Ryan et al v. Burwell

Filing 44

OPINION AND ORDER denying 19 Motion to Dismiss. Signed by Judge Geoffrey W. Crawford on 7/27/2015. (esb)

U.S. OISHi
DISTRICT

F
UNITED STATES DISTRICT COURT

FOR TIlE

DISTRICT OF VERMONT

MARCELLA RYAN and
JOHN HERBERT,
on behalf of themselves and
all others similarly situated,
Plaintiffs,

v.
SYLVIA MATHEWS BURWELL,
Secretary of Health and Human Services,
Defendant.

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Case No. 5:14-cv-00269

OPINION AND ORDER RE:
DEFENDANT'S MOTION TO DISMISS
{Doc. 19)
Plaintiffs Marcella Ryan and John Herbert are Medicare beneficiaries who receive home
health care services. They allege that the Secretary of Health and Human Services has
systematically failed to follow her own regulations and guidance governing appeal of Medicare
coverage for home health care services, resulting in the improper denial oftheir claims. Before
the court is defendant's motion to dismiss.

I.

Facts
A.

Medicare and Medicaid

In 1965, President Lyndon B. Johnson signed the Medicare and Medicaid statutes into
law at a signing ceremony attended by former President Truman. Title XVIII of the Social
Security Act, known as Medicare, is a federal health insurance program for the elderly and
disabled. See 42 U.S.C. §§ 1395-1395lll. It contains four programs. Part A provides "basic
protection against the costs of hospital, related post-hospital, home health services, and hospice
care" for persons over sixty-five years of age and others. Id. §§ 1395c-1395i-5. Part B is a
voluntary program that provides supplementary medical insurance benefits to persons who
purchase the insurance. Id. §§ 1395j-1395w-5. Part C allows individuals to receive these
1

benefits through private insurers rather than traditional Medicare. ld. §§ 1395w-21-1395w-29.
Part D provides prescription drug coverage through enrollment in private insurance plans. ld.
§§ 1395w-lOl-1395w-154. Home health services are available under Parts A, B, and C.
Medicaid created a similar program for low-income Americans. While Medicare is
administered by the Social Security Administration, Medicaid was designed as a partnership
under which states and the federal government would share the cost of providing medical care to
the poor. Concourse Rehab. & Nursing Ctr. Inc. v. Whalen, 249 F.3d 136, 139 (2d Cir. 2001).
Medicaid programs are administered by state agencies such as the Department of Vermont
Health Access. See Dep't ofVt. Health Access, http://ovha.vermont.gov/ (last visited July 22,
2015). These agencies pay for the cost of their participants' health care through a mixture of
federal and state tax dollars.
The two programs have grown and changed over the course of the last fifty years.
Medicare accounts for 20% of current health spending in the United States. NHE Fact Sheet,
Centers for Medicare & Medicaid Services, http://www.cms.gov/Research-Statistics-Data-and­
Systems/Statistics-Trends-and-Reports/NationalHealthExpendDatalNHE-Fact-Sheet.html (last
visited July 22, 2015). Medicaid accounts for an additional 15%. ld. In 2013, Medicaid
spending grew by 6.1 %-almost twice the rate of Medicare spending, which grew 3.4 %. ld.
From the inception of these programs, their different structures and the overlapping
populations they serve have created legal and political difficulties in coordinating their systems
of payments. Medicare money is federal money administered through the Centers for Medicare
and Medicaid Services, an agency within the Department of Health and Human Services. States
do not participate in Medicare. Conn. Dep't ofSoc. Servs. v. Leavitt, 428 F.3d 138, 141 (2d Cir.
2005). Medicaid money is a mixture of federal and state money which is administered through
state agencies. ld. States benefit if an expense is covered by Medicare instead of Medicaid. For
these reasons, litigation over issues of "who pays" and which program takes priority for an
expense has occurred with great frequency and in many different factual settings over recent
decades. See, e.g., id.; N

Y.c. Health & Hasp. Corp. v. Perales, 954 F.2d 854 (2d Cir. 1992);

NY. State Dep 't ofSoc. Servs. v. Bowen, 846 F.2d 129 (2d Cir. 1988).

2

This case concerns a particular subset of the problem of whether Medicare or Medicaid
pays for care. Patients who qualifY for both Medicare and Medicaid (so-called "dual eligibles")
frequently receive nursing services and therapy at home in place of care in a nursing home or
similar institution. 1n theory Medicare is the first priority payer and Medicaid is the payer oflast
resort. Conn. Dep 't ofSoc. Servs., 428 F.3d at 141; 42 U.S.C. § 1396a(a)(25). If a claim for
home health care is denied by Medicare, it is frequently submitted to Medicaid and paid through
that system. When this happens, costs are shifted from the federal to the state program. Because
the Medicaid standards for payment of home health charges are different and in some respects
less exacting than Medicare, there are occasions when Medicaid will be the appropriate agency
to pay for home health care provided to a "dual eligible" person. Compare 42 U.S.C.

