Opinion ID: 391781
Heading Depth: 3
Heading Rank: 2

Heading: The Policy Interests

Text: 53 The tendency to require oral hearings has become so automatic that judicial opinions often devote little discussion to the reasons why our society adheres, in this day of computers and sophisticated print media, to the notion that a right to a personal oral exchange can be a critical element of justice. There seem to be at least three societal goals served by an oral kind of hearing, Wolff v. McDonnell, supra, 418 U.S. at 557, 94 S.Ct. at 2975, the desire for accuracy, the need for accountability, and the necessity for a decisionmaking procedure which is perceived as fair by the citizens. Most often mentioned by the courts is the notion that an oral hearing provides a way to ensure accuracy when facts are in dispute, especially if credibility is an issue. Justice Frankfurter believed that no better instrument has been devised for arriving at truth than the notice and hearing requirement. Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 171, 71 S.Ct. 624, 649, 95 L.Ed. 817 (1951) (Frankfurter, J., concurring). Even if credibility is not likely to be directly in issue, personal, oral hearings are an effective way to eliminate misunderstandings and focus issues. Ambiguities which are not readily apparent on the face of a document can be disclosed and clarified with a few moments of oral exchange between the individual and the decisionmaker. For example, in Goss v. Lopez, supra, one of the plaintiffs had been suspended from school without a hearing after she was arrested at a demonstration. The student conceded that she had been arrested, but testified at trial that she had been swept up in a mass arrest and had engaged in no misconduct. A prior opportunity to explain personally the apparently damning arrest could well have avoided a decision based on incomplete or incorrect facts. 32 54 The hearing requirement and many of the additional procedural safeguards that due process may require in particular circumstances also serve as an institutional check on arbitrary or impermissible action. Caseworkers, auditors, parole officers and other initial decisionmakers, if required to meet personally with those whose lives they are touching, and justify, however briefly, their decisions to those who are dissatisfied, are faced with a powerful disincentive to arbitrary action. 55 (T)he fair process of decisionmaking that (the requirement of notice and an opportunity to be heard) guarantees works, by itself, to protect against arbitrary deprivation of property. For when a person has an opportunity to speak up in his own defense, and when the State must listen to what he has to say, substantively unfair and simply mistaken deprivations of property interests can be prevented. 56 Fuentes v. Shevin, 407 U.S. 67, 81, 92 S.Ct. 1983, 1994, 32 L.Ed.2d 556 (1972). An oral hearing requirement thus serves to ensure that decisionmakers recognize that their decisions affect the lives of human beings, a fact that is often obscured by a jumble of papers and depersonalized identification numbers. We can well believe it is easy for an employee processing an application for a small amount of Medicare benefits to shrug his or her shoulders and conclude that benefits should be denied or reduced, without stopping to gather the information necessary to reach that decision accurately. The situation could well be different if the employee knew that the claimant would have the opportunity personally to challenge that determination and seek an explanation. An employee is particularly vulnerable to the temptation if there are strong external pressures to reduce costs, as a district court has recently found exist in the carrier-administered Medicare program, see note 8 supra ; small claims which the employee knows cannot be subjected to the scrutiny of a later hearing would be the most likely to suffer. 57 We do not believe it unwarranted to recognize that human nature frequently leads to careless and arbitrary action when the decisionmaker can retreat behind a screen of paper and anonymity. The principle that those who govern must be accountable to those whose lives they affect in forms not only our representative system of government, but on a broader scale, forms the very essence of what we expect from the Government in its dealings with us. Providing a personal, oral hearing can be one expression of that principle. 58 A third and perhaps most important reason for generally insisting upon an oral hearing is that no other procedure so effectively fosters a belief that one has been dealt with fairly, even if there remains a disagreement with the result. Our system of government is founded on respect for, and deference to, the integrity and dignity of the individual. In the Government's dealings with individuals especially with respect to those individuals' property rights some mechanism must exist to ensure that those values are left intact, even when action is finally taken against the person. In a society like ours, which operates on the assumption of and relies for its continued stability on respect for our institutions and voluntary compliance with the dictates of the law, it is crucial that its members perceive that their rights and interests are taken seriously and thoughtfully by the officials who are deciding their claims. 