House health care bill expands state AGs' powers

Chris Rizo Nov. 24, 2009, 2:24pm

Victor Schwartz

WASHINGTON (Legal Newsline)-Nestled deeply within the 2,016-page national health care overhaul bill passed by the U.S. House of Representatives this month are three provisions that would significantly expand the powers of state attorneys general.

Sections of the $ 1 trillion Affordable Health Care for America Act would be a boon to the nation's trial lawyers, a key Democratic constituency, allowing their ranks to sue businesses through state attorneys general over alleged medical-related violations.

"With the national health care reform debate monopolizing the time and efforts of Congress over the past several months, the organized plaintiffs' bar has used this opportunity to redirect funding and lobbying power to go on the offensive," said Victor Schwartz, chairman of the Public Policy Practice at Shook, Hardy & Bacon LLP.

Schwartz, a leading Washington legal mind, said the House-approved health care overhaul would give state attorneys general broad powers to enforce provisions outlined in Title II of the proposed law: "Protections and Standards for Qualified Health Benefits Plans."

His analysis indicates that attorneys general would be able to pursue monetary damages on behalf of private plaintiffs for even technical violations.

"Given the scope of the legislation, it will, as a practical matter, be extremely difficult for defendants to comply perfectly with every provision and corresponding regulation, especially where ambiguous," Schwartz wrote. "For that reason, section 257 would effectively grant state attorneys general the authority to target almost any business."

Schwartz noted that under the provision, states would be allowed to hire outside counsel for enforcement actions.

"Thus, the end result of this provision could very easily mean hundreds of millions in liability for businesses based on the whims of the state attorney general or private plaintiffs' attorneys," he wrote.

A second "trial lawyer" earmark in the House health care bill is outlined in Subtitle D, the "Physician Payments Sunshine Provision," he noted.

Under the provision, state attorneys general would be empowered to intervene in any reporting violation of the financial relationship between pharmaceutical and medical device manufacturers and physicians or other health care entities.

State attorneys general would be authorized to pursue actions to recover damages, including fines between $1,000 and $10,000 for each violation and fines between $10,000-$100,000 for any willful violation.

"Although this provision would not enable lawsuits to be filed on behalf of individual citizens (as would be the case with the broad attorney general enforcement provision in Section 257), it would provide a significant threat to both drug and device companies and health care entities, especially if such authority was further delegated by the state attorney general to private plaintiffs' attorneys," Schwartz wrote.

A third troubling provision of the House health care bill, he said, would provide grants to states that enact alternative medical liability laws, such as requirements for a certificate of merit to file a lawsuit or promote programs for early-offer settlements.

"On the surface, these provisions may appear beneficial; however, the legislation specifically excludes state incentive payments for any law which would either limit attorneys' fees or impose caps on damages," Schwartz said. "In other words, the Act would provide a disincentive for states to take action and enact laws which would limit excessive fees or awards."

The landmark health care legislation pushed by Democrats narrowly cleared the House this month on a 220-215 vote, with the support of just one Republican and opposition from 39 Democrats.

The legislation seeks to fundamentally change the way U.S. health insurance companies do business without enacting any legal reforms, such as changing the nation's medical malpractice laws.

The House legislation would bar insurers from denying coverage and prohibit the insurance industry from charging higher premiums to consumers with a preexisting condition.

The bill also contains a public insurance option, which proponents say is aimed at injecting more competition into the health insurance marketplace. Under the legislation, the insurance industry would lose its exemption from federal antitrust restrictions on market allocation and price fixing.

House Republicans had sought a cap on punitive damages and narrowing the statute of limitations on malpractice claims as a way to cut health care costs. Democrats, who control the House, rejected their plan.

From Legal Newsline: Reach staff reporter Chris Rizo at

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