Patricia Haro v. Kathleen Sebelius

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

PATRICIA HARO; JOHN G. No. 11-16606
BALENTINE; JACK MCNUTT; TROY
HALL, D.C. No.
Plaintiffs-Appellees, 4:09-cv-00134-
DCB
v.

KATHLEEN SEBELIUS, Secretary of ORDER AND
the United States Department of AMENDED
Health and Human Services, OPINION
Defendant-Appellant.

Appeal from the United States District Court
for the District of Arizona
David C. Bury, District Judge, Presiding

Argued December 5, 2012
Submitted February 14, 2013
San Francisco, California

Filed September 4, 2013
Amended January 2, 2014

Before: Barry G. Silverman, Ronald M. Gould,
and Morgan Christen, Circuit Judges.

Opinion by Judge Christen
2 HARO V. SEBELIUS

SUMMARY*

Medicare

The panel amended an opinion filed September 4, 2013,
vacated injunctions entered by the district court, and reversed
the district court’s summary judgment entered in favor of a
nationwide class of Medicare beneficiaries in an action
brought by the beneficiaries, and a named plaintiff’s attorney,
challenging the Secretary of Health and Human Services’
practice of demanding “up front” reimbursement for
secondary payments from beneficiaries who have appealed a
reimbursement determination or sought a waiver of the
reimbursement obligation.

The district court enjoined the Secretary from seeking up
front reimbursements of Medicare secondary payments from
beneficiaries who have received payment from a primary plan
if they have unresolved appeals or waivers, and enjoined the
Secretary from demanding that attorneys withhold settlement
proceeds from their clients until after Medicare is reimbursed.
The panel held that plaintiff Patricia Haro demonstrated
Article III standing on behalf of the class of Medicare
beneficiaries, and Haro’s attorney independently
demonstrated standing to raise his individual claim. However,
the panel concluded that the beneficiaries failed to satisfy the
channeling requirement at the administrative level, and
therefore the district court lacked subject matter jurisdiction
pursuant to 42 US.C. d 405(g). The panel reached the merits
of the attorney’s claim, but concluded that the Secretary’s

*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
 HARO V. SEBELIUS 3

interpretation of the secondary payer provisions was
reasonable. The panel remanded for consideration of the
appellees’ due process claim.

COUNSEL

Alisa B. Klein (argued) and Mark B. Stern, Attorneys; Tony
West, Assistant Attorney General; Ann B. Scheel, Acting
United States Attorney, United States Department of Justice,
Civil Division, Washington, D.C.; William B. Schultz, Acting
General Counsel; Margaret M. Dotzel, Deputy General
Counsel; Janice L. Hoffman, Associate General Counsel;
Carol J. Bennett, Deputy Associate General Counsel for
Program Integrity; Leslie M. Stafford, Attorney, United
States Department of Health and Human Services,
Washington D.C., for Defendant-Appellant.

Gil Deford (argued) and Wey-Wey Kwok, Center for
Medicare Advocacy, Willimantic, Connecticut, for Plaintiffs-
Appellees.

Barbara Jones, AARP Foundation Litigation, Pasadena,
California; Iris Y. González, AARP Foundation Litigation,
Washington D.C.; Michael Schuster, AARP, Washington
D.C., for Amicus Curiae AARP.
4 HARO V. SEBELIUS

ORDER

The opinion filed on September 4, 2013, and appearing
at 729 F.3d 993, is amended as follows:

On page 5 of the slip opinion, replace the third sentence
of the first paragraph with the following language:

But we conclude that the beneficiaries failed
to satisfy the channeling requirement at the
administrative level and therefore the district
court lacked subject matter jurisdiction
pursuant to 42 US.C. § 405(g).

On page 5 of the slip opinion, in the fifth sentence of the
first paragraph, replace the word “beneficiaries’ ” with the
word “appellees.’ ”

On page 10 of the slip opinion, in the second full sentence
appearing on the page, replace the word “beneficiaries” with
“plaintiffs.”

On page 23 of the slip opinion, replace footnote 8 with the
following language:

The beneficiaries also cite, inter alia,
Mathews v. Diaz, 426 US. 67 (1976), Briggs
v. Sullivan, 886 F.2d 1132 (9th Cir. 1989),
and Lopez v. Heckler, 725 F.2d 1489 (9th Cir.
1984), vacated 469 US. 1082 (1984). But
these cases pre-date Illinois Council, 529 US.
1 (2000).
 HARO V. SEBELIUS 5

On page 24 of the slip opinion, replace heading i with the
heading “Haro’s February 2, 2009 letter did not satisfy the
channeling requirement.”

On page 24 of the slip opinion, in the first sentence in
subsection i, replace the word “presentment” with
“channeling.”

On pages 25 of the slip opinion, replace the last two
paragraphs of subsection i with the following language:

Even if Haro’s letter and subsequent
inaction did afford the Secretary an
“opportunity to apply, interpret, or revise” the
challenged policy, Haro failed to exhaust her
administrative remedies before filing suit in
federal court. To exhaust her administrative
remedies, a beneficiary must proceed through
the five levels of administrative review:
(1) the initial determination;
(2) redetermination; (3) reconsideration of the
redetermination; (4) an ALJ hearing; and
(5) review by the Medicare Appeals Council.
42 C.F.R. § 405. Haro failed to press her
claim beyond level two. Instead, less than a
week after she mailed her reimbursement
check to the Secretary, Haro filed suit —
before any agency review of the up-front
reimbursement policy.

Haro claims that the government has
waived the exhaustion requirement. But we
can find no unambiguous waiver of this issue
6 HARO V. SEBELIUS

in the record, and therefore conclude that the
issue is not waived.

We conclude that the channeling
requirement of § 405(g) was not met.
Because channeling is a jurisdictional
requirement, the district court lacked subject
matter jurisdiction over the beneficiaries’
claim.

On page 32 of the slip opinion, replace the word
“beneficiaries’ ” with the word “appellees.’ ”

An amended opinion is filed concurrently with this order.

With this amendment, Judges Silverman, Gould, and
Christen vote to deny Appellant’s petition for panel rehearing
and rehearing en banc, filed on October 18, 2013. The full
court has been advised of the petition for rehearing and
rehearing en banc and no judge requested a vote on whether
to rehear the matter en banc. Fed. R. App. P. 35.

