[00:00:01] Speaker 00: Number 14-7054, in need by her parent and ex-friend Michelle Peacock at Elle Appellants versus District of Columbia, a municipal corporation at Elle. [00:00:11] Speaker 00: Ms. [00:00:12] Speaker 00: Liu for the appellants, Mr. Lowe for the appellees. [00:01:13] Speaker 01: Your honors, may it please the court, my name is Jane Lu and I represent the appellants in this case. [00:01:18] Speaker 01: The appellants are District of Columbia Medicaid recipients. [00:01:23] Speaker 01: The basic claim in this case is simple. [00:01:26] Speaker 01: When Medicaid recipients' claims for prescription drug benefits are denied by the District of Columbia, they are entitled to written notice informing them of the reason for the denial. [00:01:35] Speaker 01: The Supreme Court has found that Medicaid recipients have a statutory entitlement to their benefits that is protected by the Due Process Clause. [00:01:45] Speaker 01: The District of Columbia provides Medicaid recipients with prescription drugs under their state Medicaid program. [00:01:51] Speaker 01: Therefore, Medicaid recipients' prescription drug benefits are protected by the Due Process Clause. [00:01:57] Speaker 01: There can be no question that Medicaid recipients have the right to notice in this case because the District of Columbia concedes that Medicaid recipients have the right to a hearing when their prescription drug claims are denied. [00:02:08] Speaker 01: It is well established that due process includes the right to adequate and timely notice. [00:02:15] Speaker 04: Let me interrupt you just a moment. [00:02:18] Speaker 04: You have actually two bases, do you not, for your claim. [00:02:22] Speaker 04: One is the [00:02:31] Speaker 04: that uh... you seem to be blending they are because federal medicaid statute incorporates the due process standards so in a sense that now this goes together what i was sick wondering that you don't have to establish a property right in the respect [00:02:59] Speaker 04: privilege or right to receive the prescription drugs. [00:03:04] Speaker 04: If you're under the constitutional claim, you would have to come within the liberty property. [00:03:08] Speaker 01: That's correct. [00:03:09] Speaker 04: In a way that you don't have to for the statutory claim. [00:03:12] Speaker 04: That's correct. [00:03:13] Speaker 04: Is that not correct? [00:03:15] Speaker 04: Yes. [00:03:15] Speaker 04: I'm not heard. [00:03:16] Speaker 04: This is not a hostile point of view. [00:03:18] Speaker 01: That's correct. [00:03:20] Speaker 01: If it comes under the federal Medicaid statute, then notice is required. [00:03:24] Speaker 04: Then you've got the right to notice provided [00:03:28] Speaker 03: That's correct. [00:03:33] Speaker 03: Under the statute and the regulations, then, why is the standard denial of a prescription drug benefit, say for lack of prior authorization, why is that a termination, suspension, or reduction of covered services? [00:03:54] Speaker 01: Well, I guess there's two parts to that. [00:03:57] Speaker 01: The federal Medicaid statute regarding the Fair Hearing Provision states that notice must be provided whenever a claim for medical assistance is denied. [00:04:09] Speaker 03: And so the... Oh, no, I don't think it says that. [00:04:13] Speaker 03: I think it says a hearing, you're entitled to seek a hearing when a claim for medical assistance is denied. [00:04:18] Speaker 03: But I think the whole question in this case is whether you're entitled to notice when the claim is denied. [00:04:22] Speaker 01: Well, the federal Medicaid statute states you have an opportunity for hearing, which includes the right to written notice. [00:04:29] Speaker 03: Does the statute say that? [00:04:31] Speaker 01: I thought that's the question we're trying to decide, is whether... The Medicaid regulations implement that statute, and the Medicaid regulations include the provision of notice. [00:04:42] Speaker 05: But opportunity for hearing is different than notice, right? [00:04:45] Speaker 05: I mean, opportunity for hearing means if I'm denied it, I can ask for hearing. [00:04:50] Speaker 05: The question before us is, am I entitled to notice? [00:04:54] Speaker 05: before I get a notice that would include telling me that I can get a hearing. [00:04:58] Speaker 05: Those are very different, aren't they? [00:04:59] Speaker 05: You seem to be conflating the two. [00:05:02] Speaker 05: You seem to be saying that the fact that you're entitled to an opportunity for a hearing means that you're also entitled to notice. [00:05:10] Speaker 05: But what's the basis for