§§ 1396a(10)(A), (D); 1396d(a)(7), with 42 U.S.C. §§ 1395f(a)(2)(C); 1395n(a)(2)(A);
1395x(m).
Plaintiffs in this case are "dual eligible" recipients of both Medicaid and Medicare. Both
receive home health care. In both cases, their claims for payment by Medicare were rejected.
Their claims were reimbursed through the Medicaid program instead. Neither is personally
liable for the cost of the care at issue.

B.

Eligibility for Home Health Benefits under Medicare

Eligibility for home health benefits under Medicare is determined by statute, 42 U.S.C.

§ 1395f(a)(2)(C), and further defined by regulation, 42 C.F.R. § 409.42. To receive coverage for
home health services, an individual must be "confined to the home," under the care of a
physician, in need of skilled services, and under a plan of care established and certified by his or
her treating physician. 42 U.S.C. § 1395f(a)(2)(C); 42 C.F.R. § 409.42. Services must be
provided by a recognized home health agency. !d. In the case of both named plaintiffs in this
action, coverage for home health care services they received was denied on the grounds that they
were not "confined to the home."

C.

Claims Review and Persuasive Authority of a Prior Favorable Ruling

Medicare pays for home healthcare services through contractors known as Medicare
Administrative Contractors (MACs). 42 C.F.R. § 421.3. MACs were formerly known as "fiscal
intermediaries" for Part A and "carriers" for Part B. Zanecki v. Health Alliance Plan ofDetroit,
3

577 F. App'x 394, 398 (6th Cir. 2014). The contractors are frequently private health insurers
who contract with the Medicare program to provide claims services. When a claim is submitted,
the MAC makes an initial determination regarding whether the services will be covered. 42
C.F.R. § 405.904(b).
The Medicare Program Integrity Manual (MPIM) provides guidance to MACs in
handling all types of claims, including claim~ for horne health benefits. Centers for Medicare &
Medicaid Servs., Pub. 100-08, Medicare Program Integrity Manual,
http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/lntemet-Only-Manuals­
IOMs-Items/CMSOI9033.htrnL Section 6.2, "Horne Health," instructs MACs to promptly pay
all claims following a favorable final appellate decision that a beneficiary is confined to the
home. MPIM § 6.2.1(A). The claims reviewers are instructed to establish procedures ensuring
favorable treatment and to notify the beneficiary and his or her horne health agency that the
favorable decision will be given "great weight" in evaluating whether the beneficiary is confined
to the horne. Id.
The beneficiary may request a redetermination of an adverse decision. 42 C.F.R.
§ 405 .904(b). If dissatisfied with the redetermination, the beneficiary may then request a

reconsideration of the claim by the "Qualified Independent Contractor" (QIC). Id. In
reconsidering the claim, the QIC provides "an independent, on-the-record review of an initial
determination, including the redetermination and all issues related to payment of the claim." 42
C.F.R. § 405.968(a)(1). Although the MPIM is not binding upon the QIC, he or she must "give
substantial deference to these policies [set out in the Manual] if they are applicable to a particular
case." Id. § 405.968(b)(2). A QIC may decline to follow a policy set forth in the manual "if the
QIC determines, either at a party's request or at its own discretion, that the policy does not apply
to the facts of the particular case." Id.
From the QIC's decision, the beneficiary may appeal to an administrative law judge
(ALI), and then to the Medicare Appeals CounciL 42 C.F.R. § 405.904(b). The ALI and the
Appeals Council also are not bound by the MPIM. They are expected, however, "to give
substantial deference to these policies if they are applicable to a particular case." 42 C.F.R.
§ 405.1062(a). If the ALJ or the Appeals Council departs from a policy set out in the manual,

they must explain their reasons for doing so. Id. § 405.1 062(b).
4

D.

The Particular Claims

i.Marcella Ryan

Plaintiff Marcclla Ryan was fifty-nine years old at the time the complaint was filed. She
suffers from cercbral palsy and muscular dystrophy as well as other serious ailments. She is
legally blind. She is limited to bed or to a wheelchair. She is frequently hospitalized. She
appeals her denial of Medicare benefits to this court for the period April 2009 to July 2010.
(Doc. 5 ~~ 34-36.)
Ryan has received home health care since at least 1998. Between 1998 and April 2009,
she received at least seven initial denials of eligibility for Medicare home health benefits. Each
denial covered a separate sixty-day period. 1 On each occasion, Ryan filed an appeal and was
detennined to be eligible by an ALJ assigned to her case. The two ALJ decisions closest in time
to the period in dispute in this case cover the periods February to April 2007 and February 2008
to April 2009. Both decisions detennined that Ryan was eligible for Medicare because she was
unable to leave her home and required skilled nursing services. (Id.

~~

37-40.)