33 During an oral hearing, the Government loses its nameless, faceless quality and comes into focus as another human being with whom the citizen can speak, present his or her case, and look to for a responsible decision. To quote Justice Frankfurter again, no better way has been found for generating the feeling, so important to a popular government, that justice has been done. Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 172, 71 S.Ct. 624, 649, 95 L.Ed. 817 (1951) (concurring). B. The Mathews v. Eldridge Balancing Test 59 Despite the impressive number of cases requiring oral hearings as part of due process and the policy reasons supporting such a right, it must be acknowledged that some federal courts 34 and learned commentators 35 maintain that there are situations involving final adjudications of rights that do not require oral process. It is suggested that under the Court's more recent enunciation in Eldridge, an oral hearing is simply one of an arsenal of procedural safeguards whose worth in any overall process must be determined by the formula, laid down in Eldridge, of whether its probable value is outweighed by its fiscal and administrative burdens. 424 U.S. at 335, 96 S.Ct. at 903. 60 Eldridge dealt with the question of what procedural protections are required before the Government may stop paying disability benefits which had been provided on a regular basis. As here, an intermediary made an initial determination that Eldridge was no longer eligible for benefits, though in the case of disability payments, the intermediary is a state agency rather than a private company acting under contract. The agency notified Eldridge of its tentative determination that his benefits should be terminated. The tentative determination included a statement of reasons and a summary of the evidence on which the agency primarily relied. He was entitled to full access to the information relied upon, permitted to respond both initially in writing, and subsequently to submit additional evidence. The decision to terminate was then reviewed by an examiner in the Social Security Administration who once again notified Eldridge of the reasons for his decision, and informed him of his right to de novo reconsideration. Again, he had the opportunity to submit additional written material, and receive a decision on reconsideration with specific reasons for the action taken. At that point, his benefits would be terminated. After termination, he was entitled to demand both a full evidentiary hearing and judicial review; if successful at either level he would receive retroactive benefits. However, he would be without remedy for the loss of interest, or interim use of the benefits withheld. The question for decision in that case, then, was whether the denial of a right to a pretermination full evidentiary hearing denied Eldridge his right to a meaningful opportunity to present his case at a meaningful time. 61 The Court considered the four factors, discussed above, to determine the identification of the specific dictates of due process: the private interest affected, the risk of an erroneous deprivation of such interest, the probable value of additional or substitute procedural safeguards, and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. 424 U.S. at 334-35, 96 S.Ct. at 902-903. It concluded that, considering the interests at stake, the not insubstantial costs of conducting pretermination hearings outweighed their likely benefits in light of the other procedural protections already afforded the claimant. Id. at 347-48, 96 S.Ct. at 908-909. 62 This balancing test has been used subsequently by other courts to determine the necessity for a variety of procedural protections normally associated with an adversary hearing 36 even if it is the only hearing the claimant will ever receive. They have justified this expansive use of the test by citation to the Court's comment at the end of Eldridge that (t)he judicial model of an evidentiary hearing is neither a required, nor even the most effective, method of decisionmaking in all circumstances, 424 U.S. at 348, 96 S.Ct. at 909, as well as by cases such as Goss v. Lopez, supra, in which the Court, though holding some kind of (notice and) hearing was necessary, recognized that very informal and summary dispute resolution procedures would satisfy due process norms even when liberty or property interests are at stake. Professor Kenneth Davis has concluded in the most recent edition of his Administrative Law Treatise that Goss and Eldridge together may stand for the proposition that (w)hen a trial is not feasible on an issue of adjudicative fact, a person may have a due process right (only) to a summary of the adverse evidence and a chance to respond informally, with the feasibility of additional procedures, including an oral hearing, to be determined by the Eldridge balancing test. 37 63 Thus courts applying the Eldridge balancing test have, on occasion, held paper hearing procedures to be adequate where in the total context of the process, they are deemed to ensure adequate notice and a genuine opportunity to explain one's case. For example, in Basciano v. Herkimer, 605 F.2d 605 (2d Cir. 1978), cert. denied, 442 U.S. 929, 99 S.Ct. 2858, 61 L.Ed.2d 296 (1979), the Second Circuit upheld New York City's procedures for determining a claimant's eligibility for disability benefits despite the fact that the City did not provide for oral hearings. Instead, the claimant was examined by two different panels of Board doctors, each of which recommended a decision, and he had the opportunity to submit his medical records as well as any other written statements. It bears noting both that the court carefully limited its holding to the case at hand, 38 and that the claimant was not totally denied the opportunity for an oral hearing inasmuch as he had the opportunity to converse with those individuals responsible for recommending the decision the agency's doctors. 