MAIN	cases	docket	decisions	orders	briefs	rules	guides	calendar
No. 98-1109: Shalala v. Illinois Council on Long Term Care Inc.

No. 98-1109

In the Supreme Court of the United States

OCTOBER TERM, 1998



DONNA E. SHALALA, SECRETARY OF HEALTH
AND HUMAN SERVICES, ET AL., PETITIONERS

v.

ILLINOIS COUNCIL ON LONG TERM CARE, INC.



ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT



REPLY BRIEF FOR THE PETITIONERS



SETH P. WAXMAN
Solicitor General
Counsel of Record
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217




In the Supreme Court of the United States

OCTOBER TERM, 1998



No. 98-1109

DONNA E. SHALALA, SECRETARY OF HEALTH
AND HUMAN SERVICES, ET AL., PETITIONERS

v.

ILLINOIS COUNCIL ON LONG TERM CARE, INC.



ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT



REPLY BRIEF FOR THE PETITIONERS



1. Respondent agrees that the Seventh Circuit's decision in this case createsa conflict in circuit authority that warrants this Court's review. See Br.in Opp. 5 ("This case * * * presents a clear circuit conflict on asignificant jurisdictional issue."). As respondent explains, "theSeventh Circuit's decision" regarding the scope of the jurisdictionalbar presented by 42 U.S.C. 405(h), as incorporated in 42 U.S.C. 1395ii,"squarely conflicts with [the Sixth Circuit's decision in] MichiganAssn. of Homes & Services for the Aging, Inc. v. Shalala, 127 F.3d 496[(1997)]," and with the "other court of appeals decisions thathave limited the holding in Bowen v. Michigan Academy of [Family] Physicians,476 U.S. 667 (1986) * * * in light of subsequent amendments to Part B ofthe Medicare program." Br. in Opp. 5; see Pet. 15-16 (citing, interalia, St. Francis Medical Center v. Shalala, 32 F.3d 805 (3d Cir. 1994),cert. denied, 514 U.S. 1016 (1995); Abbey v. Sullivan, 978 F.2d 37 (2d Cir.1992); National Kidney Patients Ass'n v. Sullivan, 958 F.2d 1127 (D.C. Cir.1992), cert. denied, 506 U.S. 1049 (1993); and American Academy of Dermatologyv. Department of Health & Human Services, 118 F.3d 1495 (11th Cir. 1997)).1
Respondent, moreover, agrees that the conflict over the scope of Section405(h)'s jurisdictional bar on pre-enforcement challenges to Medicare regulationsis "of widespread importance for both a federal agency and for providersnationwide that participate in Medicare." Br. in Opp. 6. The conflict,it notes, is likely to "spawn confusion in the lower courts,""consume an increasing amount of judicial resources," and "encourageforum shopping by plaintiffs seeking to challenge Medicare regulations."Id. at 6-7. Respondent therefore joins the Secretary in urging the Courtto grant the petition, and urges that the case be set for plenary review.2

2. When we filed the petition for certiorari, we suggested (Pet. 8-9, 17)that it be held pending the Court's decision in Your Home Visiting NurseServices, Inc. v. Shalala, No. 97-1489 (Your Home), and then disposed ofas appropriate in light of that decision. The Secretary's petition suggestedthat the Court's decision in Your Home might implicate issues concerningthe scope of Section 405(h)'s bar and the effect of the Court's prior decisionin Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667 (1986).Although respondent agrees that this case warrants review, respondent arguesin its response to the petition that the case should not be held pendingdecision in Your Home, and that plenary review should be granted.
The Court rendered its decision in Your Home on February 23, 1999. We nowagree with respondent that the appropriate disposition of the petition isto grant plenary review. The Court's decision in Your Home is consistentwith the Secretary's position here: that Section 405(h), as made applicableto the Medicare Act by 42 U.S.C. 1395ii, channels all claims arising underthe Medicare Program to the avenues of administrative and judicial reviewprovided by the Medicare Act itself-here, as provided by Section 405(g),which is made applicable in this case by 42 U.S.C. 1395cc(h)(1). Your Home,however, does not discuss Michigan Academy. See Pet. 13-14. Nor does itaddress the relationship of Michigan Academy to Heckler v. Ringer, 466 U.S.602 (1984), which rejected the contention that Section 405(h)'s jurisdictionalbar does not extend to challenges that, like respondent's claim here, donot themselves involve a specific claim for benefits. See Pet. 12. Becausethe court of appeals expressed the view that this Court's decision in MichiganAcademy compelled it to reject the Secretary's position in this case despitethe Secretary's reliance on Ringer-and expressly stated that it was "obligedto follow the holding of Michigan Academy" unless "the SupremeCourt tells [it] that * * * a change of direction" is required, Pet.App. 7a-we see no reason to remand this case for further consideration inlight of Your Home, which does not discuss Michigan Academy. Accordingly,we agree with respondent (Br. in Opp. 16) that this case is ready and suitablefor the Court's review, and that a remand in light of Your Home is neithernecessary nor appropriate.

