Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-11-16606/USCOURTS-ca9-11-16606-1/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PATRICIA HARO; JOHN G.

BALENTINE; JACK MCNUTT; TROY

HALL,

Plaintiffs-Appellees,

v.

KATHLEEN SEBELIUS, Secretary of

the United States Department of

Health and Human Services,

Defendant-Appellant.

No. 11-16606

D.C. No.

4:09-cv-00134-

DCB

ORDER AND

AMENDED

OPINION

Appeal from the United States District Court

for the District of Arizona

David C. Bury, District Judge, Presiding

Argued December 5, 2012

Submitted February 14, 2013

San Francisco, California

Filed September 4, 2013

Amended January 2, 2014

Before: Barry G. Silverman, Ronald M. Gould,

and Morgan Christen, Circuit Judges.

Opinion by Judge Christen

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2 HARO V. SEBELIUS

SUMMARY*

Medicare

The panel amended an opinion filed September 4, 2013,

vacated injunctions entered by the district court, and reversed

the district court’s summary judgment entered in favor of a

nationwide class of Medicare beneficiaries in an action

brought by the beneficiaries, and a named plaintiff’s attorney,

challenging the Secretary of Health and Human Services’

practice of demanding “up front” reimbursement for

secondary payments from beneficiaries who have appealed a

reimbursement determination or sought a waiver of the

reimbursement obligation.

The district court enjoined the Secretary from seeking up

front reimbursements of Medicare secondary payments from

beneficiaries who have received payment from a primaryplan

if they have unresolved appeals or waivers, and enjoined the

Secretary from demanding that attorneys withhold settlement

proceeds from their clients until after Medicare is reimbursed. 

The panel held that plaintiff Patricia Haro demonstrated

Article III standing on behalf of the class of Medicare

beneficiaries, and Haro’s attorney independently

demonstrated standing to raise his individual claim. However,

the panel concluded that the beneficiaries failed to satisfy the

channeling requirement at the administrative level, and

therefore the district court lacked subject matter jurisdiction

pursuant to 42 US.C. d 405(g). The panel reached the merits

of the attorney’s claim, but concluded that the Secretary’s

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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HARO V. SEBELIUS 3

interpretation of the secondary payer provisions was

reasonable. The panel remanded for consideration of the

appellees’ due process claim.

COUNSEL

Alisa B. Klein (argued) and Mark B. Stern, Attorneys; Tony

West, Assistant Attorney General; Ann B. Scheel, Acting

United States Attorney, United States Department of Justice,

Civil Division, Washington, D.C.; WilliamB. Schultz,Acting

General Counsel; Margaret M. Dotzel, Deputy General

Counsel; Janice L. Hoffman, Associate General Counsel;

Carol J. Bennett, Deputy Associate General Counsel for

Program Integrity; Leslie M. Stafford, Attorney, United

States Department of Health and Human Services,

Washington D.C., for Defendant-Appellant.

Gil Deford (argued) and Wey-Wey Kwok, Center for

Medicare Advocacy, Willimantic, Connecticut, for PlaintiffsAppellees.

Barbara Jones, AARP Foundation Litigation, Pasadena,

California; Iris Y. González, AARP Foundation Litigation,

Washington D.C.; Michael Schuster, AARP, Washington

D.C., for Amicus Curiae AARP.

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4 HARO V. SEBELIUS

ORDER

The opinion filed on September 4, 2013, and appearing

at 729 F.3d 993, is amended as follows:

On page 5 of the slip opinion, replace the third sentence

of the first paragraph with the following language:

But we conclude that the beneficiaries failed

to satisfy the channeling requirement at the

administrative level and therefore the district

court lacked subject matter jurisdiction

pursuant to 42 US.C. § 405(g).

On page 5 of the slip opinion, in the fifth sentence of the

first paragraph, replace the word “beneficiaries’ ” with the

word “appellees.’ ”

On page 10 of the slip opinion, in the second full sentence

appearing on the page, replace the word “beneficiaries” with

“plaintiffs.”

On page 23 of the slip opinion, replace footnote 8 with the

following language:

The beneficiaries also cite, inter alia,

Mathews v. Diaz, 426 US. 67 (1976), Briggs

v. Sullivan, 886 F.2d 1132 (9th Cir. 1989),

and Lopez v. Heckler, 725 F.2d 1489 (9th Cir.

1984), vacated 469 US. 1082 (1984). But

these cases pre-date Illinois Council, 529 US.

1 (2000).

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HARO V. SEBELIUS 5

On page 24 of the slip opinion, replace heading i with the

heading “Haro’s February 2, 2009 letter did not satisfy the

channeling requirement.”

On page 24 of the slip opinion, in the first sentence in

subsection i, replace the word “presentment” with

“channeling.”

On pages 25 of the slip opinion, replace the last two

paragraphs of subsection i with the following language:

Even if Haro’s letter and subsequent

inaction did afford the Secretary an

“opportunity to apply, interpret, or revise” the

challenged policy, Haro failed to exhaust her

administrative remedies before filing suit in

federal court. To exhaust her administrative

remedies, a beneficiary must proceed through

the five levels of administrative review:

( 1 ) t h e i n i t i a l d e t e r mi n a t i o n ;

(2) redetermination; (3) reconsideration of the

redetermination; (4) an ALJ hearing; and

(5) review by the Medicare Appeals Council. 

42 C.F.R. § 405. Haro failed to press her

claim beyond level two. Instead, less than a

week after she mailed her reimbursement

check to the Secretary, Haro filed suit —

before any agency review of the up-front

reimbursement policy.

Haro claims that the government has

waived the exhaustion requirement. But we

can find no unambiguous waiver of this issue

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6 HARO V. SEBELIUS

in the record, and therefore conclude that the

issue is not waived.

We conclude that the channeling

requirement of § 405(g) was not met. 

Because channeling is a jurisdictional

requirement, the district court lacked subject

matter jurisdiction over the beneficiaries’

claim.

On page 32 of the slip opinion, replace the word

“beneficiaries’ ” with the word “appellees.’ ”

An amended opinion is filed concurrently with this order.

With this amendment, Judges Silverman, Gould, and

Christen vote to deny Appellant’s petition for panel rehearing

and rehearing en banc, filed on October 18, 2013. The full

court has been advised of the petition for rehearing and

rehearing en banc and no judge requested a vote on whether

to rehear the matter en banc. Fed. R. App. P. 35.

