Agency for Health Care Admin. v. Associated Industries of Florida, Inc.

• Decision Date: 27 June 1996
• Docket Number: No. 86213,86213
• Citation: 678 So.2d 1239
• Court: Florida Supreme Court
• Parties: , 21 Fla. L. Weekly S276, 21 Fla. L. Weekly S296, Medicare & Medicaid Guide P 44,488 AGENCY FOR HEALTH CARE ADMINISTRATION, et al., Appellants/Cross-Appellees, v. ASSOCIATED INDUSTRIES OF FLORIDA, INC., et al., Appellees/Cross-Appellants.

Page 1239

678 So.2d 1239

65 USLW 2034, 21 Fla. L. Weekly S276, 21 Fla. L. Weekly S296,

Medicare & Medicaid Guide P 44,488

AGENCY FOR HEALTH CARE ADMINISTRATION, et al., Appellants/Cross-Appellees, v. ASSOCIATED INDUSTRIES OF FLORIDA, INC., et al., Appellees/Cross-Appellants.

No. 86213.

Supreme Court of Florida.

June 27, 1996.

Rehearing Denied Sept. 6, 1996.

Robert A. Butterworth, Attorney General; Louis F. Hubener, James A. Peters, Charles McCoy and Eric J. Taylor, Assistant Attorneys General, Tallahassee; Parker D. Thomson and Carol A. Licko, Special Assistant Attorneys General, Miami; Dexter Douglass, General Counsel, Executive Office of the Governor, Tallahassee; P. Tim Howard of Howard & Associates, P.A., Tallahassee; Laurence H. Tribe, Special Counsel, Cambridge, Massachusetts; Jonathan Massey, Special Counsel, Washington, D.C.; Brian Koukoutchos, Special Counsel, Bedford, Massachusetts; Susan Nial of Ness, Motley, Loadholt, Richardson & Poole, Charleston, South Carolina; W.C. Gentry of Gentry & Phillips, Jacksonville; and Wayne Hogan and Evan J. Yegelwel of Brown, Terrell, Hogan, Ellis, McClamma & Yegelwel, Jacksonville, for Appellants, Cross-Appellees.

Alan C. Sundberg, A. Broaddus Livingston, F. Townsend Hawkes and Sylvia H. Walbolt of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Tallahassee; Arthur J. England, Jr., Charles M. Auslander and Barry S. Richard of Greenberg, Traurig, Hoffman, Lipoff, Rose & Quentel, P.A., Tallahassee; Murray R. Garnick of Arnold & Porter, Washington, D.C.; and Jodi Chase with Associated Industries of Florida, Inc., Tallahassee, for Appellees, Cross-Appellants.

Jon C. Moyle, Jr., Thomas A. Sheehan, III and John R. Eubanks, Jr. of Moyle, Flanigan, Katz, Fitzgerald & Sheehan, P.A., West Palm Beach, for Good Samaritan and St. Mary's Hospitals, Amicus Curiae.

Jonathan S. Grout and Peter A. Lewis of Goldsmith & Grout, P.A., Tallahassee, for Florida Health Care Association, Inc., Amicus Curiae.

Robert C. McCurdy, Fort Myers, for Hospital Board of Directors of Lee County, d/b/a Lee Memorial Health System, Amicus Curiae.

Robert A. Ginsburg, Dade County Attorney and Sara A. Price, Assistant County Attorney, Miami, for Dade County Public Health Trust, Amicus Curiae.

Patrick G. Emmanuel and Karen O. Emmanuel of Emmanuel, Sheppard & Condon, Pensacola, for Sacred Heart Hospital of Pensacola, Amicus Curiae.

Harvey Granger, Jacksonville, for Baptist/St. Vincent's Health System, Inc., Amicus Curiae.

Tamara L. Trimble, Orlando, for Adventist Health System Sunbelt Healthcare Corporation, Amicus Curiae.

W. Spencer Mitchem of Beggs & Lane, Pensacola, for Baptist Hospital, Inc., Amicus Curiae.

James S. Eggert and Michael N. Brown of Allen, Dell, Frank & Trinkle, Tampa; and Frederick B. Karl, Tampa, for The Hillsborough County Hospital Authority, Amicus Curiae.

Ronald A. Harbert of Mateer, Harbert & Bates, P.A., Orlando, for Orlando Regional Healthcare System, Inc., Amicus Curiae.

Bruce S. Rogow of Bruce S. Rogow, P.A., Fort Lauderdale; and Beverly A. Pohl, Fort Lauderdale, for Wine and Spirits Distributors of Florida, Inc., Amicus Curiae.

Fletcher N. Baldwin, Jr., Gainesville, for National Federation of Independent Business and Florida Retail Federation, Inc., Amicus Curiae.

OVERTON, Justice.

