Charles Degnan v. Kathleen Sebelius , 765 F.3d 805 ( 2014 )

United States Court of Appeals
For the Eighth Circuit
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No. 13-3055
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Charles Degnan; Kenneth McCardle; Virginia Belford; Dale Erlandson,
Individually and on behalf of a class
lllllllllllllllllllll Plaintiffs - Appellants
v.
Sylvia Burwell,1 Secretary of the Department of Health and Human Services;
Carolyn W. Colvin, Acting Commissioner of the Social Security Administration
lllllllllllllllllllll Defendants - Appellees
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: June 11, 2014
Filed: August 25, 2014
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Before LOKEN, BEAM, and GRUENDER, Circuit Judges.
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BEAM, Circuit Judge.
1
Sylvia Burwell is substituted for her predecessor, Kathleen Sebelius, as the
Secretary of the Department of Health and Human Services. Fed. R. App. P. 43(c)(2).
Charles Degnan, Kenneth McCardle, Virginia Belford, and Dale Erlandson
appeal the district court's2 dismissal of their amended complaint for lack of subject
matter jurisdiction and mandamus jurisdiction based on their failure to exhaust
administrative remedies. We affirm.
I. BACKGROUND
Degnan, along with the other named plaintiffs, filed this lawsuit in the United
States District Court for the District of Minnesota against the Secretary of the
Department of Health and Human Services ("the Secretary" and "DHHS") and the
Commissioner of the Social Security Administration ("the Commissioner" and
"SSA"), on behalf of themselves and a class, alleging a miscalculation of their
Medicare Part B premium calculations. "The Medicare Part B medical insurance
program for the aged covers a part of the cost of certain physicians' services, home
health care, outpatient physical therapy, and other medical and health care. . . . [I]t is
financed in equal parts by the United States and by monthly premiums paid by
individuals aged 65 or older who choose to enroll." Mathews v. Diaz, 426 U.S. 67,
70 n.1 (1976); see 42 U.S.C. § 1395j. Medicare Part B premiums are calculated
pursuant to 42 U.S.C. § 1395r. Plaintiffs' complaint alleged that the calculation of
2
The Honorable David S. Doty, United States District Judge for the District of
Minnesota.
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Part B premiums conflicted with the plain language of §§ 1395r(b)3 and 1395r(f),4
resulting in their overpayment of premiums.
3
Section 1395r(b), "Increase in monthly premium," in relevant part, reads:
In the case of an individual whose coverage period began pursuant to an
enrollment after his initial enrollment period . . . , the monthly premium
determined under subsection (a) of this section . . . shall be increased by
10 percent of the monthly premium so determined for each full 12
months (in the same continuous period of eligibility) in which he could
have been but was not enrolled. . . . Any increase in an individual's
monthly premium under the first sentence of this subsection with respect
to a particular continuous period of eligibility shall not be applicable
with respect to any other continuous period of eligibility which such
individual may have. No increase in the premium shall be effected for
a month in the case of an individual who enrolls under this part during
2001, 2002, 2003, or 2004 and who demonstrates to the Secretary before
December 31, 2004, that the individual is a covered beneficiary (as
defined in section 1072(5) of Title 10).
4
Section 1395r(f), "Limitation on increase in monthly premium," in relevant
part, reads:
For any calendar year after 1988, if an individual is entitled to monthly
benefits under section 402 or 423 of this title . . . for November and
December of the preceding year, if the monthly premium of the
individual under this section for December and for January is deducted
from those benefits under section 1395s(a)(1) or section 1395s(b)(1) of
this title, and if the amount of the individual's premium is not adjusted
for such January under subsection (i) of this section, the monthly
premium otherwise determined under this section for an individual for
that year shall not be increased, pursuant to this subsection, to the extent
that such increase would reduce the amount of benefits payable to that
individual for that December below the amount of benefits payable to
that individual for that November (after the deduction of the premium
under this section).
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In 2008, Degnan pursued a similar claim, see Degnan v. Sebelius, 658 F. Supp.
2d 969 (D. Minn. 2009) ("Degnan I"). In Degnan I, the district court ruled in favor
of Degnan, holding that the SSA's calculation of the late-enrollment premiums
conflicted with the plain language of the Medicare Act as to premiums paid by
Degnan. Id. at 986. The Degnan I court limited its holding to Degnan individually
and declined class-wide relief. Id. at 988. Following Degnan I, the SSA recalculated
Degnan's Part B premiums for 2004 through 2010 and refunded him $759.70.
