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Withdrawal/Redaction Sheet
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. note
re: phone number (1 page)
n.d.
P6/b(6)
002. report
re: Sullivan V. Barnett (5 pages)
n.d.
P5
ims 4/0/15
003 report
re: Sullivan V. Barnett (5 pages)
02/09/1999
P5
one s 4/6/15
COLLECTION:
Clinton Presidential Records
Domestic Policy Council
Devorah Adler
OA/Box Number: 20469
FOLDER TITLE:
Grijalva [Folder 4]
2012-0463-S
rc766
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information |(a)(4) of the PRAJ
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA|
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
Summary of
Facts Surrounding Medicaid Managed Care
Number of Beneficiaries in Medicaid Managed Care -- 15,068,000
Percentage of Beneficiaries in Medicaid Managed Care -- Approximately 47%
Of those in Managed Care, Percentage in Mandatory Managed Care -- Probably over 90%
Only WY, AK and CT do not have either a 1915(b) or 1115 waiver.
Through an informal survey, States provided HCFA with a preliminary answer to the
question, "Does your State allow a beneficiary direct access to a State fair hearing rather
than first requiring exhaustion of internal MCO grievance procedures?"
Of the responses to this question, approximately 60% of the States answered yes.
Of the States that answered yes, approximately 40% reported that the State
encourages, but does not require, beneficiaries to first exhaust the MCO's internal
grievance procedures.
DRAFT
One Theory of How to Think About Medicaid Notice and Appeal Rights
This document is only intended to help facilitate a general discussion on theories of
notice and appeal rights. This document is not meant to convey a position on these
issues.
Recipients of certain statutorily created federal benefits, such as Medicaid
benefits, have constitutionally protected property interests. Due process
must be afforded to an individual at risk of being deprived of such a
property interest.
The government is constitutionally obligated to ensure that a recipient is
afforded due process when s/he is threatened with deprivation of Medicaid
benefits. It is not legally consequential whether the point of contact with
the recipient (in this instance, the provider of Medicaid services) is a private
or a state actor. Even if the point of contact with a recipient is a private
actor, it is incumbent upon the government to ensure that due process is
afforded. That could be achieved through regulations governing provider
participation in the Medicaid program or, for example, through a contractual
mandate on any private actor. The government cannot contract away or
otherwise wall itself off from its constitutional obligations.
Once it is established that due process must be afforded, the balancing test
in Mathews V. Eldridge determines what process is due. In that case, the
Supreme Court observed, with respect to benefits such as the cash
assistance benefits at issue in Goldberg V. Kelly, that greater constitutional
protections may be warranted where the interest at stake is held by
recipients who are eligible for the benefit because of their low income
status. Being poor (if that is not a qualification for the benefit at issue) does
not entitle one to enhanced process protections. Need, perhaps "brutal
need," must be a program-qualifying factor. This analysis may argue for
extension of enhanced protection to Medicaid beneficiaries.
Case law can be read to indicate that due process must be afforded once a
recipient has been deemed "eligible" for the benefits at issue. Before that
point, an individual has no property interest in the benefit. Thus, with
respect to Medicaid benefits, if one argues by analogy from Sullivan, not
only must a recipient meet Medicaid program eligibility requirements, but
also the item or service in question must be deemed to be reasonable and
necessary (or meet other reasonable criteria that the state imposes under 42
C.F.R. § 440.230(d)). Once a beneficiary meets all those criteria, s/he
receives benefits and has a property interest in their continued receipt.
Once the recipient has begun receiving benefits, a reduction or termination
of those benefits is subject to due process requirements.
The process due someone for denial of an initial application for benefits is
not as recently affirmed as the process due for termination of a benefit.
This summary begs an important question: Will courts determine that
ongoing services (e.g., home health services for recipients whose medical
conditions are expected to and do improve) are actually the result of a series
of applications for benefits (applications measured by whether the applicant
is not only still income eligible but also by whether the services are still
medically necessary)? If so, what process would such courts say is
required?
It would be useful to hear your views about constitutional theories of when
due process notice and hearing rights are triggered and what process is
required at various stages (if process rights differ at all from point to point).
MA
999 13:32
0000000000000000000000000
202 690 6362
P.02/05
DRAFT -- INTERNAL USE ONLY -- DRAFT
(Cover Note. This would just go out under a fax cover sheet addressed to the
individual.)
I appreciate your willingness to be a part of a consultative discussion on due process
issues related to Medicaid, and I look forward to hearing from you on this complicated
topic.
As you know, the meeting is scheduled for Friday, March 25th at 10:00am, and it will be
held at the Department of Health and Human Services, 200 Independence Ave., SW.
After you arrive, you will need to call my office (690-6726) from the security desk in
order to be signed in as a visitor. The meeting will be held in room 505A.
Attached, please find some brief facts on Medicaid Managed Care, as well as a paper that
discusses one theory of how due process rights apply to Medicaid. I hope that you will
review this material and share with us other facts that may be relevant to these issues and
other theories that will help inform our thinking on due process in Medicaid.
Unfortunately, I will not be able to attend the meeting on Friday as I have been requested
to testify at a hearing. This request was received only yesterday, March 24th. However,
in my absence, Harriet Rabb, the Department's General Council, will chair the meeting.
In addition, Gary Claxton and Jane Horvath will attend from the Department along with
Sally Richardson, Carol Cronin, and Bob Berenson from HCFA.
Again, thank you for agreeing to meet with us. I know that this discussion will be very
helpful for us, and I hope that it will be helpful for you as well.
reasonable $ necessary T ssue
property interest exist?
doesn't distinguish btwn mcore - A mcaid?
gordon
Bridgett
tomorrow at
Tim W.
kristen
Judy W.
Cindy Mann
10am
Andy Schneider
505A
Cybele
399 13:32
0000000000000000000000000
202 690 6362
P.03/05
DRAFT
Summary of
Facts Surrounding Medicaid Managed Care
Number of Beneficiaries in Medicaid Managed Care -- 15,068,000
Percentage of Beneficiaries in Medicaid Managed Care -- Approximately 47%
Of those in Managed Care, Percentage in Mandatory Managed Care -- Probably over 90%
Only WY, AK and CT do not have either a 1915(b) or 1115 waiver.
Through an informal survey, States provided HCFA with a preliminary answer to the
question, "Does your State allow a beneficiary direct access to a State fair hearing rather
than first requiring exhaustion of internal MCO grievance procedures?"
Of the responses to this question, approximately 60% of the States answered yes.
Of the States that answered yes, approximately 40% reported that State encourages,
but does not require, beneficiaries to first exhaust the MCO's internal grievance
procedures.
MAR-24-1999 13:32
0000000000000000000000000
202 690 6362
P.04/05
BRAFT
TEMPLATE FOR DISCUSSION: MEDICAID NOTICE & APPEAL RIGHTS
Recipients of certain statutorily created federal benefits, such as Medicaid
benefits, have constitutionally protected property interests. Due process must be
afforded to an individual at risk of being deprived of such a property interest.
The government is constitutionally obligated to ensure that a recipient is afforded
due process when s/he is threatened with deprivation of Medicaid benefits. It is
not legally consequential whether the point of contact with the recipient (in this
instance, the provider of Medicaid services) is a private or a state actor. Even if
the point of contact with a recipient is a private actor, it is incumbent upon the
government to ensure that due process is afforded. That could be achieved
through regulations governing provider participation in the Medicaid program or,
for example, through a contractual mandate on any private actor. The government
cannot contract away or otherwise wall itself off from its constitutional
obligations.
Once it is established that due process must be afforded, the balancing test in
Mathews V. Eldridge determines what process is due. In that case, the Supreme
Court observed, with respect to benefits such as the cash assistance benefits at
issue in Goldberg V. Kelly, that greater constitutional protections may be
warranted where the interest at stake is held by recipients who are eligible for the
benefit because of their low income status. Being poor (if that is not a
qualification for the benefit at issue) does not entitle one to enhanced process
protections. Need, perhaps "brutal need," must be a program-qualifying factor.
This analysis may argue for extension of enhanced protection to Medicaid
beneficiaries.
Case law indicates that due process must be afforded once a recipient has been
deemed "eligible" for the benefits at issue. Before that point, an individual has no
property
interest in the benefit. Thus, with respect to Medicaid benefits, not only
must a recipient meet Medicaid program eligibility requirements, but also the item
or service in question must be deemed to be reasonable and necessary (or meet
other reasonable criteria that the state imposes under 42 C.F.R. § 440.230(d))
Once a beneficiary meets all those criteria, s/he receives benefits and has a
property interest in their continued receipt. Once the recipient has begun receiving
benefits, a reduction or termination of those benefits is subject to due process
requirements.
The process due someone for denial of an initial application for benefits is not as
MAR-24-1999 13:33
0000000000000000000000000
202 690 6362 P.05/05
recently affirmed as the process due for termination of a benefit.
This summary begs an important question: Will courts determine that ongoing
services (e.g., home health services for recipients whose medical conditions are
expected to and do improve) are actually the result of a series of applications for
benefits (applications measured by whether the applicant is not only still income
eligible but also by whether the services are still medically necessary)? If so, what
process would such courts say is required?
HCFA is particularly interested in hearing other constitutional theories about when
due process notice and hearing rights are triggered and what process is required at
various stages (if process rights differ at all from point to point).
PHOTOCOPY
PRESERVATION
TOTAL P.05
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. note
re: phone number (1 page)
n.d.
P6/b(6)
COLLECTION:
Clinton Presidential Records
Domestic Policy Council
Devorah Adler
OA/Box Number: 20469
FOLDER TITLE:
Grijalva [Folder 4]
2012-0463-S
rc766
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency |(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information |(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA|
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
027 09/98
0100
No.
Me incole
In the Supreme Court of the United States
OCTOBER TERM, 1998
DONNA E. SHALALA, SECRETARY OF HEALTH
AND HUMAN SERVICES, PETITIONER
v.
GREGORIA GRIJALVA, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
SETH P. WAXMAN
Solicitor General
Counsel of Record
Department of Justice
Washington, D.C. 20530-0001
HARRIET S. RABB
(202) 514-2217
General Counsel
Department of Health and
Human Services
Washington, D.C. 20201
02/09/99
18:52
20202 514 9708
In the Supreme Court of the United States
OCTOBER TERM, 1998
No.
DONNA E. SHALALA, SECRETARY OF HEALTH
AND HUMAN SERVICES, PETITIONER
v.
GREGORIA GRUALVA, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
The Solicitor General, on behalf of Donna E. Shalala,
Secretary of Health and Human Services, respectfully peti-
tions for a writ of certiorari to review the judgment of the
United States Court of Appeals for the Ninth Circuit in this
case.
OPINIONS BELOW
The opinion of the court of appeals (App. la-21a) is re-
ported at 152 F.3d 1115. The opinion of the district court
(App. 24a-58a) is reported at 946 F. Supp. 747.
JURISDICTION
The judgment of the court of appeals was entered on
August 12, 1998. A petition for rehearing was denied on
November 12, 1998. App. 22a-23a. The jurisdiction of this
Court is invoked under 28 U.S.C. 1254(1).
(1)
02/08/88
10:06
2
STATUTORY AND REGULATORY
PROVISIONS INVOLVED
Relevant portions of the Medicare Act, as it existed when
the district court ruled, 42 U.S.C. 1395mm, are reproduced in
the Appendix to this petition, see App. 102a-109a, as are
relevant provisions of the Balanced Budget Act of 1997, Pub.
L. No. 105-33, §§ 4001-4002, 111 Stat. 275-330, see App. 70a-
101a. Relevant portions of the Secretary's regulations
implementing 42 U.S.C. 1395mm(g), as they existed at the
time the district court ruled, 42 C.F.R. 417.608-417.638
(1996), are likewise set out in the Appendix, see App. 140a-
149a, as are relevant provisions of the Secretary's current
regulations, 63 Fed. Reg. 34,968 (1998), see App. 110a-139a.
STATEMENT
1. The Medicare program, established under Title XVIII
of the Social Security Act, 42 U.S.C. 1395 et seq., pays for
covered medical care for eligible aged and disabled persons.
Originally, Medicare operated exclusively in a manner
similar to fee-for-service medical insurance. Under such
arrangements, the beneficiary first obtains needed medical
care. The beneficiary or his healthcare provider then sub-
mits a claim for reimbursement to the Medicare program.
Claims are then reviewed by processing agents known as
"fiscal intermediaries" or "carriers"-private companies that
act under contract as the Secretary's fiscal agent to evaluate
claims and determine whether payment is authorized by the
Medicare statute. Where the fiscal intermediary or carrier
approves the claim, it is paid by the federal government out
of the Medicare Trust Funds in the Treasury. See generally
Regions Hosp. V. Shalala, 118 S. Ct. 909, 912 (1998); Sch-
weiker V. McClure, 456 U.S. 188 (1982).
a. In 1982, Congress added a provision to the Medicare
Act to permit beneficiaries to obtain covered services in a
fundamentally different way-by enrolling in private
healthcare plans like health maintenance organizations
02/09/99
18:53
0202 014 8108
3
(HMOs). See Pub. L. No. 97-248, § 114(a), 96 Stat. 341,
codified at 42 U.S.C. 1395mm. (Section 1395mm(g) has now
been superseded by new Medicare Part C, as discussed in
greater detail below.) Because HMOs often operate
efficiently and can obtain discounts for medical services
from participating providers, they frequently can offer their
enrollees a more comprehensive package of services-
including extras like dental care-at the same or lower cost
than the fee-for-services model.
