TN 1 (05-05)

PR 02105.053 Washington

A. PR 04-340 (Washington) Liability of the State of Washington Disability Determination Services and its Medical or Psychological Consultants for Disability Determinations Made under the Social Security Act

1. SYLLABUS

This case involves the liability of a DDS and it Medical or Psychological Consultants for disability determinations made under Sections 221 (a) and 1633 the Social Security Act. The State issued policy requiring all independent contractors to carry liability insurance. The DDS requested a waiver--for its medical and psychological consultants--to purchase such liability insurance, believing that SSA would assume responsibility for defending any actions taken in the course of documenting and adjudicating the disability claim.

In response to the question on whether the SSA would defend the medical or psychological consultant follows:

> SSA will defend in court the disability determinations made by DDS, or any procedure for making disability determinations. If litigation involves a disability determination, SSA will ask the Department of Justice to seek to remove the state action to federal court, and to have the DDS and/or the medical or psychological consultant defendant(s) removed from the action.

> However, SSA would not be liable under the Federal Tort Claims Act (FTCA) for negligent acts of the DDS or its independent contractor medical or psychological consultants. If a claimant or beneficiary is injured in the course of a test or examination, including invasive procedures by an independent contractor or its subcontractor, SSA funds will not be used to pay for resulting treatment or damages.

OPINION

Issue

You have requested a legal opinion regarding the liability of the State of Washington Disability Determination Services (DDS) and its independent contractor medical and psychological consultants for making disability determinations under sections 221(a) and 1633(a) of the Social Security Act (the Act), 42 U.S.C. §§ 421(a), 1383b(a).

Factual Background

The State of Washington's Department of Social and Health Services (DSHS) has implemented a policy that requires all independent contractors to carry liability insurance. This policy is intended, among other things, to protect DSHS clients "from the adverse economic impact of injuries and loses which may result from the acts and omissions of DSHS contractors"; and to protect DSHS "from claims, suits, actions, costs, damages or expenses arising from any negligent or intentional act or omission of the contractor." Washington State Administrative Policy No. 13.13, which became effective on August 1, 2004. The Assistant Secretary of DSHS (or designee) has authority to waive the insurance requirement if the waiver is in the best interest of DSHS (or its clients). In making the waiver determination, the Assistant Secretary (or designee) considers "the risks associated with the type of service being purchased, the potential benefits of insurance to DSHS and its clients, and the availability of insurance." Id.

You indicated that DDS has requested a waiver for its medical and psychological consultants to purchase professional liability insurance. DDS believes that the Social Security Administration (SSA), and not DSHS, would assume responsibility for defending any actions that were taken in the course of documenting and adjudicating the disability claim. Before granting the waiver request, DDS' parent agency, the Medical Assistance Administration, has requested more specific information about the SSA/DDS partnership and liabilities each assumes for decisions and actions taken by state employees and medical or psychological consultant contractors.

You stated that it will be difficult for DDS to recruit medical and psychological consultants from various specialties if they are required to purchase professional liability insurance. You indicated that many consultants do not carry professional liability insurance because they are no longer providing direct patient care. You noted that the consultants work anywhere from five to thirty hours per week and many have stated they would find it cost prohibitive to continue with their contracts if required to purchase insurance.

You further stated that the decisions the medical and psychological consultants make are low medical risk and that insurance coverage is not necessary. The consultants authorize tests, such as treadmills that bring some chance of complications, although the treating or examining physician is required to assess if the treadmill would be contraindicated before proceeding. You noted that other low risk procedures include pulmonary function tests and arterial blood gas studies but these are performed in a clinical setting under the supervision of physicians or trained technicians. Finally, you recognized the possibility that an early medical indicator of a potentially terminal condition could be overlooked within the evidence that would cause survivors to bring suit against SSA, DSHS and/or the case medical or psychological consultant.

