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Action Alliance of Senior Citizens v. Leavitt

October 4, 2006

ACTION ALLIANCE OF SENIOR CITIZENS, AND GRAY PANTHERS, PLAINTIFFS,
v.
MICHAEL LEAVITT, SECRETARY OF DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANT.



The opinion of the court was delivered by: Henry H. Kennedy, Jr. United States District Judge

MEMORANDUM OPINION

This action, accompanied by a motion for a preliminary injunction (#3), was filed by Action Alliance of Senior Citizens and Gray Panthers (collectively "Plaintiffs") in response to attempts by Michael Leavitt, Secretary of Department of Health and Human Services (the "Secretary") to recover an erroneous premium refund sent to 230,000 Medicare beneficiaries who participate in the Part D prescription drug plan ("Part D"). On September 21, 2006, the Secretary filed a motion to dismiss [#6] and an opposition to the motion for preliminary injunction. On September 27, 2006, after considering the motions, the oppositions thereto, the record of the case, and the oral argument of counsel, the court issued an order denying the motion to dismiss and granting the motion for preliminary injunction, indicating that an opinion articulating the court's reasoning would follow.*fn1 The court now issues its memorandum opinion.

I. BACKGROUND

Part D is the Medicare prescription drug insurance plan, which, effective January 1, 2006, allows beneficiaries to receive prescription drug coverage in exchange for a monthly premium. See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2416 (codified at 42 U.S.C. §§ 1395w et seq.) (the "MMA"). Medicare, which is administered by the Secretary, is divided into four parts: Part A provides hospital inpatient and related care; Part B provides supplemental outpatient coverage in exchange for monthly premiums; Part C provides an alternative managed-care plan; and Part D provides prescription drug coverage by private insurers in exchange for monthly premiums. See 42 U.S.C. §§ 1395 et seq. Medicare beneficiaries may have their premiums withheld or deducted from their monthly Social Security check, which will then be forwarded to the private insurer. Id. § 1395w-113(c)(1). Low-income beneficiaries who qualify may have their premiums subsidized in full, or in part, by the federal government. Id. § 1395w-114.

In August 2006, a "processing error" caused the Secretary to erroneously issue refunds to approximately 230,000 Medicare beneficiaries who pay premiums through monthly deduction from their Social Security benefits. Compl. ¶¶ 3, 19; Pls.' Mot. for Prelim. Inj., Ex. A (Secretary's "Tip Sheet" regarding "Premium Withhold Refund Issue"). The beneficiaries received the erroneous refunds as either a separate refund check, or included in the direct deposit of their August 2006 Social Security checks. See Pls.' Mot. for Prelim. Inj., Ex. A; Compl., Ex. 1 (Sample Letter to Beneficiaries) at 1. The Secretary sent a letter to the same beneficiaries in late August or early September 2006, informing them of the error and of "the steps you can take to return the incorrect payment, so that it can be used to pay your premiums as you intended."

Compl., Ex. 1 (Sample Letter to Beneficiaries) at 1. The letter further informed them that they "should return this payment by September 30, 2006," but if "returning the amount in full presents you with a hardship, you may request to make monthly installment payments for as many as seven months." Id. The Secretary represented at the hearing on the motions that the average refund was about $200 and no refund was higher than $800. See also Def.'s Mot. for Stay of Order, Ex. 1 ¶ 4 (Decl. of Leslie Norwalk).

On September 15, 2006, Plaintiffs filed the instant complaint for declaratory, injunctive, and mandamus relief, and a motion seeking a temporary restraining order and preliminary injunction against the Secretary.*fn2 Plaintiffs contend that each beneficiary had a right under federal law to seek a waiver of repayment if it would present a hardship, and that the Secretary had contravened that right in failing to notify the beneficiaries of their right to seek waiver. The Secretary, for his part, asserts that Plaintiffs do not have standing to bring this action; that no right to waiver exists under federal law for an erroneous refund of a premium; and that no irreparable harm has been established; thus, Plaintiffs' complaint should be dismissed and their motion for preliminary injunction denied.

Following the hearing on the motions, the court granted the motion for preliminary injunction and issued an order requiring the Secretary to (1) notify the 230,000 affected beneficiaries of their right under federal law to request that the recovery of the incorrect payment be waived if the beneficiary was not at fault and that it would either be against equity and good conscience to recover the overpayment, or would defeat the purposes of the Medicare program; (2) provide the beneficiaries with a mechanism for requesting or declining waiver; and (3) to return any payments previously received, or received after the order, to the beneficiaries so that they may decide whether to request waiver of repayment.*fn3 On September 29, 2006, the Secretary filed a motion for a temporary stay of that order pending resolution of his appeal filed with the D.C. Circuit, which the court denied. Upon reconsideration, on October 2, 2006, the court granted the Secretary's motion for a temporary stay pending appeal.

