Alexander v. Schweicker

• Decision Date: 23 March 1981
• Docket Number: No. H-80-2.,H-80-2.
• Citation: 516 F. Supp. 182
• Court: U.S. District Court — District of Connecticut
• Parties: Stephen ALEXANDER and Bernard Dunne, On Their Behalf and On Behalf of All Others Similarly Situated v. Richard S. SCHWEICKER Secretary, United States Department of Health and Human Services.

516 F. Supp. 182

Stephen ALEXANDER and Bernard Dunne, On Their Behalf and On Behalf of All Others Similarly Situated v. Richard S. SCHWEICKER Secretary, United States Department of Health and Human Services.

No. H-80-2.

United States District Court, D. Connecticut.

March 23, 1981.

William A. Dombi, Connecticut Legal Services, Inc., Legal Assistance to Medicare Patients, Willimantic, Conn., for plaintiffs.

George J. Kelly, Jr., Asst. U. S. Atty., Richard Blumenthal, U. S. Atty., Hartford, Conn., Clifford Pierce, Asst. Regional Atty. (Region I) Dept. of Health and Human Services, Boston, Mass., for defendant.

RULING ON PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

JOSÉ A. CABRANES, District Judge:

In this action, plaintiffs challenge the method adopted by the Secretary of Health and Human Services (the "Secretary") for computing the annual $60.00 "deductible"¹ which claimants must incur before they become entitled to medical insurance payments under Part B of the Health Insurance for the Aged Act, 42 U.S.C. §§ 1395-1395rr (the "Medicare Act"). Specifically, plaintiffs object to the Secretary's policy and practice of applying the officially-approved "reasonable charge" for physicians' services,² rather than the actual charge for such services, toward a Part B beneficiary's annual deductible. See Health Care Financing Administrations's Carrier Manual ("Manual"), HIM-14, Section 2450, attached to Complaint of Intervenor Bernard V. Dunne as Exhibit II. 42 U.S.C. §§ 1395l (a), 1395l(b), 1395u(a), 1395u(b)(3); 42 C.F.R. §§ 405.501-405.501-405.511.³ Jurisdiction is alleged under 28 U.S.C. § 1331 (general federal question jurisdiction) and 28 U.S.C. § 1361 (mandamus jurisdiction). Now before the court are the plaintiffs' motion for partial summary judgment on the issue of whether defendant's policy and practice violate the Medicare Act and the defendant's motion to dismiss this action on the grounds that the court lacks jurisdiction over the subject matter, Rule 12(b)(1), Fed. R.Civ.P., or in the alternative, for summary judgment on all of the claims asserted by the plaintiffs in their complaint, Rule 56, Fed.R.Civ.P.

To the extent that the plaintiffs' challenge to the Secretary's administration of the Medicare Part B program constitutes a claim "arising under" the Medicare Act, this court may lack jurisdiction over the subject matter grounded on 28 U.S.C. § 1331.⁴See Section 1872 of the Medicare Act, 42 U.S.C. § 1395ii, incorporating Section 205(h) of the Social Security Act, 42 U.S.C. § 405(h) (explicitly prohibiting, inter alia, any judicial action under 28 U.S.C. § 1331 "to recover on any claim arising under" the Federal old-age, survivors and disability insurance program).⁵

As it happens, we are spared the necessity of having to decide whether there is jurisdiction in this case under 28 U.S.C. § 1331, because plaintiffs have not been content to rely exclusively, or even primarily, on general federal question jurisdiction. They have vigorously invoked the jurisdiction of the court "in the nature of mandamus to compel an officer ... of the United States or any agency thereof to perform a duty owed to the plaintiff," 28 U.S.C. § 1361, and it is now clear in this Circuit that under this statute, added by the Mandamus and Venue Act of 1962, 76 Stat. 744, "jurisdiction will lie to review procedures employed in administering social security benefits," Ellis v. Blum, 643 F.2d 68, 78 (2d Cir. February 18, 1981) (Friendly, J.); "the availability of mandamus jurisdiction over the Secretary to entertain procedural challenges exists despite § 405(h) ...." Id. at 79.⁶See generally, id. at 79; Byse and Fiocca, Section 1361 of the Mandamus and Venue Act of 1962 and "Nonstatutory" Judicial Review of Federal Administrative Action, 81 Harv.L.Rev. 308 (1967). Moreover, our Court of Appeals has also recently observed that "determination of mandamus jurisdiction necessarily encompasses on-the-merits analysis of whether a mandamus writ should issue," CETA Workers' Organizing Committee v. City of New York, 617 F.2d 926, 936 (2d Cir. 1980). In these circumstances the court must consider whether the Secretary's interpretation and implementation of the Medicare Act in any way conflict with requirements laid down by Congress or by the Constitution of the United States.