To give Medicare beneficiaries the option of enrolling in
HMOs at government expense, Section 1395mm authorized
the Secretary to enter into two types of contracts with
qualified HMOs. First, the Secretary could enter into a cost-
based contract, under which Medicare reimbursed the
HMO's reasonable costs (based on submitted reports) for
services actually rendered to any Medicare beneficiary
enrolled with the HMO. See 42 U.S.C. 1395mm(h); 42 C.F.R.
417.530-417.576 (1996). Second, the Secretary could enter
into "risk-sharing" contracts, under which the HMO was
paid a fixed monthly payment for each Medicare beneficiary
who chose to enroll with the HMO; in return, the HMO was
required to provide each enrollee with the full range of
services covered by Medicare. 42 U.S.C. 1395mm(g). Under
such risk-sharing contracts, the HMO bore the risks of
increased patient needs, as Medicare did not adjust its
monthly payments based on services actually used. Thus,
such contracts were similar to HMO coverage purchased by
individuals or by employers for their employees, as the HMO
(and not the purchaser of the coverage) bore all costs
associated with providing appropriate medical care. This
case concerns only patients enrolled in risk-sharing HMOs,
ie., HMOs that entered into contracts pursuant to 42 U.S.C.
1395mm(g).
Under 42 U.S.C. 1395mm, HMOs were required to pro-
vide "meaningful procedures for hearing and resolving
grievances" between themselves and enrolled members.
02/09/99
18:53
202 514 8108
4
42 U.S.C. 1395mm(c)(5)(A). Under the HHS regulations
implementing Section 1395mm(c)(5)(A) that were before the
district court, HMOs denying requests for medical services
were required to notify beneficiaries of such decisions, give
the reasons for denial, and notify beneficiaries of the right to
ask the HMO to reconsider the decision. 42 C.F.R. 417.608
(1996). HMOs, however, had 60 days in which to issue such
decisions, ibid., as well 60 days in which to resolve
reconsideration requests, id $ 417.620. Neither the statute
nor the regulations provided an expedited decision mecha-
nism for cases involving urgent medical needs. And neither
the statute nor the regulations addressed the qualifications
of HMO decisionmakers. HMO enrollees dissatisfied with
adverse HMO decisions, however, could obtain reconsidera-
tion review by the HMO and the Secretary or her agents, id.
§§ 417.614-417.626 (1996), and, subject to certain amount-in-
controversy requirements, a hearing before an Administra-
tive Law Judge (ALJ) in the Department of Health and
Human Services (HHS), followed by appeal to the Depart-
mental Appeals Board (DAB) and judicial review. See 42
U.S.C. 1395mm(c)(5)(B); 42 C.F.R. 417.630-417.636 (1996).
The HMO was required to be made a party to any hearing
before an ALJ, and the HMO, if aggrieved by the ALJ's
decision, also could seek review by the DAB and judicial
review. 42 C.F.R. 417.632(c)(2), 417.634, 417.636 (1996).
2. Respondents have been certified as the named rep-
resentatives of a nationwide class of Medicare-eligible in-
dividuals who enrolled in risk-based HMOs under Section
1395mm(g). See Order of July 18, 1995, C.A. E.R. 36; App.
25a n.1. They alleged that the HMOs were not providing
adequate notice and appeal rights with respect to decisions
to reduce or deny services. More effective procedures, they
asserted, were required by Section 1395mm(c)(5)(A). They
further claimed that initial HMO decisions constituted "state
action" affecting constitutionally-protected property in-
02/09/99
18:54
ROIR ETC 7070
5
terests, and that HMO decisions did not comport with the
Due Process Clause.
a. The parties filed cross-motions for summary judg-
ment, and the district partially granted respondents' motion,
while denying the Secretary's motion. App. 24a-58a. The
challenged HMO decisions, the court concluded, are properly
attributable to the federal government, and HMO decisional
processes therefore must comport with the Due Process
Clause. Id. at 29a-34a. The court further held that the
decisionmaking procedures then in effect did not afford
respondents the process that was due under Mathews V.
Eldridge, 424 U.S. 319 (1976). Among other things, the
district court faulted the notices of decision issued by HMOs
as difficult to understand, see App. 46a-50a, and criticized
the time used to resolve urgent requests, id at 43a-45a, 51a
On March 3, 1997, the district court entered a mandatory
injunction that imposed detailed new notice and hearing
requirements. App. 59a-64a. Among other things, the
injunction commands the Secretary to require that HMOs
provide (in all but "exceptional circumstances") a written
notice of any decision that denies, terminates or reduces
services or treatment within "five working days" of an oral
or written request for that care-without regard to whether
the beneficiary would be adversely affected if the HMO took
longer to resolve the matter. Id. at 60a. If the beneficiary
seeks reconsideration of the decision, and the request is
urgent, the HMO must issue a reconsideration decision
within three working days. Id. at 62a. (The injunction pro-
vides no deadline for resolution of non-urgent recon-
sideration requests.) And where "acute care services" are at
issue, the HMO must provide a hearing before denying the
request; it may not discontinue such services until after the
initial decision and the reconsideration process is completed.
Id. at 63a. Any notice informing a beneficiary of any such
decision, moreover, must be printed in 12-point type, specify
02/08/98
18:04
6
the basis for the decision, and advise the beneficiary of his
appeal rights. Id. at 60a-61a.
The injunction further requires the Secretary to monitor
and investigate compliance with all requirements, and bars
the Secretary from contracting with, or renewing a contract
with, any HMO that does not comply substantially with the
notice and hearing requirements. App. 63a. The order
specifies that the district court will retain jurisdiction over
the case for a three-year period, and permits respondents to
return to the court for additional relief if the order does not
redress their claimed injuries. Id. at 64a.
b. The Secretary moved the district court to stay its
injunction pending appeal, and the district court granted the
motion. App. 65a-69a. In seeking the stay, the Secretary
pointed out that on April 30, 1997-just after the district
court entered its injunction-the Secretary had issued new
HMO regulations in interim final form. See 62 Fed. Reg.
28,368 (1997). The Secretary noted that those regulations
made several significant changes in notice and appeal
procedures. Among other things, the revised regulations
provided a new procedure for expedited review in urgent
cases: Although HMOs would have 60 days within which to
make ordinary determinations, they would have only 72
hours to make decisions where delay could seriously jeo-
pardize the beneficiary's life, health, or functioning. See id
at 23,370-23,371; see also id. at 23,375 (adding 42 C.F.R.
417.608, 417.609). The district court concluded that a stay
was warranted, reasoning that "the hardships faced by the
Plaintiffs outweigh those of the Defendant, but that the
entire case may become largely moot if the Secretary's
attestations regarding rule changes
***
are implemented
without delay." App. 68a.
3. The Secretary appealed the district court's March 3,
1997 Order. While the appeal was pending, Congress (on
August 5, 1997) overhauled Medicare's statutory structure
with respect to HMOs as part of the Balanced Budget Act of
7
1997 (BBA), Pub. L. No. 105-33, §§ 4001-4002, 111 Stat. 275-
330. See App. 70a-101a (reproducing relevant portions).
a To replace Section 1395mm(g), the BBA creates new
Part C of the Medicare Act and establishes the "Medicare+
Choice" program. "Medicare+Choice" is designed to offer
beneficiaries a widely expanded choice of alternatives to
traditional fee-for-service Medicare. Those options include
participation in HMOs and other private managed-care and
fee-for-service plans at government expense, and a new
medical savings account option. See 111 Stat. 276 (Section
1851(a)(2), to be codified at 42 U.S.C. 1395w-21(a)(2)); H.R.
Conf. Rep. No. 217, 105th Cong., 1st Sess. 585 (1997). The
new law directs the Secretary to implement the Medicare+
Choice program by establishing a process through which
Medicare beneficiaries can, at their option, have the
Secretary acquire coverage for them through participating
private healthcare organizations in place of original fees-for-
services Medicare. 111 Stat. 278 (Section 1851(c)(1), to be
codified at 42 U.S.C. 1395w-21(c)(1)). HMOs may not accept
Medicare beneficiaries as enrollees and may not receive
payments under the program absent a valid "Medicare+
Choice" contract with the Secretary. See 111 Stat. 319
(Section 1857(a), to be codified at 42 U.S.C. 1395w-27(a)).
Part C provides an enhanced statutory framework-an
entire Section entitled "Benefits and Beneficiary
Protections"-to govern such issues as quality assurance,
disputes over treatment, grievances and appeals. See 111
Stat. 293 (Section 1852(g), to be codified at 42 U.S.C. 1395w-
22(g)). As before, HMOs must in the first instance
determine for themselves whether they believe that a
requested treatment is appropriate (just as they would with
respect to non-Medicare enrollees). But, as a condition of
participation, HMOs must provide Medicare enrollees with a
prompt, clear, and understandable statement concerning
adverse decisions. 111 Stat. 293 (Section 1852(g)(1), to be
codified at 42 U.S.C. 1395w-22(g)(1)). As before, an enrollee
02/09/99
18:55
0100
8
dissatisfied with such a decision may seek reconsideration.
But, unlike the statute before the district court, which did
not prescribe a deadline for reconsideration decisions, the
new statute requires HMOs to issue reconsideration
decisions within 60 days (or earlier if the Secretary 80
directs). 111 Stat. 293 (Section 1852(g)(2)(A), to be codified
at 42 U.S.C. 1395w-22g(2)(A)). Moreover, unlike the statute
and regulations that were the subject of the district court's
decision, the new statute contains expedition provisions that
require HMOs to issue decisions "not later than 72 hours
[after] receipt of the request for the determination or
reconsideration" in urgent cases. 111 Stat. 294 (Section
1852(g)(3)(B), to be codified at 42 U.S.C. 1395w-22(g)(3)(B)).
Unlike the prior statute and regulations, the new statute
also addresses the qualifications of the HMO reconsideration
decisionmaker. In particular, where the basis for the initial
decision to reduce or deny services is lack of medical
necessity, the reconsideration decision must be made by an
HMO physician with "appropriate expertise in the [relevant]
field of medicine." 111 Stat. 293 (Section 1852(g)(2)(B), to be
codified at 42 U.S.C. 1395w-22(g)(2)(B)). In addition, the
physician addressing the reconsideration request may not be
the same physician who made the initial decision. Ibid
All private HMO reconsideration decisions denying or
reducing services are subject to review by a neutral, inde-
pendent entity selected by the Secretary. 111 Stat. 294
(Section 1852(g)(4), to be codified at 42 U.S.C. 1395w-
22(g)(4)). Any enrollee (but not an HMO) dissatisfied with
the result of the determination of the independent entity
may seek a hearing before an ALJ in HHS if the amount in
controversy exceeds $100, and the HMO becomes a party to
any such hearing. 111 Stat. 294 (Section 1852(g)(5), to be
codified at 42 U.S.C. 1395w-22(g)(5)). ALJ decisions are
subject to review by the DAB and, if the amount remaining
in controversy after administrative review exceeds $1000,
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9
either the HMO or the beneficiary may (if aggrieved) seek
judicial review of the agency's decision. Ibid.
New Medicare Part C also provides the Secretary with
substantial enforcement authority, including the ability to
impose monetary penalties and to terminate contracts with
HMOs that fail to comply with statutory or regulatory
requirements. See 111 Stat. 323-325 (Section 1857(g) and (h),
to be codified at 42 U.S.C. 1395w-27(g) and (h)). The new
procedures also provide the Secretary with substantial
flexibility. Although the district court and the court of
appeals read Section 1395mm(c) as barring the Secretary
from contracting (or renewing a contract) with any HMO
that failed substantially to comply with Medicare require-
ments, see App. 19a-20a, 54a (citing 42 U.S.C. 1395mm(c)),
the new law omits the language upon which those courts
relied and does not otherwise provide that termination is a
mandatory consequence of non-compliance.¹
Finally, the new law eliminates the Secretary's authority
to renew risk-sharing contracts under Section 1395mm(g)-
the principal statutory provision at issue in the district
court-as of January 1, 1999. 111 Stat. 328 (amending Sec-
tion 1876 by adding new subsection (k)(1), to be codified at 42
U.S.C. 1395mm(k)(1)).² We have been informed by HHS
1 Section 1395mm(e)(1) provided that "[t]be Secretary may not enter
into a contract under this section with an eligible organization unless it
meets the requirements of this subsection." (emphasis added). The new
law merely provides that the Secretary's contracts with healthcare
organizations under the Medicare+Choice program "shall provide that the
organization agrees to comply with the applicable requirements and
standards of [Part C] and the terms and conditions of payment as provided
for in [Part C]." 111 Stat. 319 (Section 1857(a), to be codified at 42 U.S.C.
