AMY BERMAN JACKSON, District Judge.
Plaintiffs Association of American Physicians & Surgeons, Inc. ("AAPS") and Alliance for Natural Health USA ("ANH-USA"), bring this case challenging several unrelated government actions, each of which could have been challenged in a distinct and separate case. The challenged government actions are:
Defendant filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), and for failure to state a claim upon which relief can be granted under Rule 12(b)(6). See Defs.' Mot. to Dismiss [Dkt. #32] ("Defs.' Mot."). After filing the motion to dismiss, defendants moved to stay this case pending decisions in two cases before the D.C. Circuit, and later, one case before the United States Supreme Court, which raised claims identical to the first two counts of plaintiffs' complaint. See Defs.' Mot. to Stay Summ. J. Briefing and Discovery [Dkt. #33]. The Court granted the motion to stay. See Minute Entry (Nov. 8, 2011).
Decisions in all of the relevant appeals have now been issued. In Hall v. Sebelius, 667 F.3d 1293 (D.C.Cir.2012), the D.C. Circuit upheld the POMS provisions that are challenged in this case as consistent with the Social Security Act, 42 U.S.C. § 426(a). In National Federation of Independent Business v. Sebelius, ___ U.S. ___, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012) ("NFIB"), the Supreme Court upheld the individual mandate provision of the ACA as a valid exercise of Congress's taxing powers.
Accordingly, the stay on this action has been lifted, and defendants' motion to dismiss is ripe for decision. The parties have filed supplemental memoranda addressing whether the recent decisions require the dismissal of any counts and, notwithstanding the Supreme Court's determination, plaintiffs soldier on. In light of the original pleadings in this case, the supplemental pleadings, and the recent controlling decisions from the D.C. Circuit and the United States Supreme Court, this Court will grant defendants' motion to dismiss because plaintiffs lack standing to bring some of their claims, and the others fail to state a claim upon which relief can be granted.
Plaintiffs AAPS and ANH-USA are both associations whose members include medical caregivers, employers, owners and managers of medical businesses, and consumers of healthcare. Second Am. Compl. [Dkt. #26] ("Compl.") ¶¶ 3-4, 13-14. AAPS was founded "to preserve the practice
On September 13, 2010, plaintiffs filed the six-count second amended complaint ("complaint") in this action on behalf of their members. See Compl. ¶¶ 13-34. Count I alleges that the issuance of the three POMS provisions, which state that any individual who receives social security benefits is automatically entitled to Medicare Part A benefits, was arbitrary, capricious, an abuse of discretion, without observance of notice-and-comment rulemaking procedure required by law, not otherwise in accordance with the law, and in excess of statutory authority. Id. ¶¶ 90-93. Counts II and III allege that both the employer and individual insurance mandate provisions of the ACA contravene the United States Constitution. Id. ¶¶ 94-99. Count IV alleges that CR6417/6421 and HHS's Interim Final Rule with Comment Period, 75 Fed.Reg. at 24437, which require medical professionals who decide to opt out of Medicare but wish to make referrals under Medicare Part B to obtain an NPI and an approved enrollment record or a valid opt-out record in the PECOS, are arbitrary, capricious, an abuse of discretion, without observance of the notice-and-comment rulemaking procedure required by law, not otherwise in accordance with the law, and in excess of statutory authority. Id. ¶¶ 100-05. Finally, Counts V and VI allege that defendants Sebelius and Astrue violated their fiduciary and equitable duties. Id. ¶¶ 106-117. The complaint requests declaratory and equitable relief. Id. ¶ 118.
In evaluating a motion to dismiss under either Rule 12(b)(1) or 12(b)(6), the Court must "treat the complaint's factual allegations as true ... and must grant plaintiff `the benefit of all inferences that can be derived from the facts alleged.'" Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C.Cir.2000), quoting Schuler v. United States, 617 F.2d 605, 608 (D.C.Cir.1979) (citations omitted). Nevertheless, the Court need not accept inferences drawn by the plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the Court accept plaintiff's legal conclusions. Browning v. Clinton, 292 F.3d 235, 242 (D.C.Cir.2002).
Under Rule 12(b)(1), the plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Shekoyan v. Sibley Int'l Corp., 217 F.Supp.2d 59, 63 (D.D.C.2002). Federal courts are courts of limited jurisdiction and the law presumes that "a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); see also Gen. Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C.Cir.2004) ("As a court of limited jurisdiction, we begin, and end, with examination of our jurisdiction."). Because "subject-matter jurisdiction is an `Art[icle] III as well as a statutory requirement ... no action of the parties can confer subject-matter jurisdiction upon a federal court.'" Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C.Cir.2003), quoting Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982) (second alteration in original).
"To survive a [Rule 12(b)(6)] motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when the pleaded factual content "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. "The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not `show[n]' — `that the pleader is entitled to relief.'" Id. at 679, 129 S.Ct. 1937, quoting Fed. R. Civ. Pro. 8(a)(2). A pleading must offer more than "labels and conclusions" or a "formulaic recitation of the elements of a cause of action," and "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. at 678, 129 S.Ct. 1937, quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955. In ruling upon a motion to dismiss, a court may ordinarily consider only "the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, and matters about which the Court may take judicial notice." Gustave-Schmidt v. Chao, 226 F.Supp.2d 191, 196 (D.D.C.2002) (citations omitted).
