Neurological Injury Fund Dealt Legal Blow

TALLAHASSEE, Fla. — A Florida program that pays for the care of children who suffer neurological injuries at birth will continue facing a federal lawsuit about whether it inappropriately shifted costs to Medicaid.

The 11th U.S. Circuit Court of Appeals on Wednesday refused to reconsider an April ruling by a three-judge panel that cleared the way for the lawsuit against the Florida Birth-Related Neurological Injury Compensation Association.

The program, which sought a rehearing before the full appeals court, argued that it should be shielded from the lawsuit because of sovereign immunity.

In a May motion seeking the rehearing, the program, commonly known as NICA, pointed to potentially broad implications of the three-judge panel’s ruling.

“The panel’s unprecedented approach and destabilizing ruling make this an exceptionally important case,” the motion said. “NICA’s authorizing statutes grant it sovereign immunity under state law.

The panel’s refusal to honor that choice by the Legislature raises serious federalism concerns and infringes upon Florida’s sovereignty.”

As is common, Wednesday’s decision to deny a rehearing did not give a detailed explanation.

NICA was created by the Legislature in 1988 amid concerns about the 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. The 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.

But U.S. District Judge William Dimitrouleas and the appeals-court panel refused to dismiss the case. The panel said, for example, that 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,” the April panel ruling said.

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.

The Arvens’ child participated in the Virginia program, according to the April appeals-court ruling.

Medicaid is jointly funded by the federal government and state governments.

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