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Ryan v. Burwell

United States District Court, D. Vermont

July 27, 2015

MARCELLA RYAN and JOHN HERBERT, on behalf of themselves and all others similarly situated, Plaintiffs,
SYLVIA MATHEWS BURWELL, Secretary of Health and Human Services, Defendant.



Plaintiffs Marcella Ryan and John Herbert are Medicare beneficiaries who receive home health care services. They allege that the Secretary of Health and Human Services has systematically failed to follow her own regulations and guidance governing appeal of Medicare coverage for home health care services, resulting in the improper denial of their claims. Before the court is defendant's motion to dismiss.

I. Facts

A. Medicare and Medicaid

In 1965, President Lyndon B. Johnson signed the Medicare and Medicaid statutes into law at a signing ceremony attended by former President Truman. Title XVIII of the Social Security Act, known as Medicare, is a federal health insurance program for the elderly and disabled. See 42 U.S.C. §§ 1395-1395 lll. It contains four programs. Part A provides "basic protection against the costs of hospital, related post-hospital, home health services, and hospice care" for persons over sixty-five years of age and others. Id. §§ 1395c-1395i-5. Part B is a voluntary program that provides supplementary medical insurance benefits to persons who purchase the insurance. Id. §§ 1395j-1395w-5. Part C allows individuals to receive these benefits through private insurers rather than traditional Medicare. Id. §§ 1395w-21-1395w-29. Part D provides prescription drug coverage through enrollment in private insurance plans. Id. §§ 1395w-101-1395w-154. Home health services are available under Parts A, B, and C.

Medicaid created a similar program for low-income Americans. While Medicare is administered by the Social Security Administration, Medicaid was designed as a partnership under which states and the federal government would share the cost of providing medical care to the poor. Concourse Rehab. & Nursing Ctr. Inc. v. Whalen, 249 F.3d 136, 139 (2d Cir. 2001). Medicaid programs are administered by state agencies such as the Department of Vermont Health Access. See Dep't of Vt. Health Access, (last visited July 22, 2015). These agencies pay for the cost of their participants' health care through a mixture of federal and state tax dollars.

The two programs have grown and changed over the course of the last fifty years. Medicare accounts for 20% of current health spending in the United States. NHE Fact Sheet, Centers for Medicare & Medicaid Services, (last visited July 22, 2015). Medicaid accounts for an additional 15%. Id. In 2013, Medicaid spending grew by 6.1%-almost twice the rate of Medicare spending, which grew 3.4 %. Id.

From the inception of these programs, their different structures and the overlapping populations they serve have created legal and political difficulties in coordinating their systems of payments. Medicare money is federal money administered through the Centers for Medicare and Medicaid Services, an agency within the Department of Health and Human Services. States do not participate in Medicare. Conn. Dep't of Soc. Servs. v. Leavitt, 428 F.3d 138, 141 (2d Cir. 2005). Medicaid money is a mixture of federal and state money which is administered through state agencies. Id. States benefit if an expense is covered by Medicare instead of Medicaid. For these reasons, litigation over issues of "who pays" and which program takes priority for an expense has occurred with great frequency and in many different factual settings over recent decades. See, e.g., id.; N.Y.C. Health & Hosp. Corp. v. Perales, 954 F.2d 854 (2d Cir. 1992); N.Y. State Dep't of Soc. Servs. v. Bowen, 846 F.2d 129 (2d Cir. 1988).

This case concerns a particular subset of the problem of whether Medicare or Medicaid pays for care. Patients who qualify for both Medicare and Medicaid (so-called "dual eligibles") frequently receive nursing services and therapy at home in place of care in a nursing home or similar institution. In theory Medicare is the first priority payer and Medicaid is the payer of last resort. Conn. Dep't of Soc. Servs., 428 F.3d at 141; 42 U.S.C. § 1396a(a)(25). If a claim for home health care is denied by Medicare, it is frequently submitted to Medicaid and paid through that system. When this happens, costs are shifted from the federal to the state program. Because the Medicaid standards for payment of home health charges are different and in some respects less exacting than Medicare, there are occasions when Medicaid will be the appropriate agency to pay for home health care provided to a "dual eligible" person. Compare 42 U.S.C. §§ 1396a(10)(A), (D); 1396d(a)(7), with 42 U.S.C. §§ 1395f(a)(2)(C); 1395n(a)(2)(A); 1395x(m).