Count I of the complaint challenges three provisions of the POMS which affirm that any individual who receives Social Security benefits is automatically entitled to Medicare Part A benefits. There is now binding precedent from the D.C. Circuit upholding these provisions as a valid exercise of agency authority, Hall, 667 F.3d at 1293, so plaintiffs cannot succeed on this claim. However, because plaintiffs argue that they have raised a challenge that was not addressed by the D.C. Circuit — a procedural challenge — the Court will first address plaintiffs' standing.
The federal Medicare program was established by Title XVIII of the Social Security Act of 1935 to provide health insurance to the elderly and disabled. Amgen Inc. v. Smith, 357 F.3d 103, 105 (D.C.Cir. 2004). Part A of the Medicare program provides insurance coverage for hospital services, home health care, and hospice services. See id., citing 42 U.S.C. § 1395c. Part B is a voluntary program that provides supplemental coverage for other types of care, including physician services.
The POMS is a Social Security Administration ("SSA") handbook designed for internal use by SSA employees in processing claims. See Hall v. Sebelius, 770 F.Supp.2d 61, 66 (D.D.C.2011), aff'd by Hall, 667 F.3d at 1293. The three POMS provisions challenged here explain the interrelationship between Social Security retirement benefits and Medicare Part A benefits:
"The defect of standing is a defect in subject-matter jurisdiction." Haase v. Sessions, 835 F.2d 902, 906 (D.C.Cir.1987). In order to establish constitutional standing, a plaintiff must demonstrate that a case or controversy exists by showing (1) that he has suffered an "injury in fact" that is "concrete and particularized" and "actual or imminent, not conjectural or hypothetical"; (2) that the injury is "fairly traceable" to the challenged action of the defendant; and (3) that it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Ariz. Christian Sch. Tuition Org. v. Winn, ___ U.S. ___, 131 S.Ct. 1436, 1442, 179 L.Ed.2d 523 (2011), quoting Lujan, 504 U.S. at 560, 112 S.Ct. 2130; see also Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., 528 U.S. 167, 180-81, 120 S.Ct. 693,
In this case, plaintiffs are two associations that do not claim that they have suffered injuries as entities, but instead claim that their members have suffered injuries. Compl. ¶¶ 13-35. Under the associational standing doctrine, "an organization may sue to redress its members' injuries, even without a showing of injury to the association itself" because "the association and its members are in every practical sense identical." United Food and Commercial Workers Union Local 751, 517 U.S. at 552, 116 S.Ct. 1529 (citations and internal quotation marks omitted). To qualify for associational standing, a plaintiff must satisfy a three-prong test: (a) the organization's members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. Id. at 553, 116 S.Ct. 1529.
In Summers v. Island Earth Institute, the Supreme Court held that a plaintiff association must specifically identify members who have suffered the requisite harm in order to satisfy the standing requirement. 555 U.S. 488, 499, 129 S.Ct. 1142, 173 L.Ed.2d 1 (2009). The Court rejected a statistical probability standard, opting instead for a standard that requires a showing that one or more of the association's members would be "directly affected by the alleged illegal activity." Id. at 497-98, 129 S.Ct. 1142.
Since Summers, however, several Courts have found that a plaintiff need not identify the affected members by name at the pleading stage. See, e.g., Bldg. & Constr. Trades Council of Buffalo, N.Y. & Vicinity v. Downtown Dev., Inc., 448 F.3d 138, 145 (2d Cir.2006); Hancock Cty. Bd. of Supervisors v. Ruhr, 487 Fed. Appx. 189, 198 n. 5 (5th Cir.2012); Perez v. Texas, No. 11-CA-360-OLG-JES-XR, 2011 WL 9160142, at *9 (W.D.Tex. Sept. 2, 2011). Although those decisions are not binding on this Court, the Court finds them persuasive. "[E]ach element of Article III standing `must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.'" Bennett v. Spear, 520 U.S. 154, 167-68, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997), quoting Lujan, 504 U.S. at 561, 112 S.Ct. 2130. At the pleading stage, the Court presumes that general allegations encompass the specific facts necessary to support the claim, id., so the plaintiff need not identify an affected member by name.
As to Count I, the complaint alleges that some AAPS and ANH-USA members who are retired would like to cease participating in Medicare Part A, without losing their entitlement to Social Security retirement benefits. Compl. ¶ 16. It also alleges that AAPS and ANH-USA physician members who have opted out of Medicare are harmed by the "compelled participation" of their patients in Medicare Part
Plaintiffs' claims overstate the impact of the POMS provisions. First of all, the internal handbook does not create or eliminate any legal entitlements; it simply states what they are under existing law. And second, plaintiffs are not harmed by the statutory sections the POMS describes: they merely provide that an individual who receives Social Security retirement benefits is automatically entitled to Medicare Part A benefits. Browning, 292 F.3d at 242 (explaining that at the pleading stage, a court need not accept inferences drawn by the plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the Court accept plaintiff's legal conclusions). The provisions do not declare that the recipient must participate in Medicare Part A. In fact, any individual who is entitled to Medicare Part A may decline all of the benefits the program provides. Hall, 667 F.3d at 1295, citing Medicare Claims Processing Manual, ch. 1, § 50.1.5. So there is nothing stopping plaintiffs' members from ceasing their participation in Medicare Part A, without losing their Social Security retirement benefits.
