Court Again Rules That Part D Recipients Must Repay Mistaken Refunds

A federal appeals court has again ruled that 230,000 Medicare Part D beneficiaries who were erroneously mailed a premium refund do not have the right to apply for a waiver excusing them from repaying the money. Action Alliance of Senior Citizens v. Sebelius (D.C. Cir., No. 09-5191, June 18, 2010).

Because of a computer error, in August 2006 approximately 230,000 people were mistakenly mailed refunds for their Medicare prescription drug benefit premiums. The Bush administration insisted that the money, which averaged $215 per beneficiary, be paid back by the end of September 2006.

In response to the administration's recoupment efforts, the Center for Medicare Advocacy filed suit on behalf of the Gray Panthers and the Action Alliance of Senior Citizens, arguing that Medicare law states that the government cannot recover an overpayment if the beneficiary was not at fault and if such recovery would violate "equity and good conscience."

In September 2006, a federal district court judge agreed and issued an injunction ordering the Centers for Medicare and Medicaid Services (CMS) to immediately send a notice to all 230,000 beneficiaries stating that each has a right under federal law to request a waiver of the obligation to repay the funds. The judge also said that any money already paid to the government "must be immediately returned to the beneficiaries so that they may decide whether to request waiver." (See "Judge Orders Stop to Medicare Refund Collection Effort.") The Department of Health and Human Services, of which CMS is a part, appealed to the U.S. Court of Appeals, District of Columbia Circuit.

While calling the government's mistake "a monumental gaffe," the court ruled that the right to ask CMS to waive the repayment of an incorrect payment applies only to a "provider of services" for "items or services furnished an individual." "It has nothing to do with erroneous refunds of Medicare premiums," the court concluded. But the court said that a second argument advanced by the seniors group -- that a provision in the Social Security statute allows the recipients to keep the money if returning it would be a hardship -- had not gone through the proper jurisdictional channels.

More than two years after its original ruling, the appeals court now considers this second argument and rules that the provision in the law applies only to overpayments of actual Social Security benefits. Although the mistaken refunds of the Medicare Part D premium payments came from the Social Security Administration, they were not actual Social Security benefits, the court rules, and therefore don't qualify for the hardship provision.

To read the appeals court's decision, click here.