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Association of American Physicians & Surgeons, Inc. v. Sebelius

United States District Court, District of Columbia

October 31, 2012

ASSOCIATION OF AMERICAN PHYSICIANS & SURGEONS, INC., et al., Plaintiffs,
v.
Kathleen G. SEBELIUS, Secretary Of Health & Human Services, et al., Defendants.

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Lawrence J. Joseph, Law Office of Lawrence J. Joseph, Washington, DC, for Plaintiffs.

Eric B. Beckenhauer, Justin M. Sandberg, Justin Michael Sandberg, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

AMY BERMAN JACKSON, District Judge.

Plaintiffs Association of American Physicians & Surgeons, Inc. (" AAPS" ) and Alliance for Natural Health USA (" ANH-USA" ), bring this case challenging several unrelated government actions, each of which could have been challenged in a distinct and separate case. The challenged government actions are:

• Three sections of the Social Security Program Operations Manual System (" POMS" ), POMS HI 00801.002; POMS HI 00801.034; POMS GN

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00206.020, which state that any individual who receives social security benefits is automatically entitled to Medicare Part A benefits;
• The employer and individual insurance mandate sections of the Patient Protection and Affordable Care Act, Pub.L. No. 111-148, 124 Stat. 119 (2010) (codified as amended in scattered titles of U.S.Code) (" ACA" );
• Provisions of a Center for Medicare and Medicaid Services (" CMS" ) manual and accompanying change requests, Change Requests 6417, 6421 (" CR6417/6421" ), as well as a Department of Health and Human Services (" HHS" ) Interim Final Rule with Comment Period, 75 Fed.Reg. 24,437 (May 5, 2010) (" IFR" ), that require physicians and other eligible professionals to obtain a National Provider Identifier (" NPI" ) and an HHS-approved enrollment or opt-out record in the electronic Provider Enrollment, Chain, and Ownership System (" PECOS" ), in order to make covered referrals under Medicare Part B; and
• Alleged violations by Secretary of HHS Kathleen G. Sebelius and Commissioner of Social Security Administration Michael J. Astrue of their fiduciary and equitable duties to the American people by allowing Medicare and Social Security, respectively, to face insolvency.

Defendant filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), and for failure to state a claim upon which relief can be granted under Rule 12(b)(6). See Defs.' Mot. to Dismiss [Dkt. # 32] (" Defs.' Mot." ). After filing the motion to dismiss, defendants moved to stay this case pending decisions in two cases before the D.C. Circuit, and later, one case before the United States Supreme Court, which raised claims identical to the first two counts of plaintiffs' complaint. See Defs.' Mot. to Stay Summ. J. Briefing and Discovery [Dkt. # 33]. The Court granted the motion to stay. See Minute Entry (Nov. 8, 2011).

Decisions in all of the relevant appeals have now been issued. In Hall v. Sebelius, 667 F.3d 1293 (D.C.Cir.2012), the D.C. Circuit upheld the POMS provisions that are challenged in this case as consistent with the Social Security Act, 42 U.S.C. § 426(a). In National Federation of Independent Business v. Sebelius, ___ U.S. ___, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012) ( " NFIB " ), the Supreme Court upheld the individual mandate provision of the ACA as a valid exercise of Congress's taxing powers.

Accordingly, the stay on this action has been lifted, and defendants' motion to dismiss is ripe for decision. The parties have filed supplemental memoranda addressing whether the recent decisions require the dismissal of any counts and, notwithstanding the Supreme Court's determination, plaintiffs soldier on. In light of the original pleadings in this case, the supplemental pleadings, and the recent controlling decisions from the D.C. Circuit and the United States Supreme Court, this Court will grant defendants' motion to dismiss because plaintiffs lack standing to bring some of their claims, and the others fail to state a claim upon which relief can be granted.

FACTUAL BACKGROUND

Plaintiffs AAPS and ANH-USA are both associations whose members include medical caregivers, employers, owners and managers of medical businesses, and consumers of healthcare. Second Am. Compl. [Dkt. # 26] (" Compl." ) ¶¶ 3-4, 13-14. AAPS was founded " to preserve the practice

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of private medicine, ethical medicine, and the patient-physician relationship." Id. ¶ 3. ANH-USA seeks " to promote sustainable health and freedom of choice in healthcare" and to promote an " integrative" approach to preventative medicine that incorporates food, dietary supplements, and lifestyle changes. Id. ¶ 4.

On September 13, 2010, plaintiffs filed the six-count second amended complaint (" complaint" ) in this action on behalf of their members. See Compl. ¶¶ 13-34. Count I alleges that the issuance of the three POMS provisions, which state that any individual who receives social security benefits is automatically entitled to Medicare Part A benefits, was arbitrary, capricious, an abuse of discretion, without observance of notice-and-comment rulemaking procedure required by law, not otherwise in accordance with the law, and in excess of statutory authority. Id. ¶¶ 90-93. Counts II and III allege that both the employer and individual insurance mandate provisions of the ACA contravene the United States Constitution. Id. ¶¶ 94-99. Count IV alleges that CR6417/6421 and HHS's Interim Final Rule with Comment Period, 75 Fed.Reg. at 24437, which require medical professionals who decide to opt out of Medicare but wish to make referrals under Medicare Part B to obtain an NPI and an approved enrollment record or a valid opt-out record in the PECOS, are arbitrary, capricious, an abuse of discretion, without observance of the notice-and-comment rulemaking procedure required by law, not otherwise in accordance with the law, and in excess of statutory authority. Id. ¶¶ 100-05. Finally, Counts V and VI allege that defendants Sebelius and Astrue violated their fiduciary and equitable duties. Id. ¶¶ 106-117. The complaint requests declaratory and equitable relief. Id. ¶ 118.

