MARGARET M. HECKLER, SECRETARY OF HEALTH AND HUMAN SERVICES,
PETITIONER V. COMMUNITY HEALTH SERVICES OF CRAWFORD COUNTY, INC., ET
AL.

   No. 83-56

   In the Supreme Court of the United States

   October Term, 1983

   On Writ of Certiorari to the United States Court of Appeals for the
Third Circuit

   Reply Brief for the Petitioner

   Respondents and amici make little effort to answer our arguments
that this case does not satisfy traditional estoppel principles, much
less involves "affirmative misconduct" as that term has been construed
in this Court's decisions.  Instead, they offer a host of points in
support of their contention that the Court should depart from its
longstanding refusal to invoke equitable estoppel against the
government.  None of the points raised suggests that the Court should
abandon the considered principle that the government may not be
equitably estopped from enforcing the law.  Nor do the briefs succeed
in explaining why it would be appropriate to depart from the general
rule in order to free CHS from the obligation to repay the Medicare
funds it received for expenses already reimbursed under another
federal program.

   1. Respondents assert (Br. 11) that our position is based on the
premise that "the government can do no wrong." That characterization
is incorrect.  Indeed, the very problem in this and similar cases is
that government employees and agents do make errors in the courts of
performing their duties.  The point at issue here is whether such
errors should disable the government from relying on relevant statutes
and regulations.  As we explained in our opening brief (Gov't Br.
18-26), there are strong reasons, grounded in both policy concerns and
constitutional considerations, for the courts to refrain from applying
principles of equitable estoppel to the government in those cases.
/1/

   Respondents attempt to minimize the importance of the requirements
imposed by statutes and regulations.  They vigorously criticize what
they characterize as the Secretary's emphasis on the "sanctity" of her
regulations and the need for "blind adherence" to them, as well as the
Secretary's purported compulsion "blindly and rigidly" to enforce
those regulations (Resp. Br. 18, 19).  Amici, while not openly
critical of the Secretary's attempt to enforce regulations, urge that
estoppel in this case would not offend the principle of separation of
powers because no congressional mandate forbids payment of the funds
at issue.  National Association for Home Care, etc. (NAHC) Br. 7.

   These comments reflect an inappropriate disregard for the
Secretary's responsibilities to enforce the law and to administer the
Medicare program in a reasonable and consistent manner.  The fact that
a government employee or agent has rendered erroneous advice does not
remove the Secretary's broader enforcement and administrative
responsibilities.  Even if such advice might lead to estoppel of a
private party (and we have shown it would not in this case, see Gov't
Br. 26-36), this Court has stressed that "the Government is not in a
position identical to that of a private litigant with respect to its
enforcement of laws enacted by Congress." INS v. Hibi, 414 U.S. 5, 8
(1973).  Accord, United States v. Mendoza, No. 82-849 (Jan. 10, 1984),
slip op. 5.

   Contrary to the suggestion of amici (NAHC Br. 7), the Secretary's
responsibilities are not confined to enforcement of what appears on
the face of the Medicare statute.  Congress has delegated to the
Secretary the authority to define reim bursable "reasonable cost"
under the Medicare program.  See Gov't Br. 5.  In view of that express
delegation of substantive authority, the Secretary's determinations
are entitled to "legislative effect." Schweiker v. Gray Panthers, 453
U.S. 34, 44 (1981).  Moreover, Congress provided expressly in the
Medicare statute for the reopening of reimbursement determinations in
the case of overpayments or underpayments.  See Gov't Br. 6.  Thus,
precluding the Secretary from recovering from CHS for reimbursed
expenses not covered by Medicare would be contrary to the express
mandate of Congress.  Indeed, even if there were no statutorily
mandated recovery mechanism, it could hardly be consistent with the
legislative intent for a court to relieve a provider of any obligation
to repay when it has claimed and received reimbursement for the same
expenses under two different federal programs.  /2/

   2. Amici contend (NAHC Br. 9-10, 13-14) that allowing the Secretary
to recover the overpayments CHS received would be inconsistent with
the policy and structure of the Medicare program.  They stress that
providers are expected to consult with intermediaries and that they
benefit from certainty.

   Recovery of the overpayments in this case is in no way inconsistent
with the policy and structure of the Medicare program.  As we noted
above, Congress chose not to specify in detail the expenses that would
be reimbursable under Medicare, but delegated that responsibility to
the Secretary.  Under such a statutory scheme, there cannot always be
complete certainty about the treatment of a given cost.  The Secretary
must develop principles of reimbursement through regulations, informal
guidelines, interpretation, advice, and adjudication.  Congress
expressly recognized the potential for error in such a system and the
need for a corrective mechanism;  it therefore prescribed reopening
and recovery in the case of overpayments and underpayments.  That
congressionally mandated process is simply inconsistent with the
theory that a provider is entitled to finality in connection with
every reimbursement determination.  /3/

   Furthermore, while a provider may consult with its intermediary,
such consultation does not eliminate any obligation to return funds
that the provider was not entitled to receive.  Of course,
intermediaries are expected to perform their statutory duties
competently, and it appears that in most cases they fulfill these
expectations and render correct advice.  But the statutory and
regulatory provisions for reopening make it clear that intermediaries
do not have the final word on interpretation of the Medicare statute
and regulations.  /4/ Ultimately the provider must exercise its own
judgment, since under the terms of the statute it bears the risk that
it will be required to repay funds if the Secretary eventually
concludes that payment was erroneous.

