Linoz v. Heckler

• Decision Date: 23 September 1986
• Docket Number: No. 84-2446,84-2446
• Citation: 800 F.2d 871
• Parties: , Medicare&Medicaid Gu 35,877 Feliza Gallardo LINOZ, Julian Velez, Plaintiffs-Appellants, v. Margaret HECKLER, as Secretary of the Department of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 871

800 F.2d 871

15 Soc.Sec.Rep.Ser. 72, Medicare&Medicaid Gu 35,877

Feliza Gallardo LINOZ, Julian Velez, Plaintiffs-Appellants, v. Margaret HECKLER, as Secretary of the Department of Health and Human Services, Defendant-Appellee.

No. 84-2446.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 15, 1985.

Decided Sept. 23, 1986.

Sally Hart Wilson, National Senior Citizens Law Center, Los Angeles, Cal., for plaintiffs-appellants.

Jerry Bassett, San Francisco, Cal., for defendant-appellee.

Appeal from the United States District Court for the District of Hawaii.

Before NORRIS and REINHARDT, Circuit Judges, and BURNS, District Judge ^*.

NORRIS, Circuit Judge:

Title XVIII of the Social Security Act establishes a federally subsidized health insurance program for elderly and disabled persons. 42 U.S.C. Sec. 1395 (1982 & Supp. II 1984) ("Medicare Act" or "Act"). Part A of the Medicare Act covers institutional health costs, such as hospital expenses, and is financed by mandatory payroll deductions. 42 U.S.C. Secs. 1395c-1395i-2. Part B of the Act is an optional insurance program for supplementary medical services, including physician services, medical supplies, and laboratory tests. 42 U.S.C. Secs. 1395j-1395w.

Appellants Delmacio Linoz and Julian Velez ¹ were denied reimbursement under Part B of the Act for the cost of air and ground ambulance services incurred when they were transferred from outlying hospitals in Hawaii to better equipped urban facilities to be treated by medical specialists. Denial of their claims was based on section 2120.3F of the Carrier's Manual, ² a publication of the Secretary of Health and Human Services ("the Secretary") that sets forth rules made binding in Part B benefit determinations by 42 C.F.R. Sec. 405.860 (1985). ³ In this consolidated action, appellants, Julian Velez and Delmacio Linoz's surviving widow, seek a judicial declaration invalidating section 2120.3F of the Carrier's Manual on the ground that the Secretary issued it without rulemaking proceedings or publication in violation of the Administrative Procedure Act (APA), 5 U.S.C. Sec. 553 (1982), and the Freedom of Information Act (FOIA), 5 U.S.C. Sec. 552 (1982). ⁴ Appellants also claim that the enforcement of section 2120.3F against them violates provisions of the Medicare Act authorizing the Secretary to promulgate regulations, 42 U.S.C. Sec. 1395hh, and entitling claimants to a fair hearing, 42 U.S.C. Sec. 1395u(b)(3)(C), as well as constitutional due process requirements.

I

The Secretary has delegated the administration of Medicare Part B claims to private insurance carriers. See Schweiker v. McClure, 456 U.S. 188, 190-91, 102 S.Ct. 1665, 1667-68, 72 L.Ed.2d 1 (1982). Part B claimants submit their bills directly to the carrier, and the carrier reimburses claimants according to whether their claims meet detailed coverage criteria. 42 C.F.R. Secs. 405.801, .803. Claimants dissatisfied by delayed or insufficient payment have limited rights of appeal. They are entitled to a de novo written review before a carrier employee other than the initial decisionmaker. 42 C.F.R. Secs. 405.807-.809. If still dissatisfied, and if the claim is $100 or more, the claimant may request a hearing before a disinterested hearing officer employed by the carrier. 42 U.S.C. Sec. 1395u(b)(3)(C); 42 C.F.R. Sec. 405.820. The hearing officer's decision is "final and binding upon all parties to the hearing." 42 C.F.R. Sec. 405.835. Unlike a Part A claimant, a Part B claimant has no right to judicial review of the amount of a hearing officer's benefit award. See United States v. Erika, Inc., 456 U.S. 201, 208, 102 S.Ct. 1650, 1654, 72 L.Ed.2d 12 (1982); Schweiker v. McClure, 456 U.S. at 191, 102 S.Ct. at 1667-68.

The regulation on which Linoz and Velez based their Part B claims, 42 C.F.R. Sec. 405.232(i) (1981), authorized payment for ambulance service to the "nearest institution with appropriate facilities." When Linoz suffered a massive hemorrhage in his urinary tract, Linoz's physician, Dr. Kim, decided that Linoz should be sent by air ambulance from Kauai to Honolulu "as there was no practicing urologist on Kauai." Exhibit B of Plaintiffs' Complaint at 3 (filed July 21, 1982) (Linoz v. Heckler, No. CV 82-0390 (D.Hawaii 1984)). The carrier's hearing officer upheld the carrier's denial of benefits on the basis of section 2120.3F of the Carrier's Manual, reasoning that its plain meaning compelled the conclusion that the unavailability of an urologist at the initiating hospital "is not a consideration in determining if the [destination] hospital has appropriate facilities to care for the patient." Id. at ----.