that? [00:05:13] Speaker 01: I mean, I think the basis for that comes from, well, both the way the federal Medicaid regulations are written, but also because due process case law makes clear that the right to a hearing includes the right to a hearing. [00:05:27] Speaker 03: So can we just focus on the statute? [00:05:28] Speaker 03: Because I think that the issue with the due process clause is, I think you're right, that as a general matter, when you have an entitlement to a hearing, the due process clause entitles you to some form of notice. [00:05:37] Speaker 03: It's not at all clear that the form of notice that the due process clause would entitle you to is the form of notice that's contemplated in the regs. [00:05:43] Speaker 03: there's just some separate constitutional calculus as to what kind of notice you're entitled to. [00:05:47] Speaker 03: So under your statutory regulatory argument, your argument is the regulations presuppose a form of notice. [00:05:54] Speaker 03: We're entitled to that every time there's a prescription drug denial, including for lack of prior authorization. [00:06:00] Speaker 03: And I guess it seems to me that that would mean, that would require you to conclude that [00:06:06] Speaker 03: The prescription drug denial, including for lack of prior authorization, is a suspension, termination, or reduction of covered services, because that's what triggers the notice obligation. [00:06:17] Speaker 03: And that's my question, is why is the routine denial of prescription drug coverage for a particular person, say for lack of prior authorization, why is that a suspension, termination, or reduction of covered services? [00:06:32] Speaker 01: I mean I think that the notice provision has [00:06:38] Speaker 01: It applies, I mean, I think it's been applied to include denials mainly because of the language of 1396A3 that it also applies to denials of Medicaid services. [00:06:50] Speaker 03: So I think, I take that point, but I guess the way I read the regulations is it's saying that this provides notice in a hearing in two situations. [00:07:00] Speaker 03: One is when there's been a claim, when a claim for assistance is denied and I'm looking at 431.200A. [00:07:07] Speaker 03: And then the second is under B, when the governmental body takes action to suspend, terminate, or reduce services. [00:07:15] Speaker 03: So it's dealing with a hearing requirement as to both. [00:07:20] Speaker 03: But as to notice, the notice provisions it seems like are triggered by suspension, termination, or reduction of services. [00:07:28] Speaker 03: Not merely the denial of a claim for assistance. [00:07:34] Speaker 03: That's when notice kicks in. [00:07:36] Speaker 01: I think that the... [00:07:41] Speaker 01: The regulations should be interpreted in a way that gives substance to the statute, which requires an opportunity for hearing whenever a claim for medical assistance is denied. [00:07:52] Speaker 01: And I think that's why federal courts have interpreted denials to trigger the notice requirement as well. [00:07:59] Speaker 01: Well, the notice and the hearing requirement as well. [00:08:02] Speaker 01: I would point out that subsequent regulations include [00:08:09] Speaker 01: denials under the MCO regulations specifically. [00:08:14] Speaker 01: The Congress subsequently enacted managed care regulations that made clear that the notice requirement is also applicable in the case of denials of payment of Medicaid services. [00:08:31] Speaker 03: Which that has precise wording that addresses it, I guess. [00:08:35] Speaker 03: But it doesn't seem like the same wording exists here. [00:08:38] Speaker 01: That's correct, and I think that that's... [00:08:43] Speaker 01: I mean, I don't think it's not included in the term under the definition of action, but I think courts have repeatedly decided that it applies in the case of denials of services as well. [00:08:55] Speaker 03: So would you agree with me at least that on the text of the regulation, just on the plain terms of the regulation, notice is predicated on an action, and an action is defined as suspension, termination, or reduction. [00:09:05] Speaker 03: I don't see a place where it says notice arises any time there's the denial of a claim. [00:09:12] Speaker 03: You may have an argument that, of course, it has to be read that way. [00:09:14] Speaker 03: But I'm just saying, if you look at the letter of the regulations, am I missing something? [00:09:19] Speaker 03: Is there a place where it actually predicates notice on the denial of a claim as opposed to an action which is defined as a