Ninth Circuit Vacates Injunctions Barring HHS From Seeking Prepayment of Medicare Secondary Payer Reimbursements

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The United States Court of Appeals for the Ninth Circuit recently vacated injunctions entered by a district court that banned HHS from seeking “up front” reimbursements for Medicare secondary payments from beneficiaries who have received payment from primary insurance plans if they have unresolved appeals or waivers.  The Ninth Circuit also enjoined HHS from demanding that attorneys withhold settlement proceeds from their clients until after Medicare is reimbursed. 

The secondary payer provisions are set forth at 42 U.S.C. § 1395y(b)(2)(A) and (B) and provide that Medicare is secondary to other sources of insurance by forbidding Medicare payments when a primary insurance plan is reasonably expected to make payments for the same medical care.  Under the provisions, Medicare makes a conditional payment when a primary insurer cannot reasonably be expected to pay promptly, and Medicare is entitled to reimbursement to the extent a beneficiary later receives payment from a primary insurer.

A nationwide class of Medicare beneficiaries brought suit in an Arizona district court challenging HHS’s practice of demanding up front reimbursement for secondary payments from beneficiaries who were in the process of appealing reimbursement determinations or sought waivers of the reimbursement obligations.  The plaintiffs argued that this practice was inconsistent with the secondary payer provisions of the Medicare statutory scheme and that it violated their due process rights.  The district court agreed with the plaintiffs and enjoined HHS from continuing the practice.  The lead plaintiff’s attorney separately claimed that the practice of demanding that attorneys withhold settlement proceeds from clients until Medicare was reimbursed was also inconsistent with the secondary payer provisions.  The district court agreed with the attorney and enjoined this practice as well.

On appeal, HHS argued that the plaintiffs lacked standing, that the case was moot, and that the district court lacked subject matter jurisdiction.  HHS also argued that, on the merits, HHS’s interpretation of the Medicare secondary payer provisions was reasonable.  The Ninth Circuit held that the lead plaintiff failed to satisfy her presentment and exhaustion requirements when she filed her claim at the administrative level.  Because the claim was not properly presented to the agency, the Ninth Circuit found that the district court lacked subject matter jurisdiction.  On the merits, the Ninth Circuit held that HHS’s construction of the reimbursement provision was rational and consistent with the statute’s text, history, and purpose, and it vacated the injunctions entered by the district court.  The Ninth Circuit remanded the case for consideration of the plaintiffs’ due process claims.

The case is Haro v. Sebelius, No. 11-16606, and the Ninth Circuit opinion is available here.

Reporter, Jennifer S. Lewin, Atlanta, + 1 404 572 3569, jlewin@kslaw.com.