Gray Panthers v. Schweiker, 79-1603

• Decision Date: 18 March 1981
• Docket Number: No. 79-1603,79-1603
• Citation: 209 U.S. App. D.C. 153,652 F.2d 146
• Parties: GRAY PANTHERS et al., Appellants, v. Richard S. SCHWEIKER, Secretary of the Department of Health and Human Services.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 146

652 F.2d 146

209 U.S.App.D.C. 153

GRAY PANTHERS et al., Appellants, v. Richard S. SCHWEIKER, Secretary of the Department of Health and Human Services.

No. 79-1603.

United States Court of Appeals District of Columbia Circuit.

Argued April 28, 1980.

Decided Oct. 24, 1980.

As Modified on Rehearing March 18, 1981.

Sally Hart Wilson, Los Angeles, Cal., of the bar of the Supreme Court of California pro hac vice by special leave of Court with whom Edward C. King, Washington, D.C., was on the brief, for appellants.

Eugene Tillman, Atty., Dept. of Health and Human Services, Washington, D. C., with whom Carl S. Rauh, U. S. Atty., Washington, D. C., at the time of the brief was filed and Robert P. Jaye, Acting Asst. Gen. Counsel, Dept. of Health and Human Services, Washington, D. C., were on the brief, for appellees.

Before WILKEY, WALD and EDWARDS, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

This case is a class action brought by the Gray Panthers ¹ and three named beneficiaries of the Medicare program challenging the procedures for resolving disputes concerning program benefits of less than $100. The Secretary claims the current notice and "paper hearing" provided by his regulations meet constitutional due process requirements. ² Appellants contend, however, that nothing less than a full, formal, oral evidentiary hearing, identical to those provided for disputes concerning program benefits of more than $100, will satisfy constitutional due process guarantees. The district court found in favor of the Secretary. 466 F.Supp. 1317. We hold, however, that due process in such disputes requires a procedure that lies somewhere between the two extremes presented by the parties. While we do not find that Congress' elimination of formal hearing ³ rights for disputes over Medicare benefits of less than $100 renders the Medicare Act ("Act") itself unconstitutional, we do find that the appellee Secretary of Health and Human Services' interpretation of the Act presently provides insufficient protection of appellants' due process rights. We accordingly reverse the judgment of the district court and remand the case to it to allow the court, with the assistance of the Secretary and the plaintiffs, to formulate appropriate revisions of the affected regulations which satisfy due process considerations. ⁴

DESCRIPTION OF THE MEDICARE PROGRAM

In 1965, Congress passed the Medicare Act, 42 U.S.C. § 1395 et seq., to help assure adequate health care for the elderly. The legislation set up an insurance program to provide reimbursement for the costs of much of the medical care of the aged. Insurance coverage of hospitalization costs, "Part A" of the Act, is funded out of Social Security taxes. "Part B," in contrast, is a voluntary supplemental insurance program intended to cover most other health costs, for which a beneficiary pays a monthly premium. The $100 "amount in controversy" limitation on hearing rights challenged here applies to disputes arising under both parts.

The determination and review procedures for claims arising under the two parts of the Act are similar. Both are administered primarily through non-governmental organizations, usually insurance companies, pursuant to contracts with the Department. ⁵ Claims for payment or reimbursement are submitted to the carrier, which makes an initial determination as to the claim and sends a notice of its action together with any payment to the claimant. If the claimant is dissatisfied, a request for review may be made, ⁶ and a different employee of the carrier will examine the determination, together with any additional information the claimant may wish to submit, and notify the claimant of the decision on redetermination.

For any claimant whose disagreement with the carrier at this stage does not amount to more than $100, ⁷ that is the end of the process, according to the Secretary's procedures. There is no further review, and there is at no time an opportunity to present one's case personally to the decisionmaker. If the amount in controversy is more than $100, the claimant may request a hearing. ⁸ Finally, judicial review is available

for Part A disputes over $1000; no such review is provided for when the claim arises under Part B. ⁹

THE STATUTE AND THE LEGISLATIVE BACKGROUND

The dispute resolution procedures are an administrative scheme based upon the Secretary's interpretation of the Medicare Act. The statutes provide, in pertinent part: (1) for use of private carriers to handle the bulk of the administration of the program; (2) for the $100 amount in controversy limitation on formal hearings; ¹⁰ and (3) for the $1000 threshold for judicial review in Part A claims. The statutes do not mandate that any particular procedures be followed when resolving disputes of less than $100; rather, the Medicare statute itself bars only formal hearings, see note 15 supra, and poses no absolute statutory barrier to the provision of informal hearing procedures.