1395w-27(a)).
2 New subsection (k)(1) states that, "on or after the date standards
for Medicare+Choice organizations and plans are first established
the Secretary shall not enter into any risk-sharing contract under this
section," and further provides that "for any contract year beginning on or
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10
that all risk-sharing contracts entered into under Section
1395mm(g) expired effective December 31, 1998, and that no
such contracts were renewed for 1999.⁸
b. On June 26, 1998-while the appeal to the Ninth
Circuit was still pending-the Secretary issued interim
final regulations implementing the new Medicare Part C
Medicare+Choice program. See 63 Fed. Reg. at 34,968 (rele-
vant portions reproduced at App. 110a-139a). The reg-
ulations became applicable on January 1, 1999, at the
beginning of the initial contracting cycle for Medicare+
Choice HMOs. See 63 Fed. Reg. at 34,968, 34,969, 34,976,
52,610.
Building on new Medicare Part C's enhanced statutory
protections for Medicare beneficiaries, the Secretary's regu-
lations require participating HMOs to issue prompt and
understandable initial decisions and reconsideration de-
cisions. While the BBA provides no statutory deadline for
initial HMO decisions, and the Section 1395mm regulations
before the district court allowed delays of up to 60 days, the
Secretary's new regulations require HMOs to make initial
decisions in non-urgent cases "as expeditiously as the
[beneficiary's] health condition requires, but no later than 14
calendar days after the date the organization receives the
request." 63 Fed. Reg. at 35,108 (adding 42 C.F.R.
422.568(a)). While the BBA (like the regulations before the
district court) sets 60 days as the maximum time limit for
resolution of ordinary reconsideration requests, the Secre-
tary's new regulations now require that such decisions be
after January 1, 1999, the Secretary shall not renew any such contract."
111 Stat. 828 (to be codified at 42 U.S.C. 1395mm(k)(1).
8 We have been informed by HHS that it granted a temporary
extension of a Section 1395mm(g) contract with a New Jersey HMO that
became insolvent and is currently being operated by the State. The
temporary extension-which proved necessary to permit a transition of
enrollees to new, qualifying Medicare+Choice plans or traditional fee-for-
service Medicare-will not extend beyond February 28, 1999.
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made within 30 days in non-urgent cases. Id. at 35,110
(adding 42 C.F.R. 422.590(a)(2)). Finally, all HMO notices
informing enrollees of denials of requested services must,
among other things, state "the specific reasons for the denial
in understandable language," and inform enrollees of their
reconsideration and appeal rights. Id. at 35,108 (adding 42
C.F.R. 422.568(d)(1)); see also 111 Stat. 293 (Section
1852(g)(1) (B), to be codified at 42 U.S.C. 1895w-22(g)(1)(B)).
The regulations before the district court, in contrast, re-
quired a statement of reasons, but did not specifically
require that it be understandable to ordinary people. 42
C.F.R. 417.608 (1996); see also App. 46a-50a (criticizing prior
HMO notices).
Unlike the Section 1395mm regulations the district court
found inadequate, the new Medicare+Choice regulations also
address the need for expedition in urgent cases. Consistent
with the BBA itself, the Medicare+Choice regulations pro-
vide that, where delays may threaten the beneficiary's
health, HMOs must make initial and reconsideration deci-
sions within 72 hours of the relevant request. See 63 Fed.
Reg. at 35,108-35,109 (adding 42 C.F.R. 422.572 pertaining to
initial decisions); id. at 35,110 (adding 42 C.F.R. 422.590(d)
pertaining to reconsideration). Moreover, where an enrollee
is receiving authorized in-patient hospital care, the Secre-
tary's new regulations provide that the HMO may not decide
that the care is unnecessary absent the concurrence of the
physician responsible for the in-patient treatment. Id. at
35,112 (adding 42 C.F.R. 422.620(b)). Even then, the enrollee
may seek immediate review by an independent peer review
organization, and the care may not be discontinued until that
organization issues its decision. Id. at 35,112-35,113 (adding
42 C.F.R. 422.622).
The new regulations address other aspects of the HMO
decisional process as well. Among other things, they require
HMOs to afford enrollees seeking reconsideration "a rea-
sonable opportunity to present evidence and allegations of
10:07
12
fact or law, related to the issue in dispute, in person as well
as in writing." 63 Fed. Reg. at 35,110 (adding 42 C.F.R.
422.586). And, implementing the BBA, they provide that
reconsideration decisions must be made by qualified medical
personnel in appropriate circumstances, and by personnel
other than the individuals who made the initial decision. Id.
at 35,111 (adding 42 C.F.R. 422.590(g)(1) and (2)).4
4. On August 12, 1998-after enactment of the new
Medicare Part C, and after the Secretary's issuance
of implementing regulations-the court of appeals affirmed
the judgment of the district court. App. 1a-21a The court of
appeals declined to consider the case in light of the inter-
vening revisions to the regulations that had been before the
district court. See id. at 20a. Instead, the court of appeals
addressed the case as if the original regulations before the
district court were still in place.⁵
The court of appeals held that a private HMO's decision to
reduce or deny services constitutes government action. The
court explained that, to establish government action, the
plaintiff must show that "there is a sufficiently close nexus
4 The statute and regulations also provide mechanisms for
monitoring and enforcing HMO compliance with grievance and appeal
requirements. The statute, for example, requires HMOs to establish and
maintain provisions for monitoring and evaluating both clinical and
administrative aspects of health plan operations, and the regulations make
clear that such "quality assurance" programs must monitor and evaluate
the grievance and appeal process. See 111 Stat. 291 (Section 1852(e), to be
codified at 42 U.S.C. 1895w-22(e)); 63 Fed. Reg. at 35,082 (adding 42
C.F.R. 422.152). In addition, an HMO's failure to comply substantially
with appeal and grievance provisions is potentially 8 ground for terminat-
ing its contract. Id at 35,104 (adding 42 C.F.R. 422.510).
5 The statutory amendments were enacted shortly before the
government filed its reply brief in the court of appeals. The government
accordingly informed the Court that the statute would later modify the
requirements for HMO grievance and appeal procedures, but that it had
not yet taken effect and therefore did not, at that time, bear on the issues
presented. See Govt C.A. Reply Br. 10 n9.
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13
between the State and the challenged action of the regulated
entity 80 that the action of the latter may be fairly treated as
that of the State itself." App. 8a (quoting Blum V. Yaretsky,
457 U.S. 991, 1004 (1982)). It further noted that, while
government regulation is not by itself sufficient to attribute
private action to the government, "[g]overnment action
exists if there is a symbiotic relationship with a high degree
of interdependence between the private and public parties
such that they are joint participant[s] in the challenged
activity." Id. at 8a-9a (quoting Burton V. Wilmington Park-
ing Auth, 365 U.S. 715, 725 (1961)).
Applying those standards, the court held that "HMOs and
the federal government are essentially engaged as joint
participants to provide Medicare services such that the
actions of HMOs in denying medical services to Medicare
beneficiaries and in failing to provide adequate notice may
fairly be attributed to the federal government." App. 9a-10a.
The Ninth Circuit reasoned that the Secretary "extensively
regulates the provision of Medicare services by HMOs"; the
HMOs must "comply with all federal laws and regulations";
the Secretary pays HMOs "for each enrolled Medicare
beneficiary (regardless of the services provided)"; and the
"federal government has created the legal framework-the
standards and enforcement mechanisms-within which
HMOs" must operate. Id. at 10a. The court of appeals
rejected the Secretary's argument that HMO decisions to
deny or reduce treatment are private determinations, made
without government compulsion or influence. It held that, in
this context, such decisions "are more accurately described
as *** interpretations of the Medicare statute" rather
"than * * * * medical judgments," and thus could be
properly attributed to the government. Id. at 11a. Turning
to the due process question, the court of appeals held that,
under the balancing test established by Mathews V. Eld-
ridge, 424 U.S. 319 (1976), the process HMOs provided to
Medicare beneficiaries under Section 1395mm and the
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14
Secretary's pre-April 1997 regulations was less than their
constitutional due, largely for the reasons given by the
district court. App. 12a-18a.
The court of appeals also rejected the Secretary's chal-
lenge to the nature and scope of the injunctive remedy
imposed. Because Congress had delegated implementation
of Section 1395mm to the Secretary, she argued that the
district court should have remanded the matter to her for an
expedited rulemaking to cure the identified ills; and she
disputed the appropriateness of the district court's three-
year injunction, which prescribed detailed deadline, notice,
hearing, and proceeding requirements. The Ninth Circuit
declined to afford any deference to the Secretary's views of
appropriate process, App- 13a n.3, and rejected her request
for a remand, id. at 18a & n.4.
5. The Secretary sought rehearing and rehearing en
banc. The petition emphasized that the new statute and
implementing regulations contain substantially different and
more detailed hearing and grievance procedures than those
considered in the panel's decision. It asserted that the
court's holding, by effectively "constitutionalizing" HMO
decisions, impaired the ability of Congress and the Secretary
to tailor procedural safeguards to the complex and varied
relations between HMOs and their patients. And it urged
the court of appeals either to rehear the case or to vacate the
injunction and remand the matter to the district court with
instructions to consider the new statute and implementing
regulations. Gov't Pet. for Reh'g 9-19. The court of appeals
denied the petition. App. 22a-23a
REASONS FOR GRANTING THE PETITION
Affirming the district court's issuance of a detailed and
highly prescriptive nationwide injunction, the Ninth Circuit
in this case held (1) that Health Maintenance Organizations
and similar healthcare organizations (HMOs) engage in
government action when they deny Medicare enrollee re-
0100
15
quests for services, and (2) that the HMO procedures
required by the Secretary's now statutorily-superseded
regulations under 42 U.S.C. 1395mm were insufficient to
meet the requirements of due process. Those rulings and
their practical consequences are of broad significance in the
administration of the Medicare Program and ordinarily
would warrant plenary review by this Court. The legal
issues presented by this case, however, are similar to those
before this Court in American Manufacturers Mutual
Insurance Co., et al. V. Sullivan, et al., No. 97-2000 (argued
Jan. 19, 1999). Accordingly, we suggest that the petition in
this case be held pending the Court's decision in Sullivan.
Moreover, shortly after the district court ruled in this
case, Congress comprehensively revised Medicare's treat-
ment of HMOs by enacting an entirely new Part C of the
Medicare Act, introducing the new Medicare+Choice pro-
gram. Those new provisions, and the Secretary's regulations
implementing them, provide dramatically greater procedural
protections for beneficiaries who choose to enroll in HMOs;
they eliminate the asserted defects that prompted the
request for judicial relief in this case; and they deprive 42
U.S.C. 1395mm(g), upon which the district court and the
court of appeals relied, of any future effect. As a result of
those changes, the challenge to the regulations adjudicated
by the district court and court of appeals is now moot.
Accordingly, we ask that, after holding the petition pending
this Court's decision in Sullivan, the Court vacate the
judgment of the court of appeals and remand the case with
directions to (1) vacate the judgment of the district court and
(2) remand the case to that court for consideration of any
challenges respondents might raise to the new statute and
its implementing regulations in light of the decision in
Sullivan.
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Alternative
16
A. The Petition Should Be Held Pending This Court's
U
Decision In American Manufacturers Mutual In-
surance Co., et al. V. Sullivan, et al., No. 97-2000
(argued Jan. 19, 1999)
Government action and due process questions similar to
those raised in this case are currently before the Court in
American Manufacturers Mutual Insurance Co., et al. V.
Sullivan, et al., No. 97-2000 (argued Jan. 19, 1999). There,
the Third Circuit held that payment decisions made by
workers' compensation insurers, as permitted by state law,
were both attributable to the State and inconsistent with
due process. See Sullivan V. Barnett, 139 F.3d 158 (1998).
The court of appeals decisions in Sullivan and in this case
are remarkably similar on the government action issue.
Neither decision examines the "three principles" identified
by this Court for determining whether otherwise private
conduct "is governmental in character": (1) "the extent to
which the actor relies on governmental assistance," or
accedes to the government's coercive powers or encourage-
ment, in effectuating its will, (2) "whether the actor is per-
forming a traditional governmental function," and (3)
"whether the injury caused is aggravated in a unique way by
the incidents of governmental authority." Edmonson V.
Leesville Concrete Co., 500 U.S. 614, 621-622 (1991); see also
Blum V. Yaretsky, 457 U.S. 991, 1004 (1982) (government
"normally can be held responsible for a private decision only
when it has exercised coercive power or has provided such
significant encouragement *** that the choice must in
law be deemed to be that of the [government]"). Rather,
both predicate a finding of government action largely on the
government's regulatory role. Compare Sullivan, 139 F.3d
at 168, with App. 9a-10a.