STANDARD OF REVIEW

In evaluating a motion to dismiss under either Rule 12(b)(1) or 12(b)(6), the Court must " treat the complaint's factual allegations as true ... and must grant plaintiff ‘ the benefit of all inferences that can be derived from the facts alleged.’ " Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C.Cir.2000), quoting Schuler v. United States, 617 F.2d 605, 608 (D.C.Cir.1979) (citations omitted). Nevertheless, the Court need not accept inferences drawn by the plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the Court accept plaintiff's legal conclusions. Browning v. Clinton, 292 F.3d 235, 242 (D.C.Cir.2002).

I. Subject Matter Jurisdiction

Under Rule 12(b)(1), the plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Shekoyan v. Sibley Int'l Corp., 217 F.Supp.2d 59, 63 (D.D.C.2002). Federal courts are courts of limited jurisdiction and the law presumes that " a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); see also Gen. Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C.Cir.2004) (" As a court of limited jurisdiction, we begin, and end, with examination of our jurisdiction." ). Because " subject-matter jurisdiction is an ‘ Art[icle] III as well as a statutory requirement ... no action of the parties can confer subject-matter jurisdiction upon a federal court.’ " Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C.Cir.2003), quoting Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982) (second alteration in original).

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When considering a motion to dismiss for lack of jurisdiction, unlike when deciding a motion to dismiss under Rule 12(b)(6), the court " is not limited to the allegations of the complaint." Hohri v. United States, 782 F.2d 227, 241 (D.C.Cir.1986), vacated on other grounds, 482 U.S. 64, 107 S.Ct. 2246, 96 L.Ed.2d 51 (1987). Rather, a court " may consider such materials outside the pleadings as it deems appropriate to resolve the question of whether it has jurisdiction to hear the case." Scolaro v. D.C. Bd. of Elections & Ethics, 104 F.Supp.2d 18, 22 (D.D.C.2000), citing Herbert v. Nat'l Acad. of Sciences, 974 F.2d 192, 197 (D.C.Cir.1992); see also Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C.Cir.2005).

II. Failure to State a Claim

" To survive a [Rule 12(b)(6) ] motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when the pleaded factual content " allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. " The plausibility standard is not akin to a ‘ probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. " [W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged— but it has not ‘ show[n]’ — ‘ that the pleader is entitled to relief.’ " Id. at 679, 129 S.Ct. 1937, quoting Fed. R. Civ. Pro. 8(a)(2). A pleading must offer more than " labels and conclusions" or a " formulaic recitation of the elements of a cause of action," and " the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. at 678, 129 S.Ct. 1937, quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955. In ruling upon a motion to dismiss, a court may ordinarily consider only " the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, and matters about which the Court may take judicial notice." Gustave-Schmidt v. Chao, 226 F.Supp.2d 191, 196 (D.D.C.2002) (citations omitted).

ANALYSIS

I. Plaintiffs lack standing to assert Count I.

Count I of the complaint challenges three provisions of the POMS which affirm that any individual who receives Social Security benefits is automatically entitled to Medicare Part A benefits. There is now binding precedent from the D.C. Circuit upholding these provisions as a valid exercise of agency authority, Hall, 667 F.3d at 1293, so plaintiffs cannot succeed on this claim. However, because plaintiffs argue that they have raised a challenge that was not addressed by the D.C. Circuit— a procedural challenge— the Court will first address plaintiffs' standing.

A. Statutory Background

The federal Medicare program was established by Title XVIII of the Social Security Act of 1935 to provide health insurance to the elderly and disabled. Amgen Inc. v. Smith, 357 F.3d 103, 105 (D.C.Cir.2004). Part A of the Medicare program provides insurance coverage for hospital services, home health care, and hospice services. See id., citing 42 U.S.C. § 1395c. Part B is a voluntary program that provides supplemental coverage for other types of care, including physician services.

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See id. at 106, citing 42 U.S.C. §§ 1395j, 1395k; United Seniors Ass'n v. Shalala, 182 F.3d 965, 967 (D.C.Cir.1999). By statute, every individual who has attained age 65 and is entitled to Social Security benefits, is also " entitled to hospital insurance benefits" through Medicare Part A. Hall, 667 F.3d at 1294-95, citing 42 U.S.C. § 426(a). However, any individual who is entitled to Medicare Part A benefits may choose to decline them. Id. at 1295, citing Medicare Claims Processing Manual, ch. 1, § 50.1.5 (2011). Furthermore, an individual may avoid entitlement to Medicare Part A altogether by choosing not ...


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