The petition for panel rehearing and rehearing en banc is
DENIED. No further petitions for en banc or panel rehearing
shall be permitted.
 HARO V. SEBELIUS 7

OPINION

CHRISTEN, Circuit Judge:

Secretary of Health and Human Services Kathleen
Sebelius appeals the district court’s order certifying a
nationwide class of Medicare beneficiaries and granting
summary judgment in the beneficiaries’ favor. Patricia Haro,
Jack McNutt, and Troy Hall are named plaintiffs. John
Balentine was Haro’s lawyer in her underlying personal
injury suit.

Before the district court, the beneficiaries raised two
claims: (1) the Secretary’s practice of demanding “up front”
reimbursement for secondary payments from beneficiaries
who have appealed a reimbursement determination or sought
waiver of the reimbursement obligation is inconsistent with
the secondary payer provisions of the Medicare statutory
scheme; and (2) the Secretary’s practice violates their due
process rights. Balentine separately claimed the Secretary’s
practice of demanding that attorneys withhold settlement
proceeds from beneficiary-clients until Medicare is
reimbursed is also inconsistent with the secondary payer
provisions.

The district court agreed with the beneficiaries. The court
enjoined the Secretary from seeking up front reimbursement
of Medicare secondary payments from beneficiaries who
have received payment from a primary plan if they have
unresolved appeals of their reimbursement calculations or
unresolved requests for waiver of their reimbursement
obligations. The district court also agreed with Balentine and
enjoined the Secretary from demanding that attorneys
withhold settlement proceeds from their clients until after
8 HARO V. SEBELIUS

Medicare is reimbursed. The district court did not reach the
beneficiaries’ due process claim.

On appeal to our court, the Secretary raises three
jurisdictional arguments. First, she argues that this case is not
justiciable because neither the beneficiaries nor Balentine had
Article III standing. Second, she argues this case is moot.
Third, she argues that the district court lacked subject matter
jurisdiction over all claims in the complaint. On the merits,
the Secretary maintains that her interpretation of the
Medicare secondary payer provisions is reasonable.

We have jurisdiction over this appeal pursuant to
28 U.S.C. § 1291. We conclude that Haro has demonstrated
Article III standing on behalf of the class of Medicare
beneficiaries and that Balentine has independently
demonstrated standing to raise his individual claim. But we
conclude that the beneficiaries failed to satisfy the channeling
requirement at the administrative level and therefore the
district court lacked subject matter jurisdiction pursuant to
42 US.C. § 405(g). We reach the merits of Balentine’s claim,
but conclude that the Secretary’s interpretation of the
secondary payer provisions is reasonable. We therefore
vacate the district court’s injunctions, reverse the district
court’s summary judgment order, and remand for
consideration of the appellees’ due process claim.

I. BACKGROUND

A. Statutory Background

Congress enacted the secondary payer provisions of the
Medicare statute in 1980 to cut Medicare costs. See Zinman
v. Shalala, 67 F.3d 841, 843 (9th Cir. 1995). Those
 HARO V. SEBELIUS 9

provisions make Medicare secondary to other sources of
insurance by forbidding Medicare payments when a primary
plan—for instance, group health insurance or liability
insurance—is reasonably expected to make payment for the
same medical care; and by providing that certain Medicare
payments are conditional and must be reimbursed. 42 US.C.
§ 1395y(b)(2)(A), (B). Conditional payments are at issue in
this case.

Medicare makes a conditional payment when a primary
insurer cannot reasonably be expected to pay promptly. Id.
§ 1395y(b)(2)(B)(i). If Medicare makes a conditional
payment and the beneficiary later receives payment from a
primary insurer, Medicare is entitled to reimbursement. Id.
§ 1395y(b)(2)(B)(ii). Specifically, § 1395y(b)(2)(B)(ii)
provides that “a primary plan [or] an entity that receives
payment from a primary plan, shall reimburse” Medicare
once the primary plan’s responsibility has been demonstrated
by a judgment or settlement. Id. We refer to this
paragraph—§ 1395y(b)(2)(B)(ii)—as the “reimbursement
provision.” If Medicare is not reimbursed within 60 days
after notice of the primary insurer’s payment, the Secretary is
entitled to charge interest on the reimbursement amount. Id.

The statutory scheme also creates a cause of action by
which the United States may recover from a primary plan or
“from any entity that has received payment from a primary
plan or from the proceeds of a primary plan’s payment to any
entity.” Id. § 1395y(b)(2)(B)(iii). We refer to this part of the
Medicare statutory scheme as the “cause of action provision.”
The cause of action provision allows the United States to seek
reimbursement from “the beneficiary herself.” Zinman,
67 F.3d at 844–45; see also 42 C.F.R. § 411.24(g) (Medicare
“has a right of action to recover its payments from any entity,
10 HARO V. SEBELIUS

including a beneficiary . . . [or] attorney . . . that has received
a primary payment.”).

When Medicare learns that a beneficiary has received
payment from a primary plan, the Secretary makes an initial
determination of the amount of reimbursement due from the
beneficiary. Borrowing from the Social Security Act, the
Medicare Act incorporates administrative review procedures
set out in 42 US.C. § 405(b) and judicial review pursuant to
42 US.C. § 405(g). See 42 US.C. § 1395ff(b)(1)(A). A
beneficiary may contest the amount of reimbursement or seek
waiver of any reimbursement amount. See id. § 1395gg.

B. Factual Background

1. Patricia Haro

Patricia Haro was injured in a car accident and Medicare
paid for her medical treatment. Haro filed a personal injury
claim against the tortfeasor, which eventually settled.
Medicare, through the Medicare Secondary Payer Recovery
Contractor,1 sought reimbursement of $1,682.72 in a letter
dated January 12, 2009. The letter informed Haro of her right
to appeal the reimbursement determination or seek waiver but
also stated that Haro “must” pay within 60 days and that
interest would start to run if payment was not made in that
period. The letter encouraged Haro to pay the amount in full,
even if she decided to appeal or seek a waiver, in order to
avoid interest charges.