suspension, termination, or reduction? [00:09:29] Speaker 01: I would say the regulation does not include the word denial. [00:09:33] Speaker 01: However, I do think that the statute, read in conjunction with the regulations, clearly makes the notice requirement pick up up with the denials of claims of medical assistance. [00:09:48] Speaker 01: And that includes the opportunity for a hearing. [00:09:50] Speaker 01: I think there's no opportunity for a hearing if there's no notice provided. [00:09:55] Speaker 03: Well, at least conceptually there could be, because if the person [00:10:00] Speaker 03: I mean, I grant you that there's some practical issues here. [00:10:02] Speaker 03: I'm not going to deny that at all. [00:10:05] Speaker 03: But at least conceptually, if the person happens to know that there's an entitlement to a hearing, they're a master of the Medicaid regulations or the statute, or there's an advocacy interest group that can advise them as such, something like that, I mean, you can envision situations in which they ask for a hearing. [00:10:23] Speaker 03: And then I think the district says at that point they're actually entitled to the hearing. [00:10:27] Speaker 03: The question is whether they're entitled to get the form of notice that's in the regulation. [00:10:31] Speaker 03: Because I think you could envision, if your constitutional claim goes forward, there could be a different form of notice which would tell somebody that they're entitled to get a hearing. [00:10:40] Speaker 03: For example, notice at the time that the claim is denied, which appears to have happened at least a couple of times according to the allegations and complaints themselves. [00:10:47] Speaker 03: But it wouldn't be the form of notice that's contemplated in the regulations. [00:10:51] Speaker 01: I mean I think the regulations incorporate the due process standards and I think due process is clear that there is no opportunity for hearing without timely and adequate notice. [00:11:02] Speaker 03: But that doesn't necessarily have to be the notice that's provided for by the regs. [00:11:08] Speaker 01: No, although Goldberg versus Kelly is pretty specific about what kind of notice is envisioned for welfare recipients when their claims for medical services are denied. [00:11:19] Speaker 01: So I think it would include that kind of individual written notice that. [00:11:27] Speaker 03: So for example, and I'm sorry to be monopolizing the time, but for example, the regulations say [00:11:34] Speaker 03: under 431.211, sorry, advance notice. [00:11:38] Speaker 03: This state or local agency must send a notice at least 10 days before the date of action. [00:11:44] Speaker 03: It's hard to imagine that notice could be sent 10 days before routine prescription drug denial, including for lack of prior authorization, because that happens simultaneously. [00:11:53] Speaker 03: So it seems like it's, how can it be that the form of notice contemplated by the regulations is required every time there's a prescription drug denial if you have to have 10 days advance notice? [00:12:04] Speaker 01: I think in this case, there would be no need for advance notice because the action is taking place at the pharmacy. [00:12:13] Speaker 01: So notice would be required at that point. [00:12:16] Speaker 01: We're not asking for advance notice. [00:12:18] Speaker 03: But the form of notice that's contemplated by the regs prescribe that it has to go out 10 days beforehand. [00:12:25] Speaker 01: I believe that there's an exception for, at least I know in the NCO regulations that in the case of a denial of payment of a claim, it would occur at the point that payment is denied. [00:12:45] Speaker 03: I didn't see that kind of provision in these regs, but I may have overlooked something. [00:12:55] Speaker 01: I mean, in this case, we're not asking for advance notice. [00:12:58] Speaker 01: We are asking for notice at the time that the action occurs. [00:13:02] Speaker 04: With the holding you're asking for here, however, if we hold that the regulatory notice is required, would that not be precedent for the proposition? [00:13:22] Speaker 04: You may not be asking for that directly, but would that not be the precedent we would be creating? [00:13:30] Speaker 01: I mean, I don't read the regulations as requiring advance notice in the circumstances of this case. [00:13:39] Speaker 03: It says the state or local agency must send a notice at least 10 days before the date of action, and then accept as permitted under certain other provisions. [00:13:47] Speaker 03: And then there would be a question of whether it