3. Respondent's defense of the ruling below is incorrect and at odds withthis Court's precedents. See Pet. 13-16.
a. Respondent begins by attempting to reconcile the decision below withthis Court's decision in Heckler v. Ringer, 466 U.S. at 614-617. See Br.in Opp. 9-10. In Ringer, this Court held that, under Section 405(h), asmade applicable to Medicare by 42 U.S.C. 1395ii, federal courts can obtainjurisdiction over claims "arising under" the Medicare Act onlyif the claimant avails himself of the administrative and judicial reviewmechanisms established by the Medicare statute itself, i.e., by first presentinghis claim to the Secretary and exhausting administrative remedies and thenfiling suit under Section 405(g), which is made applicable to the MedicareProgram by 42 U.S.C. 1395cc(h)(1). According to respondent, the pre-enforcementaction at issue in Ringer, which sought the invalidation of a Medicare rule,was not "collateral" to a claim for benefits, whereas the claimsin this case are; Section 405(h), respondent appears to argue, bars pre-enforcementreview only of payment-related claims. Br. in Opp. 9.
That contention is inconsistent with Ringer itself, which holds that the"third sentence of 42 U.S.C. § 405(h), made applicable to theMedicare Act by 42 U.S.C. § 1395ii, provides that § 405(g), tothe exclusion of 28 U.S.C. § 1331, is the sole avenue for judicialreview for all 'claim[s] arising under' the Medicare Act," 466 U.S.at 614-615 (emphasis added; footnote omitted). Besides, respondent's claimis inextricably entwined with payment under the Medicare Act: Compliancewith the regulations it challenges is a condition of participation in Medicare,and thus controls its members' eligibility for payment under the program.See 42 U.S.C. 1395i-3(a) to (d); 42 C.F.R. 483.1-483.75; see also Pet. App.17a (That respondent's claim is entwined with benefits eligibility is "evidencedby the relief sought," because respondent "seeks continuationof Medicare payments and reimbursement for past due payments incurred bythe patients at the nursing homes."). Just as the plaintiff in Ringersought to bring a pre-enforcement challenge to the Secretary's rule barringpayment for the treatment he wanted, respondent here seeks to bring a pre-enforcementchallenge to regulations that condition its members' participation in Medicare(and thus payments under the program) on compliance with certain substantiveand remedial requirements.3
Respondent's construction is also inconsistent with the structure of thestatute and the channeling function that 42 U.S.C. 405(g) and (h) are designedto serve. Section 405(g), which provides for review only of the "finaldecision" of the Secretary, provides jurisdiction over claims likerespondent's after those claims are presented to the Secretary and administrativeremedies are exhausted. Section 405(h), made applicable by 42 U.S.C. 1395ii,precludes claimants from evading those presentment and exhaustion requirementsby seeking review under 28 U.S.C. 1331. See Ringer, 466 U.S. at 614-615("42 U.S.C. § 405(h) * * * provides that § 405(g), to theexclusion of 28 U.S.C. § 1331, is the sole avenue for judicial review")(footnote omitted). Given the proximity of those provisions and their obviouslyrelated purposes, Section 405(h) should be read (at a minimum) as barringcourts from reviewing under 28 U.S.C. 1331 and 1346 all claims that-likerespondent's -can be reviewed through the mechanism established by Section405(g); any other construction would permit providers to evade the presentmentand exhaustion requirements for certain claims by seeking immediate reviewunder 28 U.S.C. 1331 and 1346, rather than using the specific review mechanismthat Congress prescribed.
