Source: https://law.justia.com/cases/federal/appellate-courts/F2/894/829/307089/
Timestamp: 2019-11-14 12:00:08
Document Index: 520355700

Matched Legal Cases: ['§ 1395', '§ 1395', '§ 551', '§ 1395', '§ 553', '§ 1395', '§ 1395', '§ 1395', '§ 553', '§ 553', '§ 1395', '§ 553', '§ 1395']

Michael J. Friedrich, Plaintiff-appellee, v. Secretary of Health and Human Services, Defendant-appellant, 894 F.2d 829 (6th Cir. 1990) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Sixth Circuit › 1990 › Michael J. Friedrich, Plaintiff-appellee, v. Secretary of Health and Human Services, Defendant-appel...
Michael J. Friedrich, Plaintiff-appellee, v. Secretary of Health and Human Services, Defendant-appellant, 894 F.2d 829 (6th Cir. 1990)
U.S. Court of Appeals for the Sixth Circuit - 894 F.2d 829 (6th Cir. 1990) Argued Nov. 28, 1989. Decided Jan. 25, 1990. Rehearing Denied March 7, 1990
This case concerns a claimant's right to reimbursement under Part B of the Medicare Act, 42 U.S.C. § 1395 et seq. (1982), for a medical procedure that the Secretary of Health and Human Services (the Secretary) has found not to be "reasonable and necessary for the diagnosis or treatment" of the claimant's particular illness. 42 U.S.C. § 1395y(a) (1). The appeal presents two questions for decision: (1) Whether a "national coverage determination" by the Secretary is invalid if promulgated without compliance with the notice and comment requirements of the Administrative Procedure Act (APA), 5 U.S.C. § 551 et seq. (1982); and (2) whether a hearing before an officer who is bound by such a determination violates due process.
The Medicare Act consists of two parts or programs. Part A provides insurance against the cost of institutional health services. Part B, the portion at issue here, is a voluntary, supplemental medical insurance program that covers 80 percent of the "reasonable charge" for a number of services, including certain physician services, x-rays, lab tests and medical supplies. The purpose of this section is to complement existing insurance coverage for the aged and disabled. Part B is financed through monthly fee charges to the beneficiaries and funding from the government. Thus, Part B may be said to resemble "a private medical insurance program that is subsidized in major part by the Federal Government." Schweiker v. McClure, 456 U.S. 188, 190, 102 S. Ct. 1665, 1667, 72 L. Ed. 2d 1 (1982).
Of particular relevance to this case is the fact that under Part B, the Secretary and the insurance carriers are required to deny reimbursement for services that are not "reasonable and necessary for the diagnosis or treatment" of a claimant's illness or injury. 42 U.S.C. § 1395y(a) (1). A finding of what services are "reasonable and necessary" is often made on a case-by-case basis by the carrier. In more difficult cases, however, the Health Care Financing Administration (HCFA), a component of the Department of Health & Human Services (HHS), will make an assessment and then issue a "national coverage determination" clearly indicating to the carriers whether the particular item should be considered covered or not. National coverage determinations issued by HCFA are published in the Part B Carriers Manual (the Manual) and are therefore binding on the carriers and their hearing officers. 42 C.F.R. Sec. 405.860.
35-64 Chelation Therapy for Treatment of Atherosclerosis--Not Covered (Effective date: March 15, 1982) Chelation therapy is the application of chelation techniques for the therapeutic or preventive effects of removing unwanted metal ions from the body. The application of chelation therapy using ethylenediamine-tetra-acetic acid (EDTA) for the treatment and prevention of atherosclerosis is controversial. There is no widely accepted rationale to explain the beneficial effects attributed to this therapy. Its safety is questioned and its clinical effectiveness has never been established by well designed, controlled clinical trials. It is not widely accepted and practiced by American physicians. EDTA chelation therapy for atherosclerosis is considered experimental. For these reasons, EDTA chelation therapy for the treatment or prevention of atherosclerosis is not covered.
45-20 Ethylenediamine-Tetra-Acetic (EDTA) Chelation Therapy for Treatment of Atherosclerosis--Not Covered (Effective date: March 15, 1982)
On May 19, 1983, plaintiff filed a claim with Nationwide seeking review of the earlier denial of his claim. The plaintiff's claim was again denied by letter on June 24, 1983. On July 25, 1983, Friedrich requested a carrier hearing review. This hearing was held on March 19, 1984. At the hearing both the plaintiff and his physician, Dr. Frackleton, testified as to the benefits of chelation therapy for the treatment of atherosclerosis. The witnesses also submitted written material. The Secretary offered no contrary evidence. On April 25, 1984, the hearing officer found that " [a]lthough the evidence and testimony presented at this hearing was impressive and implies the efficacy of chelation therapy as a viable alternative to conventional treatment for coronary artery disease, this does not alter the instructions contained in the carrier's manual that EDTA chelation therapy for the treatment or prevention of atherosclerosis is not covered." Reimbursement was denied on this basis.