According to the complaint filed in this current lawsuit, Degnan's 2011 and 2012
premiums were incorrectly calculated using the pre-Degnan I methodology. After
Degnan filed this suit, the Secretary and Commissioner conceded that Degnan's
premiums were incorrect and adjusted his 2011 and 2012 premiums to comply with
Degnan I, but Degnan maintained that the corrected calculations remained inaccurate.
The Secretary and Commissioner filed a motion to dismiss the complaint for
lack of jurisdiction. The district court concluded that because the plaintiffs failed to
exhaust their administrative remedies and waiver of the exhaustion requirement was
not warranted, it lacked subject matter jurisdiction to hear the case. The court granted
the motion to dismiss. Degnan and the named plaintiffs appeal.
II. DISCUSSION
We review a district court's grant of a motion to dismiss for lack of jurisdiction
de novo. Doe v. Nixon, 716 F.3d 1041, 1051 (8th Cir. 2013). The Medicare Act
itself provides for district court review of the Secretary's benefit determinations. 42
U.S.C. § 1395ff(b)(1)(A). Section 1395ff(b)(1)(A) incorporates 42 U.S.C. § 405(g),
which governs the district court's review of SSA decisions, and accordingly informs
us here. See Midland Psychiatric Assocs., Inc. v. United States, 145 F.3d 1000, 1003
(8th Cir. 1998) (Section 405(g) as adapted by § 1395ff(b)(1) "creates federal
jurisdiction over final agency decisions in administrative Medicare appeals."). "In
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order for the district court to have subject matter jurisdiction under section 405(g),
a claimant must have presented a claim for benefits to the Secretary and exhausted the
administrative remedies prescribed by the Secretary." Schoolcraft v. Sullivan, 971
F.2d 81, 84-85 (8th Cir. 1992). Courts cannot waive the jurisdictional presentment
requirement, but may, in exceptional circumstances, waive the exhaustion of
administrative remedies requirement. Sipp v. Astrue, 641 F.3d 975, 980 (8th Cir.
2011).
"Exhaustion is generally required as a matter of preventing premature
interference with agency processes, so that the agency may function efficiently and
so that it may have an opportunity to correct its own errors, to afford the parties and
the courts the benefit of its experience and expertise, and to compile a record which
is adequate for judicial review." Weinberger v. Salfi, 422 U.S. 749, 765 (1975).
Courts may waive the exhaustion requirement if the claimants establish: "(1) their
claims to the district court are collateral to their claim of benefits; (2) that irreparable
injury will follow; and (3) that exhaustion will otherwise be futile." Titus v. Sullivan,
4 F.3d 590, 592 (8th Cir. 1993); see also Bowen v. City of New York, 476 U.S. 467,
483-84 (1986) (setting forth the Eldridge5 factors).
Here, the appellants concede that they failed to exhaust administrative
remedies, but assert that the district court misapplied the Eldridge factors.
Accordingly, they argue, that the district court should have waived the exhaustion
requirement. The district court, in determining whether waiver was appropriate,
concluded that the plaintiffs' claim was not collateral to their claim for benefits, and
thus, "even if plaintiffs could establish futility and irreparable harm, waiver of
administrative exhaustion [was] not warranted." The appellants contend that the
5
These waiver factors were first employed by the Supreme Court in Mathews
v. Eldridge, 424 U.S. 319 (1976), and are accordingly referred to as the "Eldridge
factors."
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district court was "required to examine each factor separately because no single factor
is indispensable," stated differently, the appellants contend that each of the Eldridge
factors could be dispositive. They argue it was futile to exhaust administrative
remedies; and thus, the district court should have waived the exhaustion requirement.
We disagree.
The district court's opinion is consistent with our circuit's precedent. In a
previous case applying the Eldridge factors, we concluded that where the parties
failed to establish the first of the factors, the court need not consider the remaining
two, as the district court did here. Clarinda Home Health v. Shalala, 100 F.3d 526,
531 (8th Cir. 1996). Moreover, as the appellees assert, when our circuit utilizes the
Eldridge factors, the court, in all but one case, has connected the factors with the
word "and," rather than the word "or," indicating the conjunctive nature of the factors.
