U.S.C. § 1395y(b)(2)(A). 48 Fed. Reg. 14802, 14811 (Apr. 5, 1983), amending 42 C.F.R. Part 405, Subpart C. These regulations make employer group health plans the primary payer of benefits for a patient's initial 12 months of eligibility for ESRD program benefits. An intermediary or carrier is to pay conditional primary benefits only if it "knows from experience or ascertains that the employer plan's payments are substantially less prompt than Medicare's." 48 Fed. Reg. at 14812.
Plaintiffs allege that Section 2146 of the Omnibus Budget Reconciliation Act of 1981 requires that conditional primary payments be made except when there has been payment by an employer group health plan or a prior determination by the Secretary that payment under an employer group health plan will be as prompt as if payment were made by the Secretary under Medicare. The Secondary Payer Regulations do not provide for such determinations by the Secretary, and thus, plaintiffs maintain, contravene the statute and, violate the APA.
Defendants maintain that this Court lacks jurisdiction over plaintiffs' claims, which arise under Part B of the Medicare Act, for two separate reasons. First, they argue that jurisdiction is squarely precluded by United States v. Erika, 456 U.S. 201, 72 L. Ed. 2d 12, 102 S. Ct. 1650 (1982). Second, they argue that jurisdiction is additionally precluded by the Social Security Act, 42 U.S.C. § 405(h) as incorporated into the Medicare Act by 42 U.S.C. § 1395ii.
Erika8 held that both the language and legislative history of 42 U.S.C. § 1395ff
evince a clear Congressional intent to foreclose judicial review of adverse determinations of benefit amounts made by private insurance carriers under Part B. 456 U.S. at 208-09.
Part B carrier determinations are subject to review by a hearing officer designated by the carrier where the amount in controversy is $100 or more. 42 U.S.C. § 1395u(b)(3)(C). The hearing officer's decision is final and binding on all parties. 42 C.F.R. § 405.835. Congress explicitly provided for review by the Secretary of whether an individual is entitled to benefits under Part A or Part B and of the determination of the amount of benefits under Part A. 42 U.S.C. § 1395ff(a). Judicial review of the Secretary's decision is available only where the dispute relates to eligibility to participate in either Part A or Part B, or when the dispute concerns the amount of benefits to which they are entitled under Part A. 42 U.S.C. § 1395ff(b). Thought to be generally smaller than those under Part A, Part B amount determinations were made unreviewable "in order to avoid overloading the courts with quite minor matters." 118 Cong. Rec. 33992 (1972) (statement of Senator Bennett).
Minimizing the significance of Erika's narrow focus on benefit amount determinations by private carriers, defendants maintain that plaintiffs' substantive challenges to the May 11, 1983 reimbursement regulations and the April 5, 1983 secondary payment regulations essentially represent efforts to obtain higher levels of reimbursement for Part B claims. Thus, they argue that section 1395ff, as interpreted by Erika, mandates dismissal of plaintiffs' complaint.
However, plaintiffs' claims involve the Secretary's administration of the Part B program rather than the validity of any particular benefit determinations, defendants' characterization notwithstanding. Indeed, defendants' argument has been expressly rejected recently by the United States Court of Appeals for this Circuit in College of American Pathologists v. Heckler, 734 F.2d 859 (D.C. Cir. 1984); by the Sixth Circuit in Michigan Academy of Family Physicians v. Blue Cross and Blue Shield of Michigan, 728 F.2d 326 (6th Cir. 1984); and by the Fourth Circuit in Starnes v. Schweiker, 715 F.2d 134 (4th Cir. 1983), cert. granted, 467 U.S. 1223, 104 S. Ct. 2673, 81 L. Ed. 2d 870 (1984). In College of American Pathologists, plaintiffs challenged HHS regulations that established qualifications for Medicare reimbursement for services rendered by clinical pathologists in hospital laboratories. The Court upheld the jurisdiction of the District Court, finding no legislative intent to preclude judicial review "of a challenge to the broad regulatory framework adopted by the Secretary. The legislative history cited in Erika only reveals an intent to preclude review of Part B amount determinations." Id. at 863 (emphasis in original).