The petition for panel rehearing and rehearing en banc is

DENIED. No further petitions for en banc or panel rehearing

shall be permitted.

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HARO V. SEBELIUS 7

OPINION

CHRISTEN, Circuit Judge:

Secretary of Health and Human Services Kathleen

Sebelius appeals the district court’s order certifying a

nationwide class of Medicare beneficiaries and granting

summary judgment in the beneficiaries’ favor. Patricia Haro,

Jack McNutt, and Troy Hall are named plaintiffs. John

Balentine was Haro’s lawyer in her underlying personal

injury suit.

Before the district court, the beneficiaries raised two

claims: (1) the Secretary’s practice of demanding “up front”

reimbursement for secondary payments from beneficiaries

who have appealed a reimbursement determination or sought

waiver of the reimbursement obligation is inconsistent with

the secondary payer provisions of the Medicare statutory

scheme; and (2) the Secretary’s practice violates their due

process rights. Balentine separately claimed the Secretary’s

practice of demanding that attorneys withhold settlement

proceeds from beneficiary-clients until Medicare is

reimbursed is also inconsistent with the secondary payer

provisions.

The district court agreed with the beneficiaries. The court

enjoined the Secretary from seeking up front reimbursement

of Medicare secondary payments from beneficiaries who

have received payment from a primary plan if they have

unresolved appeals of their reimbursement calculations or

unresolved requests for waiver of their reimbursement

obligations. The district court also agreed with Balentine and

enjoined the Secretary from demanding that attorneys

withhold settlement proceeds from their clients until after

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8 HARO V. SEBELIUS

Medicare is reimbursed. The district court did not reach the

beneficiaries’ due process claim.

On appeal to our court, the Secretary raises three

jurisdictional arguments. First, she argues that this case is not

justiciable because neither the beneficiaries nor Balentine had

Article III standing. Second, she argues this case is moot. 

Third, she argues that the district court lacked subject matter

jurisdiction over all claims in the complaint. On the merits,

the Secretary maintains that her interpretation of the

Medicare secondary payer provisions is reasonable.

We have jurisdiction over this appeal pursuant to

28 U.S.C. § 1291. We conclude that Haro has demonstrated

Article III standing on behalf of the class of Medicare

beneficiaries and that Balentine has independently

demonstrated standing to raise his individual claim. But we

conclude that the beneficiaries failed to satisfy the channeling

requirement at the administrative level and therefore the

district court lacked subject matter jurisdiction pursuant to

42 US.C. § 405(g). We reach the merits of Balentine’s claim,

but conclude that the Secretary’s interpretation of the

secondary payer provisions is reasonable. We therefore

vacate the district court’s injunctions, reverse the district

court’s summary judgment order, and remand for

consideration of the appellees’ due process claim.

I. BACKGROUND

A. Statutory Background

Congress enacted the secondary payer provisions of the

Medicare statute in 1980 to cut Medicare costs. See Zinman

v. Shalala, 67 F.3d 841, 843 (9th Cir. 1995). Those

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HARO V. SEBELIUS 9

provisions make Medicare secondary to other sources of

insurance by forbidding Medicare payments when a primary

plan—for instance, group health insurance or liability

insurance—is reasonably expected to make payment for the

same medical care; and by providing that certain Medicare

payments are conditional and must be reimbursed. 42 US.C.

§ 1395y(b)(2)(A), (B). Conditional payments are at issue in

this case.

Medicare makes a conditional payment when a primary

insurer cannot reasonably be expected to pay promptly. Id.

§ 1395y(b)(2)(B)(i). If Medicare makes a conditional

payment and the beneficiary later receives payment from a

primary insurer, Medicare is entitled to reimbursement. Id.

§ 1395y(b)(2)(B)(ii). Specifically, § 1395y(b)(2)(B)(ii)

provides that “a primary plan [or] an entity that receives

payment from a primary plan, shall reimburse” Medicare

once the primary plan’s responsibility has been demonstrated

by a judgment or settlement. Id. We refer to this

paragraph—§ 1395y(b)(2)(B)(ii)—as the “reimbursement

provision.” If Medicare is not reimbursed within 60 days

after notice of the primary insurer’s payment, the Secretary is

entitled to charge interest on the reimbursement amount. Id.

The statutory scheme also creates a cause of action by

which the United States may recover from a primary plan or

“from any entity that has received payment from a primary

plan or from the proceeds of a primary plan’s payment to any

entity.” Id. § 1395y(b)(2)(B)(iii). We refer to this part of the

Medicare statutory scheme as the “cause of action provision.” 

The cause of action provision allows the United States to seek

reimbursement from “the beneficiary herself.” Zinman,

67 F.3d at 844–45; see also 42 C.F.R. § 411.24(g) (Medicare

“has a right of action to recover its payments from any entity,

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10 HARO V. SEBELIUS

including a beneficiary . . . [or] attorney . . . that has received

a primary payment.”).

When Medicare learns that a beneficiary has received

payment from a primary plan, the Secretary makes an initial

determination of the amount of reimbursement due from the

beneficiary. Borrowing from the Social Security Act, the

Medicare Act incorporates administrative review procedures

set out in 42 US.C. § 405(b) and judicial review pursuant to

42 US.C. § 405(g). See 42 US.C. § 1395ff(b)(1)(A). A

beneficiarymay contest the amount of reimbursement or seek

waiver of any reimbursement amount. See id. § 1395gg.

B. Factual Background

1. Patricia Haro

Patricia Haro was injured in a car accident and Medicare

paid for her medical treatment. Haro filed a personal injury

claim against the tortfeasor, which eventually settled. 

Medicare, through the Medicare Secondary Payer Recovery

Contractor,1sought reimbursement of $1,682.72 in a letter

dated January 12, 2009. The letter informed Haro of her right

to appeal the reimbursement determination or seek waiver but

also stated that Haro “must” pay within 60 days and that

interest would start to run if payment was not made in that

period. The letter encouraged Haro to pay the amount in full,

even if she decided to appeal or seek a waiver, in order to

avoid interest charges.

1 The Medicare Secondary Payer Recovery Contractor is a private

contractor that collects secondary payment reimbursements on behalf of

Medicare. For simplicity, this opinion refers to both entities as Medicare.