The plaintiff had argued that the Secretary's instructions violate the Administrative Procedure Act's "notice and comment" requirements. 5 U.S.C. § 553. The defendant, on the other hand, argued that the magistrate was prevented from ruling that the Secretary's order was invalid because a provision of the Omnibus Budget Reduction Act of 1986 (OBRA), which amended the Medicare Act, precludes overturning national coverage determinations on the basis of a failure to conform to the notice and comment requirements of the APA. The magistrate, however, found that the OBRA is not applicable in this case because by its own language it only applies to "items or services furnished on or after January 1, 1987." Pub. L. No. 99-509, Sec. 9341(b), 100 Stat. 1874, 2037-38 (1986); see also 42 U.S.C. § 1395ff (1982 Ed. and Supp. V) (note regarding effective date of 1986 amendment). Since the plaintiff's chelation therapy was administered well before January 1, 1987, the magistrate concluded that he was not barred from overturning the Secretary's decision in this case.
The magistrate also noted that the OBRA contains a provision exempting from challenge rules or instructions associated with payment determinations issued before January 1, 1981. 42 U.S.C. § 1395ff(b) (4). This provision was found to be ineffective as to the challenged instructions because they were issued after January 1, 1981. In fact, they were issued on March 15, 1982.
The magistrate further held, for essentially the same reasons, that the OBRA did not preclude federal jurisdiction of the issue, citing Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 106 S. Ct. 2133, 90 L. Ed. 2d 623 (1986), which held that judicial review of a carrier's Part B benefit determination is available when a beneficiary challenges the validity of the regulation or instructions upon which the carrier's determination is based.
Disposing of the jurisdictional issue first, we agree with the magistrate that the district court did have jurisdiction over this case. In the absence of a showing of clear congressional intent to the contrary, there is a "strong presumption" in favor of judicial review of administrative action. Bowen v. Michigan Academy, 486 U.S. at 670, 106 S. Ct. at 2135. The Secretary contends that section 9341(a) (1) of OBRA placed explicit limitations on court review of national coverage determinations, thus overcoming the presumption. He relies on two subsections of section 9341(a) (1) (D), codified as 42 U.S.C. § 1395ff(b) (3) and (4) (1982 Ed. and Supp. V):
(3) Review of any national coverage determination under section 1395y(a) (1) of this title respecting whether or not a particular type or class of items or services is covered under this subchapter shall be subject to the following limitations:
Neither of these provisions applies to this case. Subsection (4) by its terms applies only to regulations or instructions issued before January 1, 1981. The national coverage determination of concern here was issued in 1982. It is true that subsection (3) (B) restricts judicial review by providing that a national coverage determination shall not be held unlawful on the ground that the Secretary has failed to comply with the notice and comment requirements of the APA. Section 9341(b) of OBRA states, however, that the amendments made by the subsection "shall apply [only] to items and services furnished on or after January 1, 1987." The plaintiff sought reimbursement only for services furnished prior to that date.
The APA requires notice of proposed rule making and an opportunity for interested persons to participate. 5 U.S.C. §§ 553, 556. There is an exception to the notice and hearing requirements, however, for "interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice...." 5 U.S.C. § 553(b) (A). The Secretary maintains that the national coverage determination relating to chelation therapy is an interpretative rule, the purpose of which is to define the application to one particular procedure of the general statutory requirement that Medicare covers only those services considered "reasonable and necessary" in the diagnosis or treatment of an illness. 42 U.S.C. § 1395y(a) (1). The district court concluded that the determination is a "legislative" or "substantive" rule, and thus not within the exception relied upon by the Secretary.
We have discovered no bright line that separates the two types of rules. The United States Court of Appeals for the District of Columbia, because of its heavy administrative law caseload, has dealt with this issue in many decisions. Yet, that court has stated that the distinction between the two types of rules is " 'enshrouded in considerable smog.' " General Motors Corp. v. Ruckelshaus, 742 F.2d 1561, 1565 (D.C. Cir. 1984) (quoting two earlier decisions), cert. denied, 471 U.S. 1074, 105 S. Ct. 2153, 85 L. Ed. 2d 509 (1985). The court attempted to penetrate this smog in General Motors by identifying "certain general principles" that may assist a court in determining whether a particular rule is legislative or interpretative. Id. The court stated these principles as follows:
Id. (Citations omitted). This court has stated its agreement with this approach in State of Ohio Department of Human Services v. United States Department of Health & Human Services, 862 F.2d 1228, 1234 (6th Cir. 1988), and State of Michigan v. Thomas, 805 F.2d 176, 182-83 (6th Cir. 1986). Applying these principles, the court found the rule in State of Ohio to be legislative and the rule in Thomas to be interpretative.