The on-the-merits analysis required by the invocation of 28 U.S.C. § 1361 leads the court to conclude that, in the present case, the Secretary has not failed to perform a duty that the Constitution or Congress required him to perform. The constitutional and statutory analysis undertaken by the court is necessarily the same as the analysis the court would have performed if it had considered this action under the general federal question jurisdiction statute, 28 U.S.C. § 1331, and the court's conclusions are likewise identical. Accordingly, the defendant's motion for summary judgment is granted.

I.

The challenged administrative policy conforms to the terms and intent of the Medicare Act. The language of that statute reflects the Congressional policy that only the reasonable cost of medical services be used in computing benefit payments. Title 42, U.S.C. § 1395l, governs the computation of benefit payments. Section 1395l (a)(1) provides, in pertinent part, that

... there shall be paid from the Federal Supplementary Medical Insurance Trust Fund, in the case of each individual who is covered under the insurance program established by this part and incurs expenses for services with respect to which benefits are payable under this part, amounts equal to — (1) ... 80 percent of the reasonable charges for the services.

Section 1395x(v)(1)(A) then defines the concept of "reasonable" charges, or costs, as follows:

The reasonable cost of any services shall be the cost actually incurred, excluding therefrom any part of incurred cost found to be unnecessary in the efficient delivery of needed health services, and shall be determined in accordance with regulations establishing the method or methods to be used, and the items to be included, in determining such costs for various types or classes of institutions, agencies, and services.

Section 1395u(b)(3) provides guidance to the Secretary regarding the drafting of the required regulations: "In determining the reasonable charge for services for purposes of this paragraph, there shall be taken into consideration the customary charges for similar services generally made by the physician or other person furnishing such services, as well as the prevailing charges in the locality for similar services." The regulations which the Secretary has promulgated pursuant to these Congressional guidelines are set forth at 42 C.F.R. §§ 402.501-405.511 (definitions of, and criteria for, "reasonable charges").

Having made clear, in § 1395l(a), that benefits are to be paid according to reasonable costs only, Congress then provided, in § 1395l(b), for the payment of a deductible by the recipients of Medicare Part B benefits. This deductible provision, 42 U.S.C. § 1395l(b), states, in pertinent part, that

before applying subsection (a) of this section 42 U.S.C. § 1395l(a) with respect to expenses incurred by an individual during any calendar year, the total amount of the expenses incurred by such individual during such year (which would, except for this subsection, constitute incurred expenses from which benefits payable under subsection (a) of this section are determinable) shall be reduced by a deductible of $60 ....

(emphasis supplied).

When the various elements of this statutory framework are combined, it becomes apparent that only reasonable charges are to be used in computing both the deductible and the recipient's net benefit payment. The $60 deductible is, of course, an expense actually "incurred" by the recipient in acquiring medical services. Section 1395l(b) indicates that "incurred expenses" are to be the expenses "from which benefits payable under subsection (a) of this section are determinable ...."⁷ Sections 1395l(a)(1) and 1395x(v)(1)(A), in turn, provide that, at least for purposes of determining benefits under Part B of the Medicare program, "incurred expenses" are to mean "reasonable costs" only. Thus it follows that the $60 deductible, which is itself an "incurred expense," must also be subject to the "reasonable cost" limitation.

This construction of the statutory language is consistent with the Congressional intent reflected in the Medicare Act. In establishing its guidelines for the determination of "reasonable" charges, 42 U.S.C. § 1395u(b)(3), Congress clearly states two policy goals. First, the reimbursable charges for medical services are to be based on the "customary charges for similar services generally made by the physician ...." Second, those charges are to be based on "the prevailing charges in the locality for similar services." Thus, in imposing the reasonable cost requirement, Congress sought to ensure that Medicare recipients would be billed, and reimbursed, at similar rates for similar services.

Were the Secretary not to apply the reasonable cost limitation to the deductible, however, this Congressional goal of uniform reimbursement would be undermined. Thus plaintiffs propose that the Secretary compute the deductible from the recipient's actual costs, rather than from his reasonable costs. The distorting effects which would be caused by such a scheme can be illustrated by a simple example.

Assume, arguendo, that two persons — Recipients X and Y — both of whom are otherwise eligible for Medicare Part B benefits, require only one medical procedure in a year. Assume further that both persons receive the same services, but that Recipient X is charged $60 for the work, while Recipient Y is charged only $40 for those same services. Assume, finally, that the reasonable cost for the services received by both Recipients X and Y is, as determined by the Secretary,...