Discussion

A. The Disability Determination Process

DDS' role

DDS is authorized to make the determination of whether or not a Social Security claimant is under a disability, the date when the disability began, and the date when the disability ceases. See 42 U.S.C. §§ 421(a)(1); 1383b(a)(1); see also 20 C.F.R. §§ 404.1603(c); 416.1003(c); Program Operations Manual System (POMS) DI 39501.020. In making a disability determination, DDS must comply with the Social Security Act, the Social Security regulations, and other written guidelines issued by the Commissioner of Social Security. 42 U.S.C. § 421(a)(2); see also 20 C.F.R. §§ 404.1603(c), 404.1615(a), 404.1633, 416.1003(c), 416.1015(a), 416.1033. DDS obtains evidence from the Social Security claimant or other sources, see 20 C.F.R. §§ 404.1614, 416.1014, and makes a disability determination based on both the medical and nonmedical evidence in the claims file, see 20 C.F.R. §§ 404.1615(b), 416.1015(b). DDS uses medical or psychological consultants in the disability determination process to evaluate the medical evidence, assess the severity of the claimant's impairments, and describe the functional capabilities or limitations imposed by the impairments. See 20 C.F.R. §§ 404.1615(c), 416.1015(c); POMS DI 24501.010. The regulations require that a state agency medical consultant must approve the ordering of any diagnostic test or procedure when there is a chance that it may involve a significant risk. However, the responsibility for deciding whether or not to perform the examination rests with the medical source designated to perform the consultative examination. See 20 C.F.R. §§ 404.1519m, 416.919m. The medical or psychological consultants are qualified physicians and psychologists who are expert in the Social Security disability programs. See 20 C.F.R. §§ 404.1616, 416.1016.

SSA's role

SSA provides program standards, leadership, liaison, and oversight to DDS in the disability determination process. See 42 U.S.C. §§ 421(a)(1) and (2), 1383b(a); 20 C.F.R. §§ 404.1603(a) and (b); 416.1003(a) and (b). However, SSA does not become involved in DDS' ongoing, day-to-day management of the disability determination function unless DDS does not meet the prescribed performance standards. Id.; see also POMS DI 39501.020.

B. Claims Arising Under the Social Security Act

There is an exclusive administrative process for a claims arising under the Social Security Act. A claimant who is dissatisfied with an initial disability determination made by DDS is entitled to seek reconsideration. See 20 C.F.R. §§ 404.900(a)(2), 404.907, 416.1400(a)(2), 416.1407. If the claimant is dissatisfied with the reconsideration determination made by DDS, the claimant may request a hearing before an administrative law judge (ALJ) with SSA. See 20 C.F.R. §§ 404.900(a)(3), 404.907, 404.929, 416.1400(a)(3), 416.1407, 416.1429. If the claimant is dissatisfied with the ALJ's decision, the claimant may seek review by the Appeals Council. See 20 C.F.R. §§ 404.900(a)(4), 404.955, 404.968, 416.1400(a)(4), 416.1467. If the Appeals Council denies review, the ALJ's decision becomes the final decision of the Commissioner of Social Security. See 20 C.F.R. §§ 404.981, 416.1481. If the claimant does not pursue administrative appeals rights, the disability determination becomes binding and not subject to further review. See 20 C.F.R. §§ 404.905, 404.921, 404.955, 404.981, 416.1405, 404.1421, 416.1455, 416.1481.

Congress has authorized judicial review of final decisions of the Commissioner of Social Security on claims arising under Title II of the Social Security Act, see 42 U.S.C. § 405(g), and Title XVI of the Social Security Act, 42 U.S.C. § 1383(c)(3), which incorporates § 405(g).

Specifically, § 405(g) provides that "[a]ny individual, after any final decision of the Commissioner made after a hearing to which he was a party . . . may obtain a review of such decision by civil action . . . brought in the district court of the United States. . ." and that "the court shall have the power to enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Commissioner . . ." 42 U.S.C. § 405(g).

Section 405(h) states:

The findings and decision of the Commissioner of Social Security after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Commissioner of Social Security shall be reviewed by any person, tribunal, or governmental agency except as provided herein. No action against the United States, the Commissioner of Social Security, and any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter. 42 U.S.C. § 405(h). The "subchapter" referred to is Title II, which contains the old-age, survivors and disability insurance programs, and by virtue of 42 U.S.C. § 1383(c)(3), Title XVI, which contains the Supplemental Security Income program. The United States Supreme Court has read the third sentence of section 405(h) broadly. See e.g., Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975) ("arising under" includes a claim in which "both the standing and the substantive basis for the presentation" of the claims is the Social Security Act).

