A federal appeals court has cleared the way for a lawsuit that alleges a Florida program that pays for care of children who suffer neurological injuries at birth has inappropriately shifted costs to Medicaid.
A three-judge panel of the 11th U.S. Circuit Court of Appeals last week rejected arguments that the program, the Florida Birth-Related Neurological Injury Compensation Association, should be shielded from the whistleblower lawsuit.
The program, known as NICA, was created by the Legislature in 1988 amid concerns about high costs of medical-malpractice insurance for obstetricians. It operates as a no-fault system that provides money to pay for the care of children born with certain neurological injuries, helping prevent doctors from facing lawsuits over the injuries.
Doctors and hospitals pay “assessments” to finance the program, which also receives investment income.
The lawsuit, filed in 2019 in South Florida, alleges that NICA has improperly considered itself a “payer of last resort,” effectively meaning that Medicaid could be required to pay costs before NICA steps in. Plaintiffs contend that violates a federal law known as the False Claims Act because Medicaid is supposed to be the payer of last resort.
NICA argued in federal district court and the Atlanta-based appeals court that the lawsuit should be dismissed because the program is an “arm” of the state and, as a result, is entitled to immunity under part of the U.S. Constitution.
But U.S. District Judge William Dimitrouleas refused to dismiss the case, and the panel of the appeals court upheld his decision in a 21-page opinion Thursday.
The appeals court said the state does not exercise substantial control over the program and that NICA, after receiving an initial $20 million from the state, is funded through assessments and investment income.
“NICA’s budget is not subject to approval by the state …, the voluntary assessments NICA collects are more like malpractice insurance premiums (which are traditionally collected by private insurance companies) than like taxes, and NICA’s primary source of funding comes from investment income rather than state fund,” said the ruling by Judges Charles Wilson, Robin Rosenbaum and Virginia Covington.
Also, the ruling said a NICA argument that the state would “have to step in if the judgment is large enough is too speculative.”
“Indeed, it’s unlikely that the judgments would ever be high enough to drain all NICA’s funds,” the ruling said. “But perhaps even more significantly, we don’t even know whether the state would pay the judgments if NICA didn’t have enough money. Based on the information submitted by the parties, it’s just as likely that the Legislature would let NICA go insolvent and abandon the whole program.”
The lawsuit was filed by Veronica Arven and the estate of her late husband, Theodore Arven. The couple had filed a similar whistleblower case against a Virginia program that led to Virginia reaching a $20 million settlement with the federal government. Thursday’s ruling said the Arvens’ child participated in the Virginia program.
Medicaid is jointly funded by the federal government and state governments.