1
The Medicare Secondary Payer Recovery Contractor is a private
contractor that collects secondary payment reimbursements on behalf of
Medicare. For simplicity, this opinion refers to both entities as Medicare.
 HARO V. SEBELIUS 11

Haro disputed the reimbursement determination by letter
dated January 21, 2009. Haro’s lawyer sent a second letter,
on February 2, 2009. In it, he argued that the reimbursement
provision did not grant the Secretary authority to seek
payment from a beneficiary within 60 days of notice of the
settlement if the beneficiary had appealed the reimbursement
determination. The letter also argued that the Due Process
Clause prohibits takings of property before there has been a
determination of rights to that property.

Medicare reduced Haro’s reimbursement amount to
$696.13 by letter dated March 3, 2009. On March 4, 2009,
likely before Haro received notice of the revised
reimbursement figure, Haro sent Medicare a check for $800.
Haro did not seek reconsideration of Medicare’s reduced
reimbursement amount and instead filed this lawsuit on
March 10, 2009. Medicare reimbursed Haro $103.87 (the
difference between $800 and $696.13) on April 13, 2009.

2. Jack McNutt

Like Haro, Jack McNutt was injured in a car accident and
Medicare paid his medical costs. McNutt’s personal injury
lawsuit settled and McNutt notified Medicare of the
settlement. Medicare responded with a letter requesting
reimbursement of $26,487.07. The letter stated that McNutt
was required to pay within 60 days of the receipt of the
settlement proceeds and that interest would start to accrue if
payment was not received within that time. The letter also
informed McNutt of his rights to appeal and seek waiver of
the reimbursement obligation. McNutt appealed the
reimbursement determination.
12 HARO V. SEBELIUS

After Medicare sent McNutt a notice of the Secretary’s
intent to refer the debt to the Department of Treasury, McNutt
wrote a letter of “appeal,” but with his letter he enclosed a
check for $11,366.58, the amount he believed he owed.
Medicare sent McNutt an adjusted demand. Because of
McNutt’s earlier payment, only $1,422.93 (including $13.36
in interest) remained outstanding. Medicare notified McNutt
that his remaining reimbursement payment “should” be made
within 30 days. McNutt sought reconsideration of that
amount, and the Secretary acknowledged that notice of intent
to refer the debt to Treasury was sent in error.2 Medicare then
reduced McNutt’s total reimbursement amount again, and
McNutt paid the remaining balance, plus interest. His
administrative appeal was still pending at the time this appeal
was filed. At the administrative level, McNutt did not
challenge the Secretary’s practice of demanding up front
reimbursement.

3. Troy Hall

Troy Hall was injured while working and Medicare paid
for his injury-related medical care. After Hall settled his
worker’s compensation claim, he received a reimbursement
demand from the Secretary. Hall appealed the Secretary’s
initial reimbursement calculation. Medicare reduced the
reimbursement amount and determined that Hall owed
nothing. At the administrative level, Hall did not object to
the Secretary’s practice of demanding up front
reimbursement.

2
The letter states that “debts pending appeal are excluded from referral
to the Department of Treasury.”
 HARO V. SEBELIUS 13

4. John Balentine

Attorney John Balentine represented Haro in her personal
injury lawsuit and during administrative proceedings. He
received a letter from Medicare similar to the letter that Haro
received. It instructed him not to disburse settlement funds
to his beneficiary-client until Medicare had been reimbursed,
and said he would be personally liable if he did. Balentine
declared that he routinely receives similar letters from
Medicare.

C. District Court Proceedings

As noted above, this appeal involves two separate claims
against the Secretary. First, the beneficiaries alleged that the
Secretary exceeded her authority under the Medicare
secondary payer provisions by demanding payment before
resolution of the plaintiffs’ appeals or completion of the
waiver application process. Second, Balentine alleged that
the Secretary’s demand that beneficiaries’ attorneys withhold
settlement proceeds until Medicare is reimbursed exceeds the
Secretary’s statutory authority. The beneficiaries also alleged
that the Secretary’s demand violated their due process rights.
Plaintiffs sought declaratory and injunctive relief.

In the district court, the Secretary moved pursuant to
Federal Rule of Civil Procedure 12(b)(1) to dismiss the
complaint for lack of subject matter jurisdiction. The
Secretary argued that the beneficiaries lacked Article III
standing and had not exhausted their administrative remedies
as required by 42 US.C. § 405(g). The district court
concluded that Haro and McNutt had Article III standing and
that, with respect to McNutt, § 405(g)’s exhaustion
14 HARO V. SEBELIUS

requirement was properly waived. The district court denied
the motion to dismiss.

On cross-motions for summary judgment, the district
court granted the named plaintiffs’ motion and certified a
class of beneficiaries who had been or would be subject to
demands for reimbursement from the Secretary before their
administrative appeals were exhausted. Even analyzing the
Secretary’s practice pursuant to the deferential standard
explained in Chevron U.S.A. v. Natural Resources Defense
Council, 467 US. 837 (1984), the district court determined
that the Secretary’s up front reimbursement requirement was
inconsistent with the appeals and waiver processes. The
district court therefore enjoined the Secretary from
demanding reimbursement of secondary payments from
beneficiaries prior to resolution of their administrative
appeals or requests for waiver. The district court also
enjoined the Secretary from demanding that attorneys
withhold liability proceeds from their clients pending
reimbursement of disputed claims.

II. STANDARD OF REVIEW

We review a district court’s determination of subject
matter jurisdiction de novo. Cook Inlet Region, Inc. v. Rude,
690 F.3d 1127, 1130 (9th Cir. 2012). We also review an
order granting summary judgment de novo. Int’l
Rehabilitative Sciences, Inc. v. Sebelius, 688 F.3d 994, 1000
(9th Cir. 2012).
 HARO V. SEBELIUS 15

III. DISCUSSION

A. Jurisdictional Issues

On appeal, the Secretary argues that Article III’s case or
controversy requirement was not met in this case because
neither the beneficiaries nor Balentine had standing and
because the beneficiaries’ claims are moot. The Secretary
also maintains that the district court lacked statutory subject
matter jurisdiction. Each jurisdictional argument is addressed
in turn.

