Before: WILKEY, WALD and EDWARDS, Circuit Judges
UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT 1980.CDC.262
Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 77-0488)
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WALD
Opinion for the Court filed by Circuit Judge WALD
Dissenting opinion filed by Circuit Judge WILKEY
WALD, Circuit Judge: This case is a class action brought by the Gray Panthers *fn1 and three named beneficiaries of the Medicare program challenging the procedures whereby disputes concerning sums under $100 under the program are resolved. We must decide the question of whether the Government may finally deprive an individual of a property interest *fn2 without any opportunity for an oral hearing of any sort. We hold, following an unbroken line of Supreme Court precedent, that it may not. While we need not find the Medicare Act itself unconstitutional, we do hold that the defendant Secretary of Health and Human Services' interpretation of the Act to eliminate all hearing rights *fn3 to Medicare claimants when their dispute with the defendant does not involve more than $100 denies due process to the plaintiffs.
DESCRIPTION OF THE MEDICARE PROGRAM
In 1965, Congress took an important step in assuring adequate health care for the elderly when it passed the Medicare Act, 42 U.S.C. § 1395 et seq. The legislation set up an insurance program to provide reimbursement for the costs of much of the medical care of the aged.Insurance coverage of hospitalization costs, "Part A" of the Act, is funded out of Social Security taxes. "Part B," in contrast, is a voluntary supplemental insurance program intended to cover most other health costs, for which a beneficiary pays a monthly premium. The $100 "amount in controversy" limitation on hearing rights challenged here applies to disputes arising under both parts.
The determination and review procedures for claims arising under the two parts of the Act are similar. Both are administered primarily through non-governmental organizations, usually insurance companies, pursuant to contracts with the Department. *fn4 Claims for payment or reimbursement are submitted to the carrier, which makes an initial determination as to the claim and sends a notice of its action together with any payment to the claimant. If the claimant is dissatisfied, a request for reconsideration may be made, *fn5 and a different employee of the carrier will examine the determination, together with any additional information the claimant may wish to submit, and notify the claimant of the decision on redetermination.
For any claimant whose disagreement with the carrier at this stage does not amount to more than $100, *fn6 that is the end of the process, according to the Secretary's procedures. There is no further review, and there is at no time an opportunity to present one's case personally to the decisionmaker. If the amount in controversy is more than $100, the claimant may request a hearing. *fn7 Finally, judicial review is available for Part A disputes over $1000; no such review is provided for when the claim arises under Part B.8
THE STATUTE AND THE LEGISLATIVE BACKGROUND
This administrative scheme is based upon the Secretary's interpretation of the Medicare Act itself, which provides for use of carriers to handle the bulk of the administration of the program, for the $100 amount in controversy limitation on formal hearings,9 and for the $1000 threshold for judicial review.
As the Medicare bill was first reported out of the House Committee on Ways and Means in 1965, there would have been a $1000 limitation on both formal hearing rights and judicial review, but only as to Part A claims. H.R. REP. NO. 213, 89th Cong., 1st Sess. 47 (1965).10 When the bill reached the Senate, Senator Edward Kennedy proposed that the amount in controversy requirement be reduced to $100. He emphasized the unprecedented nature of the limitation, the significance of the amounts involved to aged individuals attempting to get by on Social Security benefits and savings, and the value of hearings and appeals in attaining accurate and consistent administration of the new program.11 His amendment was adopted by the Senate, and in Conference Committee a compromise was struck, providing for hearings if the amount in controversy was $100 or more, and judicial review for disputes of $1000 or more.
At the time, there were no comparable limitations on Part B claims. So matters stood until 1972, when Congress amended the Act substantially, and in the process extended the limitation on hearings to Part B claims, expressly to eliminate the expense and inconvenience of a formal hearing when the amount in controversy is small.
As explained by the Senate Finance Committee:
Experience under the program indicates that the holding of a full fair hearing is unwarranted in cases where the amount in controversy is relatively small. Carriers have reported cases involving $5 and $10 claims for which the cost of holding a fair hearing has exceeded $100. Approximately 45 percent of the hearings held since the beginning of the program have involved an amount less than $100. Further regulations require carriers to have a reconsideration review of all denied claims. Such review involves different claims personnel than those who acted on the original claim and should be sufficient protection in small claims cases.
S. REP. NO. 1230, 92d Cong., 2d Sess. 213 (1972).12
As it now stands, review of Part A claims is governed by 42 U.S.C. 1395ff(b) which provides:
(1) Any individual dissatisfied with any determination under subsection (a) of this section as to --
the amount of benefits under Part A of this subchapter (including a determination where such amount is determined to be zero)
shall be entitled to a hearing thereon... and to judicial review of the Secretary's final decision after such hearing....
(2) Notwithstanding the provisions of subparagraph ... a hearing shall not be available to an individual by reason of such subparagraph if the amount in controversy is less than $100; nor shall judicial review be available to an individual by reason of such subparagraph if the amount in controversy is less than $1000.