For the period Apri12009 to July 2010, Ryan has exhausted the administrative process
established for the review of Medicare claims. Her initial claim for the period in question was
denied. She sought redetennination and was denied again. The reason for denial was that she
was found not to be "confined to the home" within the meaning of the Medicare law and
regulations. These denials were upheld by the QIC and subsequently by the ALJ. Her last
appeal was to the Appeals Council which denied her claim in October 2014. (Id.

ii.

~

50-62.)

John Herbert

Plaintiff John Herbert is fifty-two years old. He was rendered quadriplegic in a skiing
accident in 1992. He is wheelchair bound. He suffers from multiple medical problems related to
his paralysis. He has received home health care since at least September 1997. He appeals to
this court his denial of Medicare benefits for the period August 2010 to June 201 L (Id.

~~

69­

72.)

Medicare approval of home health benefits typically covers a sixty-day certification period. 42
C.F.R. § 484.205.
1

5

Like Ryan, Herbert has frequently been denied Medicare home health benefits at the time
of initial application. He has appealed these decisions and has always succeeded. Since
September 1997, he has received one partially favorable redetermination decision, one partially
favorable final appellate decision, and five fully favorable final appellate decisions. The most
recent favorable decision before the period in dispute came in November 2010 when he received
a fully favorable decision from ALJ Arthur Liberty for the period October to February 2009.
(!d.)

Herbert has been unsuccessful in obtaining home health benefits through Medicare for
the period August 2010 to June 2011. He received an initial denial which was upheld when he
requested redetermination. His claim was also rejected by the QIC and later by an ALJ. He filed
a request for review with the Medicare Appeals Council in October 2014. On April 3, 2015, the
Appeals Council affirmed the decisions below.
II.

(!d.,-r,-r 82-89; Doc. 23-1.)

Analysis
The Secretary moves to dismiss plaintiffs' complaint for lack of subject matter

jurisdiction under Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim for
which relief may be granted under Rule 12(b)(6). The Secretary argues that (1) plaintiffs lack
standing to sue; (2) plaintiff Herbert has failed to exhaust his administrative remedies; (3) neither
plaintiff has established the basis for mandamus jurisdiction; (4) the alleged failure to follow the
provisions of the MPIM will not support a cause of action; (5) the availability of the
administrative review process renders any error by the MACs harmless; and (6) the relief sought
by plaintiffs exceeds the court's powers. (Doc. 19.)
Standard of Review

A.

"A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1)
when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v.

United States, 201 F.3d 110, 113 (2d Cir. 2000). Plaintiffs have the burden of proving by a
preponderance of the evidence that subject matter jurisdiction exists in their case. Malik v.

Meissner, 82 F.3d 560,562 (2d Cir. 1996). The court assumes for the purposes of the motion
that the factual allegations of the complaint are true, but must not draw inferences favorable to
plaintiffs.

Js.

ex rei. NS. v. Attica Cent. Schs., 386 F.3d 107, 110 (2d Cir. 2004). In
6

considering whether subject matter jurisdiction exists over a claim, the court may consider
affidavits and other matters outside the pleadings. Id.
For the purposes of a motion to dismiss for failure to state a claim under Rule 12(b)(6),
the court accepts as true the factual allegations of the complaint and draws all inferences in favor
ofthe plaintiffs. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993). "To
survive a motion to dismiss [under Rule 12(b)(6)], a complaint must contain sufficient factual
matter, accepted as true, 'to state a claim to reliefthat is plausible on its face.'" Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
B. Whether Plaintiffs Have Standing to Bring Their Claims
Article III of the Constitution limits the judicial power of federal courts to "Cases" and
"Controversies." U.S. Const. Art. III, § 2. The Supreme Court has interpreted this provision to
require that a person who seeks to have a federal court resolve a dispute must demonstrate that
he or she has standing to bring a claim. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560
(1992). That is, the litigant must prove "that he has suffered a concrete and particularized injury
that is fairly traceable to the challenged conduct, and is likely to be redressed by a favorable
judicial decision." Hollingsworth v. Perry, 133 S. Ct. 2652, 2661 (2013).
Standing has two aspects: the constitutional requirement that the dispute concern a case
or controversy and additional prudential requirements which require parties to assert rights which
are personal to them and not those held by the citizenry as a whole or by a third party. In this
case, the parties and the court agree that the standing issue presented is ofthe constitutional
variety. The claim by the Government is that the plaintiffs have not suffered the requisite injury­
in-fact because the charges denied by Medicare were subsequently covered by Medicaid.
The court is satisfied that plaintiffs have constitutional standing to bring this suit for
several reasons. First, they are seeking to protect a right to Medicare coverage which is theirs by
virtue of their qualification for benefits under the statute-even if Medicaid is also willing to
cover the charges in question. Second, the adverse Medicare determination in their cases gives
rise to a legal rule which may impose personal liability on them for future uncovered services.
Third, by virtue of her age, plaintiff Ryan faces the possibility that the Medicaid program will
seek to recover benefits from her estate after her death. Finally, both Herbert and Ryan have
7

identified other specific respects in which Medicare and Medicaid do not provide identical
benefits and which resulted in specific harm to them. All four of these factors support a
determination that plaintiffs have standing in this case. The court will consider them in order.
i.