In concluding that medical treatment decisions by private
HMOs concerning their Medicare-beneficiary members are
properly attributed to the federal government, the Ninth
Circuit appears to have relied primarily on the "rather vague
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generalization," Blum, 457 U.S. at 1010, that there was a
"high degree of interdependence" and a "symbiotic relation-
ship," App. 9a, that made the government "a joint partici-
pant in the challenged activity." Burton V. Wilmington
Parking Auth, 365 U.S. 715, 725 (1961). The facts the Ninth
Circuit relied upon for that conclusion, however, are largely
common to heavily regulated industries. See App. 10a
(relying on the facts that the "Secretary extensively
regulates," that "HMOs are required *** to comply with
all federal laws," that the Secretary is obligated to ensure
that "HMOs provide *** meaningful *** procedures,"
that the "federal government has created the legal frame-
work," and that the Secretary has adjudicatory authority
with respect to HMO decisions). Compare Jackson V. Met-
ropolitan Edison Co., 419 U.S. 345, 357 (1974); see id. at 350.
Significantly here, the relationship between an HMO and
its Medicare-beneficiary members is the product of a private
choice by those members. Medicare beneficiaries may
choose among providers and forms of coverage, and the gov-
ernment neither requires them to enroll in an HMO nor
precludes them from dis-enrolling. In this respect, the
HMO's relationship with its Medicare-beneficiary members
resembles its relationship with members who elect HMO
coverage under employer-sponsored or other private health
plans. With respect to each, the HMO simply determines
what treatment is appropriate under its professional and
contractual obligations, without government participation or
assistance.⁶ And although money is paid out of the Medicare
6
Indeed, the first sentence of the Medicare statute prohibits the
"exercise [of] any" governmental "supervision or control over the practice
of medicine or the manner in which medical services are provided." 42
U.S.C. 1395. In Blum V. Yaretsky, the Court held that the exercise of
ordinary medical judgment is not state action, even where it may affect
eligibility for government benefits. Although the Ninth Circuit sought to
distinguish Blum by characterizing HMO determinations as more in the
nature of interpretations of the Medicare Act, rather than medical
18
Trust Funds to cover the flat monthly rate charged for the
Medicare beneficiary's enrollment in the HMO, the financial
consequences of a determination by the HMO to furnish or
deny particular services to that beneficiary once he has
enrolled are borne by the HMO alone.⁷
On the merits of the due process issue, the Ninth Circuit
rejected the Secretary's contention that her view of the
appropriate and meaningful procedures should be accorded
substantial weight, declaring that there is "nothing in
Mathews V. Eldridge or subsequent cases to suggest that
such is necessary or advisable." App. 13a n.3. That was
error. The Court expressly stated in Mathews V. Eldridge,
424 U.S. 319, 349 (1976), that, "[i]n assessing what process is
due * * substantial weight must be given to the good-
faith judgments of the individuals charged by Congress with
the administration of social welfare programs that the proce-
judgments, see App. 11a, the primary criterion employed by HMOs in this
context-whether medical services are "reasonable and necessary," 42
U.S.C. 1395y(a)-essentially requires an exercise of medical, not legal
judgment. The complaint in this case, moreover, demonstrates that the
named respondents seek to challenge medical judgments. C.A. E.R. 10-11,
1 29 (physical therapy denied because patient could not follow therapeutic
directions), 12-131 40-41 (failure to prescribe adequate pain medication
or order physical therapy), 13-15, " 48-54 (skilled nursing care found not
medically necessary), 16, 1 62 (speech therapy denied because it would not
be effective).
7
In Blum, the Court rejected the contention that decisions made by
physicians and nursing homes were attributable to the State, despite
"state subsidization of the operating and capital costs of the facilities" and
coverage for "the medical expenses of more than 90% of the patients." 457
U.S. at 1011. That the government pays for coverage neither encourages
HMOs to deny requests for treatment, nor prevents the financial impact of
HMO decisions from being visited exclusively on the HMO. If the fact
that the government pays for coverage were a sufficient basis for
attributing HMO conduct to the government, HMOs providing services to
government employees under the Federal Employees Health Benefits Act
of 1959, 5 U.S.C. 8901 et seq., would also all be government actors.
18:00
19
dures they have provided assure fair consideration." For
similar reasons, the imposition of a detailed judicial injunc-
tion providing new requirements, rather than a remand
order directing the Secretary to promulgate new procedures
through a participatory and fully public rulemaking process,
was error as well. Congress delegated implementation of
42 U.S.C. 1395mm(g) and the creation of "meaningful" proce-
dures in the first instance to the Secretary, not to the courts.
Cf. SEC V. Chenery Corp., 332 U.S. 194, 199 (1947) (where
agency action is set aside, "the [agency is] bound to deal with
the problem afresh, performing the function delegated to it
by Congress"); Florida Power & Light Co. V. Lorion, 470
U.S. 729, 744 (1985) (proper course where agency errs is to
"remand to the agency").
The arguments that the Sullivan petitioners make in
support of reversal there apply with equal force in this case
as well. Indeed, so closely related are the cases that lead
8 The district court also exceeded its authority in ordering the
Secretary to terminate contracts with HMOs that fail to comply with the
procedures it imposed. See Blessing V. Freestone, 520 U.S. 329, 343-344
(1997).
9
See 97-2000 Pet. Br. at 20-21 (arguing that State does not influence
insurer's non-payment decision), 17-22 (arguing that insurer decisions are
not governmental benefits determinations), 22-25 (no unique aggravation
of injury by government), 26-32 (regulated nature of industry does not
render private action attributable to State). And there are clear similari-
ties between the due process arguments as well For example, in this case
the lower courts implicitly concluded that respondents could have a
constitutionally-protected property interest in receiving Medicare ser-
vices before their legal entitlement to those services was established, and
that pre-deprivation processes were required in certain contexts, App.
63a. Petitioners in Sullivan challenge similar conclusions reached by the
court of appeals there. See 97-2000 Pet Br. 35-38 (arguing that due
process does not apply to disputed applications for treatment where the
legal entitlement to the treatment, and thus a property interest therein,
has not been established), 42-44 (arguing that pre-deprivation process is
not required); see also Lyng V. Payne, 476 U.S. 926, 942 (1986) (noting that
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20
counsel in this case filed an amicus brief in Sullivan, em-
phasizing the potential impact of the Court's decision there
on the Medicare program at issue here.¹⁰ For the foregoing
reasons, we suggest that the petition in this case be held
pending the decision in Sullivan.
B. The Judgments Below Should Be Vacated And
The Case Remanded To The District Court For Con-
sideration Of Intervening Statutory and Regulatory
Changes
Absent the obvious similarities between this case and
Sullivan, the Ninth Circuit's decision in this case ordinarily
would warrant plenary review by this Court at the present
time. It declares unconstitutional the Secretary's implemen-
tation of a major federal statutory program; it affirms a
detailed nationwide injunction requiring the Secretary to
impose certain procedures on participating HMOs; and it
constitutionalizes on a nationwide basis the conduct of hun-
dreds of private healthcare arganizations offering services to
millions of individuals.
On August 5, 1997, however, Congress comprehensively
reformed this area of law-enacting the new Medicare Part
C and establishing the new "Medicare+Choice" program.
See Balanced Budget Act of 1997, Pub. L. No. 105-33,
§§ 4001-4002, 111 Stat. 275-330. The new statute and the
Secretary's regulations promulgated thereunder dramati-
cally expand the procedural and substantive protections
afforded to Medicare beneficiaries who choose to enroll in
private HMOs. Indeed, Congress gave specific attention to
the procedures it considered necessary to protect beneficiary
the Court has not resolved whether "applicants for benefits, as distinct
from those already receiving them, have a legitimate claim of entitlement
protected by the Due Process Clause").
10
See 97-2000 Amici Curiae American Association of Retired Persons,
The Center For Medicare Advocacy, Inc, et al., Br. at 4, 7.
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21
rights, enacting a section of new Medicare Part C entitled
"Benefits and Beneficiary Protections." 111 Stat. 286 (Sec-
tion 1852, to be codified at 42 U.S.C. 1395w-22). Conse-
quently, the new statute and the implementing regulations it
required the Secretary to promulgate now separately
address the alleged deficiencies identified by the lower
courts. See pp. 10-12, supra. Among other things, they
specifically require HMOs to issue understandable notices of
decision, 111 Stat. 293 (Section 1852(g)(1), to be codified at 42
U.S.C. 1395w-22(g)(1); 63 Fed. Reg. 35,108 (1998) (adding 42
C.F.R. 422.568(d)); they provide that medical necessity deci-
sions must be made by qualified medical personnel, 111 Stat.
293 (Section 1852(g)(2)(B), to be codified at 42 U.S.C. 1395w-
22(g)(2)(B)); 63 Fed. Reg. at 35,111 (adding 42 C.F.R.
422.590(g)(2)); and they mandate prompt initial decisions
(within 14 days) and reconsideration decisions (within 30
days) in all cases, and expedited decisions (within 72 hours) if
delay could jeopardize the health of the beneficiary. 63 Fed.
Reg. at 35,108-35,110 (adding 42 C.F.R. 422.568(a), 422.572,
422.590(a)-(d)); 111 Stat. 293-294 (Section 1852(g)(2) and (3),
to be codified at 42 U.S.C. 1395w-22(g)(2) and (3)). 11 More-
over, HMO determinations adverse to the enrollee are sub-
ject to automatic review by an independent third party act-
ing as the Secretary's agent, 111 Stat. 294 (Section
1852(g)(4), to be codified at 42 U.S.C. 1395w-22(g)(4)); 63
Fed. Reg. at 35,111 (adding 42 C.F.R. 422.592), and dis-
satisfied beneficiaries may obtain a hearing before an ALJ
11 The district court's concern that HMO physicians might face
disincentives to assisting enrollees in pursuing their requests, App. 49a;
see id at 62a (enjoining HMO retaliation against healthcare providers), is
addressed by the new statute and regulations as well See 111 Stat. 295
(Section 1852(j)(3), to be codified at 42 U.S.C. 1895w-22(j)(3)); see, e.g., 63
Fed. Reg. at 85,108 (adding 42 C.F.R. 422.570(f)) (barring punitive action
against physician for assistance in requesting expedition).
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22
and judicial review, as provided in and subject to the limits
set forth in the statute. See p. 8-9, supra."
The legal regime that respondents challenged and the
district court and Ninth Circuit reviewed thus has been
superseded by a new statutory framework and new regu-
lations fleshing out that framework. No court has passed on
the constitutional sufficiency of the new procedures or their
implementation. As a result, the law has "been sufficiently
altered" pending appeal "so as to present a substantially dif-
ferent controversy than the one the [lower courts] originally
decided." Northeastern Fla Chapter of the Associated Gen.
Contractors V. City of Jacksonville, 508 U.S. 656, 662 n.3
(1993); id. at 670-671 (O'Connor, J., dissenting). See also
App. 66a (district court recognition that "on appeal much of
the March 3, 1997 Order might be moot" because "of other
efforts on the part of state and federal legislatures [to]
address[] the same issues addressed by this Court"); see also
id. at 68a ("the entire case may become largely moot" if even
the April 1997 rule changes were "implemented without
delay").
12 Although these new provisions address most areas covered by the
district court's injunction, they take a fundamentally different approach to
several key issues. For example, the Secretary's expedition provisions
are more favorable to beneficiaries inasmuch as they require recon-
sideration decisions within three calendar days, see P. 10, supra, whereas
the district court's order requires such decisions in three working days,
App. 62a While the district court required that detailed written notices of
initial decisions be provided within five days even where the beneficiary's
health is not in imminent jeopardy, and Congress specified no specific time
frame in such cases, see HR Conf. Rep. No. 217, 105th Cong, 1st Sess. 605
(1997) (noting that Congress left that issue to the Secretary), the Secre-
tary selected a 14-day deadline, 63 Fed Reg. at 85,108 (adding 42 C.F.R.
422.568(a)). Finally, although the Secretary has required certain in-
patient hospital services to continue during the pendency of an admin-
istrative appeal, she did not extend similar requirements to a broad, un-
specified range of "acute care" services. Compare 63 Fed. Reg. at 35,112-
35,118 (adding 42 C.F.R. 422.620(b), 422.622), with App. 63a.
02/09/99
18:07
0202 9100
23
Under circumstances such as these, the Court has "set
aside the judgment of the Court of Appeals with direction to
enter a new judgment setting aside the order of the District
Court and remanding to that court for such further pro-
ceedings as may be appropriate in light of the supervening
event." McLeod V. General Electric, 385 U.S. 533, 535 (1967)
(per curiam); see, e.g., Calhoun V. Latimer, 377 U.S. 263, 264
(1964) (per curiam) ("vacat[ing] the judgment and remand-
[ing] the cause to the District Court for further proceedings"
to consider "the nature and effect" of a supervening change
in school board policy); Heckler V. Lopez, 469 U.S. 1082
(1984) (mem.) (vacating judgment and remanding case "to
the *** Court of Appeals *** to be remanded to the
*** District Court" for appropriate action in light of new
legislation); see also United States Dep't of the Treasury V.
Galioto, 477 U.S. 556, 559-560 (1986) (vacating judgment on
direct appeal and remanding to district court because a new
"enactment significantly alter[ed] the posture of th[e] case").
As the Court explained in Lewis V. Continental Bank Corp.,
494 U.S. 472, 482 (1990), "in instances where mootness is
attributable to a change in the legal framework governing
the case, and the plaintiff may have some residual claim
under the new framework that was understandably not
asserted previously, our practice is to vacate the judgment
and remand for further proceedings in which the parties
may, if necessary, amend their pleadings or develop the
record more fully."