Moreover, plaintiffs do not show that their members suffer any injury by becoming entitled to Medicare Part A. This factor distinguishes the instant case from Hall, in which the D.C. Circuit found that the plaintiffs had standing to challenge the same POMS provisions challenged here based on allegations of concrete harms they were suffering from mere entitlement to Medicare Part A benefits. Id. The plaintiffs in Hall were individuals over 65 years old who received Social Security retirement benefits and thus were automatically entitled to Medicare Part A benefits. Id. One of the plaintiffs submitted an affidavit in which he declared that his legal entitlement to Medicare Part A benefits led his private insurance plan to reduce coverage without a matching reduction in premium. Id. Another plaintiff declared that his private insurance company stopped acting as his primary payer because of his entitlement to Medicare Part A benefits. Id. Both showed that their private insurance coverage had been curtailed as a direct result of their legal entitlement to Medicare Part A benefits and that they could obtain additional coverage from their private insurance plans if allowed to disclaim their legal entitlement to Medicare Part A benefits. Id. Unlike in Hall, AAPS and ANH-USA make no showing that mere entitlement to Medicare Part A benefits will have any effect on their retirement-age members.
Even more damaging to plaintiffs' argument: the POMS provisions at issue concern Medicare Part A, which covers care provided by institutional health care providers, such as hospitals. See United Seniors Ass'n, 182 F.3d at 967. Care provided by physicians is covered by Medicare Part B. Id. So the inference that plaintiffs ask the Court to make — that a patient's entitlement to Medicare Part A will effect his choice of which physician to see — is unreasonable. At the pleading stage, however, the Court is required to make only reasonable inferences in a plaintiff's favor. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
In sum, the chain of inferences that plaintiffs ask the Court make — (1) that patients who are entitled to, but not forced to, participate in Medicare Part A have more difficulty retaining cash-only physicians, despite the fact that Medicare Part A does not cover physician services, and (2) that this exposes those physicians to more competition — is too speculative. See Grocery Mfrs. Ass'n v. EPA, 693 F.3d 169, 175 (D.C.Cir.2012) (finding that a long chain of hypothetical chain events fails as a showing of Article III standing).
In the alternative, plaintiffs argue that they are entitled to third-party standing on behalf of the patients that their member physicians treat. Compl. ¶ 18. In other words, plaintiffs wish to assert the rights of individuals who are two steps removed from them.
Ordinarily, a plaintiff may not assert the rights of third persons who are not parties to the litigation. Singleton v. Wulff, 428 U.S. 106, 114, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976). This is a prudential standing requirement that the courts have adopted for two primary reasons:
Id. at 113-14, 96 S.Ct. 2868 (citations omitted).
There are exceptions to this bar, including the one that plaintiffs assert here — where the plaintiff has a particularly close relationship with the third-party and there is some genuine obstacle to the third party's assertion of its own right. Id. at 114-116, 96 S.Ct. 2868. However, the Court need not determine whether plaintiffs here fall within that exception because the prudential bar on third-party standing does not waive the Constitutional standing requirements. Id. at 112, 96 S.Ct. 2868. In other words, in addition to showing that they fall within an exception to the prudential bar on third-party standing, plaintiffs must also make a showing that at least one of their physician members suffers an injury in fact that is fairly traceable to the challenged POMS provisions. As the Court has already discussed, plaintiffs fail to meet that burden.
Finally, plaintiffs argue that their members have suffered procedural injury because they were not afforded the opportunity to provide comments on the POMS provisions before they were issued. Compl. ¶¶ 31-32. This argument too is flawed. The redressability and immediacy requirements are relaxed for an individual who has been accorded a procedural right. See Lujan, 504 U.S. at 572 n. 7, 112 S.Ct. 2130. Accordingly, standing might exist even if the right to comment likely would not have succeeded in persuading the agency to change its mind. Nat'l Ass'n of Home Builders v. EPA, 667 F.3d 6, 15 (D.C.Cir.2011). However, "deprivation of a procedural right without some concrete interest that is affected by the deprivation — a procedural right in vacuo — is insufficient to create Article III standing." Summers, 555 U.S. at 496, 129 S.Ct. 1142. Since plaintiffs have not alleged a substantive injury in fact that is fairly traceable to the challenged POMS provisions, the alleged procedural injury is insufficient to confer standing on plaintiffs to assert Count I. Id.; see also Fla. Audubon Soc'y v. Bentsen, 94 F.3d 658, 664 (D.C.Cir.1996) (allegation of a procedural injury does not waive the substantive injury in fact requirement). Accordingly, the Court will dismiss Count I for lack of standing.
Counts II and III of the complaint, respectively, challenge the employer and individual insurance mandate provisions of the ACA. ACA §§ 1501, 1511-1515. In light of the Supreme Court's decision in NFIB, the Court finds that these counts both fail to state a claim upon which relief can be granted.
The ACA imposes requirements on, and offers incentives to, certain employers for providing insurance to their employees. ACA §§ 1421, 1513. In general terms, certain small employers are eligible for tax credits under the act if they provide contributions toward health insurance coverage for their employees. Id. § 1421. Certain large employers are subject to an "assessable payment" under the act if they fail to offer insurance coverage of at least a minimum threshold level to full-time employees and their dependents. Id. § 1511-1513. This payment is assessed through tax returns. Id. § 1513. Plaintiffs challenge the latter requirement. Compl. ¶¶ 95-96. The mandate takes effect in 2014. Id. § 1513(d).
