Shalala v. Illinois Council on Long Term Care, Inc.
146 L. Ed. 2d 1, 529 U.S. 1, 2000 U.S. LEXIS 1734 (2000)
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Rule of Law:
A claim 'arising under' the Medicare Act must be channeled through the special administrative review scheme provided by the Act, and federal-question jurisdiction under 28 U.S.C. § 1331 is barred by 42 U.S.C. § 405(h), unless following that scheme would result in the complete preclusion of all judicial review.
Facts:
- In 1994, the Secretary of Health and Human Services (HHS) promulgated regulations governing the imposition of sanctions on Medicare-participating nursing homes.
- These regulations established categories of 'deficiencies' based on seriousness and listed corresponding remedies, ranging from minor penalties to termination of a home's provider agreement.
- The Illinois Council on Long Term Care, Inc. (Council), an association representing approximately 200 Illinois nursing homes, believed these regulations were unlawful.
- The Council's member nursing homes operate under these regulations and are subject to inspections and potential sanctions for any identified deficiencies.
- The Council asserted that the regulations were unconstitutionally vague, exceeded statutory authority, violated due process, and were improperly promulgated without notice and comment.
Procedural Posture:
- The Illinois Council on Long Term Care, Inc. sued the Secretary of HHS in the U.S. District Court for the Northern District of Illinois, asserting federal-question jurisdiction under 28 U.S.C. § 1331.
- The District Court dismissed the lawsuit for lack of subject-matter jurisdiction, finding it was barred by 42 U.S.C. § 405(h).
- The Council, as appellant, appealed to the U.S. Court of Appeals for the Seventh Circuit.
- The Court of Appeals reversed the District Court's dismissal, holding that the suit could proceed under the precedent of Bowen v. Michigan Academy of Family Physicians.
- The Secretary of HHS, as petitioner, successfully petitioned the U.S. Supreme Court for a writ of certiorari.
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Issue:
Does 42 U.S.C. § 405(h), as incorporated into the Medicare Act by § 1395ii, bar a nursing home association from challenging the validity of Medicare regulations directly in federal district court under federal-question jurisdiction, 28 U.S.C. § 1331?
Opinions:
Majority - Justice Breyer
Yes. The statute bars the nursing homes' association from bringing its challenge directly in federal court under federal-question jurisdiction. The association's statutory and constitutional challenges to the Medicare regulations are 'claims arising under' the Medicare Act and are therefore subject to the channeling requirement of 42 U.S.C. § 405(h). This provision requires that such claims proceed through the special administrative review process created by the Medicare statutes. The exception established in Bowen v. Michigan Academy of Family Physicians applies only where the statutory scheme provides no path to judicial review at all. Here, a review path exists: a nursing home can refuse to comply with a regulation, receive a sanction, and then challenge the regulation's validity during the administrative and judicial review of that sanction. The potential hardship of this process does not amount to a complete preclusion of review that would justify bypassing the statutory channel.
Dissenting - Justice Stevens
No. The statute does not bar the lawsuit from being heard under federal-question jurisdiction. The key phrase in § 405(h), 'to recover on any claim,' was drafted to describe pecuniary claims for benefits, typically made by patients, as in Salfi and Ringer. It does not encompass broad pre-enforcement challenges by providers to the validity of regulations, which is the situation in this case and was in Michigan Academy.
Dissenting - Justice Scalia
No. The statute does not bar the lawsuit from being heard under federal-question jurisdiction. Although Bowen v. Michigan Academy of Family Physicians may have been wrongly decided, it is binding precedent that controls this case. Under that precedent, this type of challenge should be allowed in federal court, as there is no basis for distinguishing between Medicare Part A (this case) and Part B (Michigan Academy) in the application of § 1395ii.
Dissenting - Justice Thomas
No. The statute does not bar the lawsuit from being heard under federal-question jurisdiction. The controlling issue is the interpretation of the incorporating statute, § 1395ii. Michigan Academy held that § 1395ii is triggered only by challenges to specific, fact-based agency determinations, not by general, pre-enforcement challenges to the validity of regulations. Any ambiguity should be resolved by the strong presumption in favor of pre-enforcement judicial review, especially since forcing providers to violate regulations and risk severe penalties to obtain review makes the supposed review channel practically unavailable.
Analysis:
This decision significantly narrows the perceived scope of the Michigan Academy exception to § 405(h)'s jurisdictional bar, clarifying that the exception is reserved for the rare situation where a statutory scheme offers no review path at all. The ruling reinforces the principle of channeling, compelling potential litigants to exhaust administrative remedies even for broad constitutional and statutory challenges to regulations, thereby strengthening the agency's role in initial dispute resolution. Future litigants will find it much harder to bring pre-enforcement challenges to Medicare regulations directly in federal court, as they must now demonstrate that the administrative review process is completely foreclosed, not merely burdensome or delayed.