   3. Respondents urge vigorously (Br. 19-20) that Travelers, the
intermediary, was "grossly negligent" and that the Secretary should
have pursued Travelers rather than CHS in order to obtain satisfaction
for the reimbursement error.  But respondents themselves argued at
every stage below that Travelers' advice was correct, and even now
they do not concede the correctness of the Secretary's determination
that CHS should not have received the Medicare payments at issue (see
Resp. Br. 13).  Thus, respondents are hardly in a position to contend
that the advice Travelers rendered in itself would constitute grounds
for liability on Travelers' part.

   Respondents suggest that Travelers acted negligently in failing to
refer the question of CETA employee salaries to HHS when CHS first
raised it.  Travelers could have raised the issue with HHS after it
first arose during a meeting in which CHS consulted Travelers about a
variety of cost issues (see PRRB Record at 196-197).  In retrospect
perhaps Travelers should have done so.  But an intermediary obviously
cannot consult HHS on every point;  otherwise, the intermediary system
would become unwieldy and ultimately pointless.  Indeed, the contract
between HHS and Travelers required the latter not only to serve as a
channel of communication with the Secretary, but also to make coverage
and payment determinations (subject to review by the Secretary).  See
42 U.S.C. (Supp. V) 1395h(a);  PRRB Record at 288.  /5/

   Travelers and CHS both erred in interpreting the Secretary's
regulations.  But it was CHS that acted on the basis of the error by
claiming reimbursement for the salaries of the CETA employees.  And it
was CHS, not Travelers, that actually received the funds.  There is
nothing unusual or unfair about the Secretary's decision to recover
erroneous payments from the party that actually received them,
particularly when Congress expressly provided for such recovery.  /6/

   In any event, respondents' focus on Travelers' alleged negligence
is simply one manifestation of their repeated contention that CHS was
not at "fault" in accepting double reimbursement for the CETA workers'
salaries.  But CHS is required to return the erroneous payments
because they were not allowable under the Medicare program, not
because CHS was at fault in accepting them.  As we noted in our
opening brief (Gov't Br. 26), Congress has authorized the Secretary to
waive recoupment under other parts of the Social Security Act where
the recipient of an overpayment was not at fault, but it has not done
so under the Medicare program in the case of provider "reasonable
cost" determinations.

   4. Amici suggest (NAHC Br. 8) that allowing estoppel of the
government in this case is unlikely to lead to a flood of claims.  The
long list of lower court decisions cited by respondents (Br. 26-28)
itself appears to disprove this suggestion.  /7/ Moreover, respondents
assert forthrightly that the rule against estoppel of the government
is "outmoded" and "socially unacceptable" (Resp. Br. 34).  They
acknowledge that "(p)ossibly" a court should withhold equitable relief
against the government in some circumstances, but they contend that
"it is difficult in even a limited way to perceive of such
circumstances and the burden to prove such circumstances should rest
with the government" (id. at 34-35).  The standard they propose is
that "the government may be estopped when justice so requires" (Resp.
Br. 26 (quoting K. Davis, Administrative Law Treatise Sec. 17.01, at
252 (1982));  see also Resp. Br. 34).  It seems clear that such a
principle would not be easy to contain.

   5. Respondents rely ultimately on the contention that the
government should not be permitted to "injure and damage" them (Resp.
Br. 11) and that CHS will go out of business if the Secretary is not
estopped (id. at 22).  But the Secretary is merely seeking recovery of
payments CHS was never entitled to receive and that were duplicated by
funds it received under another federal program.  Such a recovery
simply cannot qualify as "injury" that would warrant estoppel of the
Secretary.

   As we explained in our opening brief (Gov't Br. 35), respondents'
concerns about the effect on CHS of repayment appear to be
exaggerated, since there are methods of repayment that would mitigate
any hardship to CHS.  In addition, it is difficult to believe that CHS
is entirely without sources of funding other than Medicare.
Respondents themselves acknowledge (Br. 5) that CHS's annual budget
has risen to approximately $900,000.  /8/ In any event, the method of
repayment is not at issue at this stage of the proceedings and need
not be considered by the Court.  See Bell v. New Jersey, No. 81-2125
(May 31, 1983), slip op. 5 n.4.  The holding of the court of appeals,
which respondents embrace, does not depend upon CHS's inability to
repay the amounts unlawfully obtained under the Medicare program.

   For the foregoing reasons and the additional reasons stated in our
opening brief, the judgment of the court of appeals should be
reversed.

   Respectfully submitted.