II. ANALYSIS

Plaintiffs contend that they have met the requisite four-part showing to secure a preliminary injunction: (1) a substantial likelihood of success on the merits; (2) irreparable harm if an injunction is not granted; (3) an injunction will not substantially injure the other party; and (4) the public interest will be served by the injunction. The Secretary contends that Plaintiffs do not have standing to bring this action, that they have not alleged irreparable harm if an injunction does not issue, and that they have failed to establish that they will succeed on the merits. The court will assess these contentions in turn.

A. Standing

In order for a federal court to exercise jurisdiction under Article III of the Constitution, a plaintiff must establish standing by alleging (1) injury-in-fact; (2) that the injury is fairly traceable to the defendant's unlawful conduct; (3) that the injury will likely be redressed by a favorable decision; and (4) the injury arguably represents an invasion of the zone of interests protected by the legal basis for the complaint. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992); Bhd. of Locomotive Eng'rs and Trainmen v. Surface Transp. Bd., 457 F.3d 24, 27 (D.C. Cir. 2006). The Secretary contends that Plaintiffs have not alleged facts sufficient to establish that they have the requisite standing to bring this case. Plaintiffs disagree, contending that they have both representational and organizational standing.

To establish representational standing, an organization must allege that (1) at least one of its members has standing in their own right; (2) the organization seeks to protect interests germane to its purpose; and (3) neither the claim nor the requested relief require the participation of individual members. Sierra Club v. EPA, 292 F.3d 895, 898 (D.C. Cir. 2002) (citing Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 342-43 (1977)). The Secretary contends that Plaintiffs have not alleged sufficient facts to demonstrate either the first or the third prong of the test.

With regard to the first prong, the Secretary contends that Plaintiffs have failed to allege an injury-in-fact on behalf of any specific organizational member in that they have failed to identify a single individual member who has suffered a concrete injury. Plaintiffs respond that they are not required to identify a particular individual because representational standing merely requires an allegation that an organization's "members, or any one of them, are suffering immediate or threatened injury." Warth v. Seldin, 422 U.S. 490, 511 (1975) (emphasis added). Plaintiffs are correct. As Plaintiffs point out, they are not required to identify a particular individual by name if that member's existence and injury can be reasonably inferred from the available statistics. See Natural Res. Def. Council v. EPA, 2006 WL 2472144, at *4 (D.C. Cir. Aug. 29, 2006) (concluding that organization established standing because court "may infer from the statistical analysis that two to four of NRDC's nearly half a million members will develop cancer as a result of the rule"), reh'g en banc denied, id. (D.C. Cir. Aug. 29, 2006).

The undisputed facts here establish that 230,000 Medicare beneficiaries - or about one percent of the 22.5 million Medicare beneficiaries enrolled in Part D - received the letter regarding the erroneous premium refund. The Gray Panthers allege that they have a membership of 20,000, a large majority of whom are enrolled in Part D. Compl. ¶ 8. Action Alliance alleges that it has a membership of more than 110,000 senior citizens, most of whom are enrolled in Part D. Id. ¶ 27. Assuming that at least seventy percent (or 14,000) of the Gray Panthers are enrolled in Part D, see Pls.' Opp'n, Ex. 1 ¶ 2 (Decl. of Susan Murany), and that they are affected in approximately the same proportion as all Medicare beneficiaries (one percent), then at least 140 members of the Gray Panthers alone were likely affected by the Secretary's actions in attempting to recover the premium refunds. Thus, Plaintiffs have sufficiently alleged that at least one of their members would have standing to bring this case.

With regard to the third prong of the test, the Secretary contends that the resolution of the disputed issues here require the participation of individual members because the harm cannot be quantified otherwise. Plaintiffs counter that the goal of their action is that the Secretary properly inform all Part D enrollees of their right to seek waiver, not to establish that any or all enrollees are entitled to such waiver. As Plaintiffs rightly observe, the Secretary confuses the injury alleged here (failure to notify beneficiaries of their right to seek waiver) with the underlying substantive right to obtain waiver. Moreover, the Secretary conflates the requirements of standing (allegations of injury) with the burden of proof (proof of injury). While the right to obtain waiver for any particular member is a matter that will indeed require an individualized determination based on her own circumstances, the issue of notice is one that may be redressed on a group-wide basis, see Pub. Citizen v. F.T.C., 869 F.2d 1541, 1548 (D. C. Cir. 1989) (concluding that a deprivation of individuals' right to information was sufficient to establish organizational standing), and has been properly alleged.

There can be no question that the interests here are germane to Plaintiffs' purposes, as both are organizations that represent senior citizens, most of whom are Medicare beneficiaries and participants in Part D. Compl. ΒΆΒΆ 7-8, 27. Plaintiffs have also sufficiently alleged that the alleged injury is fairly traceable to the Secretary's conduct (failure to notify individuals of their right to seek waiver), and that a favorable decision requiring the Secretary to provide such notice would remedy the ...


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