Section 10(b) of the Administrative Procedure Act (APA), 5 U.S.C. 703, hasa channeling function that reinforces this interpretation of Section 405(g)and (h). It expressly provides that, where Congress has provided a "specialstatutory review proceeding relevant to the subject matter," complainantsmust use that "form of proceeding for judicial review," unlessit is "inadequa[te]." 5 U.S.C. 703. And the APA specifically barsresort to its general provisions for judicial review of agency action unless"there is no other adequate remedy in a court." 5 U.S.C. 704.Because respondent's members can avail themselves of the fully adequatemechanism for judicial review under 42 U.S.C. 405(g), the APA both remitsthem to that mechanism, and bars them from evading its prerequisites byseeking immediate review under 28 U.S.C. 1331 and 1346 and the cause ofaction codified in the APA.
b. Nor is respondent correct to assert (Br. in Opp. 10-12) that this Courtshould follow Michigan Academy rather than Ringer because it is "morerecent," and because portions of it have been followed in other decisionsof this Court. In this Court's most recent decision in the area, Your Home,the provider made a similar argument, seeking to avoid the jurisdictionallimitations of Section 405(h) and invoking Michigan Academy on the groundthat, absent review through 28 U.S.C. 1331, no judicial review could behad at all. See Pet. Br. at 19-20, 23, Your Home Visiting Nurse Servs.,Inc. v. Shalala, No. 97-1489. Citing Ringer, this Court rejected that argument,holding the provider's claim to be barred by Section 405(h) because theprovider's standing and the substantive basis of its claim were based onthe Medicare Act. Your Home Visiting Nurse Servs., Inc. v. Shalala, No.97-1489 (Feb. 23, 1999), slip op. 7. The same argument applies here withgreater force, since respondent's members do have an alternative mechanismfor obtaining judicial review of the agency action they seek to challenge.4
c. Finally, respondent errs in asserting that the decision below correctlyapplies this Court's decisions in Michigan Academy and McNary v. HaitianRefugee Center, Inc., 498 U.S. 479 (1991). As explained in our petition(at 13-14), both Michigan Academy and McNary underscore the point that federalcourts may assert jurisdiction over claims arising under the Medicare Actunder 28 U.S.C. 1331 and 1346 only where (if at all) the statute otherwisewould afford no meaningful avenue of judicial review, as only in that situationdoes the presumption against unreviewability come into play. See MichiganAcademy, 476 U.S. at 678-681; McNary, 498 U.S. at 498. Indeed, the Courtreiterated that distinction in Thunder Basin Coal Co. v. Reich, 510 U.S.200 (1994), upon which respondent relies (Br. in Opp. 12-13, 14). NotwithstandingMichigan Academy, the Court in Thunder Basin held that the pre-enforcementchallenge there was not subject to judicial review under 28 U.S.C. 1331because the statutory scheme provided for meaningful judicial review aftera final agency decision and evidenced an intent to allocate initial reviewto an administrative tribunal. See 510 U.S. at 207 & n.8, 213-214. Thesame is true here.
* * * * *
For the foregoing reasons, and those set forth in the petition, the petitionfor a writ of certiorari should be granted.
Respectfully submitted.