The individual insurance mandate requires all Americans to maintain a minimum level of health insurance coverage or pay an assessable penalty through their tax returns. ACA §§ 1501, 10106. Congress expressly found that by "significantly reducing the number of the uninsured, the requirement, together with the other provisions of this Act, will lower health insurance premiums." Id. §§ 1501(a)(2)(F), 10106(a). Like the employer insurance mandate, the individual mandate takes effect in 2014. Id. § 1501(d).
The complaint alleges that plaintiffs' members include businesses with more than fifty full-time employees who are subject to the employer insurance mandate. Compl. ¶ 19. It alleges that if these employers continue their current employee coverage practices, they will be subject to the assessment of a penalty under the ACA. Id. Furthermore, the complaint claims that "[t]he addition of these major new costs in 2014 and subsequent years has reduced the value of these businesses today. Removing those new costs would restore the lost value." Id. Although plaintiffs do not identify any particular member that has suffered a reduction in value, the allegations in their complaint are sufficient to satisfy the requirements of Constitutional and prudential standing at the motion to dismiss stage.
Plaintiffs also raise several theories of injury resulting from the individual insurance mandate. First, the complaint alleges that the ACA will injure AAPS and ANH-USA member physicians who do not accept medical insurance because it will cause patients to pay more money for insurance premiums or penalties, thereby decreasing the resources those patients can devote to healthcare expenditures out of pocket. Compl. ¶ 20; DuBeau Decl., Ex. 2 to Pls.' Opp. ¶ 8. This in turn will disadvantage physicians that accept only cash for their services. Compl. ¶ 20; DuBeau Decl., Ex. 2 to Pls.' Opp. ¶ 8. The complaint goes on to allege that the insurance mandates will render the "cash practice" business model of AAPS and ANH-USA members economically non-viable, putting those members out of business or causing them to have to invest in a different business model. Compl. ¶ 21.
Separately, some of the declarations that plaintiffs attach to their opposition to the motion to dismiss assert that the declarants, who are members of AAPS and ANH-USA, are consumers of medical services that are and will imminently be injured by the individual insurance mandate. See Christman Decl., Ex. 1 to Pls.' Opp. ¶¶ 6-9; Orient Decl., Ex. 5 to Pls.' Opp. ¶¶ 18-21; Smith Decl., Ex. 6 to Pls.'
There is a question whether at the time the complaint was filed, the alleged injuries were too hypothetical to satisfy the imminence requirement because the individual mandate provision does not take effect until 2014. Mem. in Support of Defs.' Mot. to Dismiss ("Defs.' Mem.") [Dkt. #32] at 25-26; see Davis v. FEC, 554 U.S. 724, 734, 128 S.Ct. 2759, 171 L.Ed.2d 737 (2008) ("T[]he standing inquiry [is] focused on whether the party invoking jurisdiction had the requisite stake in the outcome when the suit was filed.").
"[I]f a threatened injury is sufficiently `imminent' to establish standing,
The fitness of the issue for judicial decision depends on whether there are "contingent future events that may not occur as anticipated, or indeed may not occur at all." Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580-81, 105 S.Ct. 3325, 87 L.Ed.2d 409 (1985) (internal citation and quotation marks omitted). As noted above, there is some risk that circumstances could change between the time this complaint was filed and the 2014 deadline when the individual mandate provision takes effect. However, for the reasons already given, the Court finds that this risk is not so great as to render this issue unfit for judicial decision. This is supported by the fact that the Supreme Court has already considered Congress's authority to enact the mandate in NFIB. As to the hardship to the parties of the Court's withholding consideration of these issues, "absent institutional interests favoring the postponement of review, a [plaintiff] need not show that delay would impose individual hardship to show ripeness." Sabre, Inc. v. Dep't of Transp., 429 F.3d 1113, 1120 (D.C.Cir.2005). Again, since the Supreme Court has already taken up the constitutionality of this particular provision, the Court can find no institutional interest in postponing review here. Although plaintiffs have not identified any actual hardship that postponement of review would cause their members, it can infer that individuals who will be affected by this provision will need to start preparing in advance of the date it actually takes effect, see Mead, 766 F.Supp.2d at 27, so the issue is sufficiently ripe for decision.
In NFIB, the Supreme Court unequivocally held that review of the individual insurance mandate provision of the ACA is not barred by the Anti-Injunction Act and that Congress had the authority to enact it under its Article I, Section 8 power to "lay and collect Taxes." 132 S.Ct. at 2583-84, 2594-2600. The Court also found that this tax is not a capitation or direct tax, but is a type of tax permitted by the Constitution. Id. at 2598-2600. While the Court did not address the employer insurance mandate that plaintiffs challenge here under Count III, the similar manner in which the penalties are assessed under the individual and employer mandate provisions compels this Court to treat the two provisions alike for purposes of the constitutional inquiry. Accordingly, the Court will uphold both provisions.
Refusing to concede that the Supreme Court's decision definitively establishes the constitutionality of the mandate provisions, plaintiffs have now submitted a supplemental brief, which argues that the provisions, construed as imposing taxes, violate the Origination Clause, U.S. Const. art. 1, § 7, cl. 1. Pls.' First Supplemental Br. at 4-8. The Court declines to address this argument since plaintiffs waived it by failing to assert it in their complaint or opposition to the motion to dismiss, even though defendants argued in their motion
Plaintiffs also argue that the mandate provisions violate the Takings Clause of the Fifth Amendment.