We found cases where the courts have addressed §§ 405(g) or (h) in the context of litigation involving the state's role in the disability determination process. For instance, in Hooker v. United States Dep't of Health and Human Serv., 858 F.2d 525 (9th Cir. 1988), the survivors of a deceased Social Security benefit recipient (Hooker) brought a Federal Torts Claims Act suit against the United States and state law tort claims against state defendants for terminating disability insurance benefits. The plaintiffs alleged that the decedent Hooker committed suicide as a proximate result of the termination of his benefits. A disability evaluation analyst for the California DDS notified the decedent Hooker that his disability status was being reevaluated by the California DDS. The DDS ordered a consultative examination by a psychiatrist, who diagnosed Hooker as having only a paranoid personality disorder. Subsequently, the California DDS sent to SSA a cessation of benefits letter signed by the disability evaluation analyst for the California DDS. SSA approved the cessation determination. After the decedent Hooker's denial of his request for reconsideration, his mental state allegedly deteriorated and he hanged himself. An ALJ ruled that benefits should not have been terminated because Hooker had met the Listing of Impairments and that Hooker's disability continued until the date of his death. The survivors then brought an action in court for damages; the suit was dismissed. Id., at 525-528. On appeal, the Court of Appeals for the Ninth Circuit held that 42 U.S.C. § 405(h) barred the plaintiffs' state law claim under the FTCA. The Ninth Circuit stated that the plaintiffs' state law tort claim against the state defendants was "'merely a disguised dispute with the [Commissioner of Social Security]'" and therefore barred by 42 U.S.C. § 405(h). Id. at 530.

Another example is a district court's decision in Ostroff v. State of Florida, Dep't of Health & Rehab. Serv., 554 F.Supp. 347, 350-352 (M.D. Fla. 1983). The plaintiff, a Social Security claimant, brought an action pursuant to 42 U.S.C. § 405(g) against the State of Florida Department of Health and Rehabilitative Services (Florida DHRS) and its Secretary for compensatory and punitive damages for wrongful termination of his benefits over a 13-month period. The district court noted that in March 1979, Florida DHRS, acting through its Office of Disability Determinations on behalf of the SSA, reevaluated the plaintiff's eligibility for benefits and concluded that he was no longer disabled. Consequently, on June 1, 1979, the SSA terminated the plaintiff's disability benefits. However, on July 14, 1980, the plaintiff's benefits were reinstated retroactively as a result of an ALJ decision finding that the plaintiff's disability and entitlement to benefits continued. Id., at 350-51. The court held that 42 U.S.C. § 405(g) only authorizes suits against the then Secretary of Health and Human Services (now the Commissioner of Social Security) and that no other agency or official of any government-federal, state or local-is a proper party defendant. Furthermore, the district court held that 42 U.S.C. § 405(h) prohibits any non-42 U.S.C. § 405(g) action against the United States, the Secretary (now the Commissioner), or any officer or employee thereof from being brought under 28 U.S.C. § 1331 or § 1346 to recover on any claim arising under Title II of the Social Security Act. Id. at 352. The court stated:

Although Ostroff has brought this action against various state defendants, at the time of the events in question 42 U.S.C. § 421(a) provided that any disability determination made by a state agency pursuant to an agreement with the Secretary "shall be the determination of the Secretary" for purposes of Title II. Hence, Ostroff's claim against the state defendants is merely a disguised dispute with the Secretary and is barred by § 405(h). Ellis v. Blum, 643 F.2d 68, 76 (2d Cir. 1981) . . . . Ostroff, 554 F.Supp at 352-353 (footnote deleted). The court found that it lacked subject matter jurisdiction over the plaintiff's claim pursuant to 42 U.S.C. § 405(g) against the state defendants and dismissed the claim with prejudice. Id. at 352-53.

However, there is some risk that a court could find a claim against a DDS not barred by 42 U.S.C. § 405(h). For example, Sorenson v. Concannon, 893 F.Supp. 1469, 1472 (D. Or. 1994), involved a challenge to the manner in which disability determinations were made. In addition to suing the Secretary of Health and Human Services, the plaintiffs sued the Administrator for the Oregon DDS, as well as the Administrator of the Oregon Vocational Rehabilitation Division, and the Director of the Oregon Department of Human Resources. The plaintiffs claimed that these state defendants did not comply with federal guidelines and engaged "in a pattern of procedural practices in which they deny requests for disability benefits on the bases of inadequate development and evaluation of evidence of disability." Id., at 1473. The district court found that the plaintiffs claims against the state defendants were not disguised as disputes with the Secretary of Health and Human Services; consequently, § 405(h) did not apply to foreclose the plaintiffs' action against the state defendants for prospective relief. Sorenson, 893 F.Supp. at 1482.