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HARO V. SEBELIUS 11

Haro disputed the reimbursement determination by letter

dated January 21, 2009. Haro’s lawyer sent a second letter,

on February 2, 2009. In it, he argued that the reimbursement

provision did not grant the Secretary authority to seek

payment from a beneficiary within 60 days of notice of the

settlement if the beneficiary had appealed the reimbursement

determination. The letter also argued that the Due Process

Clause prohibits takings of property before there has been a

determination of rights to that property.

Medicare reduced Haro’s reimbursement amount to

$696.13 by letter dated March 3, 2009. On March 4, 2009,

likely before Haro received notice of the revised

reimbursement figure, Haro sent Medicare a check for $800. 

Haro did not seek reconsideration of Medicare’s reduced

reimbursement amount and instead filed this lawsuit on

March 10, 2009. Medicare reimbursed Haro $103.87 (the

difference between $800 and $696.13) on April 13, 2009.

2. Jack McNutt

Like Haro, Jack McNutt was injured in a car accident and

Medicare paid his medical costs. McNutt’s personal injury

lawsuit settled and McNutt notified Medicare of the

settlement. Medicare responded with a letter requesting

reimbursement of $26,487.07. The letter stated that McNutt

was required to pay within 60 days of the receipt of the

settlement proceeds and that interest would start to accrue if

payment was not received within that time. The letter also

informed McNutt of his rights to appeal and seek waiver of

the reimbursement obligation. McNutt appealed the

reimbursement determination.

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12 HARO V. SEBELIUS

After Medicare sent McNutt a notice of the Secretary’s

intent to refer the debt to the Department of Treasury, McNutt

wrote a letter of “appeal,” but with his letter he enclosed a

check for $11,366.58, the amount he believed he owed. 

Medicare sent McNutt an adjusted demand. Because of

McNutt’s earlier payment, only $1,422.93 (including $13.36

in interest) remained outstanding. Medicare notified McNutt

that his remaining reimbursement payment “should” be made

within 30 days. McNutt sought reconsideration of that

amount, and the Secretary acknowledged that notice of intent

to refer the debt to Treasurywas sent in error.2 Medicare then

reduced McNutt’s total reimbursement amount again, and

McNutt paid the remaining balance, plus interest. His

administrative appeal was still pending at the time this appeal

was filed. At the administrative level, McNutt did not

challenge the Secretary’s practice of demanding up front

reimbursement.

3. Troy Hall

Troy Hall was injured while working and Medicare paid

for his injury-related medical care. After Hall settled his

worker’s compensation claim, he received a reimbursement

demand from the Secretary. Hall appealed the Secretary’s

initial reimbursement calculation. Medicare reduced the

reimbursement amount and determined that Hall owed

nothing. At the administrative level, Hall did not object to

the Secretary’s practice of demanding up front

reimbursement.

2 The letter states that “debts pending appeal are excluded from referral

to the Department of Treasury.”

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HARO V. SEBELIUS 13

4. John Balentine

Attorney John Balentine represented Haro in her personal

injury lawsuit and during administrative proceedings. He

received a letter from Medicare similar to the letter that Haro

received. It instructed him not to disburse settlement funds

to his beneficiary-client until Medicare had been reimbursed,

and said he would be personally liable if he did. Balentine

declared that he routinely receives similar letters from

Medicare.

C. District Court Proceedings

As noted above, this appeal involves two separate claims

against the Secretary. First, the beneficiaries alleged that the

Secretary exceeded her authority under the Medicare

secondary payer provisions by demanding payment before

resolution of the plaintiffs’ appeals or completion of the

waiver application process. Second, Balentine alleged that

the Secretary’s demand that beneficiaries’ attorneys withhold

settlement proceeds until Medicare is reimbursed exceeds the

Secretary’s statutory authority. The beneficiaries also alleged

that the Secretary’s demand violated their due process rights. 

Plaintiffs sought declaratory and injunctive relief.

In the district court, the Secretary moved pursuant to

Federal Rule of Civil Procedure 12(b)(1) to dismiss the

complaint for lack of subject matter jurisdiction. The

Secretary argued that the beneficiaries lacked Article III

standing and had not exhausted their administrative remedies

as required by 42 US.C. § 405(g). The district court

concluded that Haro and McNutt had Article IIIstanding and

that, with respect to McNutt, § 405(g)’s exhaustion

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14 HARO V. SEBELIUS

requirement was properly waived. The district court denied

the motion to dismiss.

On cross-motions for summary judgment, the district

court granted the named plaintiffs’ motion and certified a

class of beneficiaries who had been or would be subject to

demands for reimbursement from the Secretary before their

administrative appeals were exhausted. Even analyzing the

Secretary’s practice pursuant to the deferential standard

explained in Chevron U.S.A. v. Natural Resources Defense

Council, 467 US. 837 (1984), the district court determined

that the Secretary’s up front reimbursement requirement was

inconsistent with the appeals and waiver processes. The

district court therefore enjoined the Secretary from

demanding reimbursement of secondary payments from

beneficiaries prior to resolution of their administrative

appeals or requests for waiver. The district court also

enjoined the Secretary from demanding that attorneys

withhold liability proceeds from their clients pending

reimbursement of disputed claims.

II. STANDARD OF REVIEW

We review a district court’s determination of subject

matter jurisdiction de novo. Cook Inlet Region, Inc. v. Rude,

690 F.3d 1127, 1130 (9th Cir. 2012). We also review an

order granting summary judgment de novo. Int’l

Rehabilitative Sciences, Inc. v. Sebelius, 688 F.3d 994, 1000

(9th Cir. 2012).

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HARO V. SEBELIUS 15

III. DISCUSSION

A. Jurisdictional Issues

On appeal, the Secretary argues that Article III’s case or

controversy requirement was not met in this case because

neither the beneficiaries nor Balentine had standing and

because the beneficiaries’ claims are moot. The Secretary

also maintains that the district court lacked statutory subject

matter jurisdiction. Each jurisdictional argument is addressed

in turn.

