Part D Recipients Must Repay Mistaken Refunds, Court Rules

A federal appeals court has 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, et al. v. Leavitt (D.C. Cir., No. 06-5295, April 17, 2007).

The decision overturns a prior ruling by a federal district court ordering the Centers for Medicare and Medicaid Services (CMS) to halt efforts to collect refunds mistakenly mailed to Medicare drug plan beneficiaries and to inform the beneficiaries that they could apply for a waiver if repaying the money would cause hardship. See "Judge Orders Stop to Medicare Refund Collection Effort."

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 a 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.'

Last September, Judge Henry H. Kennedy Jr. of the Federal District Court in Washington, D.C., agreed and issued an injunction ordering 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.'

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, which halted Judge Kenney's injunction until it could issue a decision.

While calling the government's mistake "a monumental gaffe," the court rules 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 concludes.

To read the appeals court's decision, click here. The decision is in PDF format. (If you do not have the free PDF reader installed on your computer, download it here.)