Schweiker v. Clure

• Decision Date: 20 April 1982
• Docket Number: No. 81-212,81-212
• Citation: 456 U.S. 188,102 S.Ct. 1665,72 L.Ed.2d 1
• Parties: Richard S. SCHWEIKER, Secretary of Health and Human Services, Appellant, v. William McCLURE et al
• Court: U.S. Supreme Court

456 U.S. 188

102 S.Ct. 1665

72 L.Ed.2d 1

Richard S. SCHWEIKER, Secretary of Health and Human Services, Appellant,

v William McCLURE et al.

No. 81-212.

Argued March 1, 1982.

Decided April 20, 1982.

Syllabus

Part B of the Medicare program under the Social Security Act provides federally subsidized insurance against the cost of certain physician services, outpatient physical therapy, X-rays, laboratory tests, and certain other medical and health care. The Secretary of Health and Human Services is authorized to contract with private insurance carriers to administer the payment of Part B claims. If the carrier refuses on the Secretary's behalf to pay a portion of a claim, the claimant is entitled to a "review determination," based on the submission of written evidence and arguments, and, if the amount in dispute is $100 or more, a still-dissatisfied claimant then has a right to an oral hearing, at which an officer chosen by the carrier presides. The statute and regulations make no further provision for review of the hearing officer's decision. After decisions by hearing officers were rendered against them, appellee claimants sued in Federal District Court to challenge the constitutional adequacy of the hearings afforded to them. The court held that the hearing procedures violated appellees' rights to due process insofar as the final, unappealable decision regarding their claims was made by carrier appointees, that due process required additional safeguards to reduce the risk of erroneous deprivation of Part B benefits, and that appellees were entitled to a de novo hearing conducted by an administrative law judge of the Social Security Administration.

Held : The hearing procedures in question do not violate due process requirements. Pp. 195-200.

(a) While due process demands impartiality on the part of those who function in a quasi-judicial capacity, such as the hearing officers involved in this case, there is a presumption that these officers are unbiased. This presumption can be rebutted by a showing of conflict of interest or some other specific reason for disqualification. But the factual findings here disclose no disqualifying interest. The officers' connection with the private insurance carriers would be relevant only if the carriers themselves are biased or interested, and there is no basis in the record for such a conclusion. The carriers pay Part B claims from federal, not their own, funds, the hearing officers' salaries are paid by the Federal Government, and the carriers operate under contracts requiring compliance with standards prescribed by the statute and the Secretary. In the absence of proof of financial interest on the carriers' part, there is no basis for assuming a derivative bias among their hearing officers. Pp. 195-197.

(b) Nor does the record support the contention that accuracy of Part B decisionmaking may suffer because the carriers appoint unqualified hearing officers and that thus additional procedures would reduce the risk of erroneous decisions. Pp. 1671-1672.

503 F.Supp. 409, reversed and remanded.

Kenneth S. Geller, Washington, D. C., for appellant.

Harvey Sohnen, Oakland, Cal., for appellees.

Justice POWELL, delivered the opinion of the Court.

The question is whether Congress, consistently with the requirements of due process, may provide that hearings on disputed claims for certain Medicare payments be held by private insurance carriers, without a further right of appeal.

I

Title XVIII of the Social Security Act, 79 Stat. 291, as amended, 42 U.S.C. § 1395 et seq. (1976 ed. and Supp.IV), commonly known as the Medicare program, is administered by the Secretary of Health and Human Services. It consists of two parts. Part A, which is not at issue in this case, provides insurance against the cost of institutional health services, such as hospital and nursing home fees. §§ 1395c-1395i-2 (1976 ed. and Supp.IV). Part B is entitled "Sup- plementary Medical Insurance Benefits for the Aged and Disabled." It covers a portion (typically 80%) of the cost of certain physician services, outpatient physical therapy, X-rays, laboratory tests, and other medical and health care. See §§ 1395k, 1395l, and 1395x(s) (1976 ed. and Supp.IV). Only persons 65 or older or disabled may enroll, and eligibility does not depend on financial need. Part B is financed by the Federal Supplementary Medical Insurance Trust Fund. See § 1395t (1976 ed. and Supp.IV). This Trust Fund in turn is funded by appropriations from the Treasury, together with monthly premiums paid by the individuals who choose voluntarily to enroll in the Part B program. See §§ 1395j, 1395r, and 1395w (1976 ed. and Supp.IV). Part B consequently resembles a private medical insurance program that is subsidized in major part by the Federal Government.