39 64 Goss and Eldridge, then, provide in the opinion of some a valid basis for justifying the elimination of traditionally accepted forms of dispensing due process such as oral hearings when the costs of those forms outweigh their benefits. But no case or commentator suggests that traditional trial-type procedural safeguards may be eliminated at the expense of the core requirements of due process adequate notice of why the benefit is being denied and a genuine opportunity to explain why it should not be. In deciding if the totality of a procedure meets these core requirements of due process, no component of a procedure can be analyzed independently of the others. As Judge Friendly wrote, if an agency chooses to go further than is constitutionally demanded with respect to one item, this may afford good reason for diminishing or even eliminating another. Friendly, supra note 35, at 1279. In particular, he felt that the better the agency's notice procedures, the more forthcoming the agency has been in disclosing its grounds (for decision), the stronger ... its position in asking curtailment of other procedures. Id. at 1281. 65 Given, then, the fluid and probably still evolving state of the law as to the necessity of oral hearings prior to final determinations of property interests such as these, we do not fault the district court's use of the Eldridge balancing test to determine what, if any, additional procedural safeguards are necessary here. We do disagree, however, with its conclusion that the Secretary's present procedures provide adequate safeguards to protect that due process core, as well as with the manner in which it balanced the benefits and costs of the additional safeguards of more adequate notice and/or an informal opportunity to talk to the decisionmaker at some point in the process. 66 C. The Requirements of Due Process in This Case 67 Whether a procedure such as the paper hearing employed here contains the essence of due process ... (by providing) 'a person in jeopardy of serious loss ... notice of the case against him and opportunity to meet it,'  Mathews v. Eldridge, 424 U.S. at 348, 96 S.Ct. at 909 (citing Joint Anti-Fascist Comm. v. McGrath, 341 U.S. at 171-72, 71 S.Ct. at 648-649), must be decided in the context of the entire dispute resolution process, as well as with reference to the characteristics of the group who have to use it. See id. 424 U.S. at 349, 96 S.Ct. at 909. We find serious procedural deficiencies in the current process which could be alleviated in great part by the provision of an opportunity for informal oral consultations, although possibly by other alternate procedures such as better notice as well. Without some additional improvements, however, we are unable to hold that the current procedures meet the due process minimum, and we must order the court to reengage in the Mathews v. Eldridge balancing test to ascertain what additional safeguards are feasible and necessary. In doing so, however, it is only fair that we indicate wherein we find its prior balancing at fault. 1. The Private Interest at Stake 68 Though the district court recognized that the denial of Medicare benefits undoubtedly does inflict genuine hardship upon some claimants, Mem.Op. at 7; J.A. 206, it minimized the private interest at stake by drawing upon the Court's distinction in Eldridge, supra : (e)ligibility for Medicare benefits, unlike eligibility for public assistance benefits, is not based upon financial need. Mem.Op. at 7; J.A. 206. We are not so sanguine, however, that the mere difference in eligibility criteria between the two programs is sufficient to support an inference that Medicare recipients do not have a substantial enough stake in being compensated for necessary medical expenses to warrant a more expansive notice and hearing procedure than that afforded here. The relatively small amounts involved (less than $100) in disputed claims may be misleading. A chronic patient could be denied up to $600 per year under Part A and $200 per year under Part B without qualifying for additional protection, 40 amounts greater than the cut-off point which Congress felt deserving of a full evidentiary hearing, and close to that it found deserving of judicial review. 