In fact, it may be that the new statute renders moot not
merely the appeal, but the entire case as well. Certainly the
subject matter on which the district court and the Ninth
Circuit focused their analysis-Section 1395mm(g), the
Secretary's implementing regulations, and HMO conduct
thereunder, see App. 35a-40a, 46a-50a (district court); id. at
3a-5a, 13a (court of appeals)-no longer forms a legitimate
basis for judicial relief. The new statute eliminates the
Secretary's authority to enter into risk-sharing contracts
02/09/99
18:07
0202 514 8768
24
under Section 1395mm(g), and no such contracts were
renewed for 1999. See pp. 9-10, & nn.2-3, supra. As a result,
the regulations and notice and appeal procedures that the
district court found inadequate are without force or effect;
the protections required by the new Medicare Part C and
Medicare+Choice control instead. Princeton Univ. V.
Schmid, 455 U.S. 100, 103 (1982) (per curiam) (where "the
regulation at issue is no longer in force" and the "lower
court's opinion" does not "pass on the validity of the revised
regulation," the "case has lost its character as a present, live
controversy of the kind that must exist if we are to avoid
advisory opinions on abstract questions of law")." More-
over, the conduct that respondents challenged and the lower
courts found unconstitutional (e.g., the allegedly inadequate
notice and time limits) are now addressed by the new statute
and regulations. See Associated General Contractors, 508
U.S. at 663 n.3 (cases moot where "the statutes at issue
*** were changed substantially, and *** there was
therefore no basis for concluding that the challenged conduct
13 The change in the statute, moreover, eliminates the district court's
and the court of appeals' rationale-their ratio decidendi-for prohibiting
the Secretary from entering into or renewing B contract with any HMO
that violates the procedural requirements those courts believed to be
required by Section 1395mm See App. 63a To justify that prohibition,
the district court and court of appeals both relied on Section
1395mm(c)(1)s declaration that "[t]he Secretary may not enter into a
contract under this section with an eligible organization unless it meets
the requirements of this subsection." Id. at 20a, 54a (quoting 42 U.S.C.
1895mm(c)(1)). See also id. at 54a-55a (justifying additional procedural
requirements by declaring that the Secretary's failure to impose them in
her HMO contracts is a "violation of 42 U.S.C. $ 1895mm(c)(1)"); id at 55a-
56a (similar). The BBA, however, omits the prohibitory language of
Section 1395mm(c)(1) upon which those courts relied, and nowhere
suggests that termination and non-renewal are mandatory consequences
of HMO non-compliance. See p. 9 & n.1, supra. It thus wholly eliminates
the statutory provision upon which both lower courts expressly rested
their remedial decisions.
RR/RO/Z0
19:07
ROIR TC 7070
25
was being repeated"); Bowen V. Kizer, 485 U.S. 386, 387
(1988) (per curiam) (new legislation that provides relief
sought by the plaintiffs renders lawsuit moot). 14
Of course, if the entire case (rather than just the appeal)
were indisputably moot, the proper disposition would be to
remand the case with a direction that the complaint be
dismissed. United States V. Munsingwear, Inc., 340 U.S. 36,
39-40 (1950). Given the possibility that the district court
may need to dispose of residual claims on remand, see, e.g.,
C.A. E.R. 21 (request for attorney's fees), and because
respondents might seek to amend their complaint to chal-
lenge the constitutionality of the new statute and the regula-
tions implementing the new statute, see, e.g., Calhoun, 377
U.S. at 264; Lewis, 494 U.S. at 482, the Court should neither
direct nor preclude dismissal but rather permit the district
court to conduct such "further proceedings as may be appro-
priate in light of" the statutory and regulatory reforms.
McLeod, 385 U.S. at 535. See also Burlington Truck Lines,
Inc. V. United States, 371 U.S. 156, 172 (1962) (when con-
fronted with intervening facts, court of appeals should not
review administrative agency decision but should vacate
order and remand to agency for further consideration in light
of changed conditions). The district court could then under-
take any such further proceedings in light of both the new
statute and the new regulations as well as this Court's
decision in Sullivan.
14 See also United Transp. Union V. State Bar, 401 U.S. 576, 584
(1971) ("An injunction can issue only after the plaintiff has established that
the conduct sought to be enjoined is illegal-and that the defendant, if not
enjoined, will engage in such conduct."); Legal Assistance for Vietnamese
Asylum Seekers V. Department of State, 45 F3d 469, 472 (D.C. Cir. 1995)
(Plaintiffs are "certainly not entitled to prospective relief based on a no
longer effective version of a later amended regulation.").
02/09/99
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USG/
26
CONCLUSION
The Court should hold the petition for a writ of certiorari
pending the decision in American Manufacturers Mutual
Insurance Co., et al. V. Sullivan, et al, No. 97-2000 (argued
Jan. 19, 1999). The Court should then grant the petition for a
writ of certiorari, vacate the judgment of the court of ap-
peals, and remand to the court of appeals with instructions to
(1) vacate the judgment of the district court and (2) remand
the case to the district court for consideration of Sections
4001 and 4002 of the Balanced Budget Act of 1997 and the
regulations of the Secretary of Health and Human Services
implementing those provisions in light of the Court's de-
cision in Sullivan.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
HARRIET S. RABB
General Counsel
Department of Health and
Human Services
FEBRUARY 1999
Government action and due process questions similar to those
raised in this case are currently before the Court in American
Manufacturers Mutual Insurance Co., et al. V. Sullivan, et al.,
No. 97-2000 (argued Jan. 19, 1999). There, the Third Circuit
held that payment decisions made by workers' compensation
insurers, as permitted by state law, were both attributable to
the State and inconsistent with due process. See Sullivan V.
Barnett, 139 F.3d 158 (3d Cir. 1998).
The court of appeals decisions in Sullivan and in this case
are remarkably similar on the government action issue. Neither
decision examines the "three principles" identified by this Court
for determining whether otherwise private conduct "is
governmental in character": (1) "the extent to which the actor
relies on governmental assistance," or accedes to the
government's coercive powers or encouragement, in effectuating
its will, (2) "whether the actor is performing a traditional
governmental function," (3) and "whether the injury caused is
aggravated in a unique way by the incidents of governmental
authority." Edmonson V. Leesville Concrete Co., 500 U.S. 614,
621-622 (1991) ; see also Blum V. Yaretsky, 457 U.S. 991, 1004
(1982) (government "normally can be held responsible for a
private decision only when it has exercised coercive power or has
provided such significant encouragement * * * that the choice
must in law be deemed to be that of the [government]") Rather,
both predicate a finding of government action largely on the
government's regulatory role. Compare Sullivan, 139 F.3d at 168,
with App. 9a-10a.
2
In concluding that medical treatment decisions by private
HMOs concerning their Medicare-beneficiary members are properly
attributed to the federal government, the Ninth Circuit
appears
to have relied primarily on the "rather vague generalization, "
Blum, 457 U.S. at 1010, that there was a "high degree of
interdependence" and a "symbiotic relationship, n App. 9a, that
made the government "a joint participant in the challenged
activity." Burton V. Wilmington Parking Auth., 365 U.S. 715, 725
(1961). The facts the Ninth Circuit relied upon for that
conclusion, however, are largely common to heavily regulated.
industries. See App. 10a (relying on the facts that the
"Secretary extensively regulates, n that "HMOs are required
*
to comply with all federal laws, " that the Secretary is obligated
to ensure that "HMOs provide
*
meaningful
*
procedures, "
that the "federal government has created the legal framework,"
and that the Secretary has adjudicatory authority with respect to
HMO decisions). Compare Jackson, 419 U.S. at 357; see id. at
350.
Significantly here, the relationship between an HMO and its
Medicare-beneficiary members is the product of a private choice
by those members. Medicare beneficiaries may choose among
providers and forms of coverage, and the government neither
requires them to enroll in an HMO nor precludes them from dis-
enrolling. In this respect, the HMO's relationship with its
Medicare-beneficiary members resembles its relationship with
members who elect HMO coverage under employer-sponsored or other
3
This truly def sounds contribution
like
a
private health plans. With respect to each, the HMO simply
determines what treatment is appropriate under its professional
and contractual obligations, without government participation or
assistance.
1 And although money is paid out of the Medicare
Trust Funds to cover the flat monthly rate charged for the
Medicare beneficiary's enrollment in the HMO, the financial
consequences of a determination by the HMO to furnish or deny
particular services to that beneficiary once he has enrolled are
borne by the HMO alone. 2
On the merits of the due process issue, the Ninth Circuit
rejected the Secretary's contention that her view of the
appropriate and meaningful procedures be accorded substantial
weight, declaring that there is "nothing in Mathews V. Eldridge
or subsequent cases to suggest that such is necessary or
I
Indeed, the first sentence of the Medicare statute prohibits the "exercise [of] any"
governmental "supervision or control over the practice of medicine or the manner in which medical
services are provided." 42 U.S.C. 1395. In Blum V. Yaretsky, the Court held that the exercise of
ordinary medical judgment is not state action, even where it may affect eligibility for government
benefits. The Ninth Circuit sought to distinguish Blum by characterizing HMO determinations as
more in the nature of interpretations of the Medicare Act, rather than medical judgments, see App.
11a, but the primary criterion employed by HMOs in this context -- whether medical services are
"reasonable and necessary," 42 U.S.C. 1395y(a) - essentially requires an exercise of medical, not
legal judgment. The complaint in this case, moreover, demonstrates that respondents seek to
challenge medical judgments. C.A.E.R. 10-11 (129) (physical therapy denicd because patient could
not file therapeutic directions), 12-13 (11 40-41) (failure to prescribe adequate pain medication or
order physical therapy), 13-15 (11 48-54) (skilled nursing care found not medically necessary), 16 (1
62) (speech therapy denied because it would not be effective).
in
In Blum, the Court rejected the contention that decisions made by physicians and nursing
homes were attributable to the State, despite "state subsidization of the operating and capital costs
of the facilities" and coverage for "the medical expenses of more than 90% of the patients." 457 U.S.
at 1011. That the government pays for coverage neither encourages HMOs 10 deny requests for
treatment, nor prevents the financial impact of HMO decisions from being visited exclusively on the
HMO. If the fact that the government pays for coverage were a sufficient basis for attributing HMO
(conduct to the government, HMOs providing services to government employees under the Federal
Employees Health Benefits Act of 1959, U.S.C. 8901 et seq., would also all be government actors.
4
advisable. App. 13a n.3. That was error. The Court expressly
stated in Mathews V. Eldridge, 421 U.S. 319, 349 (1976), that,
"[i]n assessing what process is due * * * substantial weight must
be given to the good-faith judgments of the individuals charged
by Congress with the administration of social welfare programs
that the procedures they have provided assure fair
consideration." For similar reasons, the imposition of a
detailed, judicial injunction providing new requirements, rather
than a remand order directing the Secretary to promulgate new
procedures through a participatory and fully public rulemaking
process, was error as well. Congress delegated implementation of
42 U.S.C. 1395mm(g) and the creation of "meaningful" procedures
in the first instance to the Secretary, not to the courts. Cf.
SEC V. Chenery, 332 U.S. 194, 199 (1947) (where prior agency
action is set aside, "the [agency is] bound to deal with the
problem afresh, performing the function delegated to it by
Congress. "); Florida Power & Light Co. V. Lorion, 470 U.S. 729,
744 (1985) (proper course where agency errs is to "remand to the
agency") 3
The arguments that the Sullivan petitioners make in support
of reversal there apply with equal force in this case as well.4
3 The district court also exceeded its authority in ordering the Secretary to terminate contracts
with HMOs that fail to comply with the procedures it imposed. See Blessing V. Freestone, 520 U.S.
329, 343-344 (1997).
'See 97-2000 Pct. Br. at 20-21 (arguing that State does not influence insurer's non-payment
decision), 17-22 (arguing that insurer decisions are not governmental benefits determinations), 22-25
(по unique aggravation of injury by government), 26-32 (regulated nature of industry does not render
private action attributable to State). And there are clear similarities between the due process
arguments as well. For example, in this case the lower courts implicitly concluded that respondents
5
Indeed, so closely related are the cases that lead counsel in
this case filed an amicus brief in Sullivan, emphasizing the
potential impact of the Court's decision there on the Medicare
program at issue here. = For the foregoing reasons, we suggest
that the petition in this case be held pending the decision in
Sullivan.
could have a constitutionally-protected property interest in receiving medical services before their
legal entitlement to those services was established, and that pre-deprivation processes were required
in certain contexis, App. 63a. Petitioners in Sullivan challenge similar conclusions reached by the
court of appeals there. See 97-2000 Pet. Br. at 35-38 (arguing that due process does not apply to
disputed applications for treatment where the legal entitlement to the treatment, and thus a property
interest therein, has not been established), 42-44 (arguing that pre-deprivation process is not
required); sce also Lyng V. Payne, 476 U.S. 926, 942 (1986) (noting that the Court has not resolved
whether "applicants for benefits, as distinct from those already receiving them, have a legitimate claim
of entitlement protected by the Due Process Clause").