Under Supreme Court precedent, the Due Process Clause of the Constitution should not be read to limit the taxing power, with the possible rare exception for cases where "the act complained of
Finally, to the extent the complaint claims that the mandates violate the Equal Protection Clause of the Fifth Amendment, Compl. ¶¶ 53, 68; see Pls.' Opp. at 53-54, the Court finds this argument unavailing as well. "[L]egislatures have especially broad latitude in creating classifications and distinctions in tax statutes." Armour v. City of Indianapolis, ___ U.S. ___, 132 S.Ct. 2073, 2080, 182 L.Ed.2d 998 (2012) (internal citation and quotation marks omitted). Since the classification drawn by the mandate provisions does not involve a "fundamental right" or a "suspect classification," the provisions will be upheld if "there is any reasonably conceivable state of facts that could provide a rational basis for the classification." FCC v. Beach Commc'ns, Inc., 508 U.S. 307, 313, 113 S.Ct. 2096, 124 L.Ed.2d 211 (1993). The burden rests with plaintiffs to "negative every conceivable basis which might support [the provisions]." Armour, 132 S.Ct. at 2080-81 (internal citation and quotation marks omitted). Here, Congress could rationally distinguish between individuals with high-deductible, catastrophic risk policies or no insurance on the one hand, and individuals with lower deductible, higher coverage plans on the other. Congress had a rational interest in providing incentives for individuals to purchase comprehensive health insurance in order to lower premium prices and to increase the number of covered individuals. See ACA §§ 1501(a)(2)(F), 10106(a). Imposing a tax on individuals who choose not to purchase qualifying insurance plans is a rational way to introduce that incentive structure. The same logic holds for the employer insurance mandate.
Since plaintiffs cannot show that the individual or employer mandates were issued in violation of the United States Constitution, the Court will dismiss Counts II and III of the complaint.
Plaintiffs next challenge an Interim Final Rule with Comment Period, 75 Fed. Reg. at 24,437, and two change requests that accompany the CMS Manual System (Change Requests 6417 and 6421).
Physicians are free to choose whether to accept patients who are Medicare Part B beneficiaries. If a physician chooses to treat a patient who receives Medicare Part B benefits, the physician may opt to enroll in Medicare, submit a claim, and obtain payment according to the Medicare fee schedule. 42 U.S.C. §§ 1395cc, 1395n, 1395w-4. This option requires the physician to submit an enrollment application, as explained below. 42 C.F.R. §§ 424.505,
Medicare Part B also covers certain medical items or services, but only when they are referred by an eligible medical professional. See 42 U.S.C. §§ 1395k, 1395x(s). Even a physician who has opted out of Medicare Part B may still be able to refer medical items or services for a patient in a way that allows the patient to use his Medicare Part B benefits. The IFR and change requests to HHS's internal claims processing manual that plaintiffs challenge here set out the steps such a physician must take in order to refer under Medicare Part B.
The requirements are better understood within the larger context of the administration of the Medicare program in general. Public and private insurance companies identify physicians by unique provider numbers. And in 1996, the Health Insurance Portability and Accountability Act, 42 U.S.C. § 201 et seq. ("HIPAA"), standardized the provider number system. The regulations implementing HIPAA adopted the National Provider Identifier ("NPI") as the universally recognized identifier. 45 C.F.R. § 162.406 (2012). A physician may obtain a free NPI by submitting an application, in paper or online, containing basic information about herself, her practice, and her specialty. NPI Application/Update Form, CMS-10114 (Nov. 2008), available at http://www.cms.gov/cmsforms/downloads/CMS10114.pdf. Under the implementing regulations, HIPAA Administrative Simplification: Standard Unique Health Identifier for Health Care Providers, 69 Fed.Reg. 3434-01 (Jan. 23, 2004) (codified at 45 C.F.R. Pt. 162), all physicians who engage in standard electronic transactions, such as submitting electronic claims to insurers, are required to obtain an NPI and to use it on all standard transactions where the NPI is required. 45 C.F.R. § 162.410(a). In addition, insurers — including Medicare — are required to use the NPI as the identifier for health care providers on all standard electronic transactions that require a health care provider identifier, 45 C.F.R. §§ 162.406(b)(1), 162.412(a), and are permitted to use the NPI for any other lawful purpose, 45 C.F.R. 162.406(b)(2).
In 2006, the Medicare program established more stringent enrollment requirements. Medicare Program; Requirements for Providers and Suppliers to Establish and Maintain Medicare Enrollment, 71 Fed.Reg. 20754, 20754-55 (Apr. 21, 2006) (codified at 42 C.F.R. Pts. 420, 424, 489, 498). Under the new requirements, any physician who has not opted out of Medicare is required to submit an enrollment application (paper or electronic) containing her NPI in order to obtain Medicare billing privileges. 42 C.F.R. §§ 424.505, 424.510; see also 75 Fed.Reg. at 24440. Those physicians must also recertify the accuracy of their enrollment information every five years. 42 C.F.R. § 424.515. The information from the enrollment applications is stored in an electronic data repository that has existed since 2003, called the Provider Enrollment, Chain, and Ownership System ("PECOS"). Cf. 42 C.F.R. § 424.505, 424.510, 424.515. The affidavits of physicians who validly opt out of Medicare
In 2008, the Medicare program began requiring all enrolled physicians to have an NPI. Id. It also began requiring that all Medicare claims submitted by any enrolled health care provider must contain the NPI of that provider as well as the NPIs any other providers or suppliers whose identification on the claim is required, such as ordering and referring providers. Id.