SETH P. WAXMAN
Solicitor General

MARCH 1999
1 Although acknowledging a circuit conflict and agreeing that the Secretary'spetition should be granted, respondent argues (Br. in Opp. 14-15) that thedecision below is consistent with United States qui tam Body v. Blue Cross& Blue Shield of Alabama, Inc., 156 F.3d 1098 (11th Cir. 1998). Thatcase, however, involved a qui tam suit brought under the False Claims Act,31 U.S.C. 3729, to recover allegedly wrongful payments made to a Medicareprovider. The case did not involve claims against the government and, asthe court of appeals held, the qui tam relator's cause of action and substantiverights arose under the False Claims Act, not the Medicare statute. 156 F.3dat 1105. As a result, that decision turns on claims and issues that differsubstantially from those presented in this case.
2 As explained in the petition, the Secretary challenges the judgment ofthe court of appeals only insofar as it reinstates respondent's claims withrespect to, and on behalf of, its members that participate in the Medicareprogram. See Pet. 7 n.5; see also Pet. i (limiting question presented towhether facilities participating "in the Medicare program" mayobtain judicial review under 28 U.S.C. 1331 and 1346 "to challengethe validity of Medicare regulations") (emphasis added). Medicaid (unlikeMedicare) does not incorporate the jurisdictional limitation of Section405(h); as a result, Section 405(h) does not apply to respondent's claimsarising under, and on behalf of members participating in, the Medicaid program.Pet. 7 n.5.
3 Even if one were to assume arguendo that respondent's claims were in somesense "collateral," that would not be sufficient to permit a federalcourt to assume subject matter jurisdiction. First, any collaterality exceptioncould excuse (at most) compliance with waivable requirements of the MedicareAct's judicial review scheme; it could not permit a litigant to circumventthe non-waivable requirement that a claim be presented to the Secretarybefore judicial review may be had. See Ringer, 466 U.S. at 617-618; Mathewsv. Eldridge, 424 U.S. 319, 328 (1976). In this case, the district courtheld that respondent had failed to present its claims to the Secretary,Pet. App. 19a, and respondent does not contend otherwise. Second, even ifthe requirement of presentment could be waived, that waiver would not beavailable absent a showing that following the ordinary statutory reviewscheme (i.e., presenting claims to the Secretary and exhausting administrativeremedies) would prevent the complainant from obtaining effective relief.See Ringer, 466 U.S. at 618 (requiring a "colorable showing that [theplaintiff's] injury could not be remedied * * * after exhaustion of hisadministrative remedies"); Bowen v. City of New York, 476 U.S. 467,483 (1986) (permitting waiver of exhaustion where plaintiff would be "irreparablyinjured"). Because respondent's members in fact can obtain review afterpresenting their claims to the Secretary, see note 4, infra, respondentcannot make that showing here. See also Cross-Resp. Br. in Opp. at 11-13,17-18 & n.10, Illinois Council on Long Term Care, Inc. v. Shalala, No.98-1307.
4 Respondent attempts to distinguish Your Home by noting that the provider'sclaim in that case did not involve a facial challenge to the validity ofa regulation, and by asserting that the Your Home provider could avail itselfof administrative remedies. Br. in Opp. 7-8. Both of those contentions arewithout merit. First, Your Home turned on whether standing and the substantivebasis of the claim were founded on the Medicare Act; nothing in the decisionsuggests that a different result would obtain where the provider is challengingthe facial validity of a Medicare regulation.
Second, this case cannot be distinguished from Your Home based on supposeddifferences in the availability of administrative remedies. Contrary torespondent's contentions, and as we have shown in the petition (at 3-4),respondent's nursing home members have substantial rights to administrativeand judicial review of administrative actions taken to enforce federal standardsof care. It is true that the administrative process will not generally addresschallenges to the validity of a federal regulation, but judicial reviewof such claims is fully available after exhaustion of administrative remedies,compilation of an administrative record detailing the factual context ofthe claim, and issuance of a final agency decision. The Court made thatvery point in Weinberger v. Salfi, 422 U.S. 749, 760-762 (1975), where itheld that a challenge to the constitutionality of a provision of the Act-whichlikewise could not be resolved in the administrative process-had to be broughtunder Section 405(g), rather than through an independent action invokingdistrict court jurisdiction under 28 U.S.C. 1331. See also Michigan Ass'nof Homes & Servs. for Aging, Inc. v. Shalala, 127 F.3d 496, 500 (6thCir. 1997).