; See Amici Curiae American Association of Retired Persons, The Center For Medicare
Advocacy, Inc., et al., Br. at 4, 7
FEB-10-99 16:56 From:OGC IMMEDIATE OFFICE
2026907998
T-498 P.01/02 Job-101
DEPARTMENT OF HEALTH AND HUMAN SERVICES
THE GENERAL COUNSEL
PHONE: 202/690-7741
FAX: 202/690-7998
TO:
DATE: 2/10/99
Chros Jenning
DEPARTMENT/OFFICE:
PHONE:
FAX:
456-5557
FROM:
HARRIET S. RABB
GENERAL COUNSEL
COMMENTS:
For use as
buh not on the
gary explained
record. Melisa's
office has the
onla the record
Qs + As
PAGES INCLUDING COVER:
2
FEB-10-99 16:56 From:OGC IMMEDIATE OFFICE
2026907998
1-498 2.02/02 Job-10
DISCUSSION POINTS - NOT ON THE RECORD
THESE ARE NOT THE PUBLIC TALKING POINTS
Q. Why go the Supreme Court now rather than back to the District Court?
A The answer to that question have both Medicare and Medicaid components:
A. Medicare The current posture of the case leaves us having to go to the Supreme
Court or go back to try to define the Constitutional parameters of Medicare in front of a district
court judge. There's a large risk that the court will maintain its prescriptive but inadequate order
on procedural requirements rather than accept or adopt our current regulations, leaving
beneficiaries less well protected than they would be under the Balanced Budget Act (Medicare +
Choice) and our regulations.
We believe that the Supreme Court will not accept this case on the merits. We hope the
Ninth Circuit decision will be vacated, and we'll have a chance to put the case in a posture where
we'll be focused on the new statute [the Balanced Budget Act] and regulations.
A major concern with the Ninth Circuit decision is that the basis for the state action
finding was the amount of federal regulation of the HMO3. At the very least, we want to re-focus
state action debate on the more traditional indicators of state action found in earlier opinions and
that we think will be found in Sullivan. We don't want Grijalva to be used as an argument against
appropriate regulation of HMOs.
This case will not necessarily end up saying there's no constitutional protection for
Medicare beneficiaries. Once the Court decides Sullivan, we will examine whether, under the
Supreme Court's ruling, Medicare HMOs are state actors when they deny, reduce or terminate
benefits. If Sullivan leads us to find that the HMOs are state actors in those situations, we will go
forward under that view.
B. Medicaid Our current Medicaid regulations are not adequate. They offer less
protection to beneficiaries than do our current Medicare regulations. We have an NPRM out now
in our effort to improve Medicaid beneficiary notice and appeal protections. We are working
toward conforming the Medicaid protections with the best and most protective aspect of those in
Medicare.
If we go back to the District Court now, in arguing whether to set aside the court's order
in favor of our Medicare regulations, we will surface some very sensitive issues that have echoes
in Medicaid. One is the type of notice recipients are entitled to when services are denied, reduced
or terminated. Another is the question of in what circumstances benefits and services should
continue during the pendency of an appeal. We aren't ready to have that argument in a court
within the next month and in a context in which the circumstances and interests of Medicaid
beneficiaries are not part of the record before the court.
2/10/99 WED 16:43 FAX 202 690 5673
DHHS/ASPA
001
THUMAN SERVICES USA
DEPARTMENT OF HEALTH & HUMAN SERVICES
4
HEALTH
Lynnette Williams
OF
Deputy Assistant Secretary for Public Affairs
Phone: (202)690-7850
Fax: (202)690-5673
To:
Fax: 456-5557 Phone:
Date:
2/10/99
Total number of pages sent: 5
Comments:
The following Talking Points
and Ps & As address The
Grijalva filing They are
not mach different from
the Ejs As after Robert
Bar 's anticle.
Please call should you
have any additional questions
or concern
200 Independence Avenue, S.W., Bldg. HHH, Room 647-D, Washington, D.C. 20201
02/10/99 WED 16:44 FAX 202 690 5673
DHHS/ASPA
002
TALKING POINTS AND Qs and As
GRIJALVA APPEAL
February 10, 1999
Background: The Administration has appealed a Ninth Circuit ruling in the case of Grijalva V.
Shalala to the Supreme Court. In Grijalva, a nationwide class action suit, the plaintiffs
challenged a since-superceded appeals process that applied when Medicare HMOs decided not
to provide or arrange for services. The Administration's appeal seeks consideration of the effect
of the stronger new Medicare+Choice appeals provisions.
Talking points:
There is no conflict between our decision to appeal the case and our support for the Patients'
Bill of Rights. The Clinton Administration has always supported the right of Medicare
beneficiaries to appeal decisions by their HMOs. That's why we issued regulations to ensure
that Medicare beneficiaries in managed care have fair and prompt appeal rights and called on
Congress to pass a Patients' Bill of Rights to ensure that all Americans have adequate
procedural protections.
We are requesting that the Supreme Court act in this case not because we believe that the
appeal rights of beneficiaries should be diminished, but because we think that it is critical
that Congress and the Administration retain the flexibility to shape appeals procedures that
are tailored to the ever-changing health care environment. We also continue to have
concerns about the repercussions of a ruling that essentially finds that HMOs should be
considered agents of the government.
The original Grijalva case was decided based on statutes and regulations that have since been
replaced by new, stronger statutory and regulatory protections. The Medicare+Choice rules
include some faster and more comprehensive appeal rights than the court-ordered procedures,
without the same burdens and confusion on patients and providers.
02/10/99 WED 16:44 FAX 202 690 5673
DHHS/ASPA
003
GRIJALVA QUESTIONS AND ANSWERS -- February 4, 1999
Q: How can you support the Patients' Bill of Rights and appeal the Grijalva decision? If
you didn't fight, wouldn't this decision give beneficiaries new appeal rights?
A:
The Clinton Administration has always supported the right of Medicare beneficiaries to
appeal decisions by their HMOs. That's why we issued regulations to ensure that Medicare
beneficiaries in managed care have fair and prompt appeal rights and called on Congress to
enact a Patients' Bill of Rights to ensure that all Americans have adequate procedural
protections.
We are requesting that the Supreme Court act in this case not because we believe that the
appeal rights of beneficiaries should be diminished, but because we think that it is critical
that Congress and the Administration retain the flexibility to shape appeals procedures that
are tailored to the ever-changing health care environment. We also continue to have
concerns about the repercussions of a ruling that essentially finds that HMOs should be
considered agents of the government.
The original Grijalva case was decided based on statutes and regulations that have since been
replaced by new, stronger statutory and regulatory protections. The Medicare+Choice rules
include some faster and more comprehensive appeal rights than the court-ordered procedures,
without the same burdens and confusion on patients and providers.
Background: In October 1997, the district court ruled in favor of the plaintiffs. It held that
when a Medicare HMO denies or reduces a beneficiary's services, that decision by the
HMO constitutes governmental action and the beneficiary is therefore entitled to due
process relating to timely notice and appeal rights. Applying those principles to the
Medicare appeals rules then in effect, the court found those rules inadequate and
established its own appeals process as a remedy in the case. In August 1998, the appeals
court affirmed the district court's ruling. Before the court of appeals issued its decision,
Congress enacted the new Medicare Choice program containing new appeals provisions.
These provisions were implemented by new HCFA regulations on June 26, 1998. The
court of appeals declined to consider the effect of these new provisions.
Q: Doesn't the Grijalva ruling give beneficiaries more rights -- and guarantee them under
the constitution?
A:
Our new regulations implementing the new Medicare+Choice law give Medicare
beneficiaries enrolled in HMOs appeal rights that are, in significant ways, superior to what
the Grijalva court ordered. For example, the court would allow plans to take up to 60 days
to make service decisions, while the new HCFA rules limit the time for decision to 14 days.
Medicare beneficiaries with emergency appeals have stronger protections under the new
HCFA rules - Medicare would require these appeals to be decided as fast as the medical
condition of the patient requires, but never any longer than 72 hours. Under the court's
procedures, even these emergency appeals could take up to 5 days.
02/10/99 WED 16:44 FAX 202 690 5673
DHHS/ASPA
004
The constitutional "guarantee" is based on a finding that HMOs are, in effect, the
government. We believe that finding to be erroneous. This administration has provided
protections to beneficiaries without relying on an incorrect state action analysis.
Q: What would be so bad about doing what the court ordered?
A:
The new Medicare+Choice statute and regulations provide appeal rights that we believe are
superior to what the court ordered in many ways, and they can be improved through a
participatory, public, regulatory process -- rather than through expensive and less flexible
judicial action -- as HMO service delivery processes evolve. The Grijalva decision found
fault with an appeals process that has been replaced by the new Medicare+Choice
requirements. The new requirements, which were not in effect at the time of the court's
ruling, give Medicare beneficiaries the strongest appeal rights of any HMO patients in the
country, including the right to appeal to an independent third party.
Q: Didn't you issue the new rules just to help you in this court case?
A: No. The new rules were promulgated on new legislation passed by Congress in August
1997, and to comply with the President's order to implement the Quality Commission's
recommendations in the Medicare program to the greatest extent possible.
Q:
Won't appealing Grijalva undercut protections for Medicaid beneficiaries in managed
care?
A: The Grijalva court case addresses grievance and appeals within the Medicare program.
Medicaid beneficiaries continue to have full appeal rights and protections under the
Medicaid statute and regulations. The Clinton Administration will continue to guarantee
and improve those protections. We have proposed additional important protections in
regulations implementing Medicaid managed care provisions in the Balanced Budget Act
(BBA). Among other things, these regulations provide for expedited decisions and
reconsiderations in time-sensitive cases.
Q: Isn't HCFA's opposition to the court's ruling similar to private health plans'
opposition to legislation and regulation?
A:
No, it is not. HCFA is more than willing to be directed in its administration of the
Medicare program by congressional and public input, as occurs in the legislative and
regulatory processes. This is evidenced by the strong appeal rights -- some mandated by
Congress and others through regulation -- currently in place in the Medicare program.
The difference between those processes and the court process is that the regulatory and
legislative processes are more responsive and flexible in dealing with the ever-changing
health care environment.
02/10/99 WED 16:45 FAX 202 690 5673
DHHS/ASPA
005
Q: Are there any other court cases that impact or relate to Grijalva?
A:
Yes. There is one currently pending in the Supreme Court, Sullivan V. American
Manufacturers Mutual Insurance, which involves a finding that private workers'
compensation insurer decisions constitute state action triggering due process obligations.
In Sullivan, like Grijalva, the court of appeals also found that due process required that
payment be made pending an external appeal.
66/80/20
15:15
202 514 9769
OSG/DOJ
44 -
ROUTING AND TRANSMITTAL SLIP
DATE
February 9, 1999
TO: (Name, office symbol, room number, Agency/Post)
Date
toitials
1.
Dan Marcus (via fax) confidential attorney-client
and attorney work-product communication
REMARKS:
This is bare bones. The version I sent you this morning is clearly preferable,
but this would be much better than not filing a petition at all.
DONOT
FROM:
Room No. --Blds
(Name, on systbol, Assocy/Post)
5712-Main DOJ
Phone No.
Seth Waxman
Solicitor General
Department of Justice
202-514-2201
02/09/99
15:15
202 514 9769
OSG/DOJ
E 003
Government action and due process questions similar to those
raised in this case are currently before the Court in American
Manufacturers Mutual Insurance Co., et al. V. Sullivan, et al.,
No. 97-2000 (argued Jan. 19, 1999) There, the Third Circuit
held that payment decisions made by workers' compensation
insurers, as permitted by state law, were both attributable to
the State and inconsistent with due process. See Sullivan V.
Barnett, 139 F.3d 158 (3d Cir. 1998)
The court of appeals decisions in Sullivan and in this case
are remarkably similar on the government action issue. Neither
decision examines the "three principles" identified by this Court
for determining whether otherwise private conduct "is
governmental in character": (1) "the extent to which the actor
relies on governmental assistance, " or accedes to the
government's coercive powers or encouragement, in effectuating
its will, (2) "whether the actor is performing a traditional
governmental function," (3) and "whether the injury caused is
aggravated in a unique way by the incidents of governmental
authority. If Edmonson V. Leesville Concrete Co., 500 U.S. 614,
621-622 (1991) ; see also Blum V. Yaretsky, 457 U.S. 991, 1004
(1982) (government "normally can be held responsible for a
private decision only when it has exercised coercive power or has
provided such significant encouragement * * * that the choice
must in law be deemed to be that of the [government]") Rather,
both predicate a finding of government action largely on the
government's regulatory role. Compare Sullivan, 139 F.3d at 168,
with App. 9a-10a.
