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From Health Law Daily, August 2, 2013

Beneficiaries’ challenge to Part B premium calculation dismissed for failure to exhaust administrative remedies

By Sarah E. Baumann, JD

Plaintiffs representing a putative class of Medicare Part B late enrollees could not proceed with their lawsuit against the Secretary of HHS and the Commissioner of the Social Security Administration (SSA) alleging that their premium calculations violated the Medicare Act because they failed to exhaust their administrative remedies (Degnan v Sebelius, July 31, 2013, Doty, D). Specifically, the members never had an administrative hearing or received a final decision from the SSA Commissioner regarding the calculations. Because they did not qualify for a waiver of the exhaustion requirement, the district court granted the Secretary’s and Commissioner’s motion to dismiss.

Background. Charles Degnan filed a putative class action lawsuit in 2009 (Degnan I), alleging that the SSA’s calculation of the class’ Part B enrollment premiums conflicted with the Medicare Act (Degnan v Sebelius, 658 F. Supp. 2d 969). The court agreed, but limited its holding to Degnan, rather than extending it to the class. As a result, the SSA recalculated Degnan’s premiums from 2004 through 2010 and refunded an overage to Degnan.

Because Degnan believed that the Part B premium calculations in 2011 and 2012 were calculated at the pre-Degnan I rate, he filed suit, along with three other Part B late enrollees, on behalf of a putative class. In response, HHS and the SSA recalculated Degnan’s premiums. However, Degnan maintains that they are incorrect. Degnan and the other plaintiffs filed a second amended complaint alleging that their late enrollment penalty calculations conflict with sec. 1395r(f) of the Medicare Act. HHS and the SSA filed a motion to dismiss due to lack of subject matter jurisdiction.

Exhaustion of remedies. 42 U.S.C. sec. 405(g) grants subject matter jurisdiction to a district court regarding a benefits decision only after the SSA Commissioner has issued a final decision after a hearing to which the plaintiffs were parties. In this instance, the plaintiffs were not party to a hearing, nor did they receive a final decision from the Commissioner.

A court may only waive the exhaustion of remedies requirement where plaintiffs’ district court claims are collateral to their claim for benefits, irreparable injury will result absent a waiver, and exhaustion would otherwise be futile. Degnan and the other plaintiffs sought compensatory damages resulting from their Part B premium overcharges. Because this claim was “inextricably intertwined” with their claims for benefits, it could not be deemed collateral. As a result, the court granted the agencies’ motion to dismiss.

The case number is 12-1869 (DSD/TNL).

Attorneys: Frederich A.P. Siekert, Assistant U.S. Attorney, for Kathleen Sebelius, Secretary of the U.S. Department of Health and Human Services, and Michael Astrue, Commissioner of the Social Security Administration.

Companies: U.S. Department of Health and Human Services; Social Security Administration

MainStory: TopStory CaseDecisions MinnesotaNews PartBNews CMSNews

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