Opinion ID: 757255
Heading Depth: 2
Heading Rank: 2

Heading: Due Process and Mathews v. Eldridge

Text: 28 The parties agree that the balancing test used by the Supreme Court in Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), applies to determine the necessary procedural protections to ensure that due process is provided to Medicare beneficiaries enrolled in HMOs. 29 In Mathews v. Eldridge, the Supreme Court considered the sufficiency of the procedures by which Social Security disability benefits were terminated. See 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976). The Supreme Court held that constitutional due process is flexible, demanding particular protections depending on the situation. See id. at 334, 96 S.Ct. 893. The requirements of due process in a particular situation depend on an analysis of three factors: 30 First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the functions involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail. 31 Id. at 335, 96 S.Ct. 893. A court must balance these factors to determine whether the particular additional procedural safeguards sought by a plaintiff are required in a given situation. 3 See id. 32 We agree with the district court's analysis of the Eldridge factors and its conclusion that due process requires additional protections for Medicare beneficiaries enrolled in HMOs.
33 The district court held that the private interest at stake from an HMO's initial denial of Medicare coverage is the potential that medical care will be precluded altogether. The court held that this interest is a substantial private interest in additional protections such as timely and effective notice of service denials. We agree. 34 In Eldridge, the Court held that the private interest at stake was the individual's interest in uninterrupted receipt of disability benefits. 424 U.S. at 340, 96 S.Ct. 893. The Court held that this interest was not based on financial need (unlike the situation of the welfare recipient in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970)) and does not implicate a high degree of potential deprivation. See id. at 340-41, 96 S.Ct. 893. 35 The district court was correct in holding that Plaintiffs' interest in Medicare benefits is greater than the interest of the plaintiff in Eldridge. As the district court noted, [u]nlike Eldridge, the deprivation suffered from an HMO denial to provide care cannot so easily be remedied by retroactive recoupment of benefits. 946 F.Supp. at 757. An HMO's denial of coverage is an initial refusal to provide any medical services. The mere fact that the enrollee may be able to go elsewhere and pay for the services herself is of little comfort to an elderly, poor patient--particularly one who is ill and whose skilled nursing care has been terminated without a specific reason or description of how to appeal. 36 The Secretary argues that the district court erred by adjudicating a complex procedural scheme as falling short of basic standards of fairness, without conducting the sort of detailed inquiry needed. For example, the Secretary argues, the district court should have distinguished between different types of medical services and their urgency when considering this first Eldridge factor, the magnitude of the private interest at stake. The Secretary also argues that the district court's finding that the interests of Medicare HMO enrollees are especially great because they may not receive immediate medical care is erroneous because some beneficiaries can seek those services elsewhere (and then seek reimbursement from the HMO) or disenroll from the HMO. The Secretary's arguments fail. Although, in some cases, the effect of service denial may be remedied easily after the fact, the potential for irreparable damage is surely great when it comes to denial of medical services (particularly denial without notice of any reason for the denial), unlike the suspension of disability benefits pending review as in Eldridge. In many, if not most, cases, the denial of coverage may result in total failure to receive the services. 37 The Secretary argues that the district court failed to recognize that the Medicare program is not need-based, a fact which the Secretary argues mandates holding against additional procedural protections. The Secretary cites to Eldridge for this proposition. The Court in Eldridge, however, discussed the fact that the disability benefits were not need-based in order to distinguish the case from that in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), where the Court had held that a hearing was necessary prior to the suspension of welfare benefits. The Court did not hold that a program has to be need-based in order for this factor to weigh in favor of additional protections. 38 Other courts have found on similar facts that a significant private interest is at stake that weighs in favor of additional protections. See, e.g., Kraemer v. Heckler, 737 F.2d 214, 222 (2d Cir.1984) (In applying the balancing test, the private interest at stake [in the termination of Medicare coverage] should be weighed more heavily than in Eldridge because of the astronomical nature of medical costs.); Vorster v. Bowen, 709 F.Supp. 934, 946 (C.D.Cal.1989) (The private interest, in this case, is the claimant's need to obtain reimbursement for medical bills that he or she has already paid. That interest is fairly great. Congress enacted the [Medicare] program because of the special coincidence of medical needs and financial problems of the elderly.). The interest of the HMO enrollees in medical services weighs in favor of additional procedural protections beyond that offered by the Secretary's original regulations.
39 The district court also held that factor two weighed in favor of greater procedural protections for Medicare beneficiaries enrolled in HMOs. The court reviewed Plaintiffs' analysis of notice failures and conducted its own review of the notices provided to Plaintiffs. The court held that the notices failed to provide adequate explanation for the denials. See 946 F.Supp. at 757-58. We agree. This failure creates a high risk of erroneous deprivation of medical care to Medicare beneficiaries. The appeal rights and other procedural protections available to Medicare beneficiaries are meaningless if the beneficiaries are unaware of the reason for service denial and therefore cannot argue against the denial. Due process requires notice that gives an agency's reason for its action in sufficient detail that the affected party can prepare a responsive defense. Barnes v. Healy, 980 F.2d 572, 579 (9th Cir.1992). Therefore, inadequate notice creates the risk of erroneous deprivation by undermining the appeal process. 40 The Secretary attacks the district court's analysis of this factor by arguing that the court simply identified an arguable problem faced by enrollees--inadequate notice--rather than address whether that problem actually results in deprivations. The Secretary argues that the district court simply assumed that the perceived failures of notice resulted in fewer appeals, and that more appeals would diminish erroneous deprivations. The Secretary fails to recognize the real problem: Inadequate notice renders the existence of an appeal process meaningless. Moreover, the question established by Eldridge is not whether the inadequate notices actually resulted in erroneous deprivations, but whether the inadequate notices created an unjustifiably high risk of erroneous deprivation. Because due process has at its foundation the notion of adequate notice, the risk of erroneous deprivation caused by ineffective notices points towards the need for added procedural protections for Medicare beneficiaries enrolled in HMOs.
41 The Secretary argues that the district court paid only cursory attention to this factor, dismissing the government's concerns. The Secretary argues that the procedures sought by plaintiffs would impose a large burden on HMOs, which would accordingly affect the benefits received by enrollees. 42 The district court did not engage in as detailed an analysis of this third factor as of the other two. A shorter analysis, however, does not mean the analysis is cursory or dismissive. The Secretary has failed to show that the added procedural protections sought by Plaintiffs would result in significant additional costs to the government. Unlike the plaintiff in Eldridge, Plaintiffs do not seek a hearing prior to every denial, which would greatly increase costs. Adequate notices do not impose a burden on HMOs that outweighs the beneficiaries' need for them. [A] weighing of the Mathews [v. Eldridge] factors suggests that the administrative burden of providing an explanation for denying a [certain benefit] is minimal in light of the added potential for spotting erroneously withheld [benefits]. Barnes v. Healy, 980 F.2d 572, 579 (9th Cir.1992). The Secretary fails to advance any convincing argument that an additional burden on the government outweighs the effects of the other factors such that additional procedural safeguards are not necessary. 43 Taken together, the Eldridge factors point to a need for additional procedural protections for Medicare beneficiaries enrolled in HMOs, in particular for adequate notice of service denials, including the specific reason for the denial and an explanation of appeal rights, and expedited review for critical care denials. We therefore affirm the district court's holdings on Eldridge.