A. The Private Interest
The private interest at issue in this case is a Medicare beneficiary's right to reimbursement for medical expenses covered under the Medicare program. The plaintiffs contend that this "property interest in Medicare benefits is critical because it relates directly to one of the necessities of life health care."
Even though the sums at stake may be small, maintain the plaintiffs, the denial of benefits has a severe impact upon the affected claimants because of the disparity between the limited financial resources of the elderly and their great medical needs. The plaintiffs further argue that the private interest in the present case is stronger than that in Mathews v. Eldridge, supra, where the Supreme Court held that an evidentiary hearing is not required prior to the termination of Social Security disability payments, because the absence of post-termination review under the Medicare program means that a denial of benefits under the current appeal procedures will involve a permanent, rather than a temporary, deprivation of property.
Although the court recognizes that the denial of Medicare benefits undoubtedly does inflict genuine hardship upon some claimants, it does not believe that the private interest affected by the challenged Medicare procedures is such that the due process clause requires the defendant to provide all beneficiaries with the opportunity for an oral, evidentiary hearing. The Court in Mathews limited the holding of Goldberg v. Kelly, supra, which required the agency to provide welfare recipients with an evidentiary hearing before it terminated their public assistance benefits, to cases where the individual's interests in benefits is "based upon financial need." 424 U.S. at 340, 96 S. Ct. 893, 47 L. Ed. 2d 18. Eligibility for Medicare benefits, unlike eligibility for public assistance benefits, is not based upon financial need. Nor is eligibility to participate in the Medicare program related to income or support. A decision denying reimbursement under the program, therefore, generally will not cause the degree of hardship identified in cases involving the termination of welfare benefits. See Goldberg v. Kelly, supra, 397 U.S. at 264, 90 S. Ct. 1011.
The court notes, moreover, that the impact of the statutory denial of a right to an evidentiary hearing is mitigated by two factors. First, as the government emphasizes, even if Medicare benefits for specific services are denied on review or reconsideration, the beneficiary's eligibility for reimbursement of all other covered medical expenses continues uninterrupted. Second, the Medicare regulations provide for cumulation of claims to meet the amount-in-controversy requirement for evidentiary hearings, so long as all claims have been through the review or reconsideration process. 42 C.F.R. § 405.740 (Part A); 42 C.F.R. § 405.820 (Part B). Thus, claimants are confronted with the possibility of a denial of benefits of less than $ 100 during a period of two months under Part A and six months under Part B after the opportunity for an appeal. If the total amount of denied claims ever reaches $ 100 within the specified period, the beneficiary is entitled to a full evidentiary hearing. In these circumstances, "something less than an evidentiary hearing is sufficient prior to adverse administrative action." Mathews v. Eldridge, supra, 424 U.S. at 343, 96 S. Ct. at 907.
The court's conclusion is not altered by the fact that the plaintiffs in Mathews, denied a hearing before the termination of their disability benefits, still were entitled to a post-termination hearing on their claim. The potential deprivation in Mathews, even though subject to reversal at the post-termination proceeding, was of a much greater magnitude than that involved here. See Mathews v. Eldridge, supra, 424 U.S. at 341-42, 96 S. Ct. 893. Further, in other cases involving significant private interests, courts have held that procedures similar to those assailed in the present case satisfied due process, even where there was no provision for a subsequent hearing. See, e.g., Geneva Towers Tenants Organization v. Federated Mortgage Investors, 504 F.2d 483 (9th Cir. 1974) (in action by the Federal Housing Administration to increase rent in federally financed low-income housing, tenants' due process rights were satisfied by notice of rent increase and the opportunity to make written objections); Lewis v. Hills, supra (due process rights of low-income persons threatened with loss of their property interest in repair benefits provided under the National Housing Act were satisfied by the opportunity to make written submissions contesting the adverse administration action).
B. Risk of Erroneous Deprivation under Current Procedures and Value of Additional Procedural Safeguard
The second part of the three-fold inquiry articulated by the Supreme Court requires consideration of "the risk of an erroneous deprivation of (the individual's) interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards." Mathews v. Eldridge, supra, 424 U.S. at 335, 96 S. Ct. at 903. The plaintiffs argue that the risk of an erroneous deprivation of Medicare benefits under current review and reconsideration procedures is "extremely high" and that this risk can be reduced greatly by giving all Medicare beneficiaries the opportunity to obtain an evidentiary hearing on their claims. In the court's view, however, the degree of demonstrated risk is not so high that the present procedural scheme fails to afford due process to beneficiaries with claims of under $ 100. Moreover, the plaintiffs have failed to prove that the adoption of evidentiary hearings would improve significantly the reliability of the existing process for reviewing small claims.
The plaintiffs allege that the unreliability of the Medicare claims determination process prior to the hearing stage is largely the result of the type of notice of an initial adverse determination received by beneficiaries.
They assert that the notice form is so cryptic, both in its statement of the reasons for a denial of benefits and in its instructions regarding the right to appeal, that many beneficiaries feel that it would be futile to seek review or reconsideration of a denial. Even when beneficiaries do appeal, argue the plaintiffs, "the reasons for claims denials given in the initial notice are so unclear (that) it is virtually impossible for the average beneficiary to present a well-reasoned argument to the insurance company . . . ."