The agency actions at issue here are the CMS Manual System along with two change requests (Change Request 6417 and 6421), and a Final Interim Rule with Comment Period, 75 Fed.Reg. at 24,437. The change requests were issued by HHS in 2009. The changes expand the automated claim editing verification process. They ensure that the claim for any billed service that requires an ordering or referring provider will be paid only if the NPI for the ordering or referring provider is on the claim, the provider is on the national PECOS file, and the NPI on the claim matches the NPI in the PECOS file for that provider. Change Request 6421, CMS Manual System, Pub. 100-20, Transmittal 643, Attachment at 1-2 (Feb. 26, 2010).
Later, the ACA amended the Medicare Act in ways that essentially ratified the existing regulatory scheme. It requires the Secretary of HHS to promulgate a regulation that requires, in relevant part, that no later than January 1, 2011, all physicians and suppliers that qualify for an NPI must include their NPI on applications to enroll in Medicare and all claims for payment submitted under Medicare. ACA § 6402(a). It also expressly authorizes the Secretary of HHS to require any physician who orders certain items, such as home health services and durable medical equipment, to be enrolled in Medicare in order for the claim for that item to be paid. Id. § 6405(a). Finally, it authorized the Secretary to extend this requirement to "all other categories of items or services... that are ordered, prescribed, or referred" by an eligible professional. Id. § 6405(c).
On May 5, 2010, the Secretary of HHS implemented these ACA provisions by issuing the IFR challenged under Count IV. 75 Fed.Reg. at 24437. The IFR announced that any physician enrolling in Medicare must report an NPI, and any physician who enrolled in Medicare before obtaining an NPI must update her enrollment by submitting her NPI, unless the physician has validly opted out of the Medicare program. 42 C.F.R. 424.506(b). Second, it announced that any provider or supplier who submits a claim to Medicare must include its NPI and the NPIs of any other providers or suppliers "required to be identified." Id. § 424.506(c)(1). Third, in order to receive payment of claims for Part B items or services, (1) the billing supplier must submit a claim that contains the legal name and NPI of the referring or ordering physician, and (2) the ordering or referring physician must have an approved enrollment record or a valid opt-out record in the PECOS. Id. § 424.507(a)(1)-(2). The requirements for payment of claims for home health services are similar. Id. § 424.507(b).
Defendants assert that plaintiffs lack standing to bring the claims set out in Count IV.
The complaint alleges that AAPS and ANH-USA member physicians will be economically injured if they decline to enroll in or opt out of Medicare because they will lose significant numbers of patients and be put at an economic disadvantage as compared to other competing physicians.
Defendants next challenge the redressability of plaintiffs' claims. They argue that the relief plaintiffs seek is not likely to redress their alleged injuries because the requirements that they claim are injuring them were established by rules that existed before the change requests and IFR were issued, and they were ratified by the ACA. Defs.' Mem. at 65-66; Reply in Support of Defs.' Mot. to Dismiss ("Defs.' Reply") [Dkt. #45] at 33. In other words, even if the Court were to strike down the Interim Final Rule and change requests, plaintiffs would continue to suffer the same alleged injuries.
At the outset, the Court emphasizes that the only agency actions challenged under Count IV are the two change requests and the IFR. Compl. ¶ 105. So the Court looks to whether these two agency actions add any new requirements that were not imposed by existing statutes, rules, and regulations. According to the complaint, the requirements that allegedly cause plaintiffs' injuries are: (1) that "non-medicare providers" must comply with the statutory opt-out procedures before treating and obtaining outside payment from Medicare beneficiaries; (2) that ordering and referring physicians must obtain a record in PECOS (either to enroll in Medicare or to opt-out); and (3) that ordering and referring physicians must obtain an NPI. Compl. ¶¶ 2(g)-(h), 59-61, 101-04. The Court addresses each theory separately.
First, plaintiffs allege that nothing in Medicare or any other provision of law requires "non-Medicare providers" to comply with the statutory opt-out requirement before treating and obtaining payment from Medicare-eligible beneficiaries outside the Medicare system.
Second, plaintiffs allege that HHS lacks the authority to require the filing of an enrollment or opt out record in the PECOS as a prerequisite to referring items or services under Medicare. Compl. ¶ 102. To the extent this claim is simply a restatement of the first claim, the Court similarly finds plaintiffs lack standing to bring it. However, this claim appears to be challenging the requirement that referring physicians must obtain a PECOS record. Defendants point out that since 2003, the submission of either an enrollment application or an opt-out affidavit has automatically generated a record in PECOS. See 75 Fed.Reg. at 24440. Moreover, under pre-existing regulations, all physicians that refer under Medicare Part B are required to either update their enrollment information every five years, 42 C.F.R. § 424.515, or to comply with the opt-out procedures every two years, 42 U.S.C. § 1395a(b). So, under pre-existing regulations, it is inevitable that all referring physicians will be required to obtain a PECOS record. Accordingly, neither the challenged change requests or IFR actually cause the alleged injuries that result from that requirement, so the Court has no jurisdiction to review it.
