Patricia Haro; John G. Balentine; Jack McNutt; Troy Hall, Plaintiffs-Appellees
Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendant-Appellant
Argued December 5, 2012
Submitted February 14, 2013 San Francisco, California
Appeal from the United States District Court for the District of Arizona David C. Bury, District Judge, Presiding D.C. No. 4:09-cv-00134-DCB
Alisa B. Klein (argued) and Mark B. Stern, Attorneys; Tony West, Assistant Attorney General; Ann B. Scheel, Acting United States Attorney, United States Department of Justice, Civil Division, Washington, D.C.; William B. Schultz, Acting General Counsel; Margaret M. Dotzel, Deputy General Counsel; Janice L. Hoffman, Associate General Counsel; Carol J. Bennett, Deputy Associate General Counsel for Program Integrity; Leslie M. Stafford, Attorney, United States Department of Health and Human Services, Washington D.C., for Defendant-Appellant.
Gil Deford (argued) and Wey-Wey Kwok, Center for Medicare Advocacy, Willimantic, Connecticut, for Plaintiffs-Appellees.
Before: Barry G. Silverman, Ronald M. Gould, and Morgan Christen, Circuit Judges.
The panel vacated injunctions entered by the district court's and reversed the district court's summary judgment order entered in favor of a nationwide class of Medicare beneficiaries in an action challenging the Secretary of Health and Human Services' practice of demanding "up front" reimbursement for secondary payments from beneficiaries who have appealed a reimbursement determination or sought a waiver of the reimbursement obligation.
The district court enjoined the Secretary from seeking up front reimbursements of Medicare secondary payments from beneficiaries who have received payment from a primary plan if they have unresolved appeals or waivers, and enjoined the Secretary from demanding that attorneys withhold settlement proceeds from their clients until after Medicare is reimbursed. The panel held that plaintiff Patricia Haro demonstrated Article III standing on behalf of the class of Medicare beneficiaries, and Haro's attorney independently demonstrated standing to raise his individual claim. However, the panel concluded that the beneficiaries' claim was not adequately presented to the agency at the administrative level, and therefore the district court lacked subject matter jurisdiction pursuant to 42 U.S.C. d 405(g). The panel reached the merits of the attorney's claim, but concluded that the Secretary's interpretation of the secondary payer provisions was reasonable. The panel remanded for consideration of the beneficiaries' due process claim.
CHRISTEN, Circuit Judge:
Secretary of Health and Human Services Kathleen Sebelius appeals the district court's order certifying a nationwide class of Medicare beneficiaries and granting summary judgment in the beneficiaries' favor. Patricia Haro, Jack McNutt, and Troy Hall are named plaintiffs. John Balentine was Haro's lawyer in her underlying personal injury suit.
Before the district court, the beneficiaries raised two claims: (1) the Secretary's practice of demanding "up front" reimbursement for secondary payments from beneficiaries who have appealed a reimbursement determination or sought waiver of the reimbursement obligation is inconsistent with the secondary payer provisions of the Medicare statutory scheme; and (2) the Secretary's practice violates their due process rights. Balentine separately claimed the Secretary's practice of demanding that attorneys withhold settlement proceeds from beneficiary-clients until Medicare is reimbursed is also inconsistent with the secondary payer provisions.
The district court agreed with the beneficiaries. The court enjoined the Secretary from seeking up front reimbursement of Medicare secondary payments from beneficiaries who have received payment from a primary plan if they have unresolved appeals of their reimbursement calculations or unresolved requests for waiver of their reimbursement obligations. The district court also agreed with Balentine and enjoined the Secretary from demanding that attorneys withhold settlement proceeds from their clients until after Medicare is reimbursed. The district court did not reach the beneficiaries' due process claim.
On appeal to our court, the Secretary raises three jurisdictional arguments. First, she argues that this case is not justiciable because neither the beneficiaries nor Balentine had Article III standing. Second, she argues this case is moot. Third, she argues that the district court lacked subject matter jurisdiction over all claims in the complaint. On the merits, the Secretary maintains that her interpretation of the Medicare secondary payer provisions is reasonable.
We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. We conclude that Haro has demonstrated Article III standing on behalf of the class of Medicare beneficiaries and that Balentine has independently demonstrated standing to raise his individual claim. But we conclude that the beneficiaries' claim was not adequately presented to the agency at the administrative level and therefore the district court lacked subject matter jurisdiction pursuant to 42 U.S.C. § 405(g). We reach the merits of Balentine's claim, but conclude that the Secretary's interpretation of the secondary payer provisions is reasonable. We therefore vacate the district court's injunctions, reverse the district court's summary judgment order, and remand for consideration of the beneficiaries' due process claim.