falls within an exception to that. [00:13:50] Speaker 01: And perhaps one of the exceptions applies, but... I mean, I see that in 206, the agency must provide the information required at the time of any action affecting his or her claim. [00:14:08] Speaker 01: I'm sorry, I don't have the... Did you say that that's 431-211? [00:14:15] Speaker 03: Yes, exactly, 431-211. [00:14:16] Speaker 01: I'm sorry, I don't have that in front of me, but I... [00:14:22] Speaker 01: I believe that the regulations allow in certain instances where that notice be provided at the time that an action takes place when there's no way to anticipate that. [00:14:52] Speaker 04: that are provided in the regulatory? [00:14:58] Speaker 01: I mean, I do know that in other contexts, in the context of other benefits, that is not the case that advance notice is always provided. [00:15:05] Speaker 01: I mean, there are certainly many instances where the district can't anticipate that they're going to deny a benefit until they denial it. [00:15:11] Speaker 01: Right. [00:15:12] Speaker 03: So I guess I'm just wondering. [00:15:13] Speaker 03: I think I agree with you on that. [00:15:14] Speaker 03: And so I guess I'm wondering which way that cuts, because it seems to me that [00:15:19] Speaker 03: If the 10-day rule applies, or seems to apply, then what that might suggest, assuming the exceptions don't apply, and I took a look at the exceptions and it didn't leap out to me that they would, but I'm not an expert on this. [00:15:29] Speaker 04: 213, certainly. [00:15:31] Speaker 03: 213, it doesn't seem. [00:15:32] Speaker 04: Or withdrawal of the... Right. [00:15:35] Speaker 03: And then what that seems to suggest is then that there's a problem in assuming that prescription drug denials, including for lack of prior authorization, are the type of thing that triggers [00:15:48] Speaker 03: the notice requirement in the first place, because these regs presuppose 10 days notice for something as to which 10 days notice doesn't make sense. [00:15:57] Speaker 01: Well, I mean, I don't have that regulation. [00:16:00] Speaker 01: I don't have all the regulations in front of me, so I can't speak to that question. [00:16:03] Speaker 01: I would just say that the MCO regulations make clear that, and a large number of recipients in the District of Columbia are MCO enrollees. [00:16:14] Speaker 01: For those recipients, there's no question that the notice would go at the time that payment of the claim is [00:16:23] Speaker 01: that at the time that the payment is denied. [00:16:27] Speaker 03: So I don't think that... And is there a claim in this case for up entitlement to notice under those provisions? [00:16:36] Speaker 01: Well, I mean, it's [00:16:40] Speaker 01: Our claim of entitlement is under the statute, but I do think that the MCO regulations are helpful in interpreting the scope of the issue. [00:16:50] Speaker 04: Did you regulate in your brief those regulations? [00:16:52] Speaker 04: Yes, we did. [00:16:54] Speaker 04: Where does that appear? [00:17:05] Speaker 04: I know we're defending your time, but we can do that. [00:17:30] Speaker 01: It would be at pages 27 and 28 where we discuss the MTO regulations and the definition of the term action under those regulations. [00:17:55] Speaker 01: And I would note that [00:17:57] Speaker 01: the opportunity for hearing requirement under those regulations applied to the state Medicaid agency, not to the managed care organization. [00:18:10] Speaker 01: I think the MCO regulations are helpful in that MCOs are essentially performing the state's responsibilities. [00:18:19] Speaker 01: So it would make sense that the duties [00:18:23] Speaker 01: with regard to notice for MCOs would carry over to the state Medicaid agency as well. [00:18:29] Speaker 01: It wouldn't make sense for state Medicaid, no, District of Columbia, Medicaid recipients who are not enrolled in MCOs to have [00:18:39] Speaker 04: First thought on that, you know, we have a glossary requirement for abbreviations and grids. [00:18:48] Speaker 04: Yours lists three only. [00:18:49] Speaker 04: It does not include MCO. [00:18:51] Speaker 04: It might have been easier to find what you were talking about. [00:18:56] Speaker 04: I'm sorry. [00:18:57] Speaker 04: The second thing is, if those rules were going to apply to this circumstance, wouldn't they have said so? [00:19:05] Speaker 04: This does seem to fall outside the contemplation of those rules. [00:19:16] Speaker 01: The managed care organization regulations were enacted subsequent to these other regulations. [00:19:28] Speaker 03: I mean, one