1. Article III Standing

a. Beneficiaries

In order to demonstrate Article III standing, a plaintiff
must show: (1) a concrete injury; (2) fairly traceable to the
challenged action of the defendant; (3) that is likely to be
redressed by a favorable decision. Lujan v. Defenders of
Wildlife, 504 US. 555, 560–61 (1992). “In a class action,
standing is satisfied if at least one named plaintiff meets the
requirements.” Bates v. United Parcel Serv., Inc., 511 F.3d
974, 985 (9th Cir. 2007) (en banc). “[A] plaintiff must
demonstrate standing for each claim” and “for each form of
relief sought.” DaimlerChrysler Corp. v. Cuno, 547 US. 332,
352 (2006) (internal quotation marks and citation omitted).
“The standing formulation for a plaintiff seeking prospective
injunctive relief” generally requires that the plaintiff’s
concrete injury be “coupled with ‘a sufficient likelihood that
he will again be wronged in a similar way.’” Bates, 511 F.3d
at 985 (quoting City of Los Angeles v. Lyons, 461 US. 95, 111
(1983)).
16 HARO V. SEBELIUS

“[A] plaintiff is presumed to have constitutional standing
to seek injunctive relief when [the plaintiff] is the direct
object of [government] action challenged as unlawful.” Los
Angeles Haven Hospice, Inc. v. Sebelius, 638 F.3d 644, 655
(9th Cir. 2011) (citing Lujan, 504 US. at 561–62). Here,
Haro was the direct object of the Secretary’s allegedly
overreaching collection practice. She received a letter
requesting reimbursement before her administrative appeal
had run its course. We therefore start with the presumption
that Haro has Article III standing, on behalf of the class, to
challenge the Secretary’s practice. See Mayfield v. United
States, 599 F.3d 964, 971 (9th Cir. 2010) (“When the lawsuit
at issue challenges the legality of government action, and the
plaintiff has been the object of the action, then it is presumed
that a judgment preventing the action will redress his
injury.”).

We consider whether the elements of Article III standing,
as articulated in Lujan, were satisfied at the time the
complaint was filed. Cnty. of Riverside v. McLaughlin,
500 US. 44, 51 (1991). When the complaint was filed,
Medicare owed Haro $103.87—the difference between the
$800 she sent to Medicare in response to the first demand
letter and Medicare’s $696.13 final reimbursement
determination. Haro had been deprived of $103.87 for
approximately one month3 and had therefore suffered a
modest but concrete fiscal injury that was directly traceable

3
Haro claims in an affidavit that she sent the $800 payment with her
request for redetermination on January 21, 2009. She repeats this
contention in her brief. However, the check itself was dated March 4,
2009. Moreover, a March 4 letter from Balentine to Medicare states that
an $800 check is enclosed. The complaint was filed on March 10, 2009
and Medicare’s reimbursement check to Haro was dated April 13, 2009.
 HARO V. SEBELIUS 17

to the challenged action of the Secretary. The first two
prongs of the Lujan formulation were therefore satisfied as to
the beneficiaries’ claim.

The third element of Article III standing is redressability.
The Secretary argues that Haro is not likely to suffer the same
injury again and that she therefore cannot show that
injunctive relief would redress her injury. Lyons suggests that
Haro must demonstrate that she was likely to suffer the same
injury in the future, absent injunctive relief. 461 US. at
105–06 (choke-hold victim lacked standing to pursue
injunctive relief against police where he was unable to
demonstrate likelihood of future choke-holds). But unlike the
plaintiff in Lyons, Haro’s alleged injury was ongoing at the
time the complaint was filed—she was deprived of $103.87.
An injunction prohibiting the Secretary from withholding
reimbursement payments until after completion of the appeals
process would have redressed Haro’s injury. See
McLaughlin, 500 US. at 51 (distinguishing Lyons). Because
we conclude that a properly framed injunction would have
redressed Haro’s injury, Haro has demonstrated the necessary
criteria for Article III standing on behalf of the class.

b. Balentine

Balentine is not part of the beneficiary class; he asserted
an individual claim unique to his status as counsel for a
Medicare beneficiary. Therefore, he must separately
demonstrate Article III standing. DaimlerChrysler, 547 US.
at 352. Because Balentine was the object of the Secretary’s
demand that he withhold disbursement of Haro’s settlement
funds, we begin with the presumption that he has standing to
challenge the Secretary’s action. Los Angeles Haven
Hospice, 638 F.3d at 655 (citing Lujan, 504 US. at 561–62).
18 HARO V. SEBELIUS

The demand Balentine received bears significant
similarity to the demand at issue in Los Angeles Haven
Hospice. Haven Hospice challenged a Department of Health
and Human Services regulation implementing a cap on
reimbursement for hospice care provided to Medicare
beneficiaries. See id. at 649; see also 42 US.C. § 1395f(i)(2).
Haven Hospice received a demand for repayment of the
amount it had been reimbursed in excess of the statutory cap.
Los Angeles Haven Hospice, 638 F.3d at 652. The Secretary
maintained that the hospice did not have Article III standing
to challenge the regulation or seek to enjoin its enforcement.
Id. at 654. But this court, applying the Lujan presumption,
concluded: “[T]he fact that the allegedly unlawful regulation
was directly applied to Haven Hospice and exposed it to
individual liability for the claimed overpayments, is sufficient
to support its claim of Article III standing to pursue the
declaratory and injunctive relief sought in the complaint.” Id.
at 655.

The demand letter the Secretary sent to Balentine
represents direct application of the Secretary’s interpretation
of her authority under 42 C.F.R. § 411.24(g).4 The letter
states that “Medicare’s claim must be paid up front out of
settlement proceeds before any distribution occurs,” and that
“Medicare must be paid within 60 days of receipt of the
proceeds from the third party.” Because 42 C.F.R.
§ 411.24(g) provides that Medicare “has a right of action to

4
Whether we analyze 42 C.F.R. § 411.24(g) individually, or in
conjunction with 42 C.F.R. § 411.24(h) is largely academic: § 411.24(h)
interprets the reimbursement provision and provides that “[i]f the
beneficiary or other party receives a primary payment, the beneficiary or
other party must reimburse Medicare within 60 days.” The Secretary’s
interpretation of the reimbursement provision is thus similarly broad—it
encompasses attorneys who have received a primary payment.
 HARO V. SEBELIUS 19

recover its payments from any entity, including a[n] . . .
attorney . . . that has received a primary payment,” the
regulation subjects Balentine to individual liability.
Consistent with Los Angeles Haven Hospice, Balentine has
demonstrated Article III standing. 638 F.3d at 655.