A. Statutory Background
Congress enacted the secondary payer provisions of the Medicare statute in 1980 to cut Medicare costs. See Zinman v. Shalala, 67 F.3d 841, 843 (9th Cir. 1995). Those provisions make Medicare secondary to other sources of insurance by forbidding Medicare payments when a primary plan—for instance, group health insurance or liability insurance—is reasonably expected to make payment for the same medical care; and by providing that certain Medicare payments are conditional and must be reimbursed. 42 U.S.C. § 1395y(b)(2)(A), (B). Conditional payments are at issue in this case.
Medicare makes a conditional payment when a primary insurer cannot reasonably be expected to pay promptly. Id. § 1395y(b)(2)(B)(i). If Medicare makes a conditional payment and the beneficiary later receives payment from a primary insurer, Medicare is entitled to reimbursement. Id. § 1395y(b)(2)(B)(ii). Specifically, § 1395y(b)(2)(B)(ii) provides that "a primary plan [or] an entity that receives payment from a primary plan, shall reimburse" Medicare once the primary plan's responsibility has been demonstrated by a judgment or settlement. Id. We refer to this paragraph—§ 1395y(b)(2)(B)(ii)—as the "reimbursement provision." If Medicare is not reimbursed within 60 days after notice of the primary insurer's payment, the Secretary is entitled to charge interest on the reimbursement amount. Id.
The statutory scheme also creates a cause of action by which the United States may recover from a primary plan or "from any entity that has received payment from a primary plan or from the proceeds of a primary plan's payment to any entity." Id. § 1395y(b)(2)(B)(iii). We refer to this part of the Medicare statutory scheme as the "cause of action provision." The cause of action provision allows the United States to seek reimbursement from "the beneficiary herself." Zinman, 67 F.3d at 844–45; see also 42 C.F.R. § 411.24(g) (Medicare "has a right of action to recover its payments from any entity, including a beneficiary . . . [or] attorney . . . that has received a primary payment.").
When Medicare learns that a beneficiary has received payment from a primary plan, the Secretary makes an initial determination of the amount of reimbursement due from the beneficiary. Borrowing from the Social Security Act, the Medicare Act incorporates administrative review procedures set out in 42 U.S.C. § 405(b) and judicial review pursuant to 42 U.S.C. § 405(g). See 42 U.S.C. § 1395ff(b)(1)(A). A beneficiary may contest the amount of reimbursement or seek waiver of any reimbursement amount. See id. § 1395gg.
B. Factual Background
1. Patricia Haro
Patricia Haro was injured in a car accident and Medicare paid for her medical treatment. Haro filed a personal injury claim against the tortfeasor, which eventually settled. Medicare, through the Medicare Secondary Payer Recovery Contractor,  sought reimbursement of $1, 682.72 in a letter dated January 12, 2009. The letter informed Haro of her right to appeal the reimbursement determination or seek waiver but also stated that Haro "must" pay within 60 days and that interest would start to run if payment was not made in that period. The letter encouraged Haro to pay the amount in full, even if she decided to appeal or seek a waiver, in order to avoid interest charges.
Haro disputed the reimbursement determination by letter dated January 21, 2009. Haro's lawyer sent a second letter, on February 2, 2009. In it, he argued that the reimbursement provision did not grant the Secretary authority to seek payment from a beneficiary within 60 days of notice of the settlement if the beneficiary had appealed the reimbursement determination. The letter also argued that the Due Process Clause prohibits takings of property before there has been a determination of rights to that property.
Medicare reduced Haro's reimbursement amount to $696.13 by letter dated March 3, 2009. On March 4, 2009, likely before Haro received notice of the revised reimbursement figure, Haro sent Medicare a check for $800. Haro did not seek reconsideration of Medicare's reduced reimbursement amount and instead filed this lawsuit on March 10, 2009. Medicare reimbursed Haro $103.87 (the difference between $800 and $696.13) on April 13, 2009.
2. Jack McNutt
Like Haro, Jack McNutt was injured in a car accident and Medicare paid his medical costs. McNutt's personal injury lawsuit settled and McNutt notified Medicare of the settlement. Medicare responded with a letter requesting reimbursement of $26, 487.07. The letter stated that McNutt was required to pay within 60 days of the receipt of the settlement proceeds and that interest would start to accrue if payment was not received within that time. The letter also informed McNutt of his rights to appeal and seek waiver of the reimbursement obligation. McNutt appealed the reimbursement determination.
After Medicare sent McNutt a notice of the Secretary's intent to refer the debt to the Department of Treasury, McNutt wrote a letter of "appeal, " but with his letter he enclosed a check for $11, 366.58, the amount he believed he owed. Medicare sent McNutt an adjusted demand. Because of McNutt's earlier payment, only $1, 422.93 (including $13.36 in interest) remained outstanding. Medicare notified McNutt that his remaining reimbursement payment "should" be made within 30 days. McNutt sought reconsideration of that amount, and the Secretary acknowledged that notice of intent to refer the debt to Treasury was sent in error. Medicare then reduced McNutt's total reimbursement amount again, and McNutt paid the remaining balance, plus interest. His administrative ...