could speculate that these regulations clarify, in a sense, what may not be clear from... But just to be clear on your argument, as I understand your complaint, you didn't argue that there's a violation of the MCO regulations. [00:19:42] Speaker 03: What you're saying, you argued there's a violation of the 431.200 at SAC regulations, and what you're arguing now is that the MCO regulations inform the proper interpretation of the regulations that you claim were violated. [00:19:56] Speaker 03: Is that right? [00:19:57] Speaker ?: Okay. [00:19:57] Speaker 04: And the 200 series, that .211, when it creates or recognizes the two exceptions, neither of those exceptions apply on the 10 days. [00:20:08] Speaker 04: So if we put the 10-day rule in effect on this certain thing, we are requiring it. [00:20:13] Speaker 04: I mean, one deal is the death or withdrawal of the ship. [00:20:16] Speaker 04: If one just shortens the 10 days to five, it's definitely not the same. [00:20:19] Speaker 03: For fraud. [00:20:20] Speaker 03: I think in fraud cases, fraud. [00:20:23] Speaker 01: I would say that we haven't had the opportunity to brief this issue. [00:20:27] Speaker 01: And so if, I mean, we'd be happy to provide something like a briefing on that particular issue, just because I don't have the regulations in front of me. [00:20:35] Speaker 01: I would say that I do know in other contexts, the 10-day rule does not apply. [00:20:40] Speaker 01: And I fully recognize that in this context, it would not make sense. [00:20:45] Speaker 01: So I believe there is an exception to that requirement in the instances of this case. [00:20:56] Speaker 05: OK, thank you. [00:20:56] Speaker 05: We'll give you back a couple minutes. [00:21:05] Speaker 05: I think you know where to begin. [00:21:06] Speaker 02: Yeah, good morning, Your Honors. [00:21:09] Speaker 02: Richard Love for the District of Columbia. [00:21:11] Speaker 02: There are two regimens that the statutes provide. [00:21:15] Speaker 02: Medicaid recipients can request a hearing, and it's very broad. [00:21:19] Speaker 02: Any time they feel that an action is taken erroneously. [00:21:23] Speaker 02: But that's a different regimen where the district is required to affirmatively provide individually talented notes. [00:21:31] Speaker 05: Could you pick up on the line of questioning Judge Sreenivasan led us through instead of your argument? [00:21:35] Speaker 05: That's what I meant with I think you know where to begin. [00:21:37] Speaker 05: This is an argument that I don't think that you all have made before. [00:21:41] Speaker 05: Is it that the denial of coverage [00:21:48] Speaker 05: is actually outside the regulations here. [00:21:51] Speaker 02: Well, I think we have. [00:21:52] Speaker 02: I mean, I think what we said was that plaintiffs still maintain their drug coverage. [00:21:58] Speaker 02: It's never been terminated. [00:21:59] Speaker 02: It's subject to the same conditions across the layers. [00:22:05] Speaker 03: Right, but your argument, I think, in the briefing and to date has been that therefore it's not a coverage service. [00:22:10] Speaker 03: And that's a different argument for saying there's been no termination, suspension or reduction. [00:22:16] Speaker 03: As far as I know, you've never made the argument that there's been no termination, suspension, or reduction. [00:22:21] Speaker 03: You focused on saying that if there's not prior authorization, then it was never a service to begin with. [00:22:26] Speaker 03: I think that plaintiffs have a response to that. [00:22:29] Speaker 02: I think we did. [00:22:30] Speaker 02: I think we said that they never complain about an ongoing service being terminated. [00:22:37] Speaker 03: That individual restrictions are... Where in your briefs did you say that this is not a termination, suspension, or reduction? [00:22:55] Speaker 03: That's not what the district court found, I don't think. [00:22:56] Speaker 03: I don't recall seeing that argument in briefs, but. [00:23:05] Speaker 02: I know, I can't find the page right now, but I know that we made the argument that they don't complain about the termination of an ongoing service, and nor could they. [00:23:17] Speaker 02: The prescription drug coverage [00:23:20] Speaker 02: has never been terminated, suspended, or what they complain of is problems filling individual prescriptions, often times for failures to comply with validly imposed restrictions to the district's prescription drug practice. [00:23:39] Speaker 02: And we said that each prescription, it's a duration. [00:23:43] Speaker 02: Each prescription