2. Mootness

The Secretary next argues that the claims asserted in the
complaint are moot.5 A claim becomes moot “when the
issues presented are no longer ‘live’ or the parties lack a
legally cognizable interest in the outcome.” Powell v.
McCormack, 395 US. 486, 496 (1969) (citation omitted). It
is undisputed that Haro did not challenge Medicare’s final
reimbursement calculation and is not owed any additional
refund. But the district court concluded, and the beneficiaries
maintain, that the “capable of repetition, yet evading review”
exception to mootness applies to their claim. See, e.g.,
Padilla v. Lever, 463 F.3d 1046, 1049 (9th Cir. 2006) (en
banc) (quoting Roe v. Wade, 410 US. 113, 125 (1973)).

In Sosna v. Iowa, 419 US. 393, 401 (1975), the Supreme
Court held that mootness of a named plaintiff’s claim after
class certification does not moot the action. After
incremental extension of Sosna,6 the Supreme Court held that
whether class certification occurs before or after a named

5
Because we conclude, infra, that Haro is the only plaintiff who
arguably presented a challenge to the practice of requiring up front
reimbursement at the administrative level, we limit our analysis of the
Secretary’s mootness argument to Haro’s claim.
6
For a comprehensive summary of this case law, see Pitts v. Terrible
Herbst, Inc., 653 F.3d 1081, 1086–90 (9th Cir. 2011).
20 HARO V. SEBELIUS

plaintiff’s claim becomes moot is immaterial. McLaughlin,
500 US. at 52 (“That the class was not certified until after the
named plaintiffs’ claims had become moot does not deprive
us of jurisdiction.”). The Court stated that where a claim is
“so inherently transitory that the trial court will not have . . .
enough time to rule on a motion for class certification before
the proposed representative’s individual interest expires . . .
the ‘relation back’ doctrine is properly invoked to preserve
the merits of the case for judicial resolution.” Id. (citations
omitted).

Here, Haro’s claim expired before the district court
certified the class. Her individual interest in injunctive relief
expired once she was fully reimbursed—approximately one
month after she filed this lawsuit—but the district court could
not have been expected to rule on a motion for class
certification in that period. Pursuant to the rule in Sosna and
McLaughlin, expiration of Haro’s personal stake in injunctive
relief did not moot the beneficiaries’ claim for injunctive
relief. We conclude that the beneficiaries’ claim for
injunctive relief is not moot, and that Article III’s
justiciability requirements are satisfied.7

7
The Secretary argues that her current practice—under which debts that
have been appealed are not referred to the Department of Treasury for
collections—mooted the beneficiaries’ claim. But this misapprehends the
nature of the beneficiaries’ claim. Whether the claims are referred for
collection or not, plaintiffs object to the demand for up front
reimbursement. To the extent a current policy could have mooted the
beneficiaries’ claim, the voluntary cessation exception applies. See
Friends of the Earth v. Laidlaw, 528 US. 167, 189 (2000) (“[A]
defendant’s voluntary cessation of a challenged practice does not deprive
a federal court of its power to determine the legality of the practice.”
(internal quotation marks omitted)).
 HARO V. SEBELIUS 21

3. Statutory Subject Matter Jurisdiction

The Secretary maintains that the district court did not
have subject matter jurisdiction. The complaint alleged
federal question jurisdiction under 28 US.C. § 1331 and,
alternatively, jurisdiction under 42 US.C. § 1395ff(b)(1)(A).
The latter statute is a provision in the Medicare scheme that
incorporates 42 US.C. § 405(g), the statute that establishes
federal jurisdiction to review final decisions of the
Commissioner of Social Security. The district court
determined that it had subject matter jurisdiction pursuant to
§ 405(g).

a. The beneficiaries’ claim

Federal question jurisdiction does not extend to most
claims arising under the Medicare Act. The Medicare Act
incorporates 42 US.C. § 405(h), which provides:

No findings of fact or decision of the
[Secretary] . . . shall be reviewed by any
person, tribunal, or governmental agency
except as herein provided. No action against
the United States, the [Secretary] . . . , or any
officer or employee thereof shall be brought
under section 1331 . . . of title 28 to recover
on any claim arising under this subchapter.

42 US.C. § 405(h); 42 US.C. § 1395ii.

The series of cases interpreting § 405(h) makes clear that
it precludes federal question jurisdiction in this case. First, in
Weinberger v. Salfi, 422 US. 749, 760–61 (1975), the
Supreme Court ruled that a claim “arises under” the Social
22 HARO V. SEBELIUS

Security Act, for purposes of § 405(h), if the Social Security
Act “provides both the standing and the substantive basis for
the presentation of” the claim. Salfi held that a due process
and equal protection challenge to duration-of-relationship
provisions of the Social Security Act could not proceed under
§ 1331. Id. at 761.

The Supreme Court extended Salfi to the Medicare Act in
Heckler v. Ringer, 466 US. 602, 614 (1984). There, the Court
ruled that there was no federal question jurisdiction to
consider a challenge to a procedure for determining Medicare
benefits. The Court described the procedural claim as
“inextricably intertwined” with the substantive claim for
benefits, id., but the Court rejected the proposition that
application of § 405(h) depends on whether a claim is
“procedural” rather than “substantive,” id. at 615.

Finally, in Shahala v. Illinois Council on Long Term
Care, Inc., the Supreme Court explained that the broad
purpose of § 405(h) is to ensure that claims are channeled so
that the agency has the first opportunity to revise its own
policies:

[T]he bar of § 405(h) reaches beyond ordinary
administrative law principles of ‘ripeness’ and
‘exhaustion of administrative remedies’—
doctrines that in any event normally require
channeling a legal challenge through the
agency. . . . [I]t demands the ‘channeling’ of
virtually all legal attacks through the agency
[and] assures the agency greater opportunity
to apply, interpret, or revise policies,
regulations, or statutes without possibly
premature interference by different individual
 HARO V. SEBELIUS 23

courts applying ‘ripeness’ and ‘exhaustion’
exceptions case by case.

529 US. 1, 12–13 (2000) (emphasis added) (citation omitted).
Illinois Council continued, “[t]he fact that the agency might
not provide a hearing for [any] particular contention, or may
lack the power to provide one . . . is beside the point because
it is the ‘action’ arising under the Medicare Act that must be
channeled through the agency.” Id. at 23 (emphasis omitted)
(citations omitted).