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2
In concluding that medical treatment decisions by private
HMOs concerning their Medicare-beneficiary members are properly
attributed to the federal government, the Ninth Circuit
appears
to have relied primarily on the "rather vague generalization, "
Blum, 457 U.S. at 1010, that there was a "high degree of
interdependence" and a "symbiotic relationship, App. 9a, that
made the government "a joint participant in the challenged
activity. " Burton V. Wilmington Parking Auth., 365 U.S. 715, 725
(1961) The facts the Ninth Circuit relied upon for that
conclusion, however, are largely common to heavily regulated.
industries. See App. 10a (relying on the facts that the
"Secretary extensively regulates,' " that "HMOs are required *
*
to comply with all federal laws, " that the Secretary is obligated
to ensure that "HMOs provide * * meaningful * * procedures, "
that the "federal government has created the legal framework,"
and that the Secretary has adjudicatory authority with respect to
HMO decisions) Compare Jackson, 419 U.S. at 357; see id. at
350.
Significantly here, the relationship between an HMO and its
Medicare-beneficiary members is the product of a private choice
by those members. Medicare beneficiaries may choose among
providers and forms of coverage, and the government neither
requires them to enroll in an HMO nor precludes them from dis-
enrolling. In this respect, the HMO's relationship with its
Medicare-beneficiary members resembles its relationship with
members who elect HMO coverage under employer-sponsored or other
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3
private health plans. With respect to each, the HMO simply
determines what treatment is appropriate under its professional
and contractual obligations, without government participation or
assistance.
1
And although money is paid out of the Medicare
Trust Funds to cover the flat monthly rate charged for the
Medicare beneficiary's enrollment in the HMO, the financial
consequences of a determination by the HMO to furnish or deny
particular services to that beneficiary once he has enrolled are
borne by the HMO alone. 2
On the merits of the due process issue, the Ninth Circuit
rejected the Secretary's contention that her view of the
appropriate and meaningful procedures be accorded substantial
weight, declaring that there is "nothing in Mathews V. Eldridge
or subsequent cases to suggest that such is necessary or
1
Indeed, the first sentence of the Medicare statute prohibits the "exercise [of] any"
governmental "supervision or control over the practice of medicine or the manner in which medical
services are provided." 42 U.S.C. 1395. In Blum V. Yaretsky, the Court held that the exercise of
ordinary medical judgment is not state action, even where it may affect eligibility for government
benefits. The Ninth Circuit sought to distinguish Blum by characterizing HMO determinations as
more in the nature of interpretations of the Medicare Act, rather than medical judgments, see App.
11a, but the primary criterion employed by HMOs in this context -- whether medical services are
"reasonable and necessary," 42 U.S.C. 1395y(a) -- essentially requires an exercise of medical, not
legal judgment. The complaint in this case, moreover, demonstrates that respondents seek to
challenge medical judgments. C.A.E.R. 10-11 (129) (physical therapy denicd because patient could
not file therapeutic directions), 12-13 (11 40-41) (failure to prescribe adequate pain medication or
order physical therapy), 13-15 01 48-54) (skilled nursing care found not medically necessary), 16 (1
62) (speech therapy denied because it would not be effective).
is
In Blum, the Court rejected the contention that decisions made by physicians and nursing
homes were attributable to the State, despite "state subsidization of the operating and capital costs
of the facilities" and coverage for "the medical expenses of more than 90% of the patients." 457 U.S.
at 1011. That the government pays for coverage neither encourages HMOs 10 deny requests for
treatment, nor prevents the financial impact of HMO decisions from being visited exclusively on the
HMO. If the fact that the government pays for coverage were a sufficient basis for attributing HMO
(conduct to the government, HMOs providing services to government employees under the Federal
Employees Health Benefits Act of 1959, 5 U.S.C. 8901 et seq., would also all be government actors.
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E UUO
4
advisable. " App. 13a n.3. That was error. The Court expressly
stated in Mathews V. Eldridge, 424 U.S. 319, 349 (1976), that,
"[i]n assessing what process is due * * * substantial weight must
be given to the good-faith judgments of the individuals charged
by Congress with the administration of social welfare programs
that the procedures they have provided assure fair
consideration." For similar reasons, the imposition of a
detailed, judicial injunction providing new requirements, rather
than a remand order directing the Secretary to promulgate new
procedures through a participatory and fully public rulemaking
process, was error as well. Congress delegated implementation of
42 U.S.C. 1395mm(g) and the creation of "meaningful" procedures
in the first instance to the Secretary, not to the courts. Cf.
SEC V. Chenery, 332 U.S. 194, 199 (1947) (where prior agency
action is set aside, "the [agency is] bound to deal with the
problem afresh, performing the function delegated to it by
Congress. ) ; Florida Power & Light Co. V. Lorion, 470 U.S. 729,
744 (1985) (proper course where agency errs is to "remand to the
agency") 3
The arguments that the Sullivan petitioners make in support
of reversal there apply with equal force in this case as well.4
3 The district court also exceeded its authority in ordering the Secretary to terminate contracts
with HMOs that fail to comply with the procedures it imposed. See Blessing V. Freestone, 520 U.S.
329, 343-344 (1997).
See 97-2000 Pet. Br. at 20-21 (arguing that State does not influence insurer's non-payment
decision), 17-22 (arguing that insurer decisions are not governmental benefits determinations), 22-25
(no unique aggravation of injury by government), 26-32 (regulated nature of industry does not render
private action attributable to State). And there are clear similarities between the due process
arguments as well. For example, in this case the lower courts implicitly concluded that respondents
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5
Indeed, so closely related are the cases that lead counsel in
this case filed an amicus brief in Sullivan, emphasizing the
potential impact of the Court's decision there on the Medicare
program at issue here. 5 For the foregoing reasons, we suggest
that the petition in this case be held pending the decision in
Sullivan.
could have a constitutionally-protecte property interest in receiving medical services before their
legal entitlement to those services was established, and that pre-deprivation processes were required
in certain contexis, App. 63a. Petitioners in Sullivan challenge similar conclusions reached by the
court of appeals there. See 97-2000 Pet. Br. at 35-38 (arguing that due process does not apply to
disputed applications for treatment where the legal entitlement to the treatment, and thus a property
interest therein, has not been established), 42-44 (arguing that pre-deprivation process is not
required); see also Lyng V. Payne, 476 U.S. 926, 942 (1986) (noting that the Court has not resolved
whether "applicants for benefits, as distinct from those already receiving them, have a legitimate claim
of entitlement protected by the Due Process Clause").
5 See Amici Curiae American Association of Retired Persons, The Center For Medicare
Advocacy, Inc., et al., Br. at 4, 7.
To Interested Parties
Ke: Grijalva and Medicaid
February 8, 1999
While the Grijalva V, Shalala case involves Medicare HMO's, potential appeals of
the case to the Supreme Court could have significant implications for patient protection in
Medicaid. In filing any appeal of Grijalva. the Administration should be cautious that it
not undermine the existing private right of action that allows Medicaid beneficiaries
access to Federal court to enforce the guarantees of Federal law.
Background
Despite HHS's arguments to the contrary, the Ninth Circuit Court of Appeals ruled
in Grijalva that actions taken by an HMO in the administration of the Medicare program
constitute government action and, therefore, must be provided with due process. The
Court went on to say that HHS's standards for patients' rights were inadequate under a
due process review (e.g., because the HMO's notices were illegible and HHS did not
require notices to be legible). In a potential appeal of the case to the Supreme Court,
HHS appears to be preparing to argue again that HMO's are not government actors.
It should be noted that due process claims (which rely on a finding of government
action) are not the only route for Medicare beneficiaries to gain Federal review. The
Medicare statute (Title 18 of the Social Security Act) provides for grievance and appeals
procedures that guarantee beneficiaries some form of Federal oversight and examination.
By contrast, the Medicaid statute (Title 19 of the Social Security Act) does not
provide a direct route for Medicaid beneficiaries to gain Federal review of any disputes.
Rather, the only route to Federal review is through a private right of action created by 42
U.S.C. 1983 (commonly known as Section 1983).¹ Section 1983, however, provides
access to Federal review only of actions by the State government or someone acting in
lieu of State government; private actions may not be addressed in Federal court through
Section 1983.
'Section 1983 was created in 1870 to address the constitutional issues posed by States
discriminating against African-Americans. Since that time, however, it has been broadly
interpreted by the courts to allow citizens to address other Federal rights, including statutory
rights such as those provided by the Federal Medicaid law. Section 1983 actions have been
brought against State Medicaid authorities for such varied problems as a State arbitrarily denying
services because of the patient's type of illness, a State refusing to provide essential
transportation services, and a State's refusal to provide access to AZT for people with AIDS.
As part of the 1995 Congressional attempt to turn Medicaid into a block grant, the
Republicans in Congress and the Governors argued vigorously that Medicaid
beneficiaries should be limited to State causes of action in State courts. Replying that the
opportunity for Federal review was an essential element of preserving a Federal
entitlement, the Clinton Administration and the Democrats defeated this proposal.
Problem
If the Supreme Court were to agree with HHS's arguments that a Medicare HMO
is not a government actor, there will remain other ways for Medicare beneficiaries to get
Federal review of disputed HMO actions.
However, if a precedent were established that a Medicare HMO is not a
government actor, it will be difficult to make a distinction and argue that a Medicaid
HMO is a State actor. If that distinction cannot be successfully drawn, Medicaid
beneficiaries would be able to enforce their rights only in HMO-granted or State-granted
venues, which may be less sympathetic or less procedurally protective than Federal
courts. It bears noting also that Medicaid beneficiaries are vulnerable people who are
poor (in both senses of the word) advocates for themselves.
There would, admittedly, remain a possibility of suing the State directly to force it
to enforce patient protections within Medicaid HMO's, but it is easy to imagine many
possibilities of vagueness in State protections and inattention to the need for ongoing
oversight. Finally, there remains the possibility of HCFA enforcing its standards directly,
but such enforcement has been, at best intermittent in the past.
In sum, whatever the effect of the HHS argument on Medicare, it could result in at
least a partial reversal of the successes of the 1995 battle to preserve a Federal private
right of action to enforce the Federal guarantee of rights under Medicaid. Rather than
appealing the "State action" rulings of the Ninth Circuit, the Administration should, at
most, petition for the case to be remanded in light of later Medicare quality rules that
might have made this case substantively moot.
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GEORGETOWNUNIVERSITYLRWGENTER
Federal Legislation Clinic
Judith C. Areen
Timoday M. Westmorcland
Dean
Senior Policy Fellow
Chai R. Feldblum
Ralph G. Neas
Director
Visiting Professor
R Scott Foster
Deputy Director
CASES USING A PRIVATE CAUSE OF ACTION TO
Devid P. Rapallo
Teaching Fellow
ENFORCE FEDERAL MEDICAID GUARANTEES
Kristen Ebeler Fonnel
Executive Assistant
The current Medicaid program is a cooperative federal-state partnership established by
Title XIX of the Social Security Act Through this program, the federal government grants funds
to participating states to provide health care services, including physician and hospital care, to
low income individuals. 42 U.S.C. §1396 et seq. A state's participation in Medicaid is
voluntary. However, if states choose to participate, they must comply with certain requirements
imposed by the Medicaid Act and regulations promulgated by the Secretary of Health and
Human Services (HHS). Under 42 U.S.C. $1396a, each state must submit a plan for medical
services in compliance with these guarantees.
Under the current Medicaid program, if a state does not provide a guaranteed service or
fails to interpret a policy consistent with federal law, individual beneficiaries and service
providers are permitted to bring suit against a state to enforce the federal guarantee and obtain a
reimbursement. This accountability mechanism a private right of action -- is not created by
the Medicaid statute itself. but is found at 42 U.S.C. § 1983. This section provides in part:
Every person who, under color of any statute
of any State
subjects
any
citizen
to the deprivation of any rights, privileges, or immunities secured by
the constitution and laws, shall be liable to the party injured in an action at law,
suit in equity, or other proper proceeding.
Following are several examples of cases brought by individuals (acting alone or in a
class) in which this private cause of action has been used effectively to ensure that states meet
federal requirements and fulfill the obligations in their state plans.
Weaver V. Reagan, 886 F.2d 194 (8th Cir. 1989): The State of Missouri attempted to deny
AIDS patients, who were otherwise qualified for Medicaid services, the drug AZT by
passing a statute that created an "irrebuttable presumption that AZT can never be
medically necessary treatment for AIDS patients
However, these AIDS patients,
by utilizing a private cause of action, were able to take the state to court and eventually
obtain this treatment by demonstrating "the widespread recognition by the medical
community and scientific literature that AZT is the only known antiviral treatment for
individuals with AIDS."
III
E
Same
NW
Washington
no
ment.
me
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to provide prescription drug coverage to severe schizophrenics suffering from intense
hallucinations. One such person who qualified for Medicaid went to court to obtain an
injunction SO she could receive Clozapine, a drug her physician prescribed and the FDA
approved. The Court's ruling allowed her immediate relief, prevented her health from
deteriorating to a point at which she would need to be institutionalized, and required the
state to meet its federal obligations. The private cause of action served, in this case, as a
check on Kansas' effort to deny federally guaranteed services merely to save money: "To
jeopardize the life of Visser in order to preserve the public fisc under the circumstances of
this case is clearly contrary to the public interest."