is valid for a definite period of time, usually 30 days, for a definite quantity of medication. [00:23:55] Speaker 02: It needs to be renewed each time. [00:24:00] Speaker 02: There have been problems with individual requests for prescriptions. [00:24:04] Speaker 03: Would you agree with me analytically? [00:24:05] Speaker 03: The regulation defines action to mean a termination, suspension, or reduction of covered services. [00:24:13] Speaker 02: No, I agree with you. [00:24:15] Speaker 02: Analytically, there is a difference between saying that we've argued both. [00:24:20] Speaker 02: I think we certainly focused more on what the district court's rationale that these were not covered services. [00:24:27] Speaker 02: But I do think we also made the argument that it was not a termination [00:24:33] Speaker 02: of prescription drug benefits here, and I think that's undisputed. [00:24:38] Speaker 02: They continue to have their drug coverage, but it's subject to the same restrictions across the province here. [00:24:44] Speaker 03: But at least with some people in the complaint, I thought, for people whose benefits were denied because of lack of prior authorization, [00:24:50] Speaker 03: this argument seems to hold together. [00:24:53] Speaker 03: But there was at least some people in the complaint for whom the denial was not based on that. [00:24:57] Speaker 03: For some of them, we don't know what it was based on. [00:24:59] Speaker 03: For some of them, I thought it was based on lack of Medicaid eligibility anymore. [00:25:02] Speaker 03: At least that's what was said. [00:25:03] Speaker 03: And if that's true, this action is defined as termination, suspension, or reduction of Medicaid eligibility or covered services. [00:25:11] Speaker 02: That's a termination of Medicaid eligibility. [00:25:12] Speaker 02: I don't read the complaint that way. [00:25:14] Speaker 02: I remain with regard to the individuals [00:25:18] Speaker 02: who had problems because either the computer showed that they weren't Medicaid eligible or there was some delay in processing a re-certification, I think was the case with a couple or a couple needed an associated... So as to someone for whom the computer shows that there's no longer Medicaid eligibility, why isn't that a termination, suspension, or reduction of Medicaid eligibility? [00:25:47] Speaker 02: Well, let's take Mr. Rucker, I think is one of the individuals. [00:25:52] Speaker 02: The pharmacy computer said they couldn't fill it because he wasn't Medicaid eligible. [00:26:00] Speaker 02: He did what should be done. [00:26:02] Speaker 02: The district has a toll-free hotline that's available exclusively for the prescription drug program. [00:26:09] Speaker 02: He called the hotline. [00:26:11] Speaker 02: The hotline said, no, you're Medicaid eligible. [00:26:14] Speaker 02: The pharmacist must have entered the wrong Medicaid identification number. [00:26:19] Speaker 02: He goes back to the pharmacy, and the pharmacist said, yeah, we're having problems with our computer. [00:26:25] Speaker 02: And a few days later, he sees he is, in fact, eligible. [00:26:29] Speaker 02: There's been no termination of Medicaid eligibility. [00:26:32] Speaker 02: There was a problem with regard to the computer. [00:26:35] Speaker 02: But there was never a decision by the district's Medicaid program to say your eligibility is being terminated, reduced, or suspended. [00:26:44] Speaker 02: If there was, it certainly would require notice. [00:26:47] Speaker 02: But I don't think in any of these factual circumstances where there were problems either with regard to the computer saying he was or she was or was not Medicaid eligible or the situations where there was, I believe, a woman who [00:27:07] Speaker 02: there was some delay in processing her recertification. [00:27:12] Speaker 02: And again, when she called the hotline or called Medicaid, they confirmed her eligibility. [00:27:17] Speaker 02: They said, you should have been noted as eligible since this particular date. [00:27:25] Speaker 02: And so none of these were an affirmative denial clear in the record that would trigger the notice provisions of 206. [00:27:40] Speaker 03: Did you rely on the 10-day provision? [00:27:43] Speaker 02: We did not raise that, but I agree with Your Honors. [00:27:46] Speaker 02: I do have it in front of me, including 431-213, which are the exceptions. [00:27:51] Speaker 02: And they are not applicable here. [00:27:54] Speaker 02: And I think when you read that, the only place that we did raise it, we gave an example. [00:28:00] Speaker 02: I think it is at the