SSA will defend in court the disability determinations made by DDS, or any procedure for making disability determinations. See 20 C.F.R. §§ 404.1615(g) and 416.1015(h); POMS DI 39518.050. DDS is instructed to notify SSA immediately if DDS and/or a medical or psychological consultant is/are named as a defendant(s) in litigation. If the litigation involves a disability determination, SSA will ask the Department of Justice to seek to remove the state action to federal court, and to have the DDS and/or the medical or psychological consultant defendant(s) removed from the action. POMS DI 39518.050.

If litigation involves a challenge to SSA policy or procedure, SSA will request representation from the Department of Justice to defend the federal interest. The Department of Justice may decide to file an "amicus curiae" brief on behalf of the DDS and/or the medical or psychological consultant. However, the likelihood that the Department of Justice will represent a DDS administrator, DDS examiner, or a medical or psychological consultant, even in a case where there is a federal interest, is remote. POMS DI 39518.055B.

C. Negligence Claims.

The Federal Tort Claims Act (FTCA) defines "employee of the Government" to include "officers and employees of any federal agency." 28 U.S.C. § 2671. The term federal agency, however, expressly excludes "any contractor with the United States." Id.; see also Carrillo v. United States, 5 F.3d 1302, 1304 (9th Cir. 1993). The United States is not liable under the FTCA for the negligence of its independent contractors. See Ducey v. United States, 713 F.2d 504, 516 (9th Cir. 1983); see also Lurch v. United States, 719 F.2d 333, 336-37 (10th Cir. 1983) (citing in part to United States v. Orleans, 425 U.S. 807, 813-14 (1976) (the United States is not liable for acts of independent contractors). For FTCA purposes, the DDS is considered to be an independent contractor of SSA. See POMS DI 39518.055C. Medical and psychological consultants are considered independent contractors of the DDS. See, e.g., POMS DI 39518.055D.

For instance, in Brown v. United States, 573 F.Supp. 740 (M.D. Ala. 1982), the plaintiff brought an action against the United States for the alleged negligence of the DDS in failing to inform the plaintiff's decedent of his serious medical condition. The district court held that the employees of the DDS of the Alabama Department of Education were not employees of the United States for purposes of the FTCA but were instead independent contractors. Id., at 741. In reaching this holding, the court relied on the Hill case, stating that:

Far more persuasive is the decision on similar facts in Hill v. Schweiker, 532 F.Supp. 1014 (D.N.H. 1982). In Hill, the plaintiff allegedly suffered a heart attack when undergoing a cardiac stress test in an examination for disability insurance benefits. The individuals administering the test were employees of the New Hampshire Disability Determination Service, a state agency which had entered into a contract with the Social Security Administration which is similar, if not identical, to the contract entered into by the Alabama Department of Education and which was written pursuant to the same statutory authority, 42 U.S.C. § 421. 532 F.Supp. at 1016. The court in Hill held, on summary judgment, that the individual employees of the New Hampshire Disability Determination Service were not federal employees. Id. This Court agrees and considers the issue closed.

Brown, 573 F.Supp. at 742. In the related case of Brown v. United States, 573 F.Supp. 743 (M.D. Ala. 1982), the district court noted that the case arose out of the death of the decedent from lung cancer and was brought pursuant to the FTCA in which the decedent's widow claimed that her husband died as a result of the negligence of the United States through the SSA. Id. at 744. A disability examiner, who was an employee of the Alabama State Department of Education, had knowledge of the decedent's condition (a mass on his lung) and she knew that the decedent's doctor had to be advised. Id. at 746. The court held:

[T]hus, the sole negligence in this case lies with the State of Alabama employees' failure to forward Mr. Brown's file or to relay the information about the cancer to his doctor. As already stated in this order and in prior orders, the United States cannot be held liable under the FTCA for the acts or omissions of independent contractors such as the State of Alabama, the Alabama Department of Education, the DDS or DDS employees. See Hill v. Schweiker, 532 F.Supp. 1014 (D.N.H. 1982).