Plaintiffs' Interest in Suing to Protect Their Medicare Benefits Even
Though Medicaid Pays

The standing problem is no stranger to "dual eligible" litigation over Medicare
entitlements. By reason of their dual eligibility, plaintiffs in these cases typically have recourse
to Medicaid. Courts which have considered whether a claimant has standing to sue for Medicare
benefits even though Medicaid has already paid the bill or is prepared to do so have frequently
identified a right-separate from personal financial interest-to be heard regarding their
entitlement to Medicare coverage.
The place to start with the analysis of whether plaintiffs have standing to sue is with the
statute which authorizes their lawsuit in the first place. Section 405(g) of Title 42 of the United
States Code establishes a right ofjudicial review for anyone who takes issue with a final decision
of the Commissioner of Social Security. This provision provides both the substance and the
standing for a lawsuit in federal court concerning entitlement to Medicare benefits. Heckler v.

Ringer, 466 U.S. 602,620 (1984); 42 U.S.C. § 1395ff(b). Except for the availability of similar
coverage from the Medicaid program, there would be little question about the legal right of these
plaintiffs to bring suit in the same manner as anyone else who believes they have been
wrongfully denied benefits under the Social Security Act.
The issue which complicates standing is the availability of Medicaid. All but one of the
handful of courts which have considered this issue have held that the dual eligible claimant has
standing to sue to defend his or her entitlement to a statutory benefit--even when the medical
bill in dispute is also covered by Medicaid.
In Martinez v. Bowen, 655

Supp. 95, 99 (D.N.M. 1986), the court rejected the

argument that a Medicare claimant lacked standing to bring suit to contest the denial of her claim
because the medical tests at issue were paid for by Medicaid. The district court identified the
claimant's "direct personal injury oflosing Medicare reimbursement for daily blood tests without
a pre-termination hearing" as the injury-in-fact required by the standing doctrine. Id. The

8

claimant's property interest in the Medicare benefits which she had earned by virtue of her age
and her payment of social security taxes gave her a personal stake in the outcome of the case
even though Medicaid had stepped forward to provide coverage for the disputed tests.
In Longobardi v. Bowen, No. H-87-628, 1988 WL 235576 (D. Conn. Oct. 25,1988), the
surviving son of a Medicare beneficiary was permitted to pursue his late mother's claim for
benefits even though the services for which he sought reimbursement were covered in full under
the Connecticut Medicaid program. The court found standing "merely by virtue of the alleged
denial of statutorily-created rights or entitlements" even in the absence of financia110ss. Id. at
*2. Relying upon Warth v. Seldin, 422 U.S. 490 (1975), the court explained:
It is irrelevant to the question of standing whether the entitlement would actually
result in a monetary payment to the claimant. Mrs. Longobardi's stake in the
outcome of this action is not in receiving a Medicare payment; it is in the
distribution of a benefit payment which comprises a portion of her Medicare
entitlement.

Id.
The District of Vermont reached a similar conclusion in Anderson v. Sebelius, No. 5:09­
cv-16, 2010 WL 4273238 (D. Vt. Oct. 25, 2010), in which a Medicare beneficiary sued to obtain
Medicare coverage for services denied as not reasonably necessary even though she had no
personal financial responsibility for the cost of services. The court determined that the
beneficiary retained standing to sue because, among other reasons, she was seeking to enforce
her statutory right to Medicare coverage. Id. at *2-3. The Anderson decision is a little different
from this case because the claimant was relieved of personal responsibility for the unpaid
charges. The court considered both issues of mootness and standing and concluded that the
claimant remained the correct party to bring suit even though they were free from any liability
for the unpaid charges.
The principle that a person may sue to enforce a statutory right in the absence of an out­
of-pocket loss or other concrete harm was recognized in Warth v. Seldin, 422 U.S. 490, 500
(1975) in which the Court wrote:
The actual or threatened injury required by Art. III may exist solely by
virtue of statutes creating legal rights, the invasion of which creates
standing.... Essentially, the standing question in such cases is whether the
9

constitutional or statutory provision on which the claim rests properly can

be understood as granting persons in the plaintiff's position a right to

judicial relief.

Id. (citations and quotation omitted). For standing purposes, it can be sufficient for persons
suing in a representative capacity-as these plaiptiffs seek to do-to demonstrate that they .
possess a statutory right which has been denied even if they have not lost money or suffered
other tangible harm. Courts applying this principle have found standing in a wide range of cases
in which the individual injury may be highly attenuated. See Graczyk v. W. Pub 'g Co., 660 F.3d
275,278 (7th Cir. 2011) (finding individual drivers had standing arising out of alleged violation
of Drivers' Privacy Protection Act); DeMando v. Morris, 206 F.3d 1300, 1303 (9th Cir. 2000)
(finding credit card holder had standing to assert statutory rights on behalf of class under the
Truth in Lending Act); In re Facebook Privacy Ling., 791 F. Supp. 2d 705, 711-12 (N.D. Cal.
2011) (finding users of social networking website had standing to assert violations of rights
under the federal Wiretap Act).
In this case, the plaintiffs' statutory right to receive Medicare benefits and to file suit
under 42 U.S.C. § 405(g) when these are denied is beyond question. Since plaintiffs have both a
statutory entitlement to Medicare coverage and the right to file suit, they satisfy the criteria set
out in Warth for parties whose standing rests upon their statutory rights even in the absence of
direct financial harm or other loss. Subject to the requirements for class certification which are
not considered here, they could serve as class representatives even in the absence of financial
loss.
ii.