end of our brief with regard to, I believe it's Ms. [00:28:04] Speaker 02: Wynn. [00:28:05] Speaker 02: She had a problem with prior authorization. [00:28:09] Speaker 02: Ultimately, there was a change in her dosage, I believe. [00:28:12] Speaker 02: And she got prior authorization from the district and went back to the pharmacist. [00:28:18] Speaker 02: The pharmacist filled the prescription but gave her the old dosage. [00:28:22] Speaker 02: And we pointed out that it would be impractical [00:28:26] Speaker 02: In that instance, I don't know how advanced notice would be possible. [00:28:37] Speaker 02: We wouldn't even know that there was an error that even occurred. [00:28:46] Speaker 02: So it was a small point I think raised at the end of the brief, but we did not raise it in the way that you are pointing it out here. [00:28:59] Speaker 03: Can I ask you a question about the constitutional claim, which is in particular your argument that there's no state action? [00:29:07] Speaker 03: So if the district, instead of contracting out the function, the district just denies a claim for a prescription drug benefit, is there not state action? [00:29:23] Speaker 02: Yeah, if the district [00:29:24] Speaker 02: did not, if the, yeah, it did. [00:29:28] Speaker 03: And then if the district then just contracts with somebody else to do that work, how is there not state action? [00:29:35] Speaker 02: Why isn't there state action? [00:29:35] Speaker 02: Well, I don't think we're disagreeing that if the, well, I think the point we were making in many of the instances that dealt with a covered service, [00:29:46] Speaker 02: that there were intervening actions that resulted in the denial that cannot be fairly attributable to the District of Columbia. [00:29:57] Speaker 02: When a pharmacist inputs the data incorrectly, that's not, and the prescription is denied as a result, that's not fairly attributable to the district and does not stay actual. [00:30:07] Speaker 03: That just seems to me to tell you that there was an error. [00:30:10] Speaker 03: So that goes to do, the whole point of having [00:30:13] Speaker 03: a due process, Matthews versus Eldridge inquiry, to decide what sort of processes do is to deal with the risk of an erroneous deprivation. [00:30:21] Speaker 03: But on the question of whether there was state action, [00:30:24] Speaker 03: It just seems like there was state action, because the entity with which the district contracted produced a result that denied the claim. [00:30:33] Speaker 03: Now, there may be an explanation for why that happened. [00:30:35] Speaker 02: We do contract with Xerox. [00:30:38] Speaker 02: The computerized electronic system is our agents. [00:30:42] Speaker 02: But I don't think when an error is made by the pharmacist in inputting data, or a pharmacist gives the wrong dose [00:30:53] Speaker 02: that those actions are fairly attributable to the District of Columbia. [00:30:57] Speaker 02: And there are incidents here, and we've identified them, I think, with some specificity in our brief. [00:31:04] Speaker 03: But what they're complaining about is that the claim is denied. [00:31:09] Speaker 03: And as a consequence of that claim denial, they have to do some things. [00:31:12] Speaker 03: They have to go to a different pharmacy. [00:31:14] Speaker 03: They have to undergo some burden as a consequence of a claim denial. [00:31:17] Speaker 03: Now, there may be some explanation for why the claim was denied. [00:31:19] Speaker 03: It may have been erroneous. [00:31:20] Speaker 03: It may have been that a pharmacist made an erroneous and key entry. [00:31:23] Speaker 03: It may have been that a physician did something wrong. [00:31:25] Speaker 03: But their point is that the claim was denied and I had underwent some burden. [00:31:30] Speaker 03: And that claim denial was state action because it was as if the district did it. [00:31:35] Speaker 03: And then you get into questions about that. [00:31:38] Speaker 02: Then that would mean any time, for whatever reason, [00:31:41] Speaker 02: that a prescription is denied, that there's state action. [00:31:45] Speaker 03: Yes, and there is. [00:31:46] Speaker 03: And then the question becomes, what's the process that's due? [00:31:50] Speaker 03: And that's where you can make an argument to the effect that, well, there's just really hardly any risk of erroneous deprivation because there's always a process by which these things can be quickly rectified. [00:32:00] Speaker 03: The degree of notice that's being supplied is amply sufficient to deal with that. [00:32:04] Speaker 03: The hearing