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U.S. District Court Holds that a Plaintiff Must Exhaust Administrative Proceedings Prior to Judicial

A U.S. District Court affirmed that a plaintiff must exhaust the administrative appeals process before seeking a declaratory judgment that Medicare is not entitled to recover conditional payment claims.

In Weiss v. Price, the Plaintiff filed a medical malpractice suit, following the death of her husband, alleging two claims: (i) a wrongful death claim, in her individual capacity, and (ii) a survivorship claim, on behalf of the Estate. The state court judge allocated all settlement proceeds to the plaintiff in her individual capacity. Afterwards, Medicare sought recovery from the Estate for conditional payment claims and the Estate appealed to the Medicare Appeals Council (MAC), citing the state court’s allocation. The MAC found that Medicare was entitled to seek recovery and the Estate appealed to the District Court. Additionally, the Plaintiff, in her individual capacity, sought a declaratory judgment from the District Court that the settlement funds were not subject to recovery by Medicare.

In response to the Plaintiff’s individual claim, the Department of Health and Human Services (HHS) argued that the District Court did not have subject matter jurisdiction to hear the request for a declaratory judgment because the Administrative Procedures Act’s waiver of sovereign immunity includes an exception in cases where another statue forbids the relief that is sought. HHS contended that the Social Security Act includes an extensive administrative appeals process for Medicare claims, which must be exhausted prior to any further judicial review. The District Court agreed and dismissed the Plaintiff’s individual claim because she had not been a party to any prior administrative appeal and she had not obtained final judgment from the agency. The District Court did note, however, that the parties agreed that the Estate’s appeal would proceed.

The District Court also dismissed the Plaintiff’s alternative argument that Medicare’s recovery attempt amounts to an unconstitutional taking of property. The court stated that absent a waiver of sovereign immunity, the Plaintiff’s takings claim does not confer subject matter jurisdiction.

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