The General Motors court noted that the agency involved had characterized the rule as interpretative. 742 F.2d at 1565. The Secretary has treated the determination as interpretative in the present case. Such a characterization is important, though not conclusive in determining the true nature of a rule. Levesque v. Block, 723 F.2d 175, 182 (1st Cir. 1983); American Postal Workers Union v. United States Postal Service, 707 F.2d 548, 559 (D.C. Cir. 1983), cert. denied, 465 U.S. 1100, 104 S. Ct. 1594, 80 L. Ed. 2d 126 (1984). The court in General Motors found it "most important [ ]" that the rule it was considering created no "new rights or duties; instead, it simply restated the consistent practice of the agency...." 742 F.2d at 1565.
The plaintiff insists that the Secretary has not followed a consistent policy of denying Medicare coverage for chelation therapy. He cites a 1975 decision of the Appeals Council finding chelation therapy reasonable and necessary under Part A of the Medicare program for the treatment of atherosclerosis. We agree with the Secretary that this single decision by the Appeals Council is not significant. The Appeals Council made this decision in considering an individual claim for Part A reimbursement. In deciding the individual Part A claim the Appeals Council was not bound in any way by the instructions to carriers in deciding claims under Part B. The Appeals Council decision was not a " 'contemporaneous expression of opinion by [a] low-ranking official [ ],' " which courts have found " 'highly relevant and material evidence of the general understanding of ambiguous regulatory provisions.' " State of Ohio, 862 F.2d at 1235 (citations omitted). Rather it was a discrete decision made totally apart from the policy-making functions of the Secretary. The record as a whole convinces us that the Secretary has been consistent in his determination that Chelation therapy is not reasonable and necessary for the diagnosis or treatment of atherosclerosis. Thus the 1982 determination did not represent a departure from a previous evaluation of this medical procedure.
Finally, the plaintiff argues that the national coverage determination is a substantive or legislative rule because it "fills the gaps" in the Medicare Act. We cannot perceive how the determination may be considered a "gap-filling" rule. The statute does not list some medical procedures as qualifying and leave it to the Secretary to supplement the list. Rather, it prescribes a test for determining what procedures qualify--those that are reasonable and necessary. The Secretary's role is not to fill in gaps, but to apply the statutory standard to an enormous number of modern medical practices. Thus, the plaintiff's reliance on Mason General Hospital v. Secretary of Health and Human Services, 809 F.2d 1220 (6th Cir. 1987), is misplaced, since that case involved agency rulemaking intended to fill in the spaces left by a complex legislative scheme.
This is a difficult case and not totally like any other we have been cited to or discovered. The Medicare program covers the full range of modern medicine and pharmacology. It is comprehensive and operates through a complex structure. National standards are essential if there is to be uniformity and equality in the administration of Medicare. The Secretary has chosen to seek uniformity by requiring Part B carriers to abide by all regulations in the Manual. It is inconceivable to us that the Secretary might be required to comply with the full panoply of APA notice and comment requirements in promulgating national standards for individual drugs and medical procedures. This is a classic case of a rule that fits perfectly the "common theme" of the Sec. 553(b) (A) exception for rules that " 'accommodate situations where the policies promoted by public participation in rulemaking are outweighed by the countervailing considerations of effectiveness, efficiency, expedition and reduction in expense.' " American Hospital Association v. Bowen, 834 F.2d 1037, 1045 (D.C. Cir. 1987), quoting Guardian Federal Savings & Loan Association v. Federal Savings & Loan Insurance Corp., 589 F.2d 658, 662 (D.C. Cir. 1978).
The Medicare Act mandates that only reasonable and necessary medical services are reimbursable. The national coverage determination does not "fill the gaps" in the statute, Postal Workers, 707 F.2d at 559, or "supplement" it, United Technologies Corp. v. United States Environmental Protection Agency, 821 F.2d 714, 719 (D.C. Cir. 1987). Thus, it creates no new law. Rather, it interprets the statutory language "reasonable and necessary" as applied to a particular medical service or method of treatment. The district court erred in concluding that the determination is a legislative rule and therefore is invalid for failure of the Secretary to comply with the requirements of 5 U.S.C. § 553(b).
The first step in deciding a procedural due process claim is to identify the interest to which the due process attaches. Here, Friedrich claimed a property interest in Medicare benefits and the magistrate agreed that he had such an interest. The Supreme Court has defined those property interests entitled to constitutional protection as "more than a unilateral expectation;" instead, a claimant must have "a legitimate claim of entitlement" to property. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 2709, 33 L. Ed. 2d 548 (1972). The only legitimate claim of entitlement under Medicare is to those services that are reasonable and necessary. 42 U.S.C. § 1395y(a) (1). There is no legitimate claim of entitlement to a given medical procedure just because a doctor prescribes it or a patient requests it.