Haro v. Sebelius
747 F.3d 1099
9th Cir.2013Background
- Plaintiffs are Medicare beneficiaries (Haro, McNutt, Hall) and attorney John Balentine challenging the Secretary’s practice of demanding “up front” reimbursement from beneficiaries (and instructing attorneys to withhold settlement proceeds) when a primary payment exists but administrative appeals or waiver requests remain pending.
- Haro received letters demanding reimbursement, disputed the demand by letters (including one on Feb. 2, 2009), later paid $800, Medicare reduced the demand and refunded $103.87; Haro filed suit shortly after paying and before completing administrative review.
- McNutt and Hall also received demands, pursued limited administrative review, and did not present the broad policy challenge to the agency; Balentine received a letter instructing attorneys not to disburse settlement funds and asserted a separate attorney-specific claim.
- The district court certified a nationwide class, granted summary judgment for plaintiffs, and enjoined the Secretary from demanding up-front reimbursement or requiring attorneys to withhold client settlement proceeds.
- On appeal the Ninth Circuit (Judge Christen) held Haro and Balentine have Article III standing but concluded the beneficiaries failed to satisfy the Medicare Act’s administrative "channeling" (presentment/exhaustion) requirement under 42 U.S.C. § 405(g), depriving the district court of jurisdiction over the beneficiaries’ claims; Balentine’s attorney-specific claim is exempt from channeling and was considered on the merits.
- On the merits the court applied Chevron deference and upheld the Secretary’s interpretation that attorneys who receive settlement proceeds may be treated as “entities that receive payment from a primary plan,” reversing the district court’s injunction as to the attorney-withholding practice and remanding for consideration of due process claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs satisfied §405(g) presentment/channeling for policy challenge | Beneficiaries: presenting reimbursement disputes and obtaining a final decision suffices to bring related policy challenges to court | Secretary: plaintiffs did not present the specific policy claim to the agency; presentment is jurisdictional | Plaintiffs failed to present the policy claim; channeling requirement not met; district court lacked jurisdiction over beneficiaries’ claim |
| Whether Haro’s Feb. 2, 2009 letter satisfied presentment | Haro: her Feb. 2 letter raised the up-front reimbursement challenge to the agency | Secretary: letter was brief, unpursued, and followed by payment and closure; did not fairly present claim | Court: Feb. 2 letter plus inaction did not satisfy presentment; Haro did not exhaust administrative remedies |
| Whether Balentine’s attorney-specific claim must be channeled administratively | Balentine: cannot present via beneficiary channel; no administrative path exists for attorney claim | Secretary: channeling should apply broadly to related challenges | Court: Michigan Academy exception applies — channeling would mean no review for Balentine; his claim is justiciable in federal court |
| Whether Secretary’s interpretation of "entity that receives payment" is reasonable | Plaintiffs (district court): statute does not support action against attorneys except as endpoint recipients; cannot compel attorneys to withhold funds | Secretary: regulations and statutory language reasonably encompass attorneys who receive primary payments; promotes reimbursement and statutory purpose | Court: Under Chevron, Secretary’s interpretation is reasonable and consistent with text, history (2003 amendments), and purpose; agency practice upheld |
Key Cases Cited
- Mathews v. Eldridge, 424 U.S. 319 (1976) (presentment and exhaustion principles in Social Security administrative review)
- Weinberger v. Salfi, 422 U.S. 749 (1975) (§405(h) bars federal-question jurisdiction when Social Security Act provides the substantive basis)
- Heckler v. Ringer, 466 U.S. 602 (1984) (extension of §405(h) principles to Medicare claims)
- Shalala v. Illinois Council on Long Term Care, 529 U.S. 1 (2000) (§405(h) requires channeling of legal attacks through agency so it can apply or revise policies)
- Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667 (1986) (limits on channeling where application would foreclose review entirely)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing requirements)
- Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984) (two-step framework for reviewing agency statutory interpretations)