In Michigan Academy, plaintiffs challenged HHS' classification for reimbursement purposes of certain family physicians separately from other physicians with comparable qualifications. Although defendants had alleged that the suit involved simply a reimbursement dispute, the Court determined that plaintiffs were "challenging the overall mechanism for determining the amounts of reimbursements, not the actual value of any particular reimbursement . . . Section 1395ff, by its terms as interpreted by the Supreme Court [in Erika ], precludes judicial review of decisions by the carrier concerning amounts of reimbursements, but is silent on the question of reviewing decisions of the Secretary made in implementing the overall Medicare part B program." 728 F.2d at 330. The Court refused to construe that silence as an affirmative restriction on judicial review. Id. at 330-331.
And, in Starnes, plaintiffs brought procedural, substantive and constitutional challenges to the establishment and implementation by the Secretary of nationwide regional ceilings or caps on Part B reimbursements for computerized tomography head scans. The Court held that the language of section 1395ff indicates that Congress sought to preserve judicial review of actions performed by the Secretary, as distinguished from actions delegated to private carriers under the Medicare Act. 715 F.2d at 138. See also Colonial Penn Ins. Co. v. Heckler, 721 F.2d 431 (3rd Cir. 1983) (permitting review to challenge regulations implementing legislation making Medicare benefits secondary to insurance coverage).
In the instant case, while the eventual result of litigation could be an increase in amounts of reimbursement, plaintiffs seek to enforce lawful conduct on the part of the Secretary in her administration of the ESRD program, and not to overturn any adverse determination of a particular claim for reimbursement. Preclusion of jurisdiction over this considerable case would not further the legislative policy cited in Erika of relieving the courts from the burden imposed by relatively insignificant lawsuits. Rather, Congress could not have intended to imbue the Secretary with "unbridled discretion to promulgate any regulation she chose." Michigan Academy v. Blue Cross, 728 F.2d at 331. The complete absence of judicial oversight over an entire regulatory program would raise a serious constitutional issue concerning an improper delegation of legislative power to the Executive.
Defendants cite Schweiker v. McClure, 456 U.S. 188, 72 L. Ed. 2d 1, 102 S. Ct. 1665 (1982), decided the same day as Erika, which upheld the carrier administrative appeals mechanism against constitutional attack, for the proposition that the absence of judicial review does not render the Medicare statute constitutionally infirm. However, the action by the Court in Schweiker v. McClure, is evidence of the reviewability of the constitutional challenge to the benefit determination procedures at issue in that case. See Michigan Academy v. Blue Cross, 728 F.2d at 330; Starnes v. Schweiker, 715 F.2d at 138. See also Ratoike v. Heckler, No. 81 C 697, slip. op. (N.D. Ill. Mar. 21, 1984).
Defendants' second argument is similarly flawed. They contend that even if the language of section 1395ff, as construed by Erika, does not deprive the Court of jurisdiction over this case, 42 U.S.C. § 405(h), Title II of the Social Security Act, incorporated into the Medicare Act by 42 U.S.C. § 1395ii, clearly proscribes jurisdiction over all Part B claims because review of those claims is not specifically available under section 1395ff. Section 405(h) states:
The findings and decisions of the Secretary after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Secretary shall be reviewed by any person, tribunal or governmental agency except as herein provided. No action against the United States, the Secretary, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.
By its own terms, section 405(h) is inapplicable to this case, which involves no findings of fact nor any decision by the Secretary on a claim for benefits. See Colonial Penn Ins. Co. v. Heckler, 721 F.2d at 439; Mathews v. Eldridge, 424 U.S. 319, 328, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976) ("Absent such a claim there can be no 'decision' of any type. And some decision is clearly required by the statute"). Indeed, it is precisely because the statute contemplates no administrative hearing in this context, that plaintiffs have brought this law suit.