Appellant Velez suffered from emphysema and asthma, with further respiratory complications. Velez's physician, Dr. Morin, ordered Velez transferred by air ambulance from Honokaa Hospital on Hawaii to Straub Hospital in Honolulu to "see if there were any further therapeutic or management approaches which might improve or at least stabilize" Velez's "severe, far advanced, incapacitating chronic obstructive lung disease." Exhibit D of Plaintiffs' Complaint at 4 (filed July 21, 1982) (Linoz v. Heckler, No. CV 82-0390 (D.Hawaii 1984)). Dr. Morin testified that there was "no pulmonary specialist in the Big Island at that time," and that "the nurses [were] not competent in reading a monitor or treating arrythmias." Id. The hearing officer upheld the carrier's denial of benefits on the basis of section 2120.3F, quoting the Manual verbatim that "[a]mbulance service to a more distant hospital solely to avail the patient of the services of ... a physician in a specific specialty does not make that hospital the nearest hospital with appropriate facilities." Id.

Appellants filed suit in district court to enjoin enforcement of the ambulance rule embodied in section 2120.3F and to obtain new hearings under revised regulations. First, they asserted that the Secretary's issuance of unpublished binding rules through the Carrier's Manual violated the APA and FOIA. Second, appellants claimed that the Secretary violated the Medicare Act's provision that the Secretary administer the program through regulations by issuing informal binding rules through the Carrier's Manual. Finally, appellants asserted a due process right to individualized case-by-case determinations of fact and applications of law in Part B hearings. After ruling in an unpublished order that it had subject matter jurisdiction under 28 U.S.C. Secs. 1331 and 1361, Linoz v. Schweiker, No. 82 0390 (D.Hawaii, order filed July 5, 1983), the district court granted the Secretary's motion for summary judgment on the ground that the manual provision was an interpretive rule that conformed with the statute and did not require notice and comment rulemaking. Linoz v. Heckler, 598 F.Supp. 486, 490 (D.Hawaii 1984). Appellants filed a timely notice of appeal, and we have jurisdiction under 28 U.S.C. Sec. 1291.

The legal questions presented by this appeal are reviewable de novo. United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.) (en banc), cert. denied 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984); Clayton v. Republic Airlines, Inc., 716 F.2d 729, 730 (9th Cir.1983) (subject matter jurisdiction).

II

As a preliminary matter, the Secretary argues that Congress precluded judicial review of Part B benefit determinations, and that appellants' challenge to the Secretary's informal issuance of binding rules is accordingly barred from review because it is either essentially a claim for benefits or "inextricably intertwined" with such a claim. ⁵ Heckler v. Ringer, 466 U.S 602, 614, 104 S.Ct. 2013, 2021, 80 L.Ed.2d 622 (1984). The Secretary's argument has been foreclosed by Bowen v. Michigan Academy of Family Physicians, --- U.S. ----, 106 S.Ct. 2133, 90 L.Ed.2d 623 (U.S.1986). In Michigan Academy of Family Physicians, the Supreme Court held that the exhaustion and judicial review provisions of the Social Security Act, incorporated by reference in the Medicare Act, 42 U.S.C. Secs. 1395ff, 1395ii, do not insulate from review Part B regulations and instructions promulgated by the Secretary. Id. at ----, 106 S.Ct. at 2137-38. The Court distinguished between individual Part B benefit determinations--which are "finally and exclusively" delegated to carrier hearing officers, id. at ----, 106 S.Ct. at 2138-40--and the validity of the Secretary's procedures for computing Part B claims, which the Carrier's Manual expressly removes from the carriers' jurisdiction. Id. at ---- & n. 5, 106 S.Ct. at 2137-38 & n. 5. While the Court reaffirmed its prior holdings that Congress deliberately foreclosed judicial review with respect to typically "trivial" Part B reimbursement amounts, id. at ---- - ----, 106 S.Ct. at 2137-40, see also Erika, 456 U.S. at 208, 102 S.Ct. at 1654, the Court held that neither the legislative history nor the statutory framework gives " 'clear and convincing evidence' " that Congress "intended no review at all of substantial statutory and constitutional challenges to the Secretary's administration of Part B of the Medicare program." Michigan Academy of Family Physicians, --- U.S. at ----, 106 S.Ct. at 2141 (quoting Abbott Laboratories v. Gardner, 387 U.S. 136, 141, 87 S.Ct. 1507, 1511-12, 18 L.Ed.2d 681 (1967)). Thus, the Court held that federal question jurisdiction was available to review Part B regulations asserted to be inconsistent with the Act.

Bowen v. Michigan Academy of Family Physicians is controlling authority for the district court's exercise of federal question jurisdiction in this case. Having determined that the district court had jurisdiction under 28 U.S.C. Sec. 1331, we need not reach the separate question whether jurisdiction lay under the mandamus statute. We now consider the merits of appellants' claim that application of section 2120.3F of the Carrier's Manual to deny reimbursement of their ambulance costs violated the APA.

III

In 1971, the...