Part B is a social program of substantial dimensions. More than 27 million individuals presently participate, and the Secretary pays out more than $10 billion in benefits annually. Brief for Appellant 9. In 1980, 158 million Part B claims were processed. Ibid. In order to make the administration of this sweeping program more efficient, Congress authorized the Secretary to contract with private insurance carriers to administer on his behalf the payment of qualifying Part B claims. See 42 U.S.C. § 1395u (1976 ed. and Supp.IV). (In this case, for instance, the private carriers that performed these tasks in California for the Secretary were Blue Shield of California and the Occidental Insurance Co.) The congressional design was to take advantage of such insurance carriers' "great experience in reimbursing physicians." H.R.Rep.No.213, 89th Cong., 1st Sess., 46 (1965). See also 42 U.S.C. § 1395u(a); S.Rep.No.404, 89th Cong., 1st Sess., 53 (1965).

The Secretary pays the participating carriers' costs of claims administration. See 42 U.S.C. § 1395u(c). In return, the carriers act as the Secretary's agents. See 42 CFR § 421.5(b) (1980). They review and pay Part B claims for the Secretary according to a precisely specified process. See 42 CFR part 405, subpart H (1980). Once the carrier has been billed for a particular service, it decides initially whether the services were medically necessary, whether the charges are reasonable, and whether the claim is otherwise covered by Part B. See 42 U.S.C. § 1395y(a) (1976 ed. and Supp.IV); 42 CFR § 405.803(b) (1980). If it determines that the claim meets all these criteria, the carrier pays the claim out of the Government's Trust Fund—not out of its own pocket. See 42 U.S.C. §§ 1395u(a)(1), 1395u(b)(3), and 1395u(c) (1976 ed. and Supp.IV).

Should the carrier refuse on behalf of the Secretary to pay a portion of the claim, the claimant has one or more opportunities to appeal. First, all claimants are entitled to a "review determination," in which they may submit written evidence and arguments of fact and law. A carrier employee, other than the initial decisionmaker, will review the written record de novo and affirm or adjust the original determination. 42 CFR §§ 405.807-405.812 (1980); McClure v. Harris, 503 F.Supp. 409, 411 (ND Cal.1980). If the amount in dispute is $100 or more, a still-dissatisfied claimant then has a right to an oral hearing. See 42 U.S.C. § 1395u(b)(3)(C); 42 CFR §§ 405.820-405.860 (1980). An officer chosen by the carrier presides over this hearing. § 405.823. The hearing officers "do not participate personally, prior to the hearing [stage], in any case [that] they adjudicate." 503 F.Supp., at 414. See 42 CFR § 405.824 (1980).

Hearing officers receive evidence and hear arguments pertinent to the matters at issue. § 405.830. As soon as practicable thereafter, they must render written decisions based on the record. § 405.834. Neither the statute nor the regulations make provision for further review of the hearing officer's decision.¹ See United States v. Erika, Inc., 456 U.S. 201, 102 S.Ct. 1650, 72 L.Ed.2d 12.

II

This case arose as a result of decisions by hearing officers against three claimants.² The claimants, here appellees, sued to challenge the constitutional adequacy of the hearings afforded them. The District Court for the Northern District of California certified appellees as representatives of a nationwide class of individuals whose claims had been denied by carrier-appointed hearing officers. 503 F.Supp., at 412-414. On cross-motions for summary judgment, the court concluded that the Part B hearing procedures violated appellees' right to due process "insofar as the final, unappealable decision regarding claims disputes is made by carrier appointees. . . ." Id., at 418.

The court reached its conclusion of unconstitutionality by alternative lines of argument. The first rested upon the principle that tribunals must be impartial. The court thought that the impartiality of the carrier's hearing officers was compromised by their "prior involvement and pecuniary interest." Id., at 414. "Pecuniary interest" was shown, the District Court said, by the fact that "their incomes as hearing officers are entirely dependent upon the carrier's decisions regarding whether, and how often, to call upon their services." ³ Id., at 415. Respecting "prior involvement," the court acknowledged that hearing officers personally had not been previously involved in the cases they decided. But it noted that hearing officers "are appointed by, and serve at the will of, the carrier [that] has not only participated in the prior stages of each case, but has twice denied the claims [that] are the subject of the hearing," and that five out of seven of Blue Shield's past and present hearing officers "are former or current Blue Shield employees." ⁴ Id., at 414. (Emphasis in original.) See also 42 CFR § 405.824 (1980). The District Court thought these links between the carriers and their hearing officers sufficient to create a constitutionally intolerable risk of hearing officer bias against claimants.

The District Court's alternative reasoning assessed the...