Several courts have disregarded section 405(h) where no other form of review is available for the plaintiff's claims. College of American Pathologists v. Heckler, slip op. at 7; National Association of Home Health Agencies v. Schweiker, 223 U.S. App. D.C. 209, 690 F.2d 932, 940 (D.C. Cir. 1982), cert. denied, 459 U.S. 1205, 103 S. Ct. 1193, 75 L. Ed. 2d 438 (1983) (NAHHA); Michigan Academy v. Blue Cross, 728 F.2d at 330-331; Starnes v. Schweiker, 715 F.2d at 140; United States v. Aquavella, 615 F.2d 12, 20-21 (2d Cir. 1979); Whitecliff, Inc. v. United States, 536 F.2d 347, 351 (Ct. Cl. 1976), cert. denied, 430 U.S. 969, 52 L. Ed. 2d 361, 97 S. Ct. 1652 (1972). Cf. Colonial Penn Ins. Co. v. Heckler, 721 F.2d at 436-437, 439 (absence of administrative mechanism for plaintiff's constitutional challenge to Medicare regulations designed to make Medicare payment liability secondary to automobile insurance coverage, "critical" in exercising federal question jurisdiction despite section 405(h)); St. Louis Univ. v. Blue Cross Hosp. Service, 537 F.2d 283, 292 (8th Cir.), cert. denied sub nom., Faith Hosp. Ass'n v. Blue Cross Hosp. Service, Inc., 429 U.S. 977, 97 S. Ct. 484, 50 L. Ed. 2d 584 (1976) (section 405(h) does not preclude Court's consideration of constitutional issues where no adequate alternative means of judicial review).
In addition, several courts, including the Court of Appeals for this Circuit in NAHHA, have concluded that section 405(h) is not a bar to federal question jurisdiction for challenges to the "mode of reimbursement" as opposed to challenges "directly related to a claim for reimbursement." NAHHA, 690 F.2d at 938; Colonial Penn Ins. Co. v. Heckler, 721 F.2d at 438; Starnes v. Schweiker, 715 F.2d at 139-141. But see American Association of Councils of Medical Staffs of Private Hospitals, Inc. v. Califano, 575 F.2d 1367, 1372 (5th Cir. 1978), cert. denied, 439 U.S. 1114, 59 L. Ed. 2d 72, 99 S. Ct. 1018 (1979).
Plaintiffs' inability to present their claims before any administrative tribunal further establishes that their claims do not directly concern the amount of reimbursement they may eventually receive. In College of American Pathologists, the District Court rejected the argument that section 405(h) had barred jurisdiction in previous cases merely because plaintiffs sought reimbursement. Rather "the fact that plaintiffs sought reimbursement meant that they had an alternative avenue of judicial review available to them under 42 U.S.C. § 1395oo." College of American Pathologists v. Heckler, No. 83-1081, slip op. at 12 (D.D.C. May 25, 1983). E.g., Humana of South Carolina, Inc. v. Califano, 191 U.S. App. D.C. 368, 590 F.2d 1070, 1079 (D.C. Cir. 1978); Association of American Medical Colleges v. Califano, 186 U.S. App. D.C. 270, 569 F.2d 101, 110 (D.C. Cir. 1977). Defendants have failed to suggest a possible forum for plaintiffs' claims. Plaintiffs seek to redress alleged statutory violations, whether or not motivated by the potentiality of increased reimbursement amounts. There being no alternative form of review, the Court readily asserts jurisdiction over this case.
A. Standard of Review
Under the APA, the Court "shall hold unlawful and set aside agency action, findings and conclusion found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). As the Supreme Court recently articulated in Motor Vehicle Manufacturers Assoc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 103 S. Ct. 2856, 77 L. Ed. 2d 443 (1983):
the scope of review under the 'arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency. Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a "rational connection between the facts found and the choice made."