Hull v. Burwell

• Decision Date: 08 December 2014
• Docket Number: No. 3:14–cv–00801 JAM.,3:14–cv–00801 JAM.
• Court: U.S. District Court — District of Connecticut
• Parties: Carolyn HULL, on behalf of herself and all others similarly situated, et al., Plaintiffs, v. Sylvia BURWELL, Secretary of Health and Human Services, Defendant.

66 F.Supp.3d 278

Carolyn HULL, on behalf of herself and all others similarly situated, et al., Plaintiffs

v.Sylvia BURWELL, Secretary of Health and Human Services, Defendant.

No. 3:14–cv–00801 JAM.

United States District Court D. Connecticut.

Signed Dec. 8, 2014.

Alice Bers, Gill W. Deford, Judith A. Stein, Margaret M. Murphy, Willimantic, CT, for Plaintiffs.

Brian G. Kennedy, Washington, DC, Carolyn Aiko Ikari, U.S. Attorney's Office, Hartford, CT, for Defendant.

RULING GRANTING DEFENDANT'S MOTION TO DISMISS

JEFFREY ALKER MEYER, District Judge.

This case poses an important issue of constitutional standing to maintain a federal court action. The question is whether a Medicare patient has standing if Medicare denies a healthcare claim but then Medicaid—a separate government health program—ends up paying the claim. In such circumstances, I conclude that there has been no redressable injury-in-fact to allow the patient to raise a challenge in federal court to Medicare's handling or denial of her claim.

Background

Plaintiffs are five elderly women from Connecticut who are homebound with serious medical conditions. Each plaintiff received home healthcare services on various dates from 2011 to 2013. Medicare declined to pay.

Plaintiffs' complaint is not about the particulars of why each of their claims was denied. Instead, they seek to challenge what they believe to be a “rigged” process that the Medicare administrators at the U.S. Department of Health and Human Services (HHS) have been using since 2006 to review claims. As plaintiffs describe it, after coverage for home healthcare services is initially declined, the denial-review process may include up to four stages (1) “a paper-review redetermination by the contractor that made the initial determination” to deny coverage, (2) followed by “a paper-review reconsideration carried out by a separate entity that contracts with” HHS to conduct such reviews, (3) followed by “a hearing before an ALJ” or administrative law judge, and (4) finally followed by a “paper review by the Medicare Appeals Council.” Doc. # 1 at 7 (Compl.¶ 28).

Based on extensive statistics compiled by plaintiffs' counsel from the Center for Medicare Advocacy, plaintiffs allege that this review process is hardly a review process at all—that it results in about 98% of initial adverse determinations being affirmed through the first two “paper” review stages of the process and that beneficiaries must take their claims to the third level of review for a hearing before an ALJ to have any realistic chance of coverage. But, as plaintiffs describe it, “[m]ost beneficiaries do not have the time, resources, or advocacy support to take their claims to the ALJ level,” and so “[a]s a practical matter, therefore, the second level of review ... operates as the final decision of the Secretary [of HHS] and invariably is adverse.” Doc. # 1 at 2 (Compl.¶ 4). Now seeking to represent a class of Medicare beneficiaries in Connecticut, plaintiffs claim that the “defective administrative review process” violates the Medicare statute and the Due Process Clause of the Fifth Amendment. Id. (Compl.¶ 5).

The defendant is the Secretary of HHS, and she has moved to dismiss plaintiffs' claims, principally on the ground that plaintiffs lack standing. According to defendant, plaintiffs have not sustained a redressable injury-in-fact because their Medicare claims have been separately and fully paid by a different payor—the Medicaid program.

Discussion

Article III of the Constitution limits the jurisdiction of the federal courts to “Cases” and “Controversies.” U.S. Const. art. III, § 2, cl. 1. The reason for a case-or-controversy limitation is to restrain the federal courts from enmeshing themselves in deciding abstract and advisory questions of law. Accordingly, any federal court plaintiff must have case-or-controversy “standing” to assert a claim—specifically, “a plaintiff must show (1) an ‘injury in fact,’ (2) a sufficient ‘causal connection between the injury and the conduct complained of,’ and (3) a ‘likel[ihood]’ that the injury ‘will be redressed by a favorable decision.’ ” Susan B. Anthony List v. Driehaus, ––– U.S. ––––, 134 S.Ct. 2334, 2341, 189 L.Ed.2d 246 (2014) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (some internal quotation marks omitted)); see also E.M. v. New York City Dep't of Educ., 758 F.3d 442, 449–50 (2d Cir.2014).

