Haro Reversed, in Part, by the 9th Circuit
Jeff Signor
September 6, 2013

Franco Signor Commentary:  If there was any question about a court’s ability to intercede with the Medicare process then the 9th Circuit has answered.  Medicare has broad, sweeping powers to collect its reimbursement amounts.  Anyone in the chain of payment is obligated to answer for a delinquent repayment to Medicare.  Medicare’s power is especially apparent in how the court allowed the plaintiff attorney to argue in court (as per the Michigan Academy exception) only to deny his request because Medicare’s interpretation of the facts and law was reasonable.  In sum, the 9th Circuit’s reversal of Haro, and the analysis it undertook to reach the holding, should provide those in the liability industry with a level of concern.  As collection efforts are more keenly focused, and as MIR data makes its way through Medicare’s processing, Department of Treasury letters and MSPRC recovery letters will be widespread.  Do not ignore such letters.  Call on us to help!

 Analysis of the Decision: Most in the industry who follow Medicare Secondary Payer case law will recall Haro v. Sebelius, 2010 WL 1452932.  A District Court in Arizona stopped the Secretary (Sebelius) from seeking up front reimbursements of Medicare secondary payments in situations where an unresolved appeal or waiver request was pending.   We blogged about that decision and focused mostly on the fact that the class of plaintiffs had overcome the usual procedural bar of obtaining jurisdiction against Medicare.  (See our blog from September of 2010.
The Secretary appealed that decision to the 9th Circuit Court of Appeals.  The 9th Circuit’s decision, filed on September 4, 2013, can be found here.  The 9th Circuit reversed the district court holding: “… we conclude that the beneficiaries’ claim was not adequately presented to the agency at the administrative level and therefore the district court lacked subject matter jurisdiction pursuant to 42 U.S.C. § 405(g).” 
The decision also does a good job of tracking the MSP Statute.  At one point, the court focuses on one part of the Medicare statutory scheme as the “cause of action provision”.  This provision allows the United States to seek reimbursement from “the beneficiary herself” upon learning that a beneficiary has received payment from a primary plan.  Under this reasoning, if the beneficiary does not properly exhaust administrative remedies then jurisdiction is not established at the court level.
The facts and procedural posture of Haro are worth restating here, in brief.   Three claimants each reached settlements of various personal injury actions and worked within the Medicare framework to obtain final demand letters from the Medicare Secondary Payer Recovery Contractor (MSPRC).  Each paid the amounts demanded, but filed appeals (one sought a waiver) and objected to Medicare’s process of demanding payment within 60 days.  A plaintiff attorney was also involved in the matter to the extent that his letter from the MSPRC instructed him not to disburse settlement funds to his beneficiary-client until Medicare had been reimbursed, stating he would be personally liable if he did.
The 9th Circuit spends some time on Article III of the Constitution (standing) and determined each plaintiff, including the plaintiff attorney, had standing to pursue their claims. 
The court’s discussion of statutory subject matter jurisdiction is where things get interesting.  § 405(h)’s procedural bar to suit against Medicare is fully briefed in the decision.  As to each of the named plaintiffs, the court held in favor of the high level of deference granted to the Medicare process and declined to extend jurisdiction.  As to the plaintiff attorney, the court applied theMichigan Academy exception, based upon the fact that he did not have an opportunity to present his challenge through the same administrative channel as the beneficiaries.   Therefore, the merits of Medicare’s repayment process were addressed by the court.
The court then applied the Chevron deference standards to the facts of Haro.  Under this analysis, the court determined there is no statutory basis to distinguish between entities that receive payment from a primary plan and end-point recipients.  “We find nothing in the statutory language to persuade us that the obligation to reimburse Medicare is limited to ‘end-point’ recipients”.