Third, plaintiffs allege that "[n]othing in [the ACA] authorizes HHS to require non-Medicare providers to obtain an NPI, outside a specific action by that provider that independently requires an NPI (e.g., HIPAA transactions)." Compl. ¶ 104. The Court construes this as a challenge to the requirement that referring physicians must obtain an NPI.
Finally, plaintiffs allege that "with respect to its PECOS-related requirements," the change requests and interim final rule were issued in violation of the APA's notice-and-comment rulemaking requirement. Compl. ¶ 101. The phrase "PECOS-related requirements" is vague, and plaintiffs' opposition to the motion to dismiss sheds no additional light on its meaning, but in the interest of giving plaintiffs the benefit of all inferences in their favor, the Court construes it to encompass the requirements that physicians who refer under Medicare Part B either obtain an
This challenge is based on a procedural injury. As noted above, the redressability component of standing is relaxed where the alleged injury is procedural, so the plaintiff need not show that better procedures would have led to a different substantive result. Nat'l Ass'n of Home Builders, 667 F.3d at 15. However, "though the plaintiff in a procedural-injury case is relieved of having to show that proper procedures would have caused the agency to take a different substantive action, the plaintiff must still show that the agency action was the cause of some redressable injury to the plaintiff." Renal Physicians Ass'n v. U.S. Dept. of Health and Human Servs., 489 F.3d 1267, 1279 (D.C.Cir.2007). So whether plaintiffs have standing to assert these procedural claims depends upon whether the relief sought is likely to change plaintiffs' position. Based on the causation problems described above, the Court finds that plaintiffs have standing to assert only the following claims: that the portions of the change requests and IFR requiring referring physicians to obtain an NPI: (1) exceed statutory authority, and (2) were promulgated without the necessary notice and comment rulemaking. The Court will address these two claims on the merits.
The Court will begin with the change requests, since those were issued before the challenged IFR.
Defendants clearly had the statutory authority to introduce the change requests. For over a decade, the Social Security Act, as amended, has required suppliers of Medicare Part B items or services to identify the referring physician by name and unique physician identification number. 42 U.S.C. § 1395l (q)(1). Under HIPAA, the NPI became the standard identification number. Id. § 1320d-2; see also 45 C.F.R. 162.406. Furthermore, the Social Security Act, as amended, delegates general authority to the Secretary of HHS to prescribe regulations for the efficient administration of the Medicare program. Id. §§ 1302, 1395hh. Existing HHS regulations require insurers, including Medicare, to use the NPI for standard electronic transactions, such as processing claims in electronic form, 45 C.F.R. §§ 162.406(b)(1), 162.412(a), and permit insurers to use the NPI for any other lawful purpose, id. § 162.406(b)(2). Indeed, by 2008, Medicare required that all paper and electronic Medicare claims contain an NPI for any secondary provider, such as the ordering or referring provider. Change Request 6093, CMS Manual System, Pub. 100-08, Transmittal 270, Manual Instruction at 1-2 (Oct. 15, 2008). Moreover, the ACA ratifies this requirement: it authorizes the Secretary of HHS to require any physician who orders or refers under Part B to be enrolled in Medicare, ACA §§ 5405(b), (c), and it requires that all physicians "include their [NPI] on all applications to enroll." Id. § 6402(a). In their Supplemental Brief on Hall and NFIB, plaintiffs appear to acknowledge that the ACA, if upheld, ratifies the referring physician NPI requirement. Pls.' Supplemental Br. on Hall v. Sebelius and NFIB v. Sebelius ("Pls.' First Supplemental Br.") [Dkt. #55] at 10 (arguing that if the ACA is invalidated, defendants lack authority for the agency actions challenged in Count IV, but "even if [the ACA]
Accordingly, it was well within defendants' authority, and not arbitrary and capricious, to change the automated claims verification process for to check the NPI for the referring physician as reported on the claim against the NPI in that physician's PECOS record.
Plaintiffs' procedural challenge also fails. Final agency actions give rise to notice and comment obligations, with exceptions. One recognized exception is for "rules of agency organization, procedure, or practice." 5 U.S.C. § 553(b)(3)(A). To determine whether a rule falls under this exemption, courts ask whether it "encodes a substantive value judgment." Public Citizen v. Dep't of State, 276 F.3d 634, 640 (D.C.Cir.2002) (internal citation and quotation marks omitted). A judgment about "what mechanics and processes are most efficient" is not a substantive value judgment under this standard. Id. (internal citation and quotation marks omitted). The change requests at issue here do not encode any substantive value judgment, but simply dictate the verification processes that HHS will use to ensure that claims for referred items or services were validly referred by a qualified physician. The change requests make no distinction between claims on the basis of subject matter. See id. (finding that a State Department policy of declining to search for documents produced after the date of the requester's letter encoded no "substantive value judgment" because it applied to all FOIA requests and made no distinction on the basis of subject matter). Accordingly, the Court finds the change requests to be valid.