69 Nor can we ignore in any evaluation of the interest at stake the significant percentage of Medicare claimants disadvantaged by disability, illness and poverty, a substantially higher figure than is true of the population at large. Indeed it was because of the special coincidence of medical needs and financial problems among elderly people that the Medicare program was established in the first place. See S.Rep.No. 1230, 92d Cong., 2d Sess. 37 (1972) (group characteristics of low incomes and high medical expenses ... led Congress to provide health insurance for older people). That unfortunate coincidence is borne out by current statistics which indicate that the elderly still have lower incomes and higher medical expenses than other segments of the population. 41 Thus, though need is not an eligibility criteria for participation in Medicare, a disproportionately large percentage of elderly recipients hover near the poverty level. Nonreimbursed medical bills of up to $100 represent a substantial loss to them. Although aware that despite evidence submitted to the Eldridge Court that disabled workers' families also tended to be on the low end of the income scale, it reached a conclusion that the potential deprivation (in disability cases) is generally likely to be less than in Goldberg, 424 U.S. at 341, 96 S.Ct. at 906, we still feel that the trial court here must give some explicit consideration to the unique disability problems and low economic status of large numbers of aged persons when evaluating their need for protections against unjustified denials of modest medical claims. 70 Finally, we emphasize that in Eldridge the interest at stake was defined by the court as sole(ly) (an) interest ... in the uninterrupted receipt of this source of income pending final administrative decision on his claim, 424 U.S. at 340, 96 S.Ct. at 905 (emphasis supplied), whereas here the interest at stake is a permanent loss of benefits. The trial judge found that critical difference between a temporary and permanent loss to be irrelevant. Mem.Op. at 8-9; J.A. 207-08. We believe that the permanency of the loss of benefits sets this case apart from Eldridge and enhances the relatively low status of the interest at stake accorded by the district court. We feel the court must weigh the very real differences involved in depriving the claimant in a case like Eldridge of the temporary use of benefit monies pending a final decision as to his right thereto against the permanent loss of the reimbursement for medical expenses involved in this case, as well as any temporary loss of the use of that money pending a final determination on review. This situation, unlike Eldridge, does not involve only the allocation of the costs of delay in the decisionmaking process, but the permanent loss of the benefits themselves. 71 2. The Risk of Erroneous Deprivation and the Benefit of Additional Safeguards 72 The accuracy of the Secretary's current dispute procedures for claims under $100 was a major source of dispute in this litigation. Each side relied on different statistical measures to measure the reversal rate. All of them are undermined to some degree by what even the agency admits is a deceptively low appeals rate; 42 for a variety of reasons acknowledged by the agency and the district court, including ignorance, confusion and disability, few people challenge adverse claims decisions. At any rate, like the Supreme Court in Eldridge, 424 U.S. at 346 n.29, 96 S.Ct. at 908 n.29, we would not feel comfortable in relying too heavily on the elusive statistics proffered by either side to measure the magnitude of the risk of error inherent in the present procedures. 73 We must therefore rely on our own judgment, bolstered by evidence from Congressional hearings and client surveys, that the notice accorded to the plaintiffs here by the EOMB form, unsupplemented by any opportunity to communicate personally with the carrier employee responsible for the initial denial, does not give constitutionally adequate notice of why benefits are being denied. We agree with the plaintiffs that the reasons for claims denials given in the initial notice (can be) ... so unclear that it is virtually impossible for the average beneficiary to present a well-reasoned argument to the insurance company. J.A. 94 (Plaintiffs' Memorandum in Support of Motion for Summary Judgment). 74 Under the Medicare law benefits may be denied either because treatments are deemed unnecessary or because the charges are deemed unreasonable. 42 U.S.C. § 1395x(v). The agency-approved notices 43 received by two of the named plaintiffs here failed to specify prior to the final agency review which of these two basically different causes for denial applied; the claimants were referred only to Item 5 on the back of the form. This item in turn states that either the provider has not charged the customary charge or that his charges are not prevailing, that is, not in the 75th percentile of his provider peers. It says nothing about whether or why the treatment may be deemed inappropriate, although in plaintiffs Patino's and Rothfeld's cases, the nature of the treatment was apparently the underlying reason for denial, not the charge, despite the notation on the EOMB form. Thus plaintiffs Patino and Rothfeld were not adequately informed by the notices whether their doctors were allegedly more expensive than others in the locality, or were charging them more than other patients, or whether or why the treatments were deemed unnecessary. 44 Plaintiff Patino's confusion was accentuated by the fact that she was given two differing and conflicting reasons for the denial of benefits for identical treatments at different times. 