1. Article III Standing

a. Beneficiaries

In order to demonstrate Article III standing, a plaintiff

must show: (1) a concrete injury; (2) fairly traceable to the

challenged action of the defendant; (3) that is likely to be

redressed by a favorable decision. Lujan v. Defenders of

Wildlife, 504 US. 555, 560–61 (1992). “In a class action,

standing is satisfied if at least one named plaintiff meets the

requirements.” Bates v. United Parcel Serv., Inc., 511 F.3d

974, 985 (9th Cir. 2007) (en banc). “[A] plaintiff must

demonstrate standing for each claim” and “for each form of

relief sought.” DaimlerChrysler Corp. v. Cuno, 547 US. 332,

352 (2006) (internal quotation marks and citation omitted). 

“The standing formulation for a plaintiff seeking prospective

injunctive relief” generally requires that the plaintiff’s

concrete injury be “coupled with ‘a sufficient likelihood that

he will again be wronged in a similar way.’” Bates, 511 F.3d

at 985 (quoting City of Los Angeles v. Lyons, 461 US. 95, 111

(1983)).

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16 HARO V. SEBELIUS

“[A] plaintiff is presumed to have constitutional standing

to seek injunctive relief when [the plaintiff] is the direct

object of [government] action challenged as unlawful.” Los

Angeles Haven Hospice, Inc. v. Sebelius, 638 F.3d 644, 655

(9th Cir. 2011) (citing Lujan, 504 US. at 561–62). Here,

Haro was the direct object of the Secretary’s allegedly

overreaching collection practice. She received a letter

requesting reimbursement before her administrative appeal

had run its course. We therefore start with the presumption

that Haro has Article III standing, on behalf of the class, to

challenge the Secretary’s practice. See Mayfield v. United

States, 599 F.3d 964, 971 (9th Cir. 2010) (“When the lawsuit

at issue challenges the legality of government action, and the

plaintiff has been the object of the action, then it is presumed

that a judgment preventing the action will redress his

injury.”).

We consider whether the elements of Article IIIstanding,

as articulated in Lujan, were satisfied at the time the

complaint was filed. Cnty. of Riverside v. McLaughlin,

500 US. 44, 51 (1991). When the complaint was filed,

Medicare owed Haro $103.87—the difference between the

$800 she sent to Medicare in response to the first demand

letter and Medicare’s $696.13 final reimbursement

determination. Haro had been deprived of $103.87 for

approximately one month3and had therefore suffered a

modest but concrete fiscal injury that was directly traceable

3 Haro claims in an affidavit that she sent the $800 payment with her

request for redetermination on January 21, 2009. She repeats this

contention in her brief. However, the check itself was dated March 4,

2009. Moreover, a March 4 letter from Balentine to Medicare states that

an $800 check is enclosed. The complaint was filed on March 10, 2009

and Medicare’s reimbursement check to Haro was dated April 13, 2009.

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HARO V. SEBELIUS 17

to the challenged action of the Secretary. The first two

prongs of the Lujan formulation were therefore satisfied as to

the beneficiaries’ claim.

The third element of Article IIIstanding is redressability.

The Secretary argues that Haro is not likely to suffer the same

injury again and that she therefore cannot show that

injunctive relief would redress her injury. Lyonssuggests that

Haro must demonstrate that she was likely to suffer the same

injury in the future, absent injunctive relief. 461 US. at

105–06 (choke-hold victim lacked standing to pursue

injunctive relief against police where he was unable to

demonstrate likelihood of future choke-holds). But unlike the

plaintiff in Lyons, Haro’s alleged injury was ongoing at the

time the complaint was filed—she was deprived of $103.87. 

An injunction prohibiting the Secretary from withholding

reimbursement payments until after completion of the appeals

process would have redressed Haro’s injury. See

McLaughlin, 500 US. at 51 (distinguishing Lyons). Because

we conclude that a properly framed injunction would have

redressed Haro’s injury, Haro has demonstrated the necessary

criteria for Article III standing on behalf of the class.

b. Balentine

Balentine is not part of the beneficiary class; he asserted

an individual claim unique to his status as counsel for a

Medicare beneficiary. Therefore, he must separately

demonstrate Article III standing. DaimlerChrysler, 547 US.

at 352. Because Balentine was the object of the Secretary’s

demand that he withhold disbursement of Haro’s settlement

funds, we begin with the presumption that he has standing to

challenge the Secretary’s action. Los Angeles Haven

Hospice, 638 F.3d at 655 (citing Lujan, 504 US. at 561–62).

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18 HARO V. SEBELIUS

The demand Balentine received bears significant

similarity to the demand at issue in Los Angeles Haven

Hospice. Haven Hospice challenged a Department of Health

and Human Services regulation implementing a cap on

reimbursement for hospice care provided to Medicare

beneficiaries. See id. at 649; see also 42 US.C. § 1395f(i)(2). 

Haven Hospice received a demand for repayment of the

amount it had been reimbursed in excess of the statutory cap. 

Los Angeles Haven Hospice, 638 F.3d at 652. The Secretary

maintained that the hospice did not have Article III standing

to challenge the regulation or seek to enjoin its enforcement. 

Id. at 654. But this court, applying the Lujan presumption,

concluded: “[T]he fact that the allegedly unlawful regulation

was directly applied to Haven Hospice and exposed it to

individual liability for the claimed overpayments, is sufficient

to support its claim of Article III standing to pursue the

declaratory and injunctive relief sought in the complaint.” Id.

at 655.

The demand letter the Secretary sent to Balentine

represents direct application of the Secretary’s interpretation

of her authority under 42 C.F.R. § 411.24(g).4 The letter

states that “Medicare’s claim must be paid up front out of

settlement proceeds before any distribution occurs,” and that

“Medicare must be paid within 60 days of receipt of the

proceeds from the third party.” Because 42 C.F.R.

§ 411.24(g) provides that Medicare “has a right of action to

4 Whether we analyze 42 C.F.R. § 411.24(g) individually, or in

conjunction with 42 C.F.R. § 411.24(h) is largely academic: § 411.24(h)

interprets the reimbursement provision and provides that “[i]f the

beneficiary or other party receives a primary payment, the beneficiary or

other party must reimburse Medicare within 60 days.” The Secretary’s

interpretation of the reimbursement provision is thus similarly broad—it

encompasses attorneys who have received a primary payment.

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HARO V. SEBELIUS 19

recover its payments from any entity, including a[n] . . .

attorney . . . that has received a primary payment,” the

regulation subjects Balentine to individual liability. 