To buttress their attack on the adequacy of the current pre-hearing review process, the plaintiffs submit statistics indicating that in 1974 and 1975 nearly 50% Of the review and reconsideration decisions reexamined at evidentiary hearings were reversed.
The court is unable to agree with the plaintiffs that the "Explanation of Medicare Benefits," the form sent to beneficiaries notifying them of the reasons for any denial of benefits, is so obscurely worded that it denies claimants a meaningful opportunity for review of adverse initial determinations. Although the notations on the front side of the document are somewhat unclear, as the plaintiffs maintain, the reverse side of the form explains those notations, informs beneficiaries that they have a right to a review of the denial of their claims, and provides a telephone number beneficiaries may call if they have any questions or problems regarding the form. Other than a tentatively phrased observation contained in a study by the Medicare Administration,
no evidence has been proffered by the plaintiffs to suggest that the notice form discourages beneficiaries from utilizing their right of appeal. Indeed, the plaintiffs themselves point out that there are "many reasons" why beneficiaries do not seek review or reconsideration, including "their advanced age, poor health . . ., (and) confusion about the benefits to which they are entitled . . ."
Nor have the plaintiffs provided convincing evidence that the statement of reasons for the denial of a claim is so confusing that many beneficiaries cannot effectively present their cases on appeal. In the case at bar, each of the individually-named plaintiffs was sufficiently apprised of the grounds for denial of benefits by the notice provided to make a meaningful submission on review. Further, in many cases it is the treating physician who will submit a claim for reimbursement to the carrier and who will provide meaningful evidence on review or reconsideration of claims that are disallowed.
The plaintiffs' statistics on the reversal rate at Medicare hearings do not substantiate their claim that the review and reconsideration process is highly unreliable in correcting erroneous claims determinations. In organizing their data, the plaintiffs looked at the ratio between the number of times in which review and reconsideration decisions were reversed at evidentiary hearings and the number of hearings actually held.
By thus "focusing solely on the reversal rate for appealed reconsideration (or review) determinations," however, the plaintiffs "overstate the relevant reversal rate." Mathews v. Eldridge, supra, 424 U.S. at 346 n. 29, 96 S. Ct. at 908. The Court in Mathews expressly rejected this statistical approach, explaining that
in order fully to assess the reliability and fairness of a system of procedure, one must . . . consider the overall rate of error for all denials of benefits.
Id. (citing Fusari v. Steinberg, 419 U.S. 379, 383 n. 6, 95 S. Ct. 533, 42 L. Ed. 2d 521 (1975)). According to the government's figures, which the plaintiffs have not challenged, the ratio of reversals to all initial denials under Parts A and B yields an overall reversal rate for hearings of less than one-tenth of 1%.
This reversal rate is a small fraction of the 3.3% Rate the Court in Mathews upheld as consistent with due process. Id.
Even if the plaintiffs were able to demonstrate that current appeal procedures prior to the hearing stage present a high risk of erroneously depriving beneficiaries of their Medicare benefits, they have failed utterly to prove the potential value of an evidentiary hearing to the decisionmaker reviewing the denial of small claims. The Court in Mathews observed that "(c)entral to the evaluation of any administrative process is the nature of the relevant inquiry." Id., 424 U.S. at 343, 96 S. Ct. at 907. In order to receive reimbursement for medical services under Parts A and B, the beneficiary must establish that the services are covered by the statute and the regulations issued pursuant thereto. The plaintiffs nowhere explain how an oral presentation by the claimant would assist the reviewer in determining whether a denial or reduction of benefits was consistent with statutory restrictions on coverage.
They do not dispute the government's contention that review or reconsideration of denials frequently depends upon facts not within the knowledge or control of the claimant. In many cases, the reviewer will request information from the treating physician, who is more likely than the claimant to be familiar with the reasons for the initial adverse determination. The reviewer's decision in those cases often will turn upon "routine, standard, and unbiased medical reports by physician specialists," Richardson v. Perales, 402 U.S. 389, 404, 91 S. Ct. 1420, 1428, 28 L. Ed. 2d 842 (1971), concerning a subject whom they personally have examined. In Richardson, the Court noted that routine doctors' reports do not present the "specter of questionable credibility and veracity." Id. at 407, 91 S. Ct. at 1430. Moreover, the government points out that the largest number of denials are "reasonable charge reductions," which typically turn upon mathematical calculations.
It appears, therefore, that "issues of witness credibility and veracity," those an oral hearing is best suited to resolve, are not "critical to the decisionmaking process" in "the generality of cases" in this area. Mathews v. Eldridge, supra, 424 U.S. at 344-45, 96 S. Ct. 893, 907. Although there may be some cases in which an evidentiary hearing would aid the reviewer, the decisions he must make usually are "sharply focused and easily documented," Id. at 343, 96 S. Ct. 893, and the court feels that the nature of his inquiry is particularly suited to procedures that afford claimants the opportunity to make written submissions.
C. Public Interest
The plaintiffs are unpersuasive in their efforts to rebut the defendant's contention that the extension of an opportunity for evidentiary hearings to all Medicare claims would impose an additional significant fiscal and administrative burden upon the Medicare program. In Mathews v. Eldridge, supra, the Court stated:
Financial cost alone is not a controlling weight in determining whether due process requires a particular procedural safeguard prior to some administrative decision. But the Government's interest, and hence that of the public, in conserving scarce fiscal and administrative resources is a factor that must be weighed.