Here, the beneficiaries and Balentine maintain that the
Secretary’s interpretation of the secondary payer provisions
is unlawful and that the Secretary’s application of the
statute’s enabling regulations injured them. Because the
secondary payer provisions of the Medicare Act provide the
standing and the substantive basis for the beneficiaries’ claim,
§ 405(h) precludes original jurisdiction under § 1331. See
Salfi, 422 US. at 760–61; see also Fanning v. United States,
346 F.3d 386, 392, 399–400 (3d Cir. 2003) (district court did
not have federal question jurisdiction over “class action
complaint seeking to enjoin the government’s attempt to
obtain reimbursement of Medicare overpayments pursuant to
the secondary payer provisions”). Pursuant to § 405(h), we
conclude the beneficiaries’ claim is subject to the requirement
that it be administratively channeled.

Because the beneficiaries were required to satisfy the
presentment and exhaustion requirements under § 405(g)
prior to seeking judicial relief, we must first determine
whether Haro fairly presented her claim at the administrative
level. Kaiser v. Blue Cross of Cal., 347 F.3d 1107, 1115 (9th
Cir. 2003). Exhaustion is waivable, presentment is not. Id.
(citing Mathews v. Eldridge, 424 US. 319, 328 (1976)). Only
24 HARO V. SEBELIUS

presentment is “purely jurisdictional.” Eldridge, 424 US. at
328 (internal quotation marks omitted).

The Secretary maintains that § 405(g)’s jurisdictional
presentment requirement was not met because none of the
named plaintiffs presented to the agency the claim that the
Secretary lacks authority to demand up front reimbursement.
The beneficiaries rely heavily on Eldridge to argue that a
final decision from the Secretary with respect to a claim for
benefits entitles a beneficiary to raise any policy challenge in
federal court, ostensibly on review of the Secretary’s final
benefits decision. We conclude the beneficiaries’ position is
inconsistent with the purpose of the channeling requirement
in § 405(h) as explained by the Supreme Court in Illinois
Council.

Eldridge involved a Social Security beneficiary who, after
responding to a questionnaire, received notice that a state
agency monitoring his status had tentatively concluded he
was no longer disabled. Id. at 323–24. Eldridge disputed one
of the reports relied upon by the agency but otherwise stated
that the agency had enough evidence of his disability. Id. at
324. The Social Security Administration accepted the
agency’s determination and terminated Eldridge’s benefits.
Id. Eldridge did not request reconsideration of the
administration’s termination of his benefits before filing a
lawsuit and arguing that due process required that he be given
a pretermination evidentiary hearing. Id. at 324–25.

Analyzing the district court’s jurisdiction to adjudicate
Eldridge’s claim, the Supreme Court ruled that “[t]hrough his
answers to the state agency questionnaire, and his letter in
response to the tentative determination that his disability had
ceased, [Eldridge] specifically presented the claim that his
 HARO V. SEBELIUS 25

benefits should not be terminated because he was still
disabled.” Id. at 329 (emphasis added). The Court
continued, “[t]he fact that Eldridge failed to raise with the
Secretary his constitutional claim to a pretermination hearing
is not controlling[,] . . . § 405(g) requires only that there be a
‘final decision’ by the Secretary with respect to the claim of
entitlement to benefits.” Id. Consequently, the Court
concluded that “the nonwaivable jurisdictional element [of
§ 405(g)] was satisfied.” Id. at 330.

The beneficiaries maintain that Eldridge stands for the
broad proposition that § 405(g)’s presentment requirement is
satisfied once a beneficiary has raised a claim for benefits. In
their view, a final decision on a claim for benefits permits a
beneficiary to raise any separate claim pertaining to the
agency’s procedure or policy in federal court. We disagree.
In our view, the beneficiaries’ reading of Eldridge is overly
broad.

The purpose of the channeling requirement is to “assure[]
the agency greater opportunity to apply, interpret, or revise
policies, regulations, or statutes without possibly premature
interference by different individual courts applying ‘ripeness’
and ‘exhaustion’ exceptions.” Illinois Council, 529 US. at
13. This purpose would not be fulfilled if plaintiffs
proceeding through the administrative channel were permitted
to raise claims in federal court that were not raised before the
agency. See Lifestar Ambulance Serv., Inc. v. United States,
365 F.3d 1293, 1298 (11th Cir. 2004) (describing
administrative review as “the first step in a comprehensive
statutory remedial scheme that fully empowers a reviewing
court to consider and remedy any of the violations of law
alleged by [a] plaintiff”).
26 HARO V. SEBELIUS

Moreover, the beneficiaries’ interpretation of the
presentment requirement is fundamentally inconsistent with
the general rule that “[o]nce federal subject matter
jurisdiction is established over the underlying case between
[plaintiff] and [defendant], the jurisdictional propriety of each
additional claim is to be assessed individually.” Caterpillar
Inc. v. Lewis, 519 US. 61, 66 n.1 (1996) (quoting 3 James
Moore, Moore’s Federal Practice ¶ 14.26, 14-116 (2d ed.
1996)). In Eldridge, the general rule described in Caterpillar
was not contravened because the plaintiff’s argument that he
was entitled to a pretermination evidentiary hearing had
direct bearing on the termination of his benefits. Notably,
this case does not involve a “claim for benefits” because the
beneficiaries do not challenge Medicare’s reimbursement
calculations. They challenge the Secretary’s policy of
demanding up front reimbursement, a policy that has no
bearing on the reimbursement calculations questioned by the
beneficiaries at the administrative level.8

Finally, Illinois Council, a case decided twenty-four years
after Eldridge, persuades us that the beneficiaries’
interpretation of Eldridge is too expansive. In Illinois
Council, the Supreme Court addressed a case bearing directly
on challenges to Medicare regulations and made clear that the
type of policy challenge at issue in this case is subject to the
channeling requirement of § 405(h), and to the presentment
requirement in § 405(g). Illinois Council, 529 US. at 14
(“Nor can we accept a distinction that limits the scope of
§ 405(h) to claims for monetary benefits.”).