Consistent with Los Angeles Haven Hospice, Balentine has

demonstrated Article III standing. 638 F.3d at 655.

2. Mootness

The Secretary next argues that the claims asserted in the

complaint are moot.5 A claim becomes moot “when the

issues presented are no longer ‘live’ or the parties lack a

legally cognizable interest in the outcome.” Powell v.

McCormack, 395 US. 486, 496 (1969) (citation omitted). It

is undisputed that Haro did not challenge Medicare’s final

reimbursement calculation and is not owed any additional

refund. But the district court concluded, and the beneficiaries

maintain, that the “capable of repetition, yet evading review”

exception to mootness applies to their claim. See, e.g.,

Padilla v. Lever, 463 F.3d 1046, 1049 (9th Cir. 2006) (en

banc) (quoting Roe v. Wade, 410 US. 113, 125 (1973)).

In Sosna v. Iowa, 419 US. 393, 401 (1975), the Supreme

Court held that mootness of a named plaintiff’s claim after

class certification does not moot the action. After

incremental extension of Sosna,

6

the Supreme Court held that

whether class certification occurs before or after a named

5 Because we conclude, infra, that Haro is the only plaintiff who

arguably presented a challenge to the practice of requiring up front

reimbursement at the administrative level, we limit our analysis of the

Secretary’s mootness argument to Haro’s claim.

6 For a comprehensive summary of this case law, see Pitts v. Terrible

Herbst, Inc., 653 F.3d 1081, 1086–90 (9th Cir. 2011).

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20 HARO V. SEBELIUS

plaintiff’s claim becomes moot is immaterial. McLaughlin,

500 US. at 52 (“That the class was not certified until after the

named plaintiffs’ claims had become moot does not deprive

us of jurisdiction.”). The Court stated that where a claim is

“so inherently transitory that the trial court will not have . . .

enough time to rule on a motion for class certification before

the proposed representative’s individual interest expires . . .

the ‘relation back’ doctrine is properly invoked to preserve

the merits of the case for judicial resolution.” Id. (citations

omitted).

Here, Haro’s claim expired before the district court

certified the class. Her individual interest in injunctive relief

expired once she was fully reimbursed—approximately one

month after she filed this lawsuit—but the district court could

not have been expected to rule on a motion for class

certification in that period. Pursuant to the rule in Sosna and

McLaughlin, expiration of Haro’s personal stake in injunctive

relief did not moot the beneficiaries’ claim for injunctive

relief. We conclude that the beneficiaries’ claim for

injunctive relief is not moot, and that Article III’s

justiciability requirements are satisfied.7

7 The Secretary argues that her current practice—under which debts that

have been appealed are not referred to the Department of Treasury for

collections—mooted the beneficiaries’ claim. But this misapprehends the

nature of the beneficiaries’ claim. Whether the claims are referred for

collection or not, plaintiffs object to the demand for up front

reimbursement. To the extent a current policy could have mooted the

beneficiaries’ claim, the voluntary cessation exception applies. See

Friends of the Earth v. Laidlaw, 528 US. 167, 189 (2000) (“[A]

defendant’s voluntary cessation of a challenged practice does not deprive

a federal court of its power to determine the legality of the practice.”

(internal quotation marks omitted)).

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3. Statutory Subject Matter Jurisdiction

The Secretary maintains that the district court did not

have subject matter jurisdiction. The complaint alleged

federal question jurisdiction under 28 US.C. § 1331 and,

alternatively, jurisdiction under 42 US.C. § 1395ff(b)(1)(A). 

The latter statute is a provision in the Medicare scheme that

incorporates 42 US.C. § 405(g), the statute that establishes

federal jurisdiction to review final decisions of the

Commissioner of Social Security. The district court

determined that it had subject matter jurisdiction pursuant to

§ 405(g).

a. The beneficiaries’ claim

Federal question jurisdiction does not extend to most

claims arising under the Medicare Act. The Medicare Act

incorporates 42 US.C. § 405(h), which provides:

No findings of fact or decision of the

[Secretary] . . . shall be reviewed by any

person, tribunal, or governmental agency

except as herein provided. No action against

the United States, the [Secretary] . . . , or any

officer or employee thereof shall be brought

under section 1331 . . . of title 28 to recover

on any claim arising under this subchapter.

42 US.C. § 405(h); 42 US.C. § 1395ii.

The series of cases interpreting § 405(h) makes clear that

it precludes federal question jurisdiction in this case. First, in

Weinberger v. Salfi, 422 US. 749, 760–61 (1975), the

Supreme Court ruled that a claim “arises under” the Social

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22 HARO V. SEBELIUS

Security Act, for purposes of § 405(h), if the Social Security

Act “provides both the standing and the substantive basis for

the presentation of” the claim. Salfi held that a due process

and equal protection challenge to duration-of-relationship

provisions of the Social Security Act could not proceed under

§ 1331. Id. at 761.

The Supreme Court extended Salfi to the Medicare Act in

Heckler v. Ringer, 466 US. 602, 614 (1984). There, the Court

ruled that there was no federal question jurisdiction to

consider a challenge to a procedure for determining Medicare

benefits. The Court described the procedural claim as

“inextricably intertwined” with the substantive claim for

benefits, id., but the Court rejected the proposition that

application of § 405(h) depends on whether a claim is

“procedural” rather than “substantive,” id. at 615.

Finally, in Shahala v. Illinois Council on Long Term

Care, Inc., the Supreme Court explained that the broad

purpose of § 405(h) is to ensure that claims are channeled so

that the agency has the first opportunity to revise its own

policies:

[T]he bar of § 405(h) reaches beyond ordinary

administrative law principles of ‘ripeness’ and

‘exhaustion of administrative remedies’—

doctrines that in any event normally require

channeling a legal challenge through the

agency. . . . [I]t demands the ‘channeling’ of

virtually all legal attacks through the agency

[and] assures the agency greater opportunity

to apply, interpret, or revise policies,

regulations, or statutes without possibly

premature interference by different individual

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HARO V. SEBELIUS 23

courts applying ‘ripeness’ and ‘exhaustion’

exceptions case by case.

