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Action Alliance of Senior Citizens v. Johnson

March 23, 2009


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


Action Alliance of Senior Citizens ("Action Alliance"), the Gray Panthers, and Lucy Carolyn Loveall (together, "Plaintiffs") bring this action against defendants Charles E. Johnson ("Secretary") in his official capacity as Acting Secretary of the Department of Health and Human Services ("HHS") and Michael J. Astrue ("Commissioner") in his official capacity as Commissioner of the Social Security Administration ("SSA") (together, "Defendants"). Plaintiffs bring their claims in response to the Secretary's efforts to recover erroneous Medicare premium payments sent to approximately 230,000 participants in the Medicare Part D Prescription Drug Plan ("Part D") including Loveall and participants belonging to the Action Alliance or the Gray Panthers (together, "Medicare Participants"). Plaintiffs seek injunctive, declaratory, and mandamus relief requiring the Secretary to provide the Medicare Participants with notice of their putative right to seek a waiver of recovery, a period within which to exercise their rights, and a hearing. For those Medicare Participants who have returned the premiums, Plaintiffs seek a court order that would require the Secretary to return those funds to those Medicare Participants until they have been notified of and given an opportunity to request the aforementioned waiver.

Before the court are Defendants' motion to dismiss the complaint [#49], and Plaintiffs' cross-motion for summary judgment [#50]. Upon consideration of the motions, the oppositions thereto, and the record of this case, the court concludes that Defendants' motion should be granted and Plaintiffs' motion should be denied.


The background facts concerning the Medicare program, Medicare Part D specifically, and the facts giving rise to this litigation along with its procedural history are thoroughly set forth in the D.C. Circuit's opinion in this case:*fn1

Medicare Part D, established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066, offers subsidized prescription drug insurance coverage. 42 U.S.C. § 1395w-101(a)(1). Whereas under Medicare Parts A and B the government pays providers on participants' behalf for goods or services received, under Part D the government contracts for and subsidizes insurance plans offered by private, third-party insurers. Id. at § 1395w-115.

Part D participants pay monthly premiums to their insurers. See id. § 1395w-113(a). Most make these payments directly, but about 20% have opted to have the [SSA] deduct the amount of their Part D premium from their monthly benefits under Title II of the Social Security Act and transmit that sum, on the participant's behalf, to the insurer. Id. §§ 1395w-116(b)(3) & 1395w-24(d)(2)(A); see also 42 C.F.R. §§ 423.293(a) & 422.262(f) (2006). [Qualifying low-income participants may have their premiums subsidized in full or in part by the government. 42 U.S.C. § 1395w-114.]

The SSA, which plaintiffs have not sued, administers Old-Age, Survivor, and Disability Insurance benefits under Title II of the Social Security Act; [HHS] administers the various Medicare programs found under Title XVIII of that Act. Since 1994 the SSA, directed by the [Commissioner], has been independent of HHS. See Social Security Independence and Program Improvements Act of 1994, Pub. L. No. 103-296, 108 Stat. 1464; 42 U.S.C. §§ 401-434 (Title II); id. §§ 1395-1395hhh (Title XVIII).

In a monumental gaffe in early August 2006, the SSA wrote to some 230,000 participants, stating "[w]e will no longer deduct money for your health plan premium(s) from your monthly benefits." The letter also said, without further explanation, that the addressee would be receiving a check in a specified amount, coinciding with the recipient's premium for the just-past month. The average payment was $215, for a total of some $47 million. The parties agree these payments were all made in error. In early September, the Secretary requested repayment of the funds by the end of that month, but indicated that "[i]f returning the amount in full presents you with a hardship, you may request to make monthly installment payments for as many as seven months." The Secretary's letter also stated (accurately) that despite the mistaken payment to the insured, "prescription drug coverage will continue uninterrupted."

On September 15, Action Alliance and the Gray Panthers..., advocacy organizations whose membership includes many Part D participants, filed suit in district court seeking injunctive, declaratory, and mandamus relief on statutory and constitutional grounds. (The plaintiffs later amended their complaint to add Lucy Carolyn Loveall, a Part D participant who received a check for $161.70, a sum which she spent and states she is now unable to repay.) The complaint rested in part on 42 U.S.C. § 1395gg, which allows the government to recover funds where "more than the correct amount is paid under th[e] [Medicare] subchapter... for items or services furnished an individual," § 1395gg(b), but provides for government waiver of this recovery:

There shall be no adjustment as provided in subsection (b) of this section (nor shall there be recovery) in any case where the incorrect payment has been made... with respect to an individual who is without fault... if such adjustment (or recovery) would defeat the purposes of subchapter II [Old-Age, Survivors, and Disability Insurance] or subchapter XVIII [Medicare] of this chapter or would be against equity and good conscience.

42 U.S.C. § 1395gg(c).

The Alliance asserted that Part D participants who received erroneous payments were entitled, under § 1395gg, to "written notice... of their right to seek waiver of repayment" and an oral hearing prior to recovery of such payments. The district court rejected this claim, noting that § 1395gg applies only to payments for "items or services" (such as under Medicare Parts A and B), and thus that its waiver provision did not encompass erroneous premium refunds. Action Alliance I, 456 F. Supp. 2d at 18.

But the court observed that Medicare Part A and B participants who authorize SSA to withhold their premiums under those parts do enjoy a waiver right for erroneous premium refunds. Internal SSA policy guidelines, in the form of its Program Operations Manual System ("POMS"), create such a right on the basis of Title II's general waiver provision, 42 U.S.C. ยง 404(b). Action Alliance I, 456 F. Supp. 2d at ...

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