See id.; Titus, 4 F.3d at 592; Schoolcraft, 971 F.2d at 85; Anderson v. Sullivan, 959
F.2d 690, 693 (8th Cir. 1992); Thorbus v. Bowen, 848 F.2d 901, 903 (8th Cir. 1988).6
The district court's opinion likewise follows the Supreme Court's reasoning in
Bowen, in that it not only considered all of the Eldridge factors, but also considered
the practical purposes of the exhaustion requirement. 476 U.S. at 484. In Bowen, the
Court noted that "[t]he ultimate decision of whether to waive exhaustion should not
6
The case that uses the word "or" rather than "and," In Home Health, Inc. v.
Shalala, 272 F.3d 554, 560 (8th Cir. 2001), cites to Anderson, 959 F.2d at 693, which
recites the Eldridge factors using "and." In Home Health does not bear the weight
appellants place on it because in that case, the court still ultimately denied waiver
based on one factor–the lack of futility. 272 F.3d at 560. Nonetheless, given our
circuit's rule that "when faced with conflicting panel opinions, the earliest opinion
must be followed as it should have controlled the subsequent panels that created the
conflict," Mader v. United States, 654 F.3d 794, 800 (8th Cir. 2011) (internal
quotation omitted), Anderson's use of "and" controls.
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be made solely by mechanical application of the Eldridge factors, but should also be
guided by the policies underlying the exhaustion requirement." Id. The appellants
advance this statement in support of their argument, but, as we read the Court's
Bowen opinion, the Eldridge factors should be considered along with the policies
underlying the "intensely practical" exhaustion doctrine. Id. In addition to its
Eldridge-factor analysis, the district court's opinion considered the policies
underlying exhaustion, which, as the court stated, would allow the agency to "'apply,
interpret, or revise policies, regulations, or statutes without possibly premature
interference by different individual courts.'" Degnan v. Sebelius, No. 12-1869, Order
at 7 (July 31, 2013) (quoting Shalala v. Ill. Council on Long Term Care, Inc., 529
U.S. 1, 13 (2000)).
Furthermore, the thrust of appellants' argument–that exhaustion would be
futile–is unpersuasive and does not warrant waiver of the exhaustion requirement on
its own.7 While Degnan previously exhausted his administrative remedies prior to
reaching the district court in Degnan I, he did not do so with regard to the
miscalculation of his 2011 and 2012 premiums, nor did the other named plaintiffs
pursue administrative remedies. As the appellees point out, there is a question as to
whether all of the named plaintiffs even presented their claim to the agency to satisfy
the nonwaivable jurisdictional requirement. Moreover, regarding Degnan's claims,
the Secretary and Commissioner corrected Degnan's premium calculations after he
filed the complaint in this case, but he maintains that, even after DHHS and SSA
made the correction, his premiums were still miscalculated. These are only a few
examples of the factual discrepancies that could potentially be solved by an
7
Because the appellants do not raise any argument regarding the other two
Eldridge factors, we consider them waived and need not address them here. See
Stephenson v. Davenport Cmty. Sch. Dist., 110 F.3d 1303, 1306-07 n.3 (8th Cir.
1997) (noting that, generally, we will consider an issue not raised or briefed to this
court waived).
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adequately-developed administrative record, illustrating the importance of exhaustion
in this case. While the appellants are challenging the systematic policy applied by the
SSA and DHHS, they are, at bottom, ultimately challenging the amount of premiums
paid, a determination that should be first made by the agency. Cf. Ill. Council on
Long Term Care, 529 U.S. at 13-15 (finding no distinction between claims for money
or benefits and claims that involve "the application, interpretation, or constitutionality
of interrelated regulations or statutory provisions," for purposes of related 42 U.S.C.
§ 405(h)). Because this case is not one of the exceptional cases where waiver of
exhaustion is appropriate, we affirm the district court's determination that it lacked
subject matter jurisdiction.
Finally, the appellants challenge the district court's denial of mandamus
jurisdiction, as codified in 28 U.S.C. § 1361. We affirm the district court's denial,
given that the appellants may pursue another avenue of relief–that is, the
administrative process. See Heckler v. Ringer, 466 U.S. 602, 616 (1984) (denying
mandamus jurisdiction where the claimants could seek relief by exhausting their
administrative remedies).
III. CONCLUSION
For these reasons we affirm the district court.
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