8
The beneficiaries also cite, inter alia, Mathews v. Diaz, 426 US. 67
(1976), Briggs v. Sullivan, 886 F.2d 1132 (9th Cir. 1989), and Lopez v.
Heckler, 725 F.2d 1489 (9th Cir. 1984), vacated 469 US. 1082 (1984).
But these cases pre-date Illinois Council, 529 US. 1 (2000).
 HARO V. SEBELIUS 27

We decline to adopt the extraordinarily broad reading of
Eldridge that the beneficiaries invite. We conclude that the
named plaintiffs’ reimbursement disputes did not provide an
opportunity for the Secretary to consider the claim that her
interpretation of the secondary payer provisions exceeded her
authority. Their requests for redetermination of their
respective amounts of reimbursement did not constitute
presentment of their policy challenge.

i. Haro’s February 2, 2009 letter did not
satisfy the channeling requirement.

The beneficiaries rely solely on presentation of their
reimbursement disputes as evidence that they fulfilled
§ 405(g)’s channeling requirement, but we consider whether
the requirement was otherwise satisfied. In the course of
exchanging correspondence regarding the amount of
reimbursement they each owed, only Haro made mention of
the argument that the Secretary exceeded her authority under
the Medicare secondary payer provisions by seeking up front
reimbursement.

Haro requested redetermination of the amount of her
reimbursement obligation by letter dated January 21, 2009,
but her letter did not challenge the Secretary’s authority to
demand “up front” reimbursement. Haro did make a brief
objection to the Secretary’s reimbursement practice in a
follow-up letter dated February 2, 2009. But subsequent
correspondence between Haro and the Secretary
memorializes that both parties ignored Haro’s objection. The
correspondence shows that Haro sent payment in response to
the Secretary’s initial demand. Medicare then reduced its
reimbursement demand, determined that Haro had overpaid,
and refunded $103.87 to Haro. With its refund, Medicare
28 HARO V. SEBELIUS

gave Haro notice that it was closing its file. Haro did not
object to the Secretary closing her file, signaling that the
parties had resolved their dispute. Approximately one month
passed between the time Haro sent her February 2, 2009
follow-up letter and the time the Secretary sent a letter
reducing the reimbursement amount. Approximately one
additional month passed before Haro was reimbursed for her
overpayment. The record does not show that either of the
parties ever followed up on Haro’s objection to the
Secretary’s practice, and neither McNutt nor Hall ever
objected to the Secretary’s authority to demand up front
reimbursement.

Even if Haro’s letter and subsequent inaction did afford
the Secretary an “opportunity to apply, interpret, or revise”
the challenged policy, Haro failed to exhaust her
administrative remedies before filing suit in federal court. To
exhaust her administrative remedies, a beneficiary must
proceed through the five levels of administrative review: (1)
the initial determination; (2) redetermination; (3)
reconsideration of the redetermination; (4) an ALJ hearing;
and (5) review by the Medicare Appeals Council. 42 C.F.R.
§ 405. Haro failed to press her claim beyond level two.
Instead, less than a week after she mailed her reimbursement
check to the Secretary, Haro filed suit — before any agency
review of the up-front reimbursement policy.

Haro claims that the government has waived the
exhaustion requirement. But we can find no unambiguous
waiver of this issue in the record, and therefore conclude that
the issue is not waived.

We conclude that the channeling requirement of § 405(g)
was not met. Because channeling is a jurisdictional
 HARO V. SEBELIUS 29

requirement, the district court lacked subject matter
jurisdiction over the beneficiaries’ claim.

b. Balentine’s claim is excepted from the
channeling requirement.

Attorney Balentine brings a separate claim unique to his
status as an attorney for a Medicare beneficiary. As such, we
must separately consider whether the district court had
jurisdiction to adjudicate his claim.

Between Ringer and Illinois Council, the Supreme Court
decided Bowen v. Michigan Academy of Family Physicians,
476 US. 667 (1986). Michigan Academy appeared to limit
the scope of the channeling requirement in § 405(h) to
quantitative, benefit-amount determinations. See id. at
680–81. But in Illinois Council the Supreme Court clarified
that “it is more plausible to read Michigan Academy as
holding that § 1395ii [the provision of the Medicare statute
that incorporates § 405(h) into the Medicare Act] does not
apply § 405(h) where application of § 405(h) would not
simply channel review through the agency, but would mean
no review at all.” Illinois Council, 529 US. at 19.

Because Balentine is not a Medicare beneficiary, he did
not have the opportunity to present his challenge through the
same administrative channel as the beneficiaries.9 We are

9
Subpart I of 42 C.F.R. § 405 describes the five levels of administrative
review. A beneficiary first receives an initial determination. 42 C.F.R.
§ 405.924(b). If the beneficiary is dissatisfied, the beneficiary may
request redetermination, id. § 405.940, reconsideration of the
redetermination, id. §§ 405.960–.978, an ALJ hearing, id.
§§ 405.1000–.1054, and review by the Medicare Appeals Council, id.
§§ 405.1100–.1140. Because Balentine is not a beneficiary, he would not
30 HARO V. SEBELIUS

unaware of any other path to administrative review of the
policy that Balentine challenges, and the parties cite none.
Therefore, because applying § 405(h)’s channeling
requirement would mean no review of Balentine’s individual
claim, the claim falls within the very narrow Michigan
Academy exception, see id., and the district court had federal
question jurisdiction under § 1331 to adjudicate it.

B. The Secretary’s interpretation of the reimbursement
provision is reasonable.

Having determined that the district court lacked subject
matter jurisdiction over the beneficiaries’ claim, but that it
had jurisdiction to adjudicate Balentine’s claim under § 1331,
we turn to the merits of the Secretary’s appeal of the district
court’s second injunction.

The district court concluded that the Secretary’s practice
of demanding that attorneys withhold client funds was
inconsistent with the secondary payer provisions. The
reimbursement provision states that “an entity that receives
payment from a primary plan, shall reimburse [Medicare] for
any [secondary payment] if it is demonstrated that such
primary plan . . . had a responsibility to make [a primary]
payment,” 42 US.C. § 1395y(b)(2)(B)(ii) (emphasis added),
but it does not define “entity.”