529 US. 1, 12–13 (2000) (emphasis added) (citation omitted). 

Illinois Council continued, “[t]he fact that the agency might

not provide a hearing for [any] particular contention, or may

lack the power to provide one . . . is beside the point because

it is the ‘action’ arising under the Medicare Act that must be

channeled through the agency.” Id. at 23 (emphasis omitted)

(citations omitted).

Here, the beneficiaries and Balentine maintain that the

Secretary’s interpretation of the secondary payer provisions

is unlawful and that the Secretary’s application of the

statute’s enabling regulations injured them. Because the

secondary payer provisions of the Medicare Act provide the

standing and the substantive basis for the beneficiaries’ claim,

§ 405(h) precludes original jurisdiction under § 1331. See

Salfi, 422 US. at 760–61; see also Fanning v. United States,

346 F.3d 386, 392, 399–400 (3d Cir. 2003) (district court did

not have federal question jurisdiction over “class action

complaint seeking to enjoin the government’s attempt to

obtain reimbursement of Medicare overpayments pursuant to

the secondary payer provisions”). Pursuant to § 405(h), we

conclude the beneficiaries’ claim is subject to the requirement

that it be administratively channeled.

Because the beneficiaries were required to satisfy the

presentment and exhaustion requirements under § 405(g)

prior to seeking judicial relief, we must first determine

whether Haro fairly presented her claim at the administrative

level. Kaiser v. Blue Cross of Cal., 347 F.3d 1107, 1115 (9th

Cir. 2003). Exhaustion is waivable, presentment is not. Id.

(citing Mathews v. Eldridge, 424 US. 319, 328 (1976)). Only

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24 HARO V. SEBELIUS

presentment is “purely jurisdictional.” Eldridge, 424 US. at

328 (internal quotation marks omitted).

The Secretary maintains that § 405(g)’s jurisdictional

presentment requirement was not met because none of the

named plaintiffs presented to the agency the claim that the

Secretary lacks authority to demand up front reimbursement. 

The beneficiaries rely heavily on Eldridge to argue that a

final decision from the Secretary with respect to a claim for

benefits entitles a beneficiary to raise any policy challenge in

federal court, ostensibly on review of the Secretary’s final

benefits decision. We conclude the beneficiaries’ position is

inconsistent with the purpose of the channeling requirement

in § 405(h) as explained by the Supreme Court in Illinois

Council.

Eldridge involved a Social Securitybeneficiarywho, after

responding to a questionnaire, received notice that a state

agency monitoring his status had tentatively concluded he

was no longer disabled. Id. at 323–24. Eldridge disputed one

of the reports relied upon by the agency but otherwise stated

that the agency had enough evidence of his disability. Id. at

324. The Social Security Administration accepted the

agency’s determination and terminated Eldridge’s benefits. 

Id. Eldridge did not request reconsideration of the

administration’s termination of his benefits before filing a

lawsuit and arguing that due process required that he be given

a pretermination evidentiary hearing. Id. at 324–25.

Analyzing the district court’s jurisdiction to adjudicate

Eldridge’s claim, the Supreme Court ruled that “[t]hrough his

answers to the state agency questionnaire, and his letter in

response to the tentative determination that his disability had

ceased, [Eldridge] specifically presented the claim that his

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HARO V. SEBELIUS 25

benefits should not be terminated because he was still

disabled.” Id. at 329 (emphasis added). The Court

continued, “[t]he fact that Eldridge failed to raise with the

Secretary his constitutional claim to a pretermination hearing

is not controlling[,] . . . § 405(g) requires only that there be a

‘final decision’ by the Secretary with respect to the claim of

entitlement to benefits.” Id. Consequently, the Court

concluded that “the nonwaivable jurisdictional element [of

§ 405(g)] was satisfied.” Id. at 330.

The beneficiaries maintain that Eldridge stands for the

broad proposition that § 405(g)’s presentment requirement is

satisfied once a beneficiary has raised a claim for benefits. In

their view, a final decision on a claim for benefits permits a

beneficiary to raise any separate claim pertaining to the

agency’s procedure or policy in federal court. We disagree. 

In our view, the beneficiaries’ reading of Eldridge is overly

broad.

The purpose of the channeling requirement is to “assure[]

the agency greater opportunity to apply, interpret, or revise

policies, regulations, or statutes without possibly premature

interference by different individual courts applying ‘ripeness’

and ‘exhaustion’ exceptions.” Illinois Council, 529 US. at

13. This purpose would not be fulfilled if plaintiffs

proceedingthrough the administrative channel were permitted

to raise claims in federal court that were not raised before the

agency. See Lifestar Ambulance Serv., Inc. v. United States,

365 F.3d 1293, 1298 (11th Cir. 2004) (describing

administrative review as “the first step in a comprehensive

statutory remedial scheme that fully empowers a reviewing

court to consider and remedy any of the violations of law

alleged by [a] plaintiff”).

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26 HARO V. SEBELIUS

Moreover, the beneficiaries’ interpretation of the

presentment requirement is fundamentally inconsistent with

the general rule that “[o]nce federal subject matter

jurisdiction is established over the underlying case between

[plaintiff] and [defendant], the jurisdictional proprietyof each

additional claim is to be assessed individually.” Caterpillar

Inc. v. Lewis, 519 US. 61, 66 n.1 (1996) (quoting 3 James

Moore, Moore’s Federal Practice ¶ 14.26, 14-116 (2d ed.

1996)). In Eldridge, the general rule described in Caterpillar

was not contravened because the plaintiff’s argument that he

was entitled to a pretermination evidentiary hearing had

direct bearing on the termination of his benefits. Notably,

this case does not involve a “claim for benefits” because the

beneficiaries do not challenge Medicare’s reimbursement

calculations. They challenge the Secretary’s policy of

demanding up front reimbursement, a policy that has no

bearing on the reimbursement calculations questioned by the

beneficiaries at the administrative level.8

Finally, Illinois Council, a case decided twenty-four years

after Eldridge, persuades us that the beneficiaries’

interpretation of Eldridge is too expansive. In Illinois

Council, the Supreme Court addressed a case bearing directly

on challenges to Medicare regulations and made clear that the

type of policy challenge at issue in this case is subject to the

channeling requirement of § 405(h), and to the presentment

requirement in § 405(g). Illinois Council, 529 US. at 14

(“Nor can we accept a distinction that limits the scope of

§ 405(h) to claims for monetary benefits.”).

