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ABRAMS v. HECKLER

March 14, 1984

ROBERT ABRAMS, Attorney General of the State of New York, and JAMES P. CORCORAN, Superindendent of Insurance of the State of New York, Plaintiffs,
v.
MARGARET M. HECKLER, Secretary of the United States Department of Health and Human Services, and CAROLYNE K. DAVIS, Administrator of Health Care Financing Administration, Defendants.



The opinion of the court was delivered by: CARTER

CARTER, District Judge

Plaintiffs, the Attorney General and Superindendent of Insurance of New York, seek a declaration that a final rule of the United States Department of Health and Human Services, 42 C.F.R. § 405.323 (48 Fed. Reg. 14,810), is unlawful, and an injunction barring its enforcement. They allege that the rule is not authorized by § 953 of the Omnibus Reconciliation Act of 1980, 42 U.S.C. § 1395(b)(1), the statute pursuant to which the rule was enacted. Defendants have moved to dismiss the complaint on the grounds that plaintiffs lack standing and sides have also moved for summary judgment on the merits. *fn1"

 I

 New York State's no-fault automobile insurance law provides that no-fault benefits are to be reduced by any amount recoverable under Medicare.N.Y. Inc. Law § 671(2)(b) *fn2" ("Medicare-offset law"). All New York no-fault policies must contain a clause excluding coverage for services payable by Medicare. N.Y. Ins. Law § 672(4); 11 NYCRR § 65.12. As a result of this provision making Medicare the primary payor and no-fault insurers only residually liable, no-fault policies sold to Medicare-eligible insureds are 40% less expensive than the policies sold to those ineligible for Medicare. The average savings is $30 per car and in the aggregate, New York's elderly and disabled auto owners save $18 million annually on car insurance.

 Section 953 of the Omnibus Reconciliation Act of 1980 amended the Medicare Act to provide that Medicare payments "may not be made with respect to any item or service to the extent that payment has been made, or can reasonably be expected to be made (as determined in accordance with regulations) . . . under an automobile or liability insurance policy . . . or under no fault insurance." 42 U.S.C. § 1395y(b)(1). On April 5, 1983, the Secretary of Health and Human Services issued a final rule designed to implement this statute. The rule provides that Medicare payments will no longer be made for services covered by any auto insurance policy (including no-fault), even if the policy itself and/or state law states that benefits under the policy are secondary to Medicare. 42 C.F.R. § 405.323. *fn3"

 This regulation, in essence, reverses the order of payment when a Medicare beneficiary covered by a New York no-fault policy requires medical or hospital services as the result of a car accident. Prior to the promulgation of the rule, no insurance benefits would have been paid until all recoverable Medicare benefits were exhausted. The rule, however, prohibits the payment of Medicare benefits prior to the exhaustion of recovery under the insurance policy. Since no-fault insurance can no longer be made secondary to Medicare, *fn4" the policies sold to Medicare beneficiaries will no longer be at a discount and New York's elderly and disabled will lose their $18 million annual savings.

 It is plaintiffs' contention that in light of the New York statute expressly prohibiting the payment of no-fault benefits for services covered by Medicare, the payment of no-fault benefits for such services could not "reasonably be expected to be made" within the meaning of § 953. It follows, plaintiffs argue, that the Secretary's enactment of the rule was in excess of her statutory authority. Defendants counter that the rule is a reasonable exercise of the Secretary's authority under § 953 to issue regulations for determining when payment can "reasonably be expected to be made." Underlying this dispute is a disagreement over the Congressional purpose behind § 953. Plaintiffs believe that Congress sought only to prevent individuals from recovering twice for the same loss, once under Medicare and once under an insurance policy. Such duplicative recoveries were already impossible under the New York statute, as all no-fault policies were required to exclude coverage for services covered by Medicare. Defendants maintain that Congress intended not merely to stop double recoveries, but to reduce federal expenditures by guaranteeing that auto insurers would be primarily liable, and Medicare only residually liable for the cost of services covered by automobile insurance.

 Before addressing the merits of this controversy, the Court must first determine whether it has jurisdiction over the action and whether plaintiffs have standing to maintain it.

