Starnes v. Schweiker
| Citation | 715 F.2d 134 |
| Decision Date | 16 August 1983 |
| Docket Number | No. 82-1543,82-1543 |
| Parties | Eula B. STARNES, Johnnie Kaye Lloyd, Nettie E. Clarkson, Jayne E. Dunlap, individually and on behalf of others similarly situated; Julian Adams, M.D., Fred H. Allen, Jr., M.D., William H. Stuart, M.D., Rhett O. Talbert, M.D., Atlanta Neurological Clinic, P.C., C.T. Scanlab and Trident Neuroimaging Laboratory, individually and on behalf of others similarly situated, Appellees, v. Richard S. SCHWEIKER, Secretary of Health and Human Services, Appellant, and Prudential Insurance Company of America and Blue Cross and Blue Shield of South Carolina, Inc., individually and on behalf of others similarly situated, Defendants. |
| Court | United States Courts of Appeals. United States Court of Appeals (4th Circuit) |
Leslie L. Clune, Dept. of Health & Human Services, Washington, D.C. (J. Paul McGrath, Asst. Atty. Gen., Washington, D.C., Henry Dargan McMaster, U.S. Atty., Columbia, S.C., Juan A. del Real, Gen. Counsel, Lynne K. Zusman, Deputy Gen. Counsel, Litigation, Washington, D.C., on brief), for appellant.
John H. Parker, Jr., Atlanta, Ga. (J. Marbury Rainer, Parker, Hudson & Rainer, Atlanta, Ga., Alexander M. Sanders, Jr., Sanders & Quackenbush, Columbia, S.C., on brief), for appellees.
Before WINTER, Chief Judge, PHILLIPS, Circuit Judge, and MERHIGE, * District Judge.
We granted leave to take this interlocutory appeal to settle the question of whether the district court had jurisdiction to decide procedural, substantive and constitutional challenges to benefit levels set by the Secretary of Health and Human Services to guide private insurance carrier benefit determinations under Part B of the Medicare statute. The district court ruled that it had jurisdiction. It exercised its jurisdiction, however, only to grant a preliminary injunction based upon a prima facie showing of a procedural deficiency in the manner in which the Secretary proceeded, reserving judgment on the substantive and constitutional challenges.
We conclude that the district court has jurisdiction either under 28 U.S.C. § 1331 or, under the mandamus statute, 28 U.S.C. § 1361. Accordingly, we affirm the judgment of the district court.
Part B of the Medicare Program is a voluntary medical insurance program for the aged and disabled, funded by monthly premiums and contributions from general revenues of the federal government. Part B supplements the general coverage of Part A by insuring against some medical expenses not covered by the latter. Determinations of benefits paid for Part B coverage are made by private insurance carriers employed by the Secretary in accordance with regulations and policy guidelines issued by the Secretary. Persons to whom Part B is applicable are entitled to reimbursement of 80 percent of the "reasonable charge" for covered medical services, including physicians' services. 42 U.S.C. § 1395k. Under the Medicare Act, the Secretary's determinations as to eligibility for benefits under Parts A and B are administratively reviewable, as are his determinations of benefits under Part A if the amount in controversy exceeds $100, with a right of judicial review. 42 U.S.C. § 1395ff. No determination of the amount of benefits under Part B is administratively or judicially reviewable. Once a carrier determines benefits owed to a claimant, they are actually paid out of a government trust fund.
Plaintiffs are (a) Medicare beneficiaries enrolled in Part B of the Medicare Program, and (b) physicians and clinics which provide computerized tomography ("CT") scans to the class of Medicare patients which the Medicare beneficiary plaintiffs represent. Plaintiffs brought this class action to challenge the establishment and implementation by the Secretary of nationwide and regional ceilings or caps on Part B reimbursements for CT head scans. Through several letters or memoranda the Secretary has established a national ceiling on reimbursement for such services. In June 1977, the Regional IV Office (Atlanta) sent letters to all Part B carriers in Region IV proposing that no more than $150 be paid for CT head scans. In December 1977 a memorandum was issued to all Regional Medicare Directors indicating that $150 was a reasonable charge for CT scans. In September 1978 the nationwide caps were adjusted by a letter issued to all insurance carriers which indicated that a reasonable charge for CT scans should range from $157.50 to $172.50, with the amount allowed in a particular case to depend upon whether contrast enhancement was used in the scan.