The Secretary has interpreted “entity that receives
payment from a primary plan” in accordance with the
statute’s enabling regulations. 42 C.F.R. § 411.24(g)
provides that the Secretary “has a right of action to recover its

receive an initial determination of a reimbursement amount directed at
him.
 HARO V. SEBELIUS 31

payments from any entity, including a beneficiary . . . [or]
attorney . . . that has received a primary payment.” (emphasis
added). And 42 C.F.R. § 411.24(h) states that “[i]f the
beneficiary or other party receives a primary payment, the
beneficiary or other party must reimburse Medicare within 60
days.” We review the Secretary’s interpretation of the statute
pursuant to the deferential Chevron standard. Zinman,
67 F.3d at 843–44.

1. Application of Chevron

The first step under Chevron is to determine “whether
Congress has directly spoken to the precise question at issue.”
467 US. at 842. The reimbursement provision does not
specify whether an attorney who receives settlement proceeds
constitutes “an entity that receives payment from a primary
plan,” and therefore Congress has not spoken to the precise
issue.

“[I]f the statute is silent or ambiguous with respect to the
specific issue, the question for the court is whether the
agency’s answer is based on a permissible construction of the
statute.” Id. at 843. If the Secretary’s construction is
“rational and consistent with the statute, it is a permissible
construction” and will be upheld. Zinman, 67 F.3d at 845
(internal quotation marks omitted). We therefore consider
whether the Secretary’s construction of the reimbursement
provision is rational and consistent with the statute.

a. There is no statutory basis to distinguish
between entities that receive payment from a
primary plan and end-point recipients.
32 HARO V. SEBELIUS

An attorney who receives settlement proceeds, even as an
intermediary, has “receive[d] payment from a primary plan”
in a literal sense; the Secretary’s interpretation of the statute
is rational in this regard. But the district court concluded that
there is nothing in the secondary payer provisions supporting
an action against attorneys, “except to the extent they are end-
point recipients of settlement proceeds.” From this, we
understand that the district court drew a distinction between
fees earned and retained by an attorney representing a
Medicare beneficiary, and funds deposited into an attorney’s
trust account to be held in trust on behalf of the attorney’s
beneficiary-client. But the relevant statutory text broadly
states that “an entity that receives payment from a primary
plan[] shall reimburse” Medicare; it does not distinguish
between a recipient of payment from a primary plan and an
“end-point recipient” of such payment. 42 US.C.
§ 1395y(b)(2)(B)(ii). We find nothing in the statutory
language to persuade us that the obligation to reimburse
Medicare is limited to “end-point” recipients.

b. The 2003 amendments indicate that Congress
intended a broad construction of “entity that
receives payment from a primary plan.”

Before 2003, the cause of action provision stated that “the
United States may bring an action against any entity which is
required . . . to [make a primary payment] or against any
other entity (including any physician or provider) that has
received payment from that entity.” United States v. Baxter
Int’l, Inc., 345 F.3d 866, 906 (11th Cir. 2003) (quoting
42 U.S.C. § 1395y(b)(2)(B)(ii)).10 Analyzing the previous

10
Before 2003, the cause of action provision was codified at 42 US.C.
§ 1395y(b)(2)(B)(ii), which now codifies the reimbursement provision.
 HARO V. SEBELIUS 33

version of the statute, the Baxter court applied the doctrine of
ejusdem generis to conclude that “Congress intended the term
‘any other entity’ to be understood with reference to
‘physician’ and ‘provider,’ and to encompass only entities of
like kind.” Id. at 906. But in the wake of Baxter, Congress
amended the statute to eliminate its reference to “physician”
and “provider.” The amended statute now states that the
United States may recover, without limitation, “from any
entity that has received payment from a primary plan or from
the proceeds of a primary plan’s payment to any entity.”
42 U.S.C. § 1395y(b)(2)(B)(iii). The amended cause of
action provision indicates that Congress intended a more
expansive construction of “entity that has received payment
from a primary plan” than the one described in Baxter.
Because the reimbursement provision uses identical language
to the amended cause of action provision, the 2003
amendments support the Secretary’s position that her
construction of the reimbursement provision is consistent
with congressional intent. See Bowoto v. Chevron Corp.,
621 F.3d 1116, 1127 (9th Cir. 2010) (“identical words used
in different part of the same act are intended to have the same
meaning” (quoting Comm’r v. Lundy, 516 US. 235, 250
(1996)).

c. The Secretary’s interpretation is consistent
with the purpose of the secondary payer
provisions.

“The transformation of Medicare from the primary payer
to the secondary payer with a right of reimbursement reflects
the overarching statutory purpose of reducing Medicare
costs.” Zinman, 67 F.3d at 845. The Secretary’s demand that
attorneys who have received settlement proceeds reimburse
Medicare before disbursing those proceeds to their clients
34 HARO V. SEBELIUS

certainly increases the likelihood that proceeds will be
available for reimbursement. Therefore, the Secretary’s
interpretation of the reimbursement provision is consistent
with the general purpose of the secondary payer provisions.

d. Whether the Secretary can recover from an
attorney who has already disbursed settlement
proceeds does not bear on the merits of the
injunction.

Balentine maintains that the secondary payer provisions
do not create a lien against the settlement proceeds.
Therefore, he argues, the Secretary may not recover from an
attorney who has already disbursed settlement proceeds. The
district court agreed and ruled that the Secretary does not
have a right of action against attorneys who have already
disbursed settlement proceeds. But that issue is not presented
on the facts of this case. The Secretary was fully reimbursed
and Balentine was not sued after disbursing Haro’s settlement
proceeds. The complaint alleges only that the Secretary’s
demand that attorneys withhold funds from their clients
exceeds her authority under the secondary payer provisions.
The Secretary’s authority to bring an action against an
attorney who has disbursed the proceeds is not a controversy
ripe for our review.

We conclude the Secretary’s interpretation of the
reimbursement provision is rational and consistent with the
statute’s text, history, and purpose, therefore it is reasonable
and the district court’s second injunction and its order on
summary judgment must be reversed.
 HARO V. SEBELIUS 35

IV. CONCLUSION

The district court lacked subject matter jurisdiction over
the beneficiaries’ claims. The Secretary’s interpretation of
42 U.S.C. §§ 1395y(b)(2)(B)(ii) and (iii) is reasonable. We
therefore VACATE the injunctions entered by the district
court and REVERSE the district court’s summary judgment
order. We REMAND this case to the district court for
consideration of the appellees’ due process claim.