As the Medicare bill was first reported out of the House Committee on Ways and Means in 1965, there would have been a $1000 limitation on both formal hearing rights and judicial review, but only as to Part A claims. H.R.Rep.No. 213, 89th Cong., 1st Sess. 47 (1965). ¹¹ When the bill reached the Senate, Senator Edward Kennedy proposed that the amount in controversy requirement be reduced to $100. He emphasized the unprecedented nature of the limitation, the significance of the amounts involved to aged individuals attempting to get by on Social Security benefits and savings, and the value of hearings and appeals in attaining accurate and consistent administration of the new program. ¹² His amendment was adopted by At the time, there were no comparable limitations on Part B claims. So matters stood until 1972, when Congress amended the Act substantially, and in the process extended the limitation on hearings to Part B claims expressly to eliminate the expense and inconvenience of a formal hearing when the amount in controversy is small. As explained by the Senate Finance Committee:

the Senate, and in Conference Committee a compromise was struck, providing for hearings if the amount in controversy was $100 or more, and judicial review for disputes of $1000 or more.

Experience under the program indicates that the holding of a full fair hearing is unwarranted in cases where the amount in controversy is relatively small. Carriers have reported cases involving $5 and $10 claims for which the cost of holding a fair hearing has exceeded $100. Approximately 45 percent of the hearings held since the beginning of the program have involved an amount less than $100. Further regulations require carriers to have a reconsideration review of all denied claims. Such review involves different claims personnel than those who acted on the original claim and should be sufficient protection in small claims cases.

S.Rep.No. 1230, 92d Cong., 2d Sess. 213 (1972) (emphasis supplied). ¹³

As it now stands, review of Part A claims is governed by 42 U.S.C. § 1395ff(b) which provides:

(1) Any individual dissatisfied with any determination under subsection (a) of this section as to

* * * *

(C) the amount of benefits under Part A of this subchapter (including a determination where such amount is determined to be zero)

shall be entitled to a hearing thereon ... and to judicial review of the Secretary's final decision after such hearing....

(2) Notwithstanding the provisions of subparagraph (C) ... a hearing shall not be available to an individual by reason of such subparagraph (C) if the amount in controversy is less than $100; nor shall judicial review be available to an individual by reason of such subparagraph (C) if the amount in controversy is less than $1000.

Administration of benefits under Part B is largely entrusted to the private carriers. 42 U.S.C. § 1395u(b)(3)(C) provides that the contract between the Secretary and the carrier must require the carrier to:

establish and maintain procedures pursuant to which an individual enrolled under this part will be granted an opportunity for a fair hearing by the carrier, in any case where the amount in controversy is $100 or more ... when the amount of such payment is in controversy.

In neither case does the statute explicitly detail what process is due those persons with disputes concerning benefits of less than $100. However, the Secretary does not argue here that the intent of the statute is to eliminate all rights of these people to any process. ¹⁴ Rather, he argues that the statute reduces the process due to the minimum constitutional requirements for due process. Therefore, the question is whether the Secretary's current regulations implementing those statutory provisions provide for these minimum requirements; to the extent they do not, the regulations must be deemed to violate the intent of the law and must be overturned. ¹⁵

THE CASE HISTORIES OF THE NAMED PLAINTIFFS

A. Plaintiff Patino

Wilma Patino suffers from rheumatoid arthritis. In February of 1976, she fell on ice, and had to undergo a four-month series of treatments, 13 in all, for which she was billed $10 per visit. Her first application for Medicare benefits covered eleven of those treatments; her second covered the final two.

A few weeks after submitting her claims she received partial payment on her first application. Nationwide Mutual Insurance Company, the carrier for her region, approved payment in full for the first seven of her treatments, and wholly disallowed payments for the next four, with the noted explanation that "Medicare does not pay for: This many services for your condition." Shortly thereafter, she received her second communication from Nationwide concerning her second application covering her final two treatments. As an example of the type of notice received by Medicare beneficiaries, we set out in the margin the form utilized by Nationwide in explaining its action...