Statutory Presumption of Knowledge of Non-Coverage

The standing requirement is also satisfied by plaintiffs' allegations that because their
claims for home health care services have been denied, they are now considered to be on notice
of Medicare's likely non-coverage (Doc. 1

mr 68,93.)

Under the Medicare regulations, a

beneficiary is generally not personally liable for the cost of health care he or she receives for
which coverage is later denied if the beneficiary did not know that the service was not covered.
42 U.S.C. § 1395pp. The medical provider-not the beneficiary-suffers the loss. Id. But once
the beneficiary is on notice that an aspect of his or her care may not be covered by Medicare, he
or she may be held financially responsible for the cost of the care. See Dennis v. Shalala, No.
10

5:92-cv-210, 1994 WL 708166, at *1 n.l (D.

vt. Mar. 4,1994); 42 U.S.C. § 1395pp(b)

(providing that Medicare will indemnify individual for uncovered services unless individual
knew or could be expected to know that such services were uncovered); 42 C.F .R. § 411.404.
This court has previously recognized that this presumption of knowledge and the ensuing
potential for personal liability changes the Medicare beneficiary's rights and obligations in a way
sufficient to establish standing. See Anderson, 2010 WL 4273238, at *4 ("[I]fthe ALJ's denial
of coverage is ultimately affirmed, Plaintiff will retain an injury-in-fact because she will be
presumed to have knowledge that the denied services will not be covered in the future and will
thus be legally bound to her detriment by the outcome of this case. This constitutes an injury-in­
fact for standing purposes." (citation omitted».
The court respectfully disagrees with the decision of the district court in Hull v. Burwell,
66 F. Supp. 3d 278 (D. Conn. 2014), which involved similar claims by Medicare beneficiaries.
The court held that the plaintiffs' potential future liability for uncovered or denied claims was
insufficient to create standing because "[t]he predicted harm is wholly contingent upon the future
acts or omissions of third parties." Id. at 283. But once an individual is notified "that there is no
Medicare payment for a service that is not covered by Medicare, he or she is presumed to know
that there is no Medicare payment for any form of subsequent treatment for the non-covered
condition." 42 C.F.R. § 411.404(b). Thus, the presumption is created as soon as the individual
receives notice that his or her claim has been denied. As these plaintiffs have chronic long-term
health care needs, this court does not find the possibility of future harm arising from the
presumption to be so remote that plaintiffs lack standing. Certainly at the motion to dismiss
stage, their allegations that they may become responsible for future expenses suffice to establish
standing. Lujan, 504 U.S. at 561?

ill.

Future Estate Consequences

The recoupment of Medicaid expenditures by state governments from the estates of
beneficiaries has been a feature of Medicaid law since 1982. See 42 U.S.C. § 1396p. In

In addition to the above injuries, plaintiffs allege that the Secretary's failure to follow the
MPIM policy has resulted in their receiving fewer reasonable and necessary home health
services or losing such services altogether, because providers refuse to provide services for
which they believe they will not be paid. (Doc. 1 ~ 99; Doc. 32 at 14.)

2

11

Vennont, anyone who receives Medicaid benefits at age fifty-five or older and leaves an estate
valued at more than $2,000 at the time of death (with certain exceptions for the inheritance of
homesteads not relevant here) is subject to this recovery program.

vt. Medicaid Covered

Services Rule 7108.3, Vt. Admin. Code 12-7-1:7108. This is not a hypothetical program, and
the dollar limit of $2,000 is low enough to have broad application. Although it is unknown at
this time whether plaintifIRyan will leave an estate subject to Medicaid recovery, each dollar
she receives now in Medicaid benefits increases the amount of the potential recovery. Ifher
estate meets criteria for recovery, the home health benefits at issue in this case may be included
in the calculation ofher estate's obligation to the Medicaid program.
The Second Circuit touched on this aspect of the standing issue in Connecticut

Department o/Social Services v. Leavitt, 428 F.3d 138 (2d Cir. 2005). The case also involved
the priority of home healthcare expenses incurred by dual eligible participants. The lead plaintiff
was the Connecticut health agency which administers the Medicaid program. Individual
claimants also joined in the action. Before reaching the merits of the dispute, the court addressed
the issue of standing for the individual claimants. "The dual eligibles care whether Medicare or
Medicaid pays for their home health-care services because if Medicaid pays and is not
reimbursed, Connecticut may levy against their estates for the cost of services provided while
they were living." Id. at 142. The same concern about future consequences to Ryan's estate
supports standing in her case.

iv.

