Thursday, February 28, 2008

High medical costs as direct evidence of disability discrimination

Federal courts of appeals continue to make family responsibility discrimination a hot button issue. Typically, we've seen family responsibility issues arise in the context of childcare. Today, we'll examine a family responsibility case that deals with associational disability discrimination, Dewitt v. Proctor Hospital, which permitted an employee with a terminally ill husband to pursue her ADA claim.

Phillis Dewitt worked at Proctor Hospital as a clinical manager, and by all accounts was a valued employee. Dewitt and her husband, Anthony, were covered under Proctor's medical plan. Proctor was partially self-insured for its medical coverage. It paid the first $250,000 of annual covered medical costs, and anything above that "stop-loss" figure rolled into an insurance policy. Because it was self-insured, Proctor kept quarterly reports of all employees with claims over $25,000.

Throughout Dewitt's tenure at Proctor, her husband suffered from prostate cancer, and the high medical costs that went along with it. In September 2004, Dewitt's supervisor, Mary Jane Davis, confronted her about her husband's medical claims, specifically asking what treatment he was receiving and why his doctor hadn't put him in hospice yet. Davis repeated her inquiry in February 2005. In May 2005, Davis organized a meeting of Proctor's clinical managers and advised them that because of the hospital's financial troubles it required a "creative" effort to cut costs. Three months later, Proctor fired Dewitt and designated her "ineligible to be rehired in the future." Dewitt's husband died a year later.

In her lawsuit, Dewitt claimed "associational discrimination" under the ADA, that Proctor fired her to avoid having to pay for the substantial self-insured medical costs it incurred because of her husband. The 7th Circuit pointed out the associational discrimination plaintiffs fall into 3 categories: expense, disabled by association, and distraction. Dewitt's claim falls into the "expense" category, an employee fired because a family member has a "disability" costly to the company.

The Court found that Dewitt had presented a jury question on her disability claim and reversed the trial court's dismissal of her claim. Specifically, the Court found that she had presented "direct evidence" of discrimination. Proctor fired Dewitt 5 months after Davis' last conversation with her about her husband's medical treatment and costs, and 3 months after Proctor warned employees about "creative" cost-cutting measures. In the Court's words:

[T]he timing of Dewitt’s termination suggests that the financial albatross of Anthony's continued cancer treatment was an important factor in Proctor's decision.... One could reasonably infer that Dewitt was terminated after Proctor conducted its latest periodic analysis of medical claim "outliers" and, this time around, decided that its "wait and see" strategy with the Dewitts was costing the hospital tens of thousands of dollars every year. A reasonable juror could conclude that Proctor, which faced a financial struggle of indeterminate length, was concerned that Anthony—a multi-year cancer veteran—might linger on indefinitely.... Because Dewitt has established that direct evidence of "association discrimination" may have motivated Proctor in its decision to fire her, a jury should be allowed to consider her claim.

This case is an example of an employer who did just about everything wrong. It repeatedly grilled an employee about her husband's medical condition, and then clearly fired her because of the high cost of his medical care. From the employer's point of view, this case would be scary to present to a jury. It's difficult to think of a more sympathetic plaintiff in an employment case, which presents a real big problem for Proctor at trial.

While I don't mean to sound heartless, the concurring opinion makes a good point as to what is and is not "disability" discrimination. The ADA makes discrimination based on "disability" illegal; discrimination based solely on medical costs simply is not illegal. [ERISA discrimination is another issue entirely, which the court did not reach].

An employer's most likely concern about an employee who has a disabled relative, especially a spouse or child, is that the relative's medical expenses may be covered by the employer's employee health plan. There is a positive correlation between being disabled and having abnormally high medical expenses, just as there is a positive correlation between the age of an employee and his salary because most employees receive regular raises as long as they perform satisfactorily. Suppose a company encounters rough waters and decides to retrench by firing its most expensive employees. They are likely to be older on average than the employees who are retained, but as we said many years ago, "nothing in the Age Discrimination in Employment Act forbids an employer to vary employee benefits according to the cost to the employer; and if, because older workers cost more, the result of the employer's economizing efforts is disadvantageous to older workers, that is simply how the cookie crumbles." ...

[A]n employer who discriminates against an employee because of the latter's association with a disabled person is liable even if the motivation is purely monetary. But if the disability plays no role in the employer’s decision—if he would discriminate against any employee whose spouse or dependent ran up a big medical bill—then there is no disability discrimination. It's as if the defendant had simply placed a cap on the medical expenses, for whatever cause incurred, that it would reimburse an employee for. This appears to be such a case. So far as the record reveals, the defendant fired the plaintiff not because her husband was disabled but because his medical expenses—which might not have been any lower had they been due to a condition that did not meet the statutory definition of a disability—were costing the defendant an amount of money that it was unwilling to spend. All the evidence recited in the majority opinion concerns costs ("cutting costs," "high cost of Anthony's medical treatment," "financial albatross," etc.) that a person who had a nondisabling medical condition could equally incur. If cost was indeed, as appears to be the case, the defendant's only motive for the action complained of, the defendant was not guilty of disability discrimination.

I am no way suggesting, from either a legal, HR, or human perspective, that companies should do what Proctor did. However, I do think that Judge Posner's concurrence makes a compelling argument on whether an employment decision based solely on medical costs constitutes "disability" discrimination. Proctor's job at trial is to convince the jury that medical costs were its only reason for the discharge, and that the disability itself played no role, a difficult argument to make and difficult distinction for a jury to draw.