45 Their experiences cannot be dismissed as isolated ones. Congressional witnesses recently testified in a hearing on Medicare that their elderly constituents on a widespread scale experienced similar confusion as to why expected benefits were being denied; 46 a survey cited to the trial judge by the plaintiffs also showed that the average Medicare recipient did not understand from the notice why his claim was denied or what to do about it. 47 Unlike the trial judge, we cannot agree that other factors such as age or disability which impede elderly claimants' efforts to seek reconsideration or review in any way detract from their need for informative notice; 48 in our opinion these other factors only accentuate the need for adequate notice as to the specific basis for denial. 75 It is universally agreed that adequate notice lies at the heart of due process. 49 Unless a person is adequately informed of the reasons for denial of a legal interest, a hearing serves no purpose and resembles more a scene from Kafka than a constitutional process. Without notice of the specific reasons for denial, a claimant is reduced to guessing what evidence can or should be submitted in response and driven to responding to every possible argument against denial at the risk of missing the critical one altogether. 76 It may be that in some circumstances a lack of precise initial notice of the grounds for denial may be compensated for by ready access to the adverse evidence or a summary thereof. For instance, in Eldridge, the claimant had such ready access to the decisionmaker's entire file on his case. Moreover, he had the opportunity to talk to the examining doctors. Therefore, he had the opportunity to flesh out the notice of denial and determine from the file and conversations with doctors what factual matters, if any, were in dispute even before the pretermination denial. In this case, however, the cryptic notice on the EOMB form is the sum total of the communication from decisionmaker to claimant before a final denial 50 and it comes only after an initial denial has already been made. The claimant has no opportunity to flesh out the notice at any stage by access to the files or informal consultation with either the initial or reviewing decisionmaker before a final and irrevocable denial of benefits is made. Because the reconsideration is a paper one only, he can only write a letter or get his doctor to write a letter that he hopes will address the issue. The lack of adequate notice is in no way offset by a compensating procedure elsewhere in the process. Cf. Memphis Light, Gas & Water Div. v. Craft, supra. We find the risk of erroneous deprivation encountered in such a process to be substantial enough to require a careful assessment of additional protections. 77 Again we refer to the unique characteristics of the group involved here in order to appraise the accentuated effects of these notice defects. Congress, in enacting and amending Medicare, has repeatedly recognized that the elderly, as a group, are less able than the general populace to deal effectively with legal notices and written registration requirements Congress itself amended the Medicare Act to automatically include Part A eligibles into Part B because elderly eligibles were failing to enroll due to inattention or inability to manage their affairs. S.Rep.No. 1230, 92d Cong., 2d Sess. 38 (1972). 51 To countenance granting them less than adequate notice of the reasons for denial of medical benefits would be inconsistent with that Congressional intent, to say the least. 78 Opportunity for an oral interview or consultation could alleviate some of the problems caused by the inadequate notice, although a conscientious definition of due process would include both specific notice of the factual grounds for denial plus a subsequent opportunity to address these grounds in a way that is accessible to the users of the process. But the chance to talk to someone in charge would at least offer the claimant the opportunity to discover the basis of his dispute with the agency, and, if he has a defense, either answer on the spot or prepare rebuttal material for later submission. 79 In addition, an oral hearing has an independent value in many reviews of this kind which was not taken into account by the trial judge. Oral hearings are peculiarly suitable to advance factfinding on issues which depend on the credibility and veracity of the claimant. See Califano v. Yamasaki, 442 U.S. 682, 696, 99 S.Ct. 2545, 2555, 61 L.Ed.2d 176 (1979). In Medicare review, despite the Secretary's and the trial judge's emphasis on the routine or computational aspects of most denials, issues involving credibility often do arise. For example, the statute and the regulations provide for a waiver of the reasonable and necessary test for the payment of assigned claims in certain cases. Specifically, a beneficiary may be reimbursed for any payments made to a provider for treatments deemed not reasonable or necessary if the beneficiary acted under a good faith belief that the expenses were reimbursable. The agency may then recoup these indemnified funds from the provider, but only if the provider did not in good faith believe that the treatments were necessary or appropriate. 