Other Collateral Consequences

Although the Medicare and Medicaid programs are very similar from the perspective of
the beneficiary, they are not identical and the differences which exist are more favorable to the
recipient of Medicare. In 2012 Vermont imposed a co-payment for one year on prescriptions and
durable medical equipment and supplies paid for by Medicaid. 2012 Acts & Resolves No. 162
(Adj. Sess.) § E.307.2. The co-payment was in effect during a period following the claims in
these cases and does not affect the standing issue. The co-payment for durable medical
equipment and supplies was repealed the following year. 2013 Acts & Resolves, No. 50,

§ E.307.6.

12

In addition, however, plaintiff Herbert alleges that the process of ordering home health
supplies is substantially more convenient for Medicare recipients. (Doc. 32-3

~

5.) Plaintiff

Ryan alleges that the denial of Medicare has resulted in her receiving fewer reasonable and
necessary home health services or losing such services altogether because providers refuse to
provide services for which they believe they may not be paid. (Doc. 1 ~ 99; Doc. 32-1

'[~

4-5.)

For purposes of standing, the court accepts as true plaintiffs' allegations that they experience
denial of services and inconvenience due to the denial of their Medicare benefits. These
allegations support a further determination that plaintiffs have already suffered an actual,
concrete injury as a result of the denial of their Medicare claims.
These four bases for standing provide sufficient support to meet the constitutional
requirement ofjusticiability. The court declines to dismiss the action on standing grounds.

C.

Whether the Court Has Subject Matter Jurisdiction

In their complaint, plaintiffs allege that this court has jurisdiction to hear their claims
under the appeals provision of the Social Security Act, 42 U.S.C. § 405(g), as well as federal
question jurisdiction under 28 U.S.C. § 1331 and mandamus jurisdiction under 28 U.S.C. § 1361.
(Doc. 5 ~ 6.) The Secretary originally argued that the court lacks § 405(g) jurisdiction over
plaintiff Herbert's claim because he has failed to exhaust his administrative remedies. The
Secretary has withdrawn this argument in light of the decision of the Appeals Council affirming
the ALJ's decision denying home health benefits to Herbert. (Doc. 23-1 at 2.) The Secretary
further argues that the court lacks mandamus and federal question jurisdiction over plaintiffs'
claims.
Mandamus is an extraordinary remedy that is available only if the petitioner shows "(1) a
clear right in the plaintiff to the relief sought; (2) a plainly defined and peremptory duty on the
part ofthe defendant to do the act in question; and (3) no other adequate remedy available."

Anderson v. Bowen, 881 F.2d 1, 5 (2d Cif. 1989). Mandamus relief is not available in this action
because plaintiffs may obtain relief through direct appeal under 42 U .S.C. § 405(g). See Are! v.

United States, 452 F .3d 202, 206 (2d Cif. 2006) ("If relief may be obtained by direct appeal,
mandamus is inappropriate."); Landers v. Leavitt, No. 3:04-cv-1988, 2006 WL 2560297, at *2
(D. Conn. Sept. 1, 2006) (holding that court had jurisdiction under 42 U .S.c. § 405(g) over
13

Medicare beneficiaries' class action challenging Secretary's interpretation of coverage
regulation, and thus mandamus jurisdiction was unnecessary and federal question jurisdiction
was barred).
Similarly, because the court has jurisdiction under § 405(g) to hear plaintiffs' claims, it
does not have federal question jurisdiction under 28 U.S.c. § 1331. See 42 U.S.C. § 405(h) ("No
action against the United States, the Commissioner of Social Security, or any officer or employee
thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising
under this subchapter."); Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 10(2000)
(explaining that § 405(h) "plainly bars § 1331 review" of Medicare appeal "irrespective of
whether the individual challenges the agency's denial on evidentiary, rule-related, statutory,
constitutional, or other legal grounds"). As discussed above, the lack of mandamus or federal
question jurisdiction is not fatal to plaintiffs' claims because they have established jurisdiction
under 42 U.S.C. § 405(g).
D.

Whether Plaintiffs Have Stated a Claim for Which Relief May Be Granted

The Secretary argues that plaintiffs cannot state a claim against her for failure to follow
the MPIM in adjudicating Medicare appeals because the MPIM is essentially an interpretive rule
which does not have legal effect and cannot bind her agency.
Plaintiffs allege that the Secretary has failed, at all levels of review, to adhere to her own
policy as expressed in the MPIM. Section 6.2.1 ofthe MPIM provides:
[MACs] are instructed to do the following when a favorable final appellate
decision that a beneficiary is "confined to home" is rendered on or after July 1,
2000....
Promptly pay the claim that was the subject ofthe favorable final appellate
decision. Promptly payor review based on the review criteria below: All claims
that have been denied that are properly pending in any stage of the appeals
process. All claims that have been denied where the time to appeal has not lapsed.
All future claims submitted for this beneficiary....
Establish procedures to ensure that medical review of a beneficiary's claim, after
the receipt by that beneficiary of a favorable final appellate decision related to
"confined to home," is reviewed based on the review criteria below.