8 The beneficiaries also cite, inter alia, Mathews v. Diaz, 426 US. 67

(1976), Briggs v. Sullivan, 886 F.2d 1132 (9th Cir. 1989), and Lopez v.

Heckler, 725 F.2d 1489 (9th Cir. 1984), vacated 469 US. 1082 (1984). 

But these cases pre-date Illinois Council, 529 US. 1 (2000).

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We decline to adopt the extraordinarily broad reading of

Eldridge that the beneficiaries invite. We conclude that the

named plaintiffs’ reimbursement disputes did not provide an

opportunity for the Secretary to consider the claim that her

interpretation of the secondary payer provisions exceeded her

authority. Their requests for redetermination of their

respective amounts of reimbursement did not constitute

presentment of their policy challenge.

i. Haro’s February 2, 2009 letter did not

satisfy the channeling requirement.

The beneficiaries rely solely on presentation of their

reimbursement disputes as evidence that they fulfilled

§ 405(g)’s channeling requirement, but we consider whether

the requirement was otherwise satisfied. In the course of

exchanging correspondence regarding the amount of

reimbursement they each owed, only Haro made mention of

the argument that the Secretary exceeded her authority under

the Medicare secondary payer provisions by seeking up front

reimbursement.

Haro requested redetermination of the amount of her

reimbursement obligation by letter dated January 21, 2009,

but her letter did not challenge the Secretary’s authority to 

demand “up front” reimbursement. Haro did make a brief

objection to the Secretary’s reimbursement practice in a

follow-up letter dated February 2, 2009. But subsequent

correspondence between Haro and the Secretary

memorializes that both parties ignored Haro’s objection. The

correspondence shows that Haro sent payment in response to

the Secretary’s initial demand. Medicare then reduced its

reimbursement demand, determined that Haro had overpaid,

and refunded $103.87 to Haro. With its refund, Medicare

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gave Haro notice that it was closing its file. Haro did not

object to the Secretary closing her file, signaling that the

parties had resolved their dispute. Approximately one month

passed between the time Haro sent her February 2, 2009

follow-up letter and the time the Secretary sent a letter

reducing the reimbursement amount. Approximately one

additional month passed before Haro was reimbursed for her

overpayment. The record does not show that either of the

parties ever followed up on Haro’s objection to the

Secretary’s practice, and neither McNutt nor Hall ever

objected to the Secretary’s authority to demand up front

reimbursement.

Even if Haro’s letter and subsequent inaction did afford

the Secretary an “opportunity to apply, interpret, or revise”

the challenged policy, Haro failed to exhaust her

administrative remedies before filing suit in federal court. To

exhaust her administrative remedies, a beneficiary must

proceed through the five levels of administrative review: (1)

the initial determination; (2) redetermination; (3)

reconsideration of the redetermination; (4) an ALJ hearing;

and (5) review by the Medicare Appeals Council. 42 C.F.R.

§ 405. Haro failed to press her claim beyond level two. 

Instead, less than a week after she mailed her reimbursement

check to the Secretary, Haro filed suit — before any agency

review of the up-front reimbursement policy.

Haro claims that the government has waived the

exhaustion requirement. But we can find no unambiguous

waiver of this issue in the record, and therefore conclude that

the issue is not waived.

We conclude that the channeling requirement of § 405(g)

was not met. Because channeling is a jurisdictional

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HARO V. SEBELIUS 29

requirement, the district court lacked subject matter

jurisdiction over the beneficiaries’ claim.

b. Balentine’s claim is excepted from the

channeling requirement.

Attorney Balentine brings a separate claim unique to his

status as an attorney for a Medicare beneficiary. As such, we

must separately consider whether the district court had

jurisdiction to adjudicate his claim.

Between Ringer and Illinois Council, the Supreme Court

decided Bowen v. Michigan Academy of Family Physicians,

476 US. 667 (1986). Michigan Academy appeared to limit

the scope of the channeling requirement in § 405(h) to

quantitative, benefit-amount determinations. See id. at

680–81. But in Illinois Council the Supreme Court clarified

that “it is more plausible to read Michigan Academy as

holding that § 1395ii [the provision of the Medicare statute

that incorporates § 405(h) into the Medicare Act] does not

apply § 405(h) where application of § 405(h) would not

simply channel review through the agency, but would mean

no review at all.” Illinois Council, 529 US. at 19.

Because Balentine is not a Medicare beneficiary, he did

not have the opportunity to present his challenge through the

same administrative channel as the beneficiaries.9 We are

9 Subpart I of 42 C.F.R. § 405 describes the five levels of administrative

review. A beneficiary first receives an initial determination. 42 C.F.R.

§ 405.924(b). If the beneficiary is dissatisfied, the beneficiary may

request redetermination, id. § 405.940, reconsideration of the

redetermination, id. §§ 405.960–.978, an ALJ hearing, id.

§§ 405.1000–.1054, and review by the Medicare Appeals Council, id.

§§ 405.1100–.1140. Because Balentine is not a beneficiary, he would not

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unaware of any other path to administrative review of the

policy that Balentine challenges, and the parties cite none. 

Therefore, because applying § 405(h)’s channeling

requirement would mean no review of Balentine’s individual

claim, the claim falls within the very narrow Michigan

Academy exception, see id., and the district court had federal

question jurisdiction under § 1331 to adjudicate it.

B. The Secretary’s interpretation of the reimbursement

provision is reasonable.

Having determined that the district court lacked subject

matter jurisdiction over the beneficiaries’ claim, but that it

had jurisdiction to adjudicate Balentine’s claim under § 1331,

we turn to the merits of the Secretary’s appeal of the district

court’s second injunction.

The district court concluded that the Secretary’s practice

of demanding that attorneys withhold client funds was

inconsistent with the secondary payer provisions. The

reimbursement provision states that “an entity that receives

payment from a primary plan, shall reimburse [Medicare]for

any [secondary payment] if it is demonstrated that such

primary plan . . . had a responsibility to make [a primary]

payment,” 42 US.C. § 1395y(b)(2)(B)(ii) (emphasis added),

but it does not define “entity.”

The Secretary has interpreted “entity that receives

payment from a primary plan” in accordance with the

statute’s enabling regulations. 42 C.F.R. § 411.24(g)

provides that the Secretary “has a right of action to recover its

receive an initial determination of a reimbursement amount directed at

him.

