Haro v. Sebelius

• Decision Date: 02 January 2014
• Docket Number: No. 11–16606.,11–16606.
• Parties: Patricia HARO; John G. Balentine; Jack McNutt; Troy Hall, Plaintiffs–Appellees, v. Kathleen SEBELIUS, Secretary of the United States Department of Health and Human Services, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

747 F.3d 1099

Patricia HARO; John G. Balentine; Jack McNutt; Troy Hall, Plaintiffs–Appellees,

v.Kathleen SEBELIUS, Secretary of the United States Department of Health and Human Services, Defendant–Appellant.

No. 11–16606.

United States Court of Appeals, Ninth Circuit.

Argued Dec. 5, 2012.

Submitted Feb. 14, 2013.

Filed Sept. 4, 2013.

Amended Jan. 2, 2014.

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, CT, for Plaintiffs–Appellees.

Barbara Jones, AARP Foundation Litigation, Pasadena, CA; Iris Y. González, AARP Foundation Litigation, Washington D.C.; Michael Schuster, AARP, Washington, D.C., for Amicus Curiae AARP.

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.

Before: BARRY G. SILVERMAN, RONALD M. GOULD, and MORGAN CHRISTEN, Circuit Judges.

Opinion by Judge CHRISTEN.

ORDER

The opinion filed on September 4, 2013, and appearing at 729 F.3d 993, is amended as follows:

On page 5 of the slip opinion, replace the third sentence of the first paragraph with the following language:

But we conclude that the beneficiaries failed to satisfy the channeling requirement at the administrative level and therefore the district court lacked subject matter jurisdiction pursuant to 42 U.S.C. § 405(g).

On page 5 of the slip opinion, in the fifth sentence of the first paragraph, replace the word “beneficiaries' ” with the word “appellees.' ”

On page 10 of the slip opinion, in the second full sentence appearing on the page, replace the word “beneficiaries” with “plaintiffs.”

On page 23 of the slip opinion, replace footnote 8 with the following language:

The beneficiaries also cite, inter alia, Mathews v. Diaz, 426 U.S. 67 [96 S.Ct. 1883, 48 L.Ed.2d 478] (1976), Briggs v. Sullivan, 886 F.2d 1132 (9th Cir.1989), and Lopez v. Heckler, 725 F.2d 1489 (9th Cir.1984), vacated469 U.S. 1082 [105 S.Ct. 583, 83 L.Ed.2d 694] (1984). But these cases pre-date Illinois Council, 529 U.S. 1 (2000).

On page 24 of the slip opinion, replace heading i with the heading “Haro's February 2, 2009 letter did not satisfy the channeling requirement.”

On page 24 of the slip opinion, in the first sentence in subsection i, replace the word “presentment” with “channeling.”

On pages 25 of the slip opinion, replace the last two paragraphs of subsection i with the following language:

Even if Haro's letter and subsequent inaction did afford the Secretary an “opportunity to apply, interpret, or revise” the challenged policy, Haro failed to exhaust her administrative remedies before filing suit in federal court. To exhaust her administrative remedies, a beneficiary must proceed through the five levels of administrative review: (1) the initial determination; (2) redetermination; (3) reconsideration of the redetermination; (4) an ALJ hearing; and (5) review by the Medicare Appeals Council. 42 U.S.C. § 405. Haro failed to press her claim beyond level two. Instead, less than a week after she mailed her reimbursement check to the Secretary, Haro filed suit—before any agency review of the up-front reimbursement policy.

Haro claims that the government has waived the exhaustion requirement. But we can find no unambiguous waiver of this issue in the record, and therefore conclude that the issue is not waived.

We conclude that the channeling requirement of § 405(g) was not met. Because channeling is a jurisdictional requirement, the district court lacked subject matter jurisdiction over the beneficiaries' claim.

On page 32 of the slip opinion, replace the word “beneficiaries” ' with the word “appellees.' ”

An amended opinion is filed concurrently with this order.

With this amendment, Judges Silverman, Gould, and Christen vote to deny Appellant's petition for panel rehearing and rehearing en banc, filed on October 18, 2013. The full court has been advised of the petition for rehearing and rehearing en banc and no judge requested a vote on whether to rehear the matter en banc. Fed. R.App. P. 35.

The petition for panel rehearing and rehearing en banc is DENIED. No further petitions for en banc or panel rehearing shall be permitted.

OPINION

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 failed to satisfy the channeling requirement 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 appellees' due process claim.

I. BACKGROUND

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 also42 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...