 II

 Plaintiffs assert that the Court has jurisdiction under the general federal question and mandamus statutes. 28 U.S.C. §§ 1331 and 1361. In light of the Court's conclusion that § 1331 does provide jurisdiction over the case, it is unnecessary to consider plaintiffs' alternative jurisdictional theroy.

 42 U.S.C. § 405(h), made applicable to the Medicare Act by 42 U.S.C. § 1395ii, states in relevant part: "No action against the United States, the Secretary, or any officer or employee thereof shall be brought under section 1331 or 1346 of title 28 to recover on any claim arising under this chapter." This unequivocal language would, at first, seem to eliminate § 1331 as a possible basis of jurisdiction, but an extensive body of case law has interpreted § 405(h) as being less absolute in its jurisdictional prohibition than it would appear.

 The cases are not all in accord, but two general principles are well established. First, there can be no doubt that plaintiffs would be unable to bring this suit under § 1331 if the Medicare Act contained a jurisdictional grant of its own which would allow plaintiffs to obtain judicial review of the Secretary's action. See Weinberger v. Salfi, 422 U.S. 749, 762, 45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975); National Association of Home Health Agencies v. Schweiker, 223 U.S. App. D.C. 209, 690 F.2d 932, 937-38 (D.C. CIr. 1982), cert. denied, 459 U.S. 1205, 103 S. Ct. 1193, 75 L. Ed. 2d 438 (1983). The parties agree, however, that the judicial review provisions of the Medicare Act do not apply to this case. Second, if plaintiffs claims were constitutionally based, the cases agree that some forum would be available for judicial review, Colonial Penn Insurance Co. v. Heckler, 721 F.2d 431, 436-37 (3d Cir. 1983); National Association of Home Health Agencies, 690 F.2d at 939, *fn5" but plaintiffs do not allege a violation of their constitutional rights. Greater discord is evident among the cases considering the question presented here, whether § 405(h) bars § 1331 jurisdiction over a non-constitutional challenge when no alternative procedure exists for securing judicial review. See National Association of Home Health Agencies, 690 F.2d at 940.

 A number of cases have reasoned persuasively that § 405(h) does not bar federal question jurisdiction where, as here, the plaintiff does not seek Medicare benefits or a money judgment based on a claim for reimbursement for services rendered, but rather, review of agency action unrelated to such disputes.Colonial Penn, 721 F.2d at 436-39; Starnes v. Schweiker, 715 F.2d 134, 139-41 (4th Cir. 1983); National Association of Home Health Agencies, 690 F.2d at 939-42; United States v. Aquavella, 615 F.2d 12, 17-21 (2d Cir. 1979). Section 405(h) was originally passed to insure that the many thousands of social security claimants did not bypass the regulatory scheme established to review their claims. The incorporation of § 405(h) into the Medicare Act serves an analogous purposes. For example, it keeps the Courts out of "the complex interplay between physician and hospital in ascertaining the appropriate medical charges for technical services. . . ." St. Louis University v. Blue Cross Hospital Service, 537 F.2d 283 (8th Cir. 1976), cert. denied, 429 U.S. 977, 50 L. Ed. 2d 584, 97 S. Ct. 484 (1976). These concerns are not implicated in a suit such as this, nor is there any likelihood of "a flood of small claims inundating the courts with matters capable of being fairly resolved in administrative proceedings." Colonial Penn, 721 F.2d at 439. Moreover, Congressional intent to preclude jurisdiction will not be presumed absent clear and convincing evidence. Johnson v. Robison, 415 U.S. 361, 373, 39 L. Ed. 2d 389, 94 S. Ct. 1160 (1974). The legislative history of § 405(h) shows that Congress intended to steer social security claimants into the scheme of administrative and judicial review prescribed by the Act, not that is sought to foreclose federal question jurisdiction when no other statutory review mechanism was provided. Chelsea Community Hospital v. Michigan Blue Cross, 630 F.2d 1131, 1135 (6th Cir. 1980).

 With these considerations in mind, the Court holds that it has subject matter jurisdiction over this action under 28 U.S.C. § 1331. The Court finds additional support for this conclusion in the Third Circuit's recent ruling that federal question jurisdiction exists over an insurance company's challenge to the retroactivity of the ...


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