United States v. State of Ohio

EDGAR, District Judge.

The district court entered a declaratory judgment that the “economic loss” requirement in Ohio’s Victims of Crime Act, Ohio Rev.Code Ann. § 2743.52 (Anderson 1981 & Supp.1990), conflicts with and is preempted by 38 U.S.C. § 1729.¹ The State of Ohio was ordered to pay the United States the reasonable cost of medical treatment provided to Ohio resident David F. Bernath (“Bernath”) by the United States Department of Veterans Affairs. 756 F.Supp. 340. The State of Ohio appealed. We AFFIRM.

I.

Bernath was the victim of a violent crime in Ohio. He received medical treatment at the Veterans Administration (“VA”) hospital in Cleveland, as well as treatment at a private facility, Elyria Memorial Hospital. As a veteran, Bernath was not charged for the care that he received at the VA hospital. Bernath applied for benefits under Ohio's Victims of Crime Act, Ohio Rev. Code Ann. §§ 2743.51-.72 (Anderson 1981 & Supp.1990). The VA obtained an assignment from Bernath and submitted to the state a statement for $1,972.00 representing the reasonable cost of the medical care furnished by the VA to Bernath. The state awarded Bernath recovery for lost wages and medical costs he incurred at Elyria Memorial Hospital. However, because the state determined that Bernath had not suffered an “economic loss” as defined by Ohio Rev.Code Ann. § 2743.51(E) as a consequence of his treatment at the VA hospital, the VA was denied recovery.

In this suit brought by the United States, the district court via summary judgment awarded recovery of $1,972.00 to the United States under what is now 38 U.S.C. § 1729, holding that the “economic loss” provision of the Ohio statute conflicts with and is preempted by § 1729.

II.

38 U.S.C. § 1729 provides in relevant part:

Subject to the provisions of this section, in any case in which a veteran is furnished care or services under this chapter for a non-service-connected disability described in paragraph (2) of this subsection, the United States has the right to recover or collect the reasonable cost of such care or services (as determined by the Secretary) from a third party to the extent that the veteran (or the provider of the care or services) would be eligible to receive payment for such care or services from such third party if the care or services had not been furnished by a department or agency of the United States.

38 U.S.C. § 1729(a)(1).

Paragraph (1) [the above quoted paragraph] of this subsection applies to a non-service-connected disability—

that is incurred as the result of a crime of personal violence that occurred in a State, or a political subdivision of a State, in which a person injured as the result of such a crime is entitled to receive health care and services at such State’s or subdivision’s expense for personal injuries suffered as the result of such crime[.]

38 U.S.C. § 1729(a)(2)(C).

[T]he United States shall be subrogated to any right or claim that the veteran (or the veteran’s personal representative, successor, dependents, or survivors) may have against a third party.

38 U.S.C. § 1729(b)(1).

No law of any State or of any political subdivision of a State, and no provision of any contract or other agreement, shall operate to prevent recovery or collection by the United States under this section. ...

38 U.S.C. § 1729(f).

The Ohio statute allows payment when the claimant has suffered “economic loss” which is defined as “economic detriment consisting only of allowable expense, work loss, funeral expense, unemployment benefits loss, and replacement services loss.” Ohio Rev.Code Ann. § 2743.51(E) (Supp. 1990). Allowable expense includes “reasonable charges incurred for reasonably needed products, services, and accommodations, including those for medical care....” Ohio Rev.Code Ann. § 2743.51(F). (Anderson 1981 & Supp.1990). The State of Ohio says that since Bernath was not required to pay for his treatment at the VA hospital, he incurred no “allowable expense,” suffered no “economic loss,” and therefore, no recovery may be had. Moreover, says the state, it is Bernath, the injured victim, which the Ohio statute is intended to recompense, not health care providers.

The difficulty with these arguments is that they fly in the face of Congress’ intent in enacting 38 U.S.C. § 1729. This legislative history shows clearly that § 1729 was aimed precisely at state statutes such as Ohio’s Victims of Crime Act which have the practical effect of preventing VA hospitals from recovering their costs in situations when a private hospital would be entitled to recover.

The House Report, which describes the enacted § 1729, states:

Twenty-six States have statutes on compensating victims of crimes of personal violence; however, the Veterans’ Administration has difficulty in collecting in nine States because (1) Federal hospitals are excluded as “other source of recovery”; (2) claims go directly to the victim and claims are not assignable; or (3) veterans are not required to pay for medical care received.

The reported bill would strengthen and clarify the Veterans’ Administration’s authority to recover the costs of veterans’ nonservice-connected care from State workers’ compensation, “no fault” auto insurance and crimes of personal violence where a veteran would have entitlement to payment or reimbursement by a third party for appropriate medical care furnished in a non-Federal hospital.

H.R.Rep. No. 97-79, 97th Cong., 1st Sess. 8 (1981), reprinted in 1981 U.S.C.C.A.N. 1685, 1693.

We join the Fourth and Third Circuits which have held that Maryland and New Jersey statutes, similar to the Ohio statute, do not prevent recovery by the VA under § 1729 for the reasonable cost of medical care or services rendered to veterans. United States v. Maryland, 914 F.2d 551 (4th Cir.1990); United States v. New Jersey, 831 F.2d 458 (3d Cir.1987).

The State of Ohio, and the dissent, focus on the language of § 1729(a)(1) which authorizes the United States to recover the reasonable cost of medical services “from a third party to the extent that the veteran (or the provider of the care or services) would be eligible to receive payment for such care or services from such third party if the care or services had not been furnished by a department or agency of the United States.” The state says that the VA may not recover under this language because the state would not reimburse a crime victim/veteran who had been treated in a private hospital or other health care provider which did not charge for its services. As both the Third and Fourth Circuits have said, the problem with this argument is that it is “inconsistent with economic reality” and the legislative history of § 1729. Maryland, 914 F.2d at 555; New Jersey, 831 F.2d at 462. The economic reality is that private hospitals do not provide free medical treatment. Thus, the VA is, for all practical purposes, denied recovery under the state statute, while private hospitals are not. This is exactly what happened in this case. The State of Ohio paid Bernath for his expenses at Elyria Memorial, but not for his expenses at the VA hospital.

The legislative history is, as recited above, that Congress intended to prevent just the sort of thing that the Ohio statute attempts to do. “In determining the meaning of the statute, we look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy.” Crandon v. United States, 494 U.S. 152, 158, 110 S.Ct. 997, 1001, 108 L.Ed.2d 132 (1990). Since the Ohio statute conflicts with § 1729, it must give way under the Supremacy Clause, Article VI, of the United States Constitution. Free v. Bland, 369 U.S. 663, 666, 82 S.Ct. 1089, 1092, 8 L.Ed.2d 180 (1962).

The dissent has raised the question of whether 38 U.S.C. § 1729 contravenes the Tenth Amendment by unreasonably infringing upon powers reserved to the states. This issue was not raised in the district court. We decline to consider it pursuant to the general rule that, absent “exceptional cases or particular circumstances,” a federal appellate court will not consider issues not passed on by the district court. Pinney Dock and Transport Co. v. Penn Central Corp., 838 F.2d 1445, 1461 (6th Cir.), cert. denied, 488 U.S. 880, 109 S.Ct. 196, 102 L.Ed.2d 166 (1988). There is nothing about this case that would warrant an exception to the rule.

III.

The United States is entitled to recover $1,972 from the State of Ohio. The judgment of the district court is AFFIRMED.

1 . 38 U.S.C. § 1629 was renumbered to 38 U.S.C. § 1729 by amendment effective August 6, 1991.