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HARO V. SEBELIUS 31

payments from any entity, including a beneficiary . . . [or]

attorney . . . that has received a primary payment.” (emphasis

added). And 42 C.F.R. § 411.24(h) states that “[i]f the

beneficiary or other party receives a primary payment, the

beneficiaryor other partymust reimburse Medicare within 60

days.” We review the Secretary’s interpretation of the statute

pursuant to the deferential Chevron standard. Zinman,

67 F.3d at 843–44.

1. Application of Chevron

The first step under Chevron is to determine “whether

Congress has directly spoken to the precise question at issue.” 

467 US. at 842. The reimbursement provision does not

specifywhether an attorneywho receives settlement proceeds

constitutes “an entity that receives payment from a primary

plan,” and therefore Congress has not spoken to the precise

issue.

“[I]f the statute is silent or ambiguous with respect to the

specific issue, the question for the court is whether the

agency’s answer is based on a permissible construction of the

statute.” Id. at 843. If the Secretary’s construction is

“rational and consistent with the statute, it is a permissible

construction” and will be upheld. Zinman, 67 F.3d at 845

(internal quotation marks omitted). We therefore consider

whether the Secretary’s construction of the reimbursement

provision is rational and consistent with the statute.

a. There is no statutory basis to distinguish

between entities that receive payment from a

primary plan and end-point recipients.

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An attorney who receives settlement proceeds, even as an

intermediary, has “receive[d] payment from a primary plan”

in a literal sense; the Secretary’s interpretation of the statute

is rational in this regard. But the district court concluded that

there is nothing in the secondary payer provisions supporting

an action against attorneys, “except to the extent they are endpoint recipients of settlement proceeds.” From this, we

understand that the district court drew a distinction between

fees earned and retained by an attorney representing a

Medicare beneficiary, and funds deposited into an attorney’s

trust account to be held in trust on behalf of the attorney’s

beneficiary-client. But the relevant statutory text broadly

states that “an entity that receives payment from a primary

plan[] shall reimburse” Medicare; it does not distinguish

between a recipient of payment from a primary plan and an

“end-point recipient” of such payment. 42 US.C.

§ 1395y(b)(2)(B)(ii). We find nothing in the statutory

language to persuade us that the obligation to reimburse

Medicare is limited to “end-point” recipients.

b. The 2003 amendments indicate that Congress

intended a broad construction of “entity that

receives payment from a primary plan.”

Before 2003, the cause of action provision stated that “the

United States may bring an action against any entity which is

required . . . to [make a primary payment] or against any

other entity (including any physician or provider) that has

received payment from that entity.” United States v. Baxter

Int’l, Inc., 345 F.3d 866, 906 (11th Cir. 2003) (quoting

42 U.S.C. § 1395y(b)(2)(B)(ii)).10 Analyzing the previous

 

10 Before 2003, the cause of action provision was codified at 42 US.C.

§ 1395y(b)(2)(B)(ii), which now codifies the reimbursement provision.

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HARO V. SEBELIUS 33

version of the statute, the Baxter court applied the doctrine of

ejusdem generis to conclude that “Congress intended the term

‘any other entity’ to be understood with reference to

‘physician’ and ‘provider,’ and to encompass only entities of

like kind.” Id. at 906. But in the wake of Baxter, Congress

amended the statute to eliminate its reference to “physician”

and “provider.” The amended statute now states that the

United States may recover, without limitation, “from any

entity that has received payment from a primary plan or from

the proceeds of a primary plan’s payment to any entity.” 

42 U.S.C. § 1395y(b)(2)(B)(iii). The amended cause of

action provision indicates that Congress intended a more

expansive construction of “entity that has received payment

from a primary plan” than the one described in Baxter. 

Because the reimbursement provision uses identical language

to the amended cause of action provision, the 2003

amendments support the Secretary’s position that her

construction of the reimbursement provision is consistent

with congressional intent. See Bowoto v. Chevron Corp.,

621 F.3d 1116, 1127 (9th Cir. 2010) (“identical words used

in different part of the same act are intended to have the same

meaning” (quoting Comm’r v. Lundy, 516 US. 235, 250

(1996)).

c. The Secretary’s interpretation is consistent

with the purpose of the secondary payer

provisions.

“The transformation of Medicare from the primary payer

to the secondary payer with a right of reimbursement reflects

the overarching statutory purpose of reducing Medicare

costs.” Zinman, 67 F.3d at 845. The Secretary’s demand that

attorneys who have received settlement proceeds reimburse

Medicare before disbursing those proceeds to their clients

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34 HARO V. SEBELIUS

certainly increases the likelihood that proceeds will be

available for reimbursement. Therefore, the Secretary’s

interpretation of the reimbursement provision is consistent

with the general purpose of the secondary payer provisions.

d. Whether the Secretary can recover from an

attorney who has already disbursed settlement

proceeds does not bear on the merits of the

injunction.

Balentine maintains that the secondary payer provisions

do not create a lien against the settlement proceeds. 

Therefore, he argues, the Secretary may not recover from an

attorney who has already disbursed settlement proceeds. The

district court agreed and ruled that the Secretary does not

have a right of action against attorneys who have already

disbursed settlement proceeds. But that issue is not presented

on the facts of this case. The Secretary was fully reimbursed

and Balentine was not sued after disbursing Haro’s settlement

proceeds. The complaint alleges only that the Secretary’s

demand that attorneys withhold funds from their clients

exceeds her authority under the secondary payer provisions. 

The Secretary’s authority to bring an action against an

attorney who has disbursed the proceeds is not a controversy

ripe for our review.

We conclude the Secretary’s interpretation of the

reimbursement provision is rational and consistent with the

statute’s text, history, and purpose, therefore it is reasonable

and the district court’s second injunction and its order on

summary judgment must be reversed.

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HARO V. SEBELIUS 35

IV. CONCLUSION

The district court lacked subject matter jurisdiction over

the beneficiaries’ claims. The Secretary’s interpretation of

42 U.S.C. §§ 1395y(b)(2)(B)(ii) and (iii) is reasonable. We

therefore VACATE the injunctions entered by the district

court and REVERSE the district court’s summary judgment

order. We REMAND this case to the district court for

consideration of the appellees’ due process claim.

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