having managed-care organizations make payments as they did in this case, Chutich continued. Therefore the discounted payments are made “pursuant to” the Social Security Act.

The court did not accept the defense’s alternative argument that negotiated discounts are not collateral sources under the common law. Since the Legislature had acted in the field, the court did not reach the common law, Chutich wrote. “The Legislature, by exempting those payments from its definition of collateral source, expressly disallowed defendants from bringing motions to reduce damage awards by the amount of those payments.”

Dissent: Discounts not required

The majority’s analysis is inconsistent with the plain language of the collateral-source statute, the Social Security Act, and the court’s precedent, wrote the chief justice, and gives the plaintiff a windfall.

The dissent wrote that the “strict construction” of the statute in derogation of the common law only applies if a statute is ambiguous.

“Instead of turning to an inapplicable canon of statutory construction, I would simply apply the plain meaning of the statute,” Gildea wrote.

The court has previously said that “pursuant to” means “required.” Gildea continued, “Applying that interpretation, the negotiated discounts were not made ‘pursuant to’ the Social Security Act. This is so because nothing in the Act required these discounts.”

Minn. Stat. 548.251 collateral source calculations

Subdivision 1.Definition.

For purposes of this section, “collateral sources” means payments related to the injury or disability in question made to the plaintiff, or on the plaintiff’s behalf up to the date of the verdict, by or pursuant to: …

(2) health, accident and sickness, or automobile accident insurance or liability insurance that provides health benefits or income disability coverage; except life insurance benefits available to the plaintiff, whether purchased by the plaintiff or provided by others, payments made pursuant to the United States Social Security Act, or pension payments[.]

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