Administration of benefits under Part B is largely entrusted to the carriers. 42 U.S.C. § 1395u(3)(c) provides that the contract between the Secretary and the carrier must require the carrier to:
establish and maintain procedures pursuant to which an individual enrolled under this part will be granted an opportunity for a fair hearing by the carrier, in any case where the amount in controversy is $100 or more... when the amount of such payment is in controversy.
Though not required by statute, the Secretary has provided by regulation that all carriers must provide a review of the initial determination upon request of the dissatisfied claimant. This review does not include any sort of oral hearing, though the claimant may submit written evidence, but is simply a redetermination of the claim by another employee of the carrier.13
THE CASE HISTORIES OF THE NAMED PLAINTIFFS
Wilma Patino suffers from rheumatoid arthritis. In February of 1976, she fell on ice, and had to undergo a four-month series of treatments, 13 in all, for which she was billed $10 per visit. Her first application for Medicare benefits covered eleven of those treatments; her second covered the final two.
A few weeks later she received partial payment on her first application. Nationwide Mutual Insurance Company, the carrier for her region, approved payment in full for the first seven of her treatments, and wholly disallowed payments for the next four, with the noted explanation that "Medicare does not pay for: This many services for your condition." Shortly thereafter, she received her second communication from Nationwide concerning her second application covering her final two treatments. As an example of the type of notice received by Medicare beneficiaries, we set out in the margin the form utilized by Nationwide in explaining its action to Patino.14 On her second submission, Nationwide approved payment for the services rendered, but only in the amount of $8.25 per treatment. She was directed to "Item 5 on back" for an explanation of why she had not received full compensation. According to Item 5, a preprinted paragraph on the back of the form, the carrier had determined either that her doctor did not customarily charge that much, or that the $10 charge was greater than most area physicians would have charged. The form does not specify which was the case here.
Patino sought reconsideration, submitting a letter from her doctor that the number of treatments was not excessive, considering her age and condition, but Nationwide reaffirmed its initial determination. On her request for a hearing, she was notified that since, after subtracting the deductible, the amount in controversy was only $32,15 she had no right to a hearing, and the determination on reconsideration was final.
In 1976, Louis Keiser underwent surgery, and received a bill from the anesthesiologist for $270. Keiser submitted his claim to his regional carrier, Blue Cross/Blue Shield of New York, which allowed only $170 of his claim. Keiser requested reconsideration and submitted additional documentation from the hospital, but Blue Cross confirmed its earlier reduction of the bill, notifying Keiser that the doctor's "customary fee" was $170. Keiser's subsequent request for a hearing was denied because the amount in controversy, after subtracting the deductible, was $80.
In 1975, Jack Rothfeld, suffering from glaucoma and cataracts, was treated by two physicians at a clinic in Boston. He received two bills, in the amounts of $140 and $150. The services were covered by his Part B supplemental Medicare policy, so he submitted his claim for reimbursement to Blue Shield of Massachusetts, the Medicare carrier for his region.
A few weeks later, Rothfeld received a form, nearly identical to the one received by Patino, entitled "Explanation of Medicare Benefits." Apparently assuming that the treatment had been for only one eye, Blue Shield paid only $140 of his $290 claim. The "explanation" for this determination was limited to the same "Item 5" on the back of the form indicating that the bills submitted by Rothfeld were either higher than his doctor's customary fee, or higher than the fees usually charged in the area for similar services.
Upon Rothfeld's request for reconsideration, in which he pointed out that his treatment covered both eyes, Blue Shield adjusted his claim by $50. He requested a hearing as to whether the denial of the balance of his claim was proper, but since the amount in controversy was not $100, his request was denied.
We are thus presented with a case in which the Government has taken final adjudicatory16 action against the plaintiffs, determining their admitted property rights against them, without at any time in the process providing an opportunity for an oral hearing. The positions of the parties are simply stated. The plaintiff argues that the historical core of due process, notice and the right to a hearing are fundamental procedural rights which cannot be denied, absent emergency, by the Government in any case when a property or liberty interest which is not de minimus is at stake.17 The timing of these rights and additional procedural protections to which an individual might be entitled may vary substantially depending on the stake involved and the Government's interest in efficient, inexpensive administration, but those core procedural rights of notice and an oral hearing, however informally provided, may not be wholly denied.18
The Secretary agrees that due process dictates the procedures it must follow in making its determinations, but argues that when small money claims are at issue, the claimant's affected rights are not large, the cost of oral hearings in comparison to the amount at stake would be unduly burdensome, and the risk of an erroneous determination after the carrier's reconsideration is not great. Therefore, the contends, applying the Mathews v. Eldridge19 "flexible" due process test, in which a balance is struck based on these factors,20 plaintiffs have received all the procedural protection to which they are entitled under the Constitution.
The district court's analysis essentially followed the position taken by the Secretary. First noting that due process is not a fixed technical concept, but is a flexible notion of fair procedure that requires such protections as the particular situation demands, the court went on to conclude that even though the law was clear that "some kind of hearing is required at some time" before a person can be finally deprived of a property interest, that "hearing" need not be an "oral, evidentiary proceeding" but could be simply an opportunity to submit written ...