Having concluded that the change requests are valid, the Court need not assess the validity of the portions of the IFR at issue because those portions just replicate the requirements imposed by the change requests and the HIPAA implementing regulations. In other words, even if this Court were to invalidate the challenged portions of the interim final rule, that would not redress plaintiffs' alleged injuries. Nonetheless, the Court notes that the statutes and regulations discussed above, including the ACA, supply ample authority for the IFR provisions at issue. Moreover, the agency did not violate the APA by declining to subject the rule to formal notice-and-comment rulemaking because the rule falls under the section 553(b)(3)(B) exemption, which applies "when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest." 5 U.S.C. § 553(b)(3)(B); see 75 Fed.Reg. at 24445. The interim final rule includes a finding that notice-and-comment rulemaking was unnecessary for the portions of the rule at issue here because they do not "add any new burdens for Medicare or Medicaid providers and suppliers." 75 Fed.Reg. at 24445-46. This is sufficient good cause for foregoing notice and comment rulemaking since the reassertion of a preexisting requirement is insignificant and inconsequential. Cf. Mack Trucks, Inc. v. EPA, 682 F.3d 87, 94 (D.C.Cir.2012) ("[The unnecessary] prong of the good cause inquiry is confined to those situations in which the administrative rule is a routine determination, insignificant in nature and impact,
Finally, plaintiffs claim that defendants Sebelius and Astrue have violated their fiduciary and equitable duties to the American people by allowing the Medicare and Social Security programs to face insolvency, Compl. ¶¶ 106-117, 118(A)(xii), and the complaint demands an honest accounting of both programs, Compl. ¶¶ 118(B)(vi), (vii). Plaintiffs, however, fail to identify any actual or imminent injury that is sufficiently concrete and particularized. Rather, this challenge rests on a generalized grievance about the unforeseeable future of Medicare and Social Security.
"[A] plaintiff raising only a generally available grievance about government — claiming only harm to his and every citizen's interest in proper application of the Constitution and laws, and seeking relief that no more directly and tangibly benefits him than it does the public at large — does not state an Article III case or controversy." Lujan, 504 U.S. at 573-74, 112 S.Ct. 2130. Plaintiffs argue that their claim is particularized because their members "obviously have a financial interest in the solvency of the programs that provide benefits to them" and that "[p]laintiffs' physician members have an interest in the solvency of Medicare on behalf of Medicare-eligible patients ... even if those physicians do not themselves use Medicare." Pls.' Opp. at 66 n. 34. But the financial interest of their members is no stronger than the financial interest of all Americans who will reach the age of Social Security and Medicare eligibility. Moreover, the problem here is not just that the alleged harm at issue is widely shared, but that it is too abstract and indefinite in nature to satisfy the concrete and particularized requirement. Cf. FEC v. Akins, 524 U.S. 11, 34, 118 S.Ct. 1777, 141 L.Ed.2d 10 (1998) (Explaining that in the cases the Supreme Court has found to present "generalized grievances" that do not satisfy the standing requirements, "the harm at issue is not only widely shared, but is also of an abstract and indefinite nature.").
Because plaintiffs have no standing to assert the claims under Counts I, V, VI and portions of Count IV, and because Counts II and III and the remainder of
In addition, plaintiffs' opposition to the motion to dismiss further addresses their grounds for standing, but it provides little assistance for the claim-by-claim assessment the Court is required to make. See DaimlerChrysler Corp., 547 U.S. at 352, 126 S.Ct. 1854. The opposition discusses the types of injuries courts have recognized in general terms, but it does not connect the recognized injuries to the claims in this case. See Pls.' Opp. to Mot. to Dismiss [Dkt. #38] ("Pls.' Opp.") at 7-20.
The language under Counts II and III is incredibly broad, and could be read to encompass any Constitutional challenge to the mandate provisions. Compl. ¶¶ 95-96, 98-99 ("Nothing in Article I or elsewhere in the U.S. Constitution authorizes the federal government to [impose the employer or individual mandate requirements]," and "[f]or the foregoing reasons, [the mandate provisions are] in excess of authority granted by law, not in accordance with the law, and ultra vires."). However, the complaint also makes express allegations about particular powers accorded by the Constitution that do not support the individual mandate, and particular provisions of the Constitution that the individual mandate allegedly violates. See id. ¶¶ 51-54, 66-71. The Origination Clause is not one of them. See, e.g., id. ¶ 69 (alleging that "[i]f a tax, the penalties associated with [the ACA's] insurance mandates are either an un-apportioned capitation or direct tax or a non-uniform excise tax, all of which violate Article I, sections 2 and 9 of the Constitution," but not alleging that they violate the Origination Clause). Moreover, as stated above, plaintiffs make no mention of the Origination Clause argument in their opposition to the motion to dismiss.
In their supplemental briefs, plaintiffs also assert — for the first time — that their complaint challenges the mandate provisions both facially and as applied to the plaintiffs in this case. The Court has reviewed the complaint extensively, and finds no as-applied challenge. See generally Compl. ¶¶ 94-99. Moreover, plaintiffs do not mention an as-applied challenge in their opposition to the motion to dismiss. The first time they raise this argument is in the supplemental brief they submitted after the Court lifted the stay. See Pls.' First Supplemental Br. at 4, 8; see also Pls.' Supplemental Br. in Resp. to the Ct.'s Minute Order Dated Oct. 3, 2012, [Dkt. #57] at 1-2. However, even if the Court were to find that the complaint asserts an as-applied challenge to the mandate provisions, the Court would find that the complaint fails to allege sufficient facts to state a claim under Federal Rule of Civil Procedure 12(b)(6) for the same reasons that it fails to state a facial claim.