Brown, 574 F.Supp at 746. The court noted that it had no doubt that DDS had every intention to relay the information about the decedent's x-ray (that had revealed the mass on his lung) to his family physician but that apparently through some inadvertence neither the report nor the information was sent to his doctor. Id., at 747. The court concluded that "[t]he fault, however, does not lie with the United States but with the independent contractor" and ordered "[t]hat plaintiff have and recover nothing from the defendant United States." Id.

As a further example, in Marks v. United States Soc. Sec. Admin., 906 F.Supp. 1017 (E.D. Va. 1995), aff'd in part and vacated in part, 92 F.3d 1180, 1996 WL 438926 (4th Cir. 1996) (unpublished decision), on remand, 963 F. Supp. 517 (E.D. Va. 1997), the plaintiffs filed a negligence action against the Commissioner, a SSA district manager, the Virginia Department of Rehabilitative Services (DDS), and two DDS medical consultants. Plaintiffs alleged that the negligent handling of Ms. Marks' disability benefits claim, specifically the delay in processing the claim and an erroneous diagnosis, led to the family's financial loss and accompanying emotional distress. Ms. Marks application for disability insurance benefits was denied initially and upon reconsideration. At the hearing level, the Office of Hearings and Appeals notified Ms. Marks that her hearing would be scheduled at a later date because of the volume of pending requests for hearing at that office. Before the hearing could be scheduled, DDS recalled the case and reversed the denial of benefits. Thirteen months passed between Ms. Marks application for benefits and the granting those benefits. The plaintiffs claimed that the delay in scheduling the hearing and the continued denial of benefits resulted in the foreclosure on their property. Marks, 906 F.Supp. at 1019-20.

The district court dismissed the action against the SSA district manager because the manager was only responsible for shipping "'the file with medical records ... for storage to the Federal Archives as a closed file when it should have been delivered to the proper Appeals Hearings office.'" See Marks, 906 F.Supp. at 1024. The court found that supervision of this action was insufficient to bring the district manager out of the protection of sovereign immunity. Id. With respect to the two medical consultants, the court noted that these doctors were employed by DDS and that the plaintiffs must allege claims sufficient to sue them in their individual capacity. See M~, 906 F.Supp. at 1024. The plaintiffs asserted that one of the doctors signed a denial that "included a diagnosis that was not in the medical records submitted for review nor a medical condition known to any person in the profession" and that the second doctor included this mistaken diagnosis in the denial of benefits on reconsideration. See Marks, 906 F.Supp. at 1024. The district court found, however, that:

Plaintiffs have not presented evidence to show that the doctors' conduct lay beyond the ordinary course of their duties. No facts are asserted to categorize the doctors' conduct as willful, or even that the diagnosis was incorrect. More importantly, however, these doctors were acting within the scope of their official duties, and therefore cannot be sued in their individual capacities. Since Plaintiffs' only option is to sue them in their official capacities for money damages, sovereign immunity protects them from this suit.

M~, 906 F.Supp. at 1024.

The Court of Appeals for the Fourth Circuit affirmed the district court's dismissal of all claims against the defendants except the claims against the two DDS medical consultants. M~, 92 F.3d 1180, 1996 WL 438926, *1. The Fourth Circuit vacated that portion of the district court's decision with respect to these consultants and remanded for the limited purpose of having the district court address whether the complaint stated a claim against the consultants in their individual capacities. See M~, 92 F.3d 1180, 1996 WL 438926, *1-2. After considering the evidence and the arguments, the district court found that the consultants were not sued in their individual capacities and dismissed the case against them. M~, 963 F.Supp. at 521.

In terms of risk management and assessing whether to advocate for a waiver of the liability insurance requirement, we did not find any reported cases in Washington State where a DDS medical or psychological consultant was held liable for negligence. If such litigation were to be filed, however, SSA would not be liable under the FTCA for the negligent acts of DDS or its independent contractor medical or psychological consultants. In fact, the POMS at DI 39518.055D states: "If a claimant or beneficiary is injured in the course of a test or examination, including invasive procedures by an independent contractor or its subcontractor, SSA funds will not be used to pay for resulting treatment or damages."


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http://policy.ssa.gov/poms.nsf/lnx/1502105053
PR 02105.053 - Washington - 03/31/2017
Batch run: 03/31/2017
Rev:03/31/2017