Plaintiffs in this case are "dual eligible" recipients of both Medicaid and Medicare. Both receive home health care. In both cases, their claims for payment by Medicare were rejected. Their claims were reimbursed through the Medicaid program instead. Neither is personally liable for the cost of the care at issue.

B. Eligibility for Home Health Benefits under Medicare

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

C. Claims Review and Persuasive Authority of a Prior Favorable Ruling

Medicare pays for home healthcare services through contractors known as Medicare Administrative Contractors (MACs). 42 C.F.R. § 421.3. MACs were formerly known as "fiscal intermediaries" for Part A and "carriers" for Part B. Zanecki v. Health Alliance Plan of Detroit, 577 F.Appx. 394, 398 (6th Cir. 2014). The contractors are frequently private health insurers who contract with the Medicare program to provide claims services. When a claim is submitted, the MAC makes an initial determination regarding whether the services will be covered. 42 C.F.R. § 405.904(b).

The Medicare Program Integrity Manual (MPIM) provides guidance to MACs in handling all types of claims, including claims for home health benefits. Centers for Medicare & Medicaid Servs., Pub. 100-08, Medicare Program Integrity Manual, Section 6.2, "Home Health, " instructs MACs to promptly pay all claims following a favorable final appellate decision that a beneficiary is confined to the home. MPIM § 6.2.1(A). The claims reviewers are instructed to establish procedures ensuring favorable treatment and to notify the beneficiary and his or her home health agency that the favorable decision will be given "great weight" in evaluating whether the beneficiary is confined to the home. Id.

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

From the QIC's decision, the beneficiary may appeal to an administrative law judge (ALJ), and then to the Medicare Appeals Council. 42 C.F.R. § 405.904(b). The ALJ and the Appeals Council also are not bound by the MPIM. They are expected, however, "to give substantial deference to these policies if they are applicable to a particular case." 42 C.F.R. § 405.1062(a). If the ALJ or the Appeals Council departs from a policy set out in the manual, they must explain their reasons for doing so. Id. § 405.1062(b).

D. The Particular Claims

i. Marcella Ryan

Plaintiff Marcella Ryan was fifty-nine years old at the time the complaint was filed. She suffers from cerebral palsy and muscular dystrophy as well as other serious ailments. She is legally blind. She is limited to bed or to a wheelchair. She is frequently hospitalized. She appeals her denial of Medicare benefits to this court for the period April 2009 to July 2010. (Doc. 5 ¶¶ 34-36.)

Ryan has received home health care since at least 1998. Between 1998 and April 2009, she received at least seven initial denials of eligibility for Medicare home health benefits. Each denial covered a separate sixty-day period.[1] On each occasion, Ryan filed an appeal and was determined to be eligible by an ALJ assigned to her case. The two ALJ decisions closest in time to the period in dispute in this case cover the periods February to April 2007 and February 2008 to April 2009. Both decisions determined that Ryan was eligible for Medicare because she was unable to leave her home and required skilled nursing services. ( Id. ¶¶ 37-40.)

For the period April 2009 to July 2010, Ryan has exhausted the administrative process established for the review of Medicare claims. Her initial claim for the period in question was denied. She sought redetermination and was denied again. The reason for denial was that she was found not to be "confined to the home" within the meaning of the Medicare law and regulations. These denials were upheld by the QIC and subsequently by the ALJ. Her last appeal was to the Appeals Council which denied her claim in October 2014. ( Id. ¶¶ 50-62.)

ii. John Herbert

Plaintiff John Herbert is fifty-two years old. He was rendered quadriplegic in a skiing accident in 1992. He is wheelchair bound. He suffers from multiple medical problems related to his paralysis. He has received home health care since at least September 1997. He appeals to this court his denial ...

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