Harris V. James, 883 F.Supp. (M.Dist.Ala 1995): In this case, Alabama refused to provide
transportation services to Medicaid beneficiaries who needed to reach providers and
receive essential medical treatment. The state denied these services despite a regulation
requiring that "a state plan for medical assistance under Title XIX of the Social Security
Act must
specify that there will be provision for assuring necessary transportation of
recipients to and from providers of services
A person eligible for such services
brought a suit, however, and forced the state to follow this federal requirement, thus
avoiding the denial of guaranteed medical services and a deterioration of his medical
condition.
Miller V. Whitburn, 10 F.3d 1315 (7th Cir. 1993): In this case, there was no dispute that five-
year old Tiffany Miller was entitled to Medicaid benefits. She suffered from a condition
known as "short-bowel syndrome," which required that she be fed intravenously through
a catheter in her stomach and which, unfortunately, resulted in liver deterioration.
Without a liver transplant, Tiffany was "almost certain to die." However, the State of
Wisconsin refused to pay for a transplant "for one reason and one reason only: the
Department [of Health] considered the procedure "experimental"," and thus not
reimbursable. Although Wisconsin argued that this decision was solely within the
discretion of the state, the court disagreed, vacated the lower court's order, and ordered
the district court to reexamine the propriety of the operation.
Regardless of whether one believes the Medicaid program should continue all of the
guarantees now in place, or move to a system with more state control, it is imperative to
recognize the integral nature of the private right of action within such a scheme. Without an
efficient, reliable enforcement mechanism such as this, any federal guarantees that Congress may
choose to continue will remain subject to the fiscal, moral, and polítical pressures of the states
highlighted above. Any effort to retain important federal guarantees to medical services must,
by definition, include a corresponding attempt to retain the private right of action.
Prepared by the Georgetown Federal Legislation Clinic on behalf of
Catholic Charities USA (Rapallo.2/6/96/peacases.wpd)
2
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GEORGETOWN UNIVERSITY LAW GENTER
Federal Legislation Clinic
Timothy M. Westmorcland
Judich C. Areen
Senior Policy Fellow
Dean
Ralph G. Neas
Chai R. Feldblum
Visiting Professor
Director
R. Scott Foster
Deputy Director
THE PRIVATE RIGHT OF ACTION AS MEDICAID ENFORCEMENT
David P. Rapallo
Tesching Fellow
MECHANISM - NOT AS SUBSTANTIVE RIGHT
Kristen Ebsier Fennel
Executive Assistant
The Medicaid program establishes a system in which states agree to provide health care
services to indigent persons in exchange for federal funding. Although a state's participation in
Medicaid is voluntary, if it chooses to receive federal funds, the state must provide specified
services and comply with requirements agreed to in the Medicaid contract, as set forth in the
statute and in the regulations promulgated by the Secretary of Health and Human Services.
If a state does not provide a contractual service or fails to interpret a policy consistent
with federal law, individual beneficiaries and service providers may sue a state to enforce the
federal guarantee. This accountability mechanism - a private right of action - is not created by
the Medicaid statute itself, but is found at 42 U.S.C. § 1983. This section prohibits any person
acting under color of state law from depriving an individual of any rights guaranteed in any
federal law.
Although $ 1983 was originally intended to address the constitutional problems of states
discriminating against African-Americans, in 1980 the Supreme Court officially recognized that
§ 1983 provides a cause of action against anyone who infringes upon federal statutory rights as
well. Parties bringing § 1983 claims can go to federal or state courts and have available to them
the full range of legal and equitable remedies.
Scope of § 1983 Claims
In 1990, the Supreme Court, in Wilder V. Virginia Hospital Association, set forth three
questions for analyzing whether a statute created 8 clear right that could be enforced through a
§ 1983 action, and in 1994, Congress passed legislation codifying this approach:
(1)
Was the provision in question intended to benefit the plaintiff?
(2)
Does the provision create binding obligations on the State (or other governmental
unit), rather than merely expressing a congressional preference?
(3)
Is the interest the plaintiff asserts specific enough to be enforced judicially, rather
than being "vague and amorphous"?
111 F Street NIV Washington DC 20001-2095
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Thus, iri order to utilize the § 1983 enforcement mechanism, Congress must have first
created a substantive right. The current Medicaid Act contains several substantive rights that
can and have been enforced through a § 1983 claim:
When the State of Kansas refused to cover under its Medicaid plan a specific drug
for treating severe schizophrenia, a Medicaid patient went to court to obtain an
injunction to require the state to provide the medicine. The court found in the
patient's favor, based upon a Medicaid regulation prohibiting states from
arbitrarily denying services due to the patient's type of illness. The court's
decision allowed the patient immediate relief, preventing her health from
deteriorating to a point at which she would need to be institutionalized. The
private cause of action served as a check on Kansas' effort to deny federally
guaranteed services merely to trim its budget. Visser V. Taylor, 756 F.Supp. 501
(D.Kan. 1990).
When the State of Alabama refused to provide transportation services to Medicaid
beneficiaries who needed to reach providers and receive essential medical
treatment, Medicaid patients brought suit, claiming the State was in violation of a
Medicaid regulation that required states to "ensure necessary transportation
to
and from providers." By using the private right of action, the patients were able
to force the state to follow this federal requirement, thus avoiding the denial of
guaranteed medical services and a deterioration of their health. Harris V. James,
896 F.Supp. 1120 (M.Dist.Ala. 1995).
After the U.S. Food and Drug Administration announced its approval of AZT, the
State of Missouri Department of Health Services promulgated a rule that severely
limited eligibility for Medicaid coverage of AZT. Medicaid patients with AIDS
brought a successful § 1983 claim to challenge this rule. The court ruled in the
patients' favor, citing Medicaid regulations that have been interpreted by courts as
requiring state Medicaid plans to cover "medically necessary" treatments. The
AZT treatments, ultimately obtained, substantially improved and prolonged lives
of these patients. Weaver V. Reagan, 886 F.2d 194 (8th Cir. 1989).
As demonstrated above, the private right of action is merely an enforcement
mechanism, not a substantive right. The substantive right is decided first by Congress.
If the private right of action is prohibited in Medicaid reform, beneficiaries and providers
will not be able to hold states accountable to comply with their federal obligations under
the Medicaid program even if Congress mandates that Medicaid beneficiaries have
these substantive rights. The complete removal of the private right of action will
effectively eliminate these remaining guarantees as well.
Prepared by the Georgetown Federal Legislation Clinic on behalf of Catholic Charities USA (Dady.1983pra.mmo.3/13/96)
Devorah R. Adler
02/09/99 01:57:38 PM
Record Type:
Record
To:
CC:
Subject: response to HHS's argument about Medicaid
Forwarded by Devorah R. Adler/OPD/EOP on 02/09/99 01:58 PM
Jeanne Lambrew
02/09/99 01:48:10 PM
Record Type:
Record
To:
Elena Kagan/OPD/EOP
CC:
Christopher C. Jennings/OPD/EOP, Devorah R. Adler/OPD/EOP
Subject: response to HHS's argument about Medicaid
From Chris as well:
HHS argues that a decision about state action in Medicare is not applicable to Medicaid because
Medicare beneficiaries can always return to fee-for-service, while Medicaid beneficiaries cannot not.
(Note: Under the BBA, by 2001, beneficiaries will be locked into managed care plans for nine
months from when they join the plan).
Medicaid is not that different from Medicare -- millions of Medicaid beneficiaries have a
choice of managed care or fee-for-service.
-
Only 2 states have 100 percent of beneficiaries in managed care (Tennessee and
Washington). States need 1115 waivers to require Medicare-Medicaid "dual
eligibles" and children with special needs to join Medicaid managed care plans. In
10 states, less than 25 percent of beneficiaries are enrolled in managed care.
Half (25) of states do not enroll any elderly or disabled Medicaid beneficiaries in
managed care. This, plus the choice of fee-for-service for some adults and children
account for the fact that 50 percent of Medicaid beneficiaries are not enrolled in
managed care.
Absurd to make the case based on whether a beneficiary chooses managed care. In
Medicaid, some children with special needs can choose but cannot be forced to enroll in
managed care -- while healthy children may be required to enroll. Under HHS's logic, it
would be alright to have no private right of action for the sick child whose parents' chose
managed care but not alright to take away the right of action from the healthy child.
Some Medicare-Medicaid dual eligibles are enrolled in managed care. For some elderly and
people with disabilities, Medicare covers their basic health services and Medicaid pays for
prescription drugs, Medicare cost sharing, etc. In this situation, the managed care plan
could be sued as a state actor in Medicaid but not in Medicare.
Christopher C. Jennings
02/08/99 03:13:45 PM
Record Type:
Record
To:
Devorah R. Adler/OPD/EOP
CC:
Subject: Grijalva and Medicaid
Forwarded by Christopher C. Jennings/OPD/EOP on 02/08/99 03:15 PM
Dan Marcus
02/08/99 12:30:36 PM
Record Type:
Record
To:
Elena Kagan/OPD/EOP, Christopher C. Jennings/OPD/EOP
CC:
Subject: Grijalva and Medicaid
Kneedler expressed doubts that HHS has less ability to require the States in Medicaid to ensure
beneficiaries' rights vis-a-vis HMOs than it does in Medicare. I talked to Harriet Rabb and Anna
Kraus (her deputy?), who basically confirmed his suspicions: HCFA regs do require State Medicaid
agencies to ensure beneficiaries procedural rights re decisions on provision of services -- including
appeals from HMO decions to the state agency -- comparable to those in Medicare. Rabb and
Kraus say only real difference between Medicare and Medicaid is that there are already one or two
court decisions saying Medicaid HMOs are state actors, but none as to Medicare HMOs.
Christopher C. Jennings
02/08/99 03:13:39 PM
Record Type:
Record
To:
Devorah R. Adler/OPD/EOP
CC:
Subject: Re: Grijalva and Medicaid
Forwarded by Christopher C. Jennings/OPD/EOP on 02/08/99 03:15 PM
Elena Kagan
02/08/99 03:11:53 PM
Record Type:
Record
To:
Christopher C. Jennings/OPD/EOP
CC:
Subject: Re: Grijalva and Medicaid
Forwarded by Elena Kagan/OPD/EOP on 02/08/99 03:13 PM
Dan Marcus
02/08/99 02:51:24 PM
Record Type:
Record
To:
Elena Kagan/OPD/EOP
CC:
bcc:
Subject: Re: Grijalva and Medicaid
I have a call into Westmoreland. I pressed the very reluctant Mr. K re timing. Lamkin is working on
it but he and Seth need to see it and the best we can do is first thing tomorrow. I will call Seth on
merits of middle course. Shalala, as you point out, has come around, but only, I suspect, as an
alternative to not filing at all. Certainly Rabb, whom I will talk to again, has not told Kneedler that
Shalala is now convinced stripped-down is best. I may also call Seth.
Elena Kagan
Elena Kagan
02/08/99 01:14:45 PM
Record Type:
Record
To:
Dan Marcus/WHO/EOP
CC:
Subject: Re: Grijalva and Medicaid
1. I'm not convinced. Why don't you talk with Tim Westmoreland? He's at the Georgetown
legislation program -- Devorah Adler will be able to give you a number.
2. I'd like to see it by the end of the day. And I do not think that a stripped-down brief can
include any explicit conclusions on the merits of the state action issue. If the SG can't write a brief
without those conclusions, then we're really left with a choice between filing or not filing. And by
the way, my understanding is that Shalala and Min now want a true stripped-down brief -- at least,
that's what Thurm told Podesta this morning.
Christopher C. Jennings
02/08/99 02:51:18 PM
Record Type:
Record
To:
Devorah R. Adler/OPD/EOP
CC:
Subject: Re: Grijalva and Medicaid
Forwarded by Christopher C. Jennings/OPD/EOP on 02/08/99 02:52 PM
Elena Kagan
02/08/99 01:21:38 PM
Record Type:
Record
To:
Christopher C. Jennings/OPD/EOP
CC:
Subject: Re: Grijalva and Medicaid
I responded by asking him to call westmoreland and telling him that this was not my idea of a
stripped-down brief.
Forwarded by Elena Kagan/OPD/EOP on 02/08/99 01:22 PM
Dan Marcus
02/08/99 12:58:07 PM
Record Type:
Record
To:
Elena Kagan/OPD/EOP
CC:
bcc:
Subject: Re: Grijalva and Medicaid
1. I don't know. I assume advocates don't trust state Medicaid agencies and HCFA to enforce
beneficiary rights and want the leverage of the consitutional cause of action. But I don't know
that there's a big distinction between Medicare and Medicaid in that regard.
2. I told Kneedler we'd like to see stripped-down version by tomorrow morning. I'll call
back and emphasize as early as possible. He is, as you might expect, unenthusiastic and
emphasizes that we must at least say 9th Circuit wrong on state action and a little bit of why.
Elena Kagan
Elena Kagan
02/08/99 12:37:01 PM
Record Type:
Record
To:
Dan Marcus/WHO/EOP
CC:
Subject: Re: Grijalva and Medicaid
Why, then, is everyone so insistent about the need for section 1983 actions in medicaid?
And when are we going to see a stripped-down version of the brief?