42 U.S.C. § 1395pp. 52 As the Medicare Carriers Manual itself recognizes, the interests of patient and provider in such a situation may be adverse and issues of credibility and veracity are involved. Medicare Carriers Manual, Part 3, Claims Process P 7300.4. The Supreme Court has already held in Yamasaki that a determination of a claimant's good faith or fault requires personal contact between claimant and decisionmaker. 80 (A) written review hardly seems sufficient to discharge the Secretary's statutory duty to make an accurate determination of waiver under § 204(b). Under that subsection, the Secretary must assess the absence of fault and determine whether or not recoupment would be against equity and good conscience. ... The Court previously has noted that a broad 'fault' standard is inherently subject to factual determination and adversarial input. Mitchell v. W. T. Grant Co., 416 U.S. 600, 617 (94 S.Ct. 1895, 1905, 40 L.Ed.2d 406) (1974). As the Secretary's regulations make clear, fault depends on an evaluation of all pertinent circumstances including the recipient's intelligence ... and physical and mental condition as well as his good faith. 20 CFR § 404.507 (1978). We do not see how these can be evaluated absent personal contact between the recipient and the person who decides his case. Evaluating fault, like judging detrimental reliance, usually requires an assessment of the recipient's credibility, and written submissions are a particularly inappropriate way to distinguish a genuine hard luck story from a fabricated tall tale. See Goldberg v. Kelly, 397 U.S. at 269 (90 S.Ct., at 1021). 81 442 U.S. at 676-77, 99 S.Ct. at 2555. 82 Thus, the overriding benefits of an oral hearing where the claimant's good faith belief in the coverage of the services is at issue have already been asserted by the Supreme Court. 53 We cannot, therefore, agree with the trial judge's conclusion here that the nature of (the reviewer's) inquiry is particularly suited to procedures that afford claimants the opportunity to make written submissions. Mem.Op. at 15; J.A. 214. While the largest numbers of denials ... (may be) 'reasonable charge reductions' which typically turn upon mathematical calculations, we do not see on what basis he could conclude that most other decisions are  'sharply focused and easily documented'  by  'routine, standard, and unbiased medical reports by physician specialists.'  Mem.Op. at 14-15; J.A. 213-14. We can foresee different scenarios in which both the claimants' and the providers' credibility may be at issue and their interests at stake not necessarily congruent. 83 As a final fillip here, we note that the decisionmaker on review is himself an employee of the very private insurance carrier which previously denied the claim. Moreover, this carrier has a financial interest in the outcome of the proceedings. The possibility of bias inherent in utilizing the employees of an interested private party as administrative decisionmakers has led one court to hold the full fair hearings provided claimants of over $100 under Part B violative of due process. The failure to provide an impartial tribunal, the court concluded, rendered the hearing fatally defective. The district court in McClure v. Harris, supra note 8, reasoned: 84 If hearing officers are potentially biased in favor of the carriers whose determinations they review, then the availability of an independent, administrative appeal beyond the hearing officer level might well mitigate the harmful effects of such bias. On the other hand, if no independent tribunal is ever to review a hearing officer's decision, the impartiality must be fully ensured at the hearing officer's level. 85 503 F.Supp. at 414. Without passing on the correctness of the McClure court's ruling, we do find its balancing equation instructive. In weighing the calculus of whatever process is due Part B claimants who are not entitled to a full fair hearing because their claims are under $100, the court should consider both that (1) the decisionmaker has a financial incentive to keep payments low because the Secretary periodically reviews the Department's contracts with private carriers, 54 (2) the decisionmaker on review is an employee of the same carrier as the person who originally denied the claim, and could only rule in the beneficiaries' favor by directly overturning the carriers' decision, id., and (3) there is not only no appeal from the carrier employees' decisions but also no opportunity for direct contact between the claimant and these decisionmakers at any stage of the proceeding. 86 In sum, we believe the current procedures allotted to the elderly Medicare claimant, probably disadvantaged by disability and poverty, resemble playing against a stacked deck notice that does not adequately inform him of the basis of the denial, no access to files or a summary of the evidence, no opportunity for any direct oral communication with the decisionmaker, a provider and a decisionmaker with possible bias, no appeal of any sort. This combination results in a significant possibility of deprivation. Our concern is that this combination be altered by the addition of some other protections in a way that will assure a claimant minimal due process, i. e., adequate notice and a genuine opportunity to present his case.