Seeking Jurisdiction against Medicare
Roy Franco
September 28, 2010

Commencing litigation against Medicare is difficult.  As a Federal entity, sovereign immunity usually precludes jurisdiction.  Moreover, Congress further insulated Medicare by passing legislation requiring claimants to first exhaust administrative remedies before allowing a case to proceed to Federal court.  See 28 U.S.C. 1331.  Consequently, it could take years before a case is brought before the court and any precedent established.  In this environment valid claims against Medicare are simply not pursued because of the cost in both time and money.

Notwithstanding the above, Haro v. Sebelius 2010 WL 1452932 (D. Ariz.) stands as an impressive exception to obtaining jurisdiction against Medicare.  To overcome the procedural bar, plaintiffs alleged the Secretary exceeded her powers under the Medicare Secondary Payer Act to obtain immediate review by the court.  The problem as outlined by plaintiffs was how Medicare, after final demand for reimbursement of conditional payments, required reimbursement within 60 days, even if an appeal or request for waiver is filed.  In taking the funds before determination of an appeal or request for waiver, Medicare takes property that it does not own and when it returns any overpayment, it does so without any interest.

The court in reaching its decision noted:

The Court explained that Section 405(g) does not provide a mechanism to review these decisions by the Secretary. Also escaping review under section 405(g) is the Secretary’s decision to instruct Plaintiff’s attorney that as of her initial decision on the MSP claim, he may not release Plaintiff McNutt’s settlement funds in that amount, or he will be subject to collection and penalty measures himself. Because these are the decisions challenged by the Plaintiffs, the Court held the exhaustion requirement contained in section 405(g) was waived.

Plaintiffs constitutional and due process claims were collateral to any individual claim for benefits.  The Court rejected the defendant’s perspective of the case, which is that it must be decided as to each beneficiary’s claim in respect to interest calculations and collection activities and may only be reviewed by the Court after any appeal or request for a waiver is administratively resolved by the Secretary.

The Court precluded the Secretary from sidestepping the “procedural” distinction between this case and a standard claim dispute by a beneficiary.

This is an important distinction for practitioners looking to commence an action under the Medicare Secondary Payer Act.  The “405(g)” bar is difficult to overcome, but this particular Court has found it inapplicable where MSP enforcement exceeds the powers authorized under the statute.  The decision does not authorize general MSP lawsuits against Medicare, so those practitioners wanting to speed up the collection of conditional payment information from Medicare cannot cite to this case as authority on that point.  However, if Medicare is leveraging MSP to collect for medical items and services that are not authorized for reimbursement (e.g., prescription medications) this case may be helpful to avoid the need to exhaust a claimant’s administrative remedies, a process that could take 2 – 3 years, to going directly to court.