We have for review a final order and declaratory judgment of the Second Judicial Circuit Court holding that significant portions of the Medicaid Third-Party Liability Act (Act) ¹ are unconstitutional. The trial court also held that the Agency for Health Care Administration (Agency), the entity charged with enforcing that Act, was structured in violation of the Florida Constitution. The First District Court of Appeal certified that this judgment passed on a matter of great public importance that required immediate resolution by this Court. We accepted jurisdiction and heard oral argument. Art. V, § 3(b)(5), Fla. Const.

At issue is the State's ability to fashion a cause of action to recover health care expenditures made on behalf of Floridians and occasioned by the allegedly tortious conduct of others. At the outset, we note that the judicial branch must be cautious when evaluating the choices made by the legislative branch as to the appropriate funding for programs it has deemed important to the public welfare. We must avoid unnecessarily limiting the funding options available to the legislature when addressing today's policy problems. With this philosophy in mind, we now proceed.

In summary, we affirm the judgment in part and reverse the judgment in part. First, we find no legal infirmity in the structure of the Agency. We next, with two significant caveats, find the Act to be facially constitutional. We have no cause to invalidate, on its face, this legislative enactment aimed at the recoupment of Medicaid expenditures necessitated by the tortious conduct of others. The State concedes that it must demonstrate a defective product or negligent conduct, it must establish causation, and it must prove damages. Certainly the legislature may pursue these legitimate public-policy objectives. We do, however, limit our holding in the following two ways. First, a ruling of facial constitutionality does not preclude a later action challenging the manner in which the Act is applied. Indeed, some provisions of the Act may give rise to some serious constitutional issues at a later point in time. Second, while the essential aspects of the Act are facially constitutional, the following provisions must be modified or stricken to avoid offending the due process guarantees of the Florida Constitution: (1) the authority to pursue an action without identifying individual Medicaid recipients must be stricken; (2) the abolition of a statute-of-repose defense is ineffective to revive time-barred claims; and (3) the provision for combining the theories of market share liability and joint and several liability must be stricken even though either theory may be used separately.

We therefore strike the offensive provisions and leave the remainder of the Act intact.

Legislative and Case History

Importantly, the underlying basis for the government's recovery of health care costs expended for its citizens did not begin with the 1994 modifications to the Act that are at issue in this proceeding. Instead, the State has been legislatively authorized to pursue such reimbursement since Medicaid was enacted in 1968. See 42 U.S.C. § 1396a(a)(25)(1994). The State originally used federal law as a basis for its actions. In 1978, however, the legislature enacted statutory authority by which the State could pursue recovery of expenditures from third parties. ² At that point, the State was given a traditional subrogation action. ³ Such an action allowed the State to occupy the same position as a Medicaid recipient in its pursuit of third-party resources. Then, in 1990, the existing statutory authority was substantially modified with the passage of major amendments to the Act. ⁴ The purpose of this modification was to strengthen the State's ability to recover funds expended for Medicaid costs. The following are the 1990 modifications relevant to this case:

(1) ... Medicaid is to be repaid in full from, and to the extent of, any third-party benefits, regardless of whether a recipient is made whole or other creditors paid. Principles of common law and equity as to assignment, lien, and subrogation are to be abrogated to the extent necessary to ensure full recovery by Medicaid from third-party resources....

....

(7) When the department provides, pays for, or becomes liable for medical care under [the Medicaid program], it shall have the following rights, as to which the department may assert independent principles of law, which shall nevertheless be construed together to provide the greatest recovery from third-party benefits:

....

(12) The department may, as a matter of right, in order to enforce its rights under this section, institute, intervene in, or join any legal proceeding in its own name in one or more of the following capacities: individually, as subrogee of the recipient, as assignee of the recipient, or as lienholder of the collateral.

§ 409.2665, Fla. Stat. (Supp.1990).

The Act was again modified in 1994. ⁵ It is these amendments that are directly at issue in this case. The relevant provisions of the Act affected by the 1994 amendments, with those amendments identified by underlining or strike-through, read as follows:

409.910 Responsibility for payments on behalf of Medicaid-eligible persons when other parties are liable.--

(1) It is the intent of the Legislature that Medicaid be the payer of last resort for medically necessary goods and services furnished to Medicaid recipients. All other sources of payment for medical care are primary to medical assistance provided by Medicaid. If benefits of a liable third party are available , it is the intent of the Legislature that Medicaid be repaid in full and prior to any other person, program, or entity. Medicaid is to be repaid in full from, and to the extent of, any third-party benefits, regardless of whether a recipient is made whole or other creditors paid. Principles of common law and equity as to assignment, lien subrogation, comparative negligence, assumption of risk, and all other affirmative defenses normally available to a liable third party, are to be abrogated to the extent necessary to ensure full recovery by Medicaid from third-party resources; such principles shall apply to a recipient's right to recovery against any third party, but shall not act to reduce the recovery of the agency pursuant to this section. The concept of joint and several liability applies to any recovery on the part of the agency. It is intended that if the resources of a liable third party become available at any time, the public treasury should not bear the burden of medical assistance to the extent of such resources. Common law theories of recovery shall be...