McClure v. Harris

• Decision Date: 19 May 1980
• Docket Number: No. C-79-0201 WHO.,C-79-0201 WHO.
• Citation: 503 F. Supp. 409
• Parties: William McCLURE, Charles Shields, and "Ann Doe," individually and on behalf of a class of persons similarly situated, Plaintiffs, v. Patricia Roberts HARRIS, Secretary of the Department of Health, Education and Welfare, and Blue Shield of California, Defendants.
• Court: U.S. District Court — Northern District of California

503 F. Supp. 409

William McCLURE, Charles Shields, and "Ann Doe," individually and on behalf of a class of persons similarly situated, Plaintiffs, v. Patricia Roberts HARRIS, Secretary of the Department of Health, Education and Welfare, and Blue Shield of California, Defendants.

No. C-79-0201 WHO.

United States District Court, N. D. California.

May 19, 1980.

COPYRIGHT MATERIAL OMITTED

Harvey Sohnen, Clifford Sweet, Legal Aid Society of Alameda County, Oakland, Cal., Sally Hart Wilson, Neal Dudovitz, Gill Deford, National Senior Citizens Law Center, Los Angeles, Cal., Patricia Burgess, Fortuna, Cal., Diane M. Roth, Peter H. Reid, Legal Aid Society of San Mateo County, Redwood City, Cal., for plaintiffs.

G. William Hunter, U. S. Atty., George Christopher Stoll, Asst. U. S. Atty., San Francisco, Cal., for defendants.

OPINION

ORRICK, District Judge.

Three named plaintiffs bring this action on behalf of a class of Medicare beneficiaries challenging the constitutionality of the hearing procedures available under Part B of the Medicare program. 42 U.S.C. §§ 1395j-1395w, 1395ff. Defendants are Patricia Roberts Harris, Secretary of Health, Education and Welfare ("HEW"), and Blue Shield of California ("Blue Shield"), a private insurance carrier that administers Part B benefits under contract with HEW.

Plaintiffs claim that the statutory scheme, whereby the final determination of whether, or to what extent, Part B beneficiaries are entitled to claimed benefits is made by hearing officers appointed by private insurance carriers, violates their rights to due process and equal protection of the law and unconstitutionally delegates judicial power to private parties.

Presently before the Court are plaintiffs' motion for class certification and both parties' cross-motions for summary judgment. For the reasons set forth below, the Court certifies this case as a class action, and grants in part and denies in part the parties' summary judgment motions.

I

The Medicare program, established in Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., provides health insurance benefits for aged and disabled persons. It consists of two subprograms. Part A covers certain costs of institutional care, such as hospital and nursing home fees. 42 U.S.C. §§ 1395c-1395i-2. Part B covers "supplementary" medical costs such as physicians' services and physical therapy. 42 U.S.C. §§ 1395j-1395w. The programs differ in the manner in which they are funded, the standards of eligibility, the scope of coverage, and the procedures for resolving claims disputes.

After incurring supplementary medical expenses, a Part B beneficiary submits a claim to the private insurance carrier with whom HEW has contracted to administer benefits in that beneficiary's locale.¹ The carrier makes an initial determination whether, and to what extent, the claimed benefits are covered. 42 C.F.R. §§ 405.803-405.806. Any claimant who is dissatisfied with the initial determination may request a "review determination," which involves a de novo review of the written record by a carrier employee different than the one who rendered the initial determination. 42 C.F.R. §§ 405.807-405.812. If the amount in controversy is at least $100, a claimant who is dissatisfied with the review determination may request an oral, evidentiary hearing. 42 U.S.C. § 1395u(b)(3)(C); 42 C.F.R. §§ 405.820-405.835. The hearing officer is appointed by the carrier and may be an employee of the carrier, but he may not hear "any case in which he is prejudiced or partial with respect to any party, or if he has any interest in the matter before him." 42 C.F.R. § 405.824. The hearing officer's decision is final; no further administrative or judicial review has been authorized by Congress or provided by HEW. 42 U.S.C. § 1395ff(b); 42 C.F.R. § 405.835.² Only where a dispute concerns a person's eligibility to enroll in the Part B program, rather than his entitlement to particular benefits claimed, may he appeal an adverse decision to the Secretary of HEW and, if the amount in controversy is at least $1,000, to the courts. 42 U.S.C. § 1395ff(b).