machinery never kicks in because somebody can call a hotline and they can get this corrected right away. [00:32:11] Speaker 03: So there's all kinds of fail-safe mechanisms that are built into the system. [00:32:15] Speaker 03: So therefore, the degree of process that's supplied is due. [00:32:19] Speaker 03: It's what's required by the due process clause. [00:32:21] Speaker 03: But it doesn't say that there wasn't state action in the denial to begin with. [00:32:28] Speaker 02: Well, I just would disagree with the beginning of the analysis, and that is that there is a state action any time an individual goes in with anything that purports to be a prescription, gives it to the pharmacist, and leaves the pharmacy without the drug. [00:32:43] Speaker 05: You're forgetting a very important actor, and that's the government, right? [00:32:46] Speaker 05: This is a government program. [00:32:48] Speaker 02: It is a government program, but there are intervening factors. [00:32:51] Speaker 02: I think they're evident in the facts of the allegations of this complaint. [00:32:56] Speaker 02: I think we pointed them out. [00:32:58] Speaker 02: I think, again, I don't want to go back to the situation with Mr. Rucker. [00:33:03] Speaker 03: I don't think those... So the government executes a search warrant, and it's based on some terrible advice it got from a witness who's not a government employee. [00:33:13] Speaker 03: And then they visit the property, and it results in some sort of actionable harm. [00:33:20] Speaker 03: I think the government would be entitled to say, well, there was some other error that caused me to do this. [00:33:27] Speaker 03: But there's no doubt that the action that was undertaken and that's being complained of is state action. [00:33:31] Speaker 02: I agree. [00:33:33] Speaker 02: But I think the actions of the pharmacist or the other actors that we've described in our brief are intervening causes. [00:33:41] Speaker 02: that removes the state from the equation where it was the state's action that, you know, substantially their actions, you know, were substantial. [00:33:56] Speaker 04: Excuse me, substantial factors. [00:33:57] Speaker 04: Can that be told at the 12b6 stage? [00:33:59] Speaker 04: Can that be discerned at the 12b6 stage? [00:34:01] Speaker 04: That sounds like a factual defense that, okay, maybe it happened, but it wasn't us. [00:34:06] Speaker 04: It was them. [00:34:08] Speaker 04: We're at 12b6. [00:34:10] Speaker 02: I agree, and I think what we tried to point out where the only reasonable inference was that it was the result of some third-party actor. [00:34:21] Speaker 02: Before I sit down, I did want to point out one part of the brief where the [00:34:30] Speaker 02: Pelham's correctly indicate that the district does not have a formulary. [00:34:36] Speaker 02: And I think that's true. [00:34:38] Speaker 02: And I apologize for the error. [00:34:40] Speaker 02: But I think it's a distinction without a difference. [00:34:42] Speaker 02: What the district has is a prior authorization program. [00:34:46] Speaker 02: And the regulations clearly allow states to require prior authorization as a condition of coverage or payment of any covered outpatient drug. [00:35:00] Speaker 02: And so it's really not, you know, you just substitute the language of what is D5 instead of D4. [00:35:09] Speaker 02: I think it brings you to the same place, and that is that the district has the authority to condition coverage of these drugs. [00:35:16] Speaker 02: The distinction between coverage and payment is really a distinction without a difference here. [00:35:21] Speaker 02: This is a third party provider payment program. [00:35:25] Speaker 02: The district doesn't provide services directly. [00:35:30] Speaker 02: And it is the statute that says that states may require prior authorization as a condition of coverage or payment. [00:35:39] Speaker 02: That means that you basically can. [00:35:44] Speaker 02: The drugs that require prior authorization, they're not covered without that prior authorization. [00:35:53] Speaker 02: If there's no further questions, then we would ask the court to affirm the district court's decision. [00:35:58] Speaker 05: Thank you very much. [00:36:07] Speaker 01: to respond to some of the district's points. [00:36:09] Speaker 01: Well, I wanted to go back to that 10-day requirement. [00:36:12] Speaker 01: You know, the district's position is inconsistent with its own practice. [00:36:17] Speaker 01: There are numerous other instances where the district provides notice to recipients without providing it 10 days in