The named plaintiffs unsuccessfully exhausted their administrative remedies before bringing this action to challenge the directives. They appealed benefit determinations to carrier-appointed hearing officers, the only administrative remedy provided under the Act, 42 U.S.C. § 1395u(b)(3)(C), and they have informally petitioned the Secretary and the Regional Offices for relief from the caps. The Secretary and his subordinates have been steadfast in enforcing the caps, although the Secretary's counsel advised that the Secretary should proceed in accordance with the Administrative Procedure Act and "make a case in the rulemaking record" why the caps selected are reasonable.
Plaintiffs challenge the cap on a number of grounds. They contend that the Secretary's informal letters, directives and memoranda establishing the caps constitute rulemaking without notice and opportunity for comment, in violation of the Administrative Procedure Act. 5 U.S.C. § 553(b). They contend that the caps violated their equal protection and due process rights by depriving them of property rights without notice or opportunity for comment and by arbitrarily and unreasonably imposing a different standard for the determination of CT scan benefits than is used for the determination of other Part B benefits. They contend that the caps are inconsistent with the Medicare Act's requirement that carriers, and not the Agency, determine the reasonableness of charges on which benefits to be paid to claimants are computed. And, they assert that the caps violate the requirement that the customary and prevailing charge be paid for Part B services. They seek an injunction against enforcement and implementation of the caps and a direction to the Secretary that she withdraw the caps, advise all Part B carriers of their withdrawal and require all carriers who have applied the caps to recompute claims and make additional payments with interest where indicated. As supplemental relief plaintiffs request costs and attorneys' fees.
On March 6, 1980, the district court ruled that it had jurisdiction over all of plaintiffs' claims, concluded the caps were promulgated in violation of the APA's rulemaking requirements, and preliminarily enjoined their implementation nationwide until regulations authorizing such caps were properly promulgated. The district court reaffirmed its jurisdictional holding on April 16, 1982, reserving ruling on plaintiffs' other contentions, and certified the question for appeal to this court. We granted leave to maintain it.
Plaintiffs allege jurisdiction in the district court by virtue of 28 U.S.C. § 1331 (federal question jurisdiction), § 1346 (), and § 1361 (mandamus jurisdiction). They also allege jurisdiction under 5 U.S.C. §§ 701-706, the Administrative Procedure Act, but it is well-settled that that Act contains no independent grant of jurisdiction. See, Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977). Thus we consider, first, if there is federal question jurisdiction, and, second, if there is jurisdiction to grant a writ of mandamus. The Secretary argues that federal court jurisdiction is barred by two provisions of the Medicare Act, 42 U.S.C. § 1395ff and 42 U.S.C. § 1395ii. We discuss them seriatim.
As we have previously described, § 1395ff provides that the Secretary shall determine eligibility for the Part A and Part B programs and benefit amounts for the Part A program, and that judicial review of these determinations may be had pursuant to 42 U.S.C. § 405(g). It does not, however, empower the Secretary to determine benefit amounts under the Part B program, nor does it provide for judicial review of carrier determinations. 1 Instead, Part B benefit determinations are made by private insurance carriers and are appealable only to carrier-appointed hearing officers. 42 U.S.C. § 1395u.
In two recent cases, the Supreme Court has addressed this scheme. In United States v. Erika, 456 U.S. 201, 102 S.Ct. 1650, 72 L.Ed.2d 12 (1982), it held that § 1395ff forbade judicial review of Part B benefit amount determinations made by carriers. And, in Schweiker v. McClure, 456 U.S. 188, 102 S.Ct. 1665, 72 L.Ed.2d 1 (1982), it found no due process violation in the use of carrier-appointed hearing officers to resolve disputes over benefit amounts and in the denial of a right to de novo administrative review of their determinations.
We find nothing in the language of § 1395ff nor in the Supreme Court's opinion in Erika to suggest that the Secretary's administration of the Part B program, as distinguished from the correctness of benefit determinations thereunder, should not be subject to judicial oversight. The language of § 1395ff indicates that Congress sought to preserve judicial review of actions taken by the Secretary, but not actions taken by private carriers. Section 1395ff renders reviewable those actions to be performed by the Secretary--Part A benefit amount determinations and Part A and Part B eligibility determinations--while those actions which are delegated to private carriers--Part B benefit amount determinations--are made unreviewable. In the discussion of the section in the Act's legislative history, only benefit amount determinations are said to be unreviewable, and in each instance it is also noted that...
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