14

Notify the beneficiary and the affected home health agency that the favorable
final appellate decision related to "confined to home" will be given "great weight"
in evaluating if the beneficiary is "confined to home." Inform them of what steps
should be taken if they believe a claim has been denied in error.
Maintain records containing information on the beneficiaries receiving favorable
final appellate decision related to "confined to home." ...
B. Review Criteria
Afford the favorable final appellate decision that a beneficiary is "confined to
home" great weight in evaluating whether the beneficiary is confined to the home
when reviewing services rendered after the service date of the claim addressed in
the favorable final appellate decision unless there has been a change in facts (such
as medical improvement or an advance in medical technology) that has improved
the beneficiary's ability to leave the home. All medical review that is done on
claims for services performed after the service date of the claim that is addressed
in the favorable final appellate decision should determine if (a) there has been a
change in facts (as noted above) that affects the beneficiary's ability to leave the
home and (b) if the services provided meet all other criteria for home health care.
If there have been no changes in facts that affect the beneficiary's ability to leave
the home and if all other criteria for home health services are met, the claim
would ordinarily be paid.
The Medicare regulations state that in reviewing the initial contractor determinations, QICs,
ALJ s, and the Medicare Appeals Council are not bound by manuals such as the MPIM, "but will
give substantial deference to these policies if they are applicable to a particular case." 42 C.F.R.
§§ 405.968(b); 405.1062(a). If a QIC, ALJ, or the Appeals Council declines to follow a manual
instruction in a particular case, it is required by the regulations to explain why the policy was not
followed. 42 C.F.R. §§ 405.968(b); 405.1062(b).
Plaintiff Ryan alleges that she received two favorable final appellate decisions finding her
to be confined to the home during the periods of February 9,2006 to April 7, 2007 and February
8,2008 to April 6, 2009. (Doc. 5 ~~ 38-39.) Despite these decisions, the MAC denied coverage
for home health care services she received from April 2009 to July 2010. (Id.

~

50.) Upon

reconsideration, the MAC upheld the denial of coverage, but did not address the prior favorable
decisions or document any change in plaintiff Ryan's condition that affected her ability to leave
her home. (Id.

~~

51-52.) The QIC also upheld the denial of coverage without addressing the

prior favorable decisions or explaining its reasoning, and did not give substantial deference to the
MPIM. (Id.

~

54.) The ALJ also upheld the denial, and did not give substantial deference to the

15

MPIM, concluding that it only applied to Medicare contractors. (!d.
makes similar allegations. (!d.

~~82-89.)

~~

57-58.) Plaintiff Herbert

In both of their cases, the Medicare Appeals Council

upheld the denial of coverage. Plaintiffs allege that the Appeals Council has ruled in other
appeals that MPIM § 6.2.1 should be applied at the ALJ and MAC levels, but did not do so in
their cases. (!d.

~

61.)

Plaintiffs' allegations are sufficient to state a claim under the "long-settled principle that
the rules promulgated by a federal agency, which regulate the rights and interests of others, are
controlling upon the agency." Mantilla v. I.NS., 926 F.2d 162, 166 (2d Cir. 1991). Particularly
"[w Jhere the rights of individuals are affected, it is incumbent upon agencies to follow their own
procedures. This is so even where the internal procedures are possibly more rigorous than
otherwise would be required." Morton v. Ruiz, 415 U.S. 199,235 (1974). This principle is
known as the Accardi doctrine, after

us. ex reI. Accardi. v. Shaughnessy, 347 U.S. 260, 268

(1954), in which the Supreme Court reversed a deportation order of the Board ofImmigration
appeals because the Board failed to follow its own regulations. "The Accardi doctrine is
premised on fundamental notions of fair play underlying the concept of due process." Mantilla,
926 F.2d at 167; see also Int'l House v. NL.R.B., 676 F.2d 906,912 (2d Cir. 1982) (explaining
that an agency's failure to follow its own guidelines "tends to cause unjust discrimination and
deny adequate notice contrary to fundamental concepts of fair play and due process").
The Secretary correctly points out that not all agency rules are binding upon an agency.

Lyng v. Payne, 476 U.S. 926,937 (1986); see Schweiker v. Hansen, 450 U.S. 785, 789 (1981)
(finding that failure of agency employee to follow Social Security Claims Manual did not estop
the agency from denying benefits to claimant). "The general consensus is that an agency
statement, not issued as a formal regulation, binds the agency only ifthe agency intended the
statement to be binding." Farrell v. Dep't ojInterior, 314 F.3d 584,590 (Fed. Cir. 2002)
(collecting cases). The intent of the agency is determined by examining the language of the rule,
its context, and any extrinsic evidence. Chiron Corp. v. Nat 'I Transp. Safety Bd., 198 F.3d 935,
944 (D.C. Cir. 1999). "[MJandatory, definitive language is a powerful, even potentially
dispositive, factor suggesting" that a rule is intended to be binding. Cmty. Nutrition Inst. v.