The first requirement—that a plaintiff have sustained an injury-in-fact—“helps to ensure that the plaintiff has a ‘personal stake in the outcome of the controversy.’ ” Susan B. Anthony List, 134 S.Ct. at 2341 (citing Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) (internal quotation marks omitted)). An injury-in-fact must be “ ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’ ” Ibid. (some internal quotation marks and citations omitted); E.M., 758 F.3d at 449.

Plaintiffs here bear the burden of establishing standing. Susan B. Anthony List, 134 S.Ct. at 2342. Moreover, for class action lawsuits, “the named class plaintiffs ‘must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent.’ ” Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck–Medco Managed Care, L.L.C.,

433 F.3d 181, 199 (2d Cir.2005) (quoting Warth, 422 U.S. at 502, 95 S.Ct. 2197 ).

The Medicare program is a government health insurance program primarily for the elderly, while the Medicaid program is a government health insurance program for needy people of any age with modest incomes. See generally Cmty. Health Care Ass'n of New York v. Shah, 770 F.3d 129, 135 (2d Cir.2014) ; Connecticut Dep't of Soc. Servs. v. Leavitt, 428 F.3d 138, 141 (2d Cir.2005). Those who are both elderly and poor may be “dually eligible” to receive benefits under both programs. Ibid.

The Medicare and Medicaid programs are administered and financed differently. Medicare is administered and financed entirely by the federal government through HHS; by contrast, Medicaid is principally administered by state governments subject to federal guidelines, and state governments roughly split the costs with the federal government for services provided under the Medicaid program. Ibid. In Connecticut, Medicaid is administered by a state agency—the Connecticut Department of Social Services (DSS). Ibid.

For home healthcare benefits that are provided to dual-eligible persons like plaintiffs in this case, Medicare is supposed to be the payor of first resort, while Medicaid is a payor of last resort. Ibid. Although Medicaid may choose to pay a claim that Medicare has denied, state governments have an obvious incentive to have Medicare pay claims rather than Medicaid, for which the states must shoulder a significant portion of the costs. Id. at 142. When a state pays a claim under Medicaid that the federal government has denied under Medicare, the state may seek recoupment from the federal government by availing itself of the Medicare denial-of-benefits review process, and the state then acts as a statutory subrogee of the patient beneficiary. See 42 U.S.C. § 1396k(a)(1) ; New York State Dept. of Soc. Servs. v. Bowen, 846 F.2d 129 (2d Cir.1988) ; 42 C.F.R. § 405.908.

And that is what has happened for the claims of each of the plaintiffs in this lawsuit Medicaid has covered the claims, and the DSS in turn has invoked the denial-of-claim review process seeking to recoup its expenses from Medicare. Apparently, this review is still ongoing. Although each of the plaintiffs may technically be “parties” to the review process, it is the DSS—which has not been named a party to or sought to intervene in this lawsuit—that has initiated and controls the litigation of the administrative review process to seek recoupment from the Medicare program for services that Medicaid has already paid. None of the plaintiffs has had to take part in the administrative review process, and plaintiff's counsel at oral argument was unable to identify any manner in which plaintiffs have been otherwise inconvenienced or adversely affected by the ongoing review proceedings.

A plaintiff has no constitutional injury-in-fact that would allow her to complain in federal court when her “injury” consists solely of a financial liability that has been paid for in full by a third party (such as an insurance company), absent a showing of some residual or collateral harm to the plaintiff (such as an increase in insurance rates or other inconvenience due to litigation). Thus, for example, in Pittston Stevedoring Corp. v. Dellaventura, 544 F.2d 35, 45–46 (2d Cir.1976), aff'd sub nom. Ne. Marine Terminal Co. v. Caputo, 432 U.S. 249, 97 S.Ct. 2348, 53 L.Ed.2d 320 (1977), the Second Circuit concluded that an employer had no redressable injury to contest an administrative award of workers compensation benefits to an employee after the employer's insurance company had opted to pay the claim without further contesting the matter. Judge Friendly wrote that “where the issue of liability is determined against an insured and its insurer, and the insurer pays the damages in full even without the consent of the insured and chooses not to appeal, the insured cannot appeal from the judgment against him.” Id. at 46. Nor was there any residual or collateral harm to the employer, because the employer had “submitted nothing but conclusory assertions of adverse effect on future premiums” from the insurance company's payment of a single claim. Id. at 45.

The same holds true here, where a payor or insurer (such as the DSS through the Medicaid program) has satisfied each of the claims on behalf of plaintiffs. Because the Medicaid payor has assumed all of plaintiffs' liability but not joined in this court action, plaintiffs themselves have no standing to maintain this action.¹ See also Wheeler v....