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Smith v. United States

United States District Court, W.D. Washington

January 2, 2020

EMMETT L. SMITH, YESFIR MIKHAYLIK a/k/a ESTHER SMITH, Plaintiffs,
v.
UNITED STATES OF AMERICA; HEALTHPOINT; DEP'T OF HEALTH AND HUMAN SERVICES; OFFICE OF MEDICARE, Defendants,

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

          BARBARA J. ROTHSTEIN UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Plaintiff Emmett Smith[1] brings this action seeking: (1) declaratory relief that he is not required to reimburse the government the amounts paid for his medical treatment for his kidney disease or, alternatively, that repayment should be paid by a settlement reversionary trust, (2) review of the final HHS administrative decision affirming Smith's obligation to repay the Medicare program, and (3) a claim under the Little Tucker Act for amounts the government took from Smith's tax refund in partial satisfaction of his Medicare debt. Before the Court is Defendants' partial motion to dismiss the first and third Claims. Plaintiff opposes the motion and the matter is now fully briefed. See Dkt Nos. 27, 29, 30. Having considered the parties' submissions, the record of the case, and relevant legal authorities, the Court will GRANT in part and DENY in part Defendants' motion.

         II. BACKGROUND

         In 2012 and 2013, Emmett Smith sought medical treatment at HealthPoint Community Clinic, a federally funded community health center, in Renton, Washington. Dkt. No. 12-1 at 3-4. In February 2013 he was sent to a larger hospital, where testing revealed that he had acute renal failure, a condition also known as End-Stage Renal Disease ("ESRD"). Id. at 4. He immediately began emergency dialysis and learned that he only had 5-6% kidney function and would require a kidney transplant. Id.

         Medicare paid for much of Smith's medical treatment. Medicare is a federal program administered by the Centers for Medicare and Medicaid Services ("CMS"), which is a federal agency within the U.S. Department of Health and Human Services ("HHS"). Medicare pays for medical care for the aged, disabled, and persons suffering from ESRD. See Medicare Act, 42 U.S.C. § 1395, et seq. Medicare was originally designed to paid for medical services regardless of whether the beneficiary was also covered by other insurance. Beginning in 1980, however, Congress enacted the Medicare Secondary Payer ("MSP") statute, 42 U.S.C. § 1395y(b)(2), to reduce program costs by making Medicare coverage secondary to other insurance coverage. Health Ins. Ass'n of America, Inc. v. Shalala, 23 F.3d 412, 414 (D.C. Cir. 1994). The MSP statute permits Medicare to make conditional payments that are subject to reimbursement if paid by another source. 42 U.S.C. § 1395y(b)(2)(B)(i). Under MSP, HHS through CMS can pursue reimbursement, including, if necessary, from a Medicare beneficiary. See 42 C.F.R. § 411.37; Buckner v. Heckler, 804 F.2d 258, 259 (4th Cir. 1986).

         In 2014 Smith filed an administrative claim under the Federal Tort Claims Act ("FTCA"), 28 USC §§ 1346(b), 2401(b), 2671-80, alleging that the United States, through Health Point and its doctors, was negligent in diagnosing and treating his kidney condition. After the United States denied the claim, Smith filed suit in 2015 against the United States. See Smith v. United States, Case No. 2:15-cv-00116-RSL (W.D. Wash.). Following mediation, the FTCA claim was settled and then dismissed by stipulated motion on June 20, 2017. As part of the settlement, the parties established an Irrevocable Reversionary Inter Vivos Grantor Medical Care Trust to pay benefits to Smith related to the underlying FTCA lawsuit. Dkt. No. 12-2.

         Following the settlement and dismissal of Smith's FTCA claim, CMS, through its Medicare contractor, issued a letter demanding that Smith repay Medicare $33, 513.79, plus future interest. Dkt. No. 12-3 at p. 2. This letter included a notice of intent that CMS would refer the debt to the Department of Treasury for cross-servicing. Id.

         Smith sought review of this demand for reimbursement through a four-step administrative review process. At these stages Smith argued that he should not have to reimburse Medicare because he had already settled his FTCA claim with the United States for a lower amount to account for and eliminate his debt to Medicare. First, he sought a redetermination from the Medicare contractor, who concluded that the demand for reimbursement plus accumulated interest was properly made. See Dkt. No. 12-5 at p. 6. Second, Smith sought reconsideration by a Qualified Independent Contractor, who also found that Smith owed the Medicare program the amount sought. Id. Third, Smith requested a hearing before an administrative law judge ("ALJ") who held a de novo review hearing and issued a decision affirming Smith's obligation to repay Medicare. Id. at p. 15. Fourth, Smith appealed the ALJ's finding to the Medicare Appeals Council, which on April 5, 2019 issued a final decision affirming Smith's obligation to repay the Medicare program. See Dkt. No. 12-7 at p. 2; Dkt. No. 12 at p. 5.

         On February 27, 2019 the Department of Treasury notified Smith that it had withheld $9505 from Smith's joint tax refund in partial satisfaction of his debt to Medicare. Dkt. No. 29-1 at 5.

         Plaintiff filed the present action in this Court on January 14, 2019, and amended his complaint on May 9, 2019. Compl., Dkt No. 1, Am. Compl., Dkt. No. 12.

         III. LEGAL STANDARDS

         A. Lack of Subject Matter Jurisdiction

         Federal Rule of Civil Procedure 12(b)(1) allows litigants to seek the dismissal of an action for lack of subject matter jurisdiction. Federal district courts are courts of limited jurisdiction that "may not grant relief absent a constitutional or valid statutory grant of jurisdiction." A-Z Int'l v. Phillips, 323 F.3d 1141, 1145 (9th Cir. 2003) (citations and quotation marks omitted). "When subject matter jurisdiction is challenged under Federal Rule of Procedure 12(b)(1), the plaintiff has the burden of proving jurisdiction in order to survive the motion." Tosco Corp. v. Communities for a Better Env't, 236 F.3d 495, 499 (9th Cir. 2001) (per curiam), abrogated on other grounds by Hertz Corp. v. Friend, 559 U.S. 77 (2010). Subject matter jurisdiction is a threshold issue that goes to the court's power to hear the case. See, e.g., Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95 (1998).

         When considering a motion to dismiss for lack of subject matter jurisdiction, the court construes the complaint in the light most favorable to the non-moving party. See Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005); see also Wolfe v. Strankman,392 F.3d 358, 362 (9th Cir. 2004). Generally, the court must accept as true all well- pleaded allegations of material fact and draw all reasonable inferences in favor of the plaintiff. See Wyler Summit P'ship v. Turner Broad. Sys., Inc.,135 F.3d 658, 661 (9th Cir. 1998). However, a federal court is presumed to lack subject matter jurisdiction until the plaintiff establishes otherwise. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). Therefore, a plaintiff bears the burden of ...


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