Young, 818 F.2d 943, 947 (D.C. Cir. 1987). Another relevant factor is whether the agency has
stated an intention to be bound by the language. Chiron, 198 F.3d at 944; Service v. Dulles, 354
16

U.S. 363, 379 (1957). Further, manuals or procedures may be binding on an agency when they
affect individuals' rights. See Morton, 415 U.S. at 235 (holding that agency is bound by
procedures in its manual where individual's entitlement to government benefits was affected by
procedures); Mantilla, 925 F.2d at 167.
Section 6.2.1 and the relevant Medicare regulations are both phrased in mandatory
language. MACs "are instructed to do the following when a favorable final appellate decision
that a beneficiary is 'confined to home' is rendered ... [a]fford the favorable final appellate
decision that a beneficiary is 'confined to home' great weight in evaluating [subsequent
claims] ... unless there has been a change in facts." MPIM § 6.2.1. The Medicare regulations
state that QICs, ALJs and the Appeals Council "will give substantial deference to these policies
iftheyare applicable to a particular case." 42 C.F.R. §§ 405.968(b); 405.l062(a) (emphasis
added). If the ALJ or Appeals Council declines to give the manual substantial deference, it

"must explain the reasons why the policy was not followed." 42 C.F.R. § 405.1062 (emphasis
added). Through these regulations, the agency has expressed its intention to be bound by the
provisions of the manuals. Additionally, plaintiffs allege that the Appeals Council itself has
previously recognized that it must give substantial deference to § 6.2.1 of the MPIM. The rule is
not merely procedural-it directly affects plaintiffs' rights to receive insurance benefits for home
health care services. All of these factors support a conclusion that the rule is intended to be
binding upon the MACs and-through the operation of the Medicare regulations-the QICs,
ALJs, and Appeals Council.
The availability of multiple stages of administrative review of a MAC decision does not
defeat plaintiffs' claims by rendering an improper decision "harmless," as the Secretary argues.
(Doc. 19 at 23.) Plaintiffs allege a system-wide practice of using an improper standard to decide
home health care claims that is inconsistent with the Secretary's own rules. (Doc.

5,-r,-r 1-5.)

Accepting plaintiffs' allegations as true, an error by the MAC is not "cured by the plaintiffs'
opportunity to make their arguments at the second, third, and final levels" because the rule is not
followed at each ofthese levels. (Doc. 19 at 24.) Plaintiffs' claim is therefore different from a
case where a claimant is merely arguing that the agency incorrectly applied the rule in his or her
individual case. See Bowen v. City ofNew York, 476 U.S. 467, 485 (1986) (holding that social
security claimants were not required to exhaust administrative remedies where there was "a
17

systemwide, unrevealed policy that was inconsistent in critically important ways with established
regulations," making agency review futile).
Finally, the Secretary objects that the relief sought by plaintiffs exceeds that which the
court should grant. Plaintiffs seek, inter alia, injunctive relief directing the Secretary to enforce
MPIM § 6.2.1 in future, to revise any rules that are responsible for the failure ofMACs to follow
the rule, to correct internal guidelines and educate employees as to the correct approach for
deciding home health care claims, to monitor the compliance ofMACs and QICs with the rule,
and to re-review plaintiffs' claims. (Doc. 5 at 23-24.) The Secretary argues that this would be a
"wholesale" restructuring of agency programs better left to the agency and Congress. See Lujan
v.

Nat 'I Wildlife Fed., 497 U.S. 871, 891 (1990). The court disagrees. Plaintiffs' claims involve

the improper application of a specific policy promulgated by the agency itself in a fashion that
has harmed plaintiffs, a situation that the Lujan decision recognizes as actionable. See id.
(holding that agency regulation is not ripe for judicial review ''until the scope of the controversy
has been reduced to more manageable proportions, and its factual components fleshed out, by
some concrete action applying the regulation to the claimant's situation in a fashion that harms
or threatens to harm him"). And as plaintiffs correctly point out, broad injunctive relief is
commonly sought and obtained in cases ofthis type. See, e.g., Jimmo v. Sebelius, No. 5:11-CV­
17,2011 WL 5104355, at *2 (D. Vt. Oct. 25,2011) (describing relief sought by Medicare
beneficiaries who alleged Secretary had adopted unlawful and clandestine coverage
determination standard); id. (Doc. 83-1 at 4-6).

III.

Conclusion
For the reasons stated above, defendant's motion to dismiss plaintiffs' complaint is

DENIED.

-----

Dated at Rutland, in the District of Vermont, this 27th da

......

Geoffrey W. Crawford, Judge
United States District Court

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