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Court: Medicare policy of collecting patient payments is ‘reasonable’

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WASHINGTON – A federal appeals court Wednesday overturned a lower court ruling that would have kept the federal government from collecting Medicare reimbursements from patients, even as they were challenging their bills.

But a three-judge panel of the 9th U.S. Circuit Court of Appeals also ordered the U.S. district court in Tucson to determine whether the “up front” collection of Medicare reimbursement payments by the Department of Health and Human Services violates beneficiaries’ due-process rights.

Federal law allows Medicare to pay a person’s medical bills if their primary insurance plan cannot pay right away. Under that arrangement, Medicare is reimbursed by the beneficiary after the primary insurer comes through with the money.

At that point, Medicare determines how much is owed and beneficiaries have 60 days to pay up. Even though they have a right to appeal or seek a waiver of the reimbursement, beneficiaries have to pay whether they agree with the assessment or not.

The policy was challenged by Patricia Haro and Jack McNutt, Medicare beneficiaries who had been injured in car accidents, and Troy Hall, who was injured while working.

U.S. District Judge David Bury ruled in May 2011 in their favor, blocking Medicare from demanding reimbursement before resolution of administrative appeals and waiver requests.

But the circuit court Wednesday vacated that injunction, saying the district court lacked jurisdiction in the case because the plaintiffs had not properly presented their claims for administrative review first.

Gil Deford, the attorney who represented the plaintiffs on appeal, said the court’s ruling will make it “virtually impossible” for beneficiaries challenging a policy to bring their case to circuit court.

“Essentially, what the court of appeals did was to say, ‘If you’re challenging a policy of the (Department of Health and Human Services) secretary, you have to explicitly state the nature of that challenge at the very beginning and all through the administrative process,’” Deford said.

“That’s never been required before either by the Supreme Court or the appellate courts,” Deford said. “So it’s a fairly staggering requirement.”

At the beginning of an administrative challenge in Medicare, many beneficiaries don’t even know specifically what they are contesting, Deford said, they “just know they’re unhappy with what’s happened.”

“Often at the beginning of the administrative process, it’s difficult to know exactly what the nature of the challenge will be if you have to go to court,” he said.

The circuit court also overturned the lower court’s ruling that attorneys representing Medicare beneficiaries can be personally liable for the reimbursement payment. Under current law, attorneys who receive a settlement on behalf of a client are required to pay Medicare first before handing any money over to the beneficiary.

The appellate court ruled that while the district court had jurisdiction to consider the question of attorney’s payments, it came to the wrong conclusion. The policy requiring Medicare be paid first is a “reasonable” interpretation of federal law, it said, and reversed the lower court’s decision.

Deford said the appellate decision would mean the ability to challenge Medicare policy in court would be “sharply curtailed” in the 9th Circuit.

“Everybody would have to be an experienced attorney even to have a shot at it,” he said.

The Department of Health and Human Services did not immediately respond to requests for comment on the ruling.