   REX E. LEE

      Solicitor General

   FEBRUARY 1984

   /1/ Respondents contend (Br. 29) that estoppel is necessary to
ensure that government employees will learn how to do their jobs
correctly.  But it is inappropriate for the courts to prevent the
government from enforcing the law in the hope that such "discipline"
will have the effect of reducing the number of government errors in
the future.  While such "punitive" estoppel might occasionally lead to
increased supervision of government employees and improved
performance, there is no assurance that this will occur;  instead, the
result could be a sharp decline in the willingness of government
agencies to make efforts to provide assistance to citizens.  See
Braunstein, In Defense of a Traditional Immunity:  Toward an Economic
Rationale for Not Estopping the Government, 14 Rutgers L.J. 1, 31-39
(1982).  In the Medicare program, for example, intermediaries might
simply decline to answer providers' inquiries, rather than risk
estoppel in the event the advice proved to be erroneous.  See
Schweiker v. Han;en, 450 U.S. 785, 790 & n.5 (1981).

   /2/ Respondents suggest (Br. 16) that CHS in fact had a substantive
entitlement to reimbursement for the salaries of the CETA employees
and that the only dispute is over a technical question of offset to
the amount claimed.  CHS presumably would have been entitled to
Medicare reimbursement for the salaries if it had not also received
CETA funds to cover them.  But once CHS claimed and received the CETA
funds, there was no substantive entitlement to receive Medicare funds
for the same expenses.

   Respondents also contend (Br. 17) that estoppel of the Secretary in
this case will have no effect on the public treasury.  This assertion
is both irrelevant (see INS v. Miranda, No. 82-29 (Nov. 8, 1982), slip
op. 5) and incorrect.  As respondents acknowledge, Congress would have
to appropriate funds to cover any shortfall in the Medicare trust
fund.

   /3/ Amici contend (NAHC Br. 11-13) that the provisions for
reopening of reimbursement determinations and recovery of overpayments
are meant only to allow correction of estimation errors or oversights
in the computation of interim payments.  That contention, which was
not raised in the courts below, is incorrect.  The statutory provision
and the Secretary's regulation are not so narrowly confined on their
face, and amici cite no legislative history that would support their
reading.  In the past, the Secretary has applied the reopening
provisions to recover overpayments made because of prior erroneous
interpretations of the Medicare statute and regulations.  See, e.g.,
Abbott-Northwestern Hospital, Inc. v. Schweiker, 698 F.2d 336, 338-339
(8th Cir. 1983);  River Garden Hebrew Home for the Aged v. Califano,
507 F. Supp. 221 (M.D. Fla. 1980).  It would be peculiar indeed if the
recovery provisions did not apply to all types of overpayments,
including those that result from a provider's or an intermediary's
incorrect interpretation of the statute.

   /4/ Both respondents and amici characterize intermediaries as the
Secretary's agents.  In many respects, an intermediary does act on
behalf of the Secretary in performing its duties under the Medicare
program.  But the Medicare statute and regulations make it quite clear
that an intermediary has no authority to render final reimbursement
determinations.  At least within the three-year period provided under
42 C.F.R. 405.1885, the intermediary's reimbursement determinations
are expressly subject to review and reversal by the Secretary.  Thus,
the intermediary's role as the Secretary's agent for some purposes
cannot provide grounds for binding the Secretary when the intermediary
renders erroneous adivce.

   /5/ Contrary to respondents' suggestion, it is not evident in this
case that Travelers breached any duty, contractual or otherwise, to
serve as a channel of communication.  The record does not indicate
that CHS specifically requested in 1975 or 1976 that Travelers contact
HHS about the treatment of the CETA salaries;  thus, Travelers might
have taken the position that there was no "communication" to be
channeled to the Secretary.  When CHS did finally press Travelers
about the question in 1977, the intermediary contacted HHS and
promptly communicated HHS's reply to CHS.

   /6/ As we explained in our opening brief (Gov't Br. 42 n.19), it
appears that the Secretary would not be able to hold an intermediary
liable for payments it certifies in the absence of gross negligence or
intent to defraud the government.

   /7/ Amici characterize Moser v. United States, 341 U.S. 41 (1951),
and United States v. Stinson, 197 U.S. 200 (1905), as cases in which
this Court accepted the principle of estoppel against the government.
NAHC Br. 5.  As we explained in our opening brief (Gov't Br. 19-20
n.6), Moser does not appear to involve the issue of estoppel.  The
decision in Stinson rested not on estoppel, but on the government's
failure to meet its burden of proof in an action to set aside
allegedly fraudulent land patents.

   /8/ In view of respondents' explanation (Br. 4-6) that the Crawford
County Commissioners encouraged the expansion of services that was
made possible by the double reimbursement of CETA employees' salaries
and that Medicare payments were spent for the purpose of providing
needed services, it might be expected that the County or a charitable
organization would be willing to help CHS in its efforts to repay the
funds.  Of course, if recovery of the overpayments in this case would
in fact create a "major medical crisis" in Crawford County (Resp. Br.
22), HHS could be expected to take that into account in connection
with its attempt to recover the funds.