Each of the named plaintiffs submitted Part B claims to Blue Shield and was denied benefits, in whole or in part, by the carrier (upon both initial and review determinations) and then by carrier-appointed hearing officers. Plaintiff William McClure was denied partial reimbursement for the cost of an air ambulance which transported him to a hospital specially equipped to treat his myocardial infarction. The hearing officer ruled that although air ambulance services were necessary, McClure could have been taken to a hospital that was closer to his home. Plaintiff Charles Shields was denied reimbursement for part of the cost of an operation that involved both a cholecystectomy and an appendectomy. The disallowed portion of his claim was that attributable to the appendectomy and was denied on the ground that the appendectomy was merely incidental to the cholecystectomy. Plaintiff Ann Doe³ was denied reimbursement for the full cost of a sex-change operation on the ground that the operation was not medically necessary and therefore not covered by Medicare.⁴

Plaintiffs filed this action not to contest the substantive denial of their claims, but to challenge the procedures by which Part B claims disputes are resolved. They assert four constitutional claims. First, they argue that a hearing officer appointed by the same insurance carrier which has twice denied the claim under review (upon initial and review determinations) is not an impartial tribunal as required by the Due Process Clause of the Fifth Amendment. Second, they contend that the vesting of final decision-making authority in such hearing officers is an unconstitutional delegation of judicial power. Third, they claim that the procedures employed at Part B hearings do not comport with either the Due Process Clause or the Social Security Act because hearing officers are not guided by "fair evidentiary standards" such as the preponderance of the evidence rule. Fourth, plaintiffs allege that their right to equal protection of the law is violated insofar as the hearing procedures available under Part A are superior to those available under Part B of the Medicare program.

This Court has jurisdiction over the plaintiffs' constitutional claims because they are collateral to their substantive claims for Medicare benefits. Mathews v. Eldridge, 424 U.S. 319, 330, 96 S.Ct. 893, 900, 47 L.Ed.2d 18 (1976). See also Califano v. Sanders, 430 U.S. 99, 109, 97 S.Ct. 980, 986, 51 L.Ed.2d 192 (1977). As plaintiffs acknowledge, the Court lacks jurisdiction to review the merits of the decisions denying their benefits claims. 42 U.S.C. § 1395ff.

II

Plaintiffs seek to litigate these constitutional issues on behalf of a nationwide class of Part B beneficiaries whose claims for benefits have been or will be denied by carrier-appointed hearing officers. Defendants concede that plaintiffs satisfy the threshold requirements for maintaining a class action under Rule 23 of the Federal Rules of Civil Procedure. Nevertheless, they urge the Court to exercise its discretion to deny class certification or to restrict the scope of the proposed class.

The Court finds that the proposed class possesses each of the Rule 23(a) prerequisites to a class action. Even if limited, as defendants suggest, geographically to the Northern District of California and temporally to Part B beneficiaries who will be denied claimed benefits after hearing, the proposed class is so numerous that joinder is impracticable, there are common questions of law involved, the named plaintiffs' claims are typical of other class members', and the named plaintiffs and their attorneys will fairly and adequately protect the interests of the class. In addition, the Court finds that a class action is properly maintainable under Rule 23(b)(2) because the defendants have uniformly applied the challenged statutory provisions and administrative policies to all class members and the declaratory and mandamus relief being sought would be appropriate with respect to the class as a whole.

Finally, the Court finds that it is not only permissible but also desirable that this action proceed on a class basis. Similar cases are currently pending in at least three other district courts. Gadsden v. Califano, No. C-75-2946 ALS (C.D.Cal., filed August 29, 1975); Monroe v. Califano, No. C-78-4175 ALS (C.D.Cal., filed Oct. 31, 1978) (consolidated with Gadsden); Leduc v. Califano, No. C-77-3386-S (D.Mass., filed Nov. 4, 1977); Salitan v. Califano, No. C-77-84D (M.D.N.C., filed Feb. 23, 1977). Another, similar case in a fourth district has already been decided. Davis v. HEW, 416 F.Supp. 448 (S.D.N.Y.1976). A class action is the most efficient and expeditious means of reaching a final and binding resolution of the constitutional questions surrounding the Part B Medicare program. The class action device is particularly well suited to this situation, where the maintenance of countless individual actions might produce inconsistent demands upon defendants and inequitable results for similarly-situated plaintiffs. Although plaintiffs here would exclude from their proposed class all persons who are plaintiffs in the pending cases listed above, class certification would preclude any further proliferation of such lawsuits.

From this analysis flows the logical conclusion that the class should be nationwide in geographical scope. The statute and hearing procedures under attack apply to all Part B beneficiaries across the country. The antiproliferation aspect of class certification can be meaningfully realized only if the class is nationwide. Moreover, the Supreme Court recently underscored the appropriateness of nationwide classes in actions such as this. Califano v. Yamasaki, 442 U.S. 682, 701-703, 99 S.Ct. 2545, 2557-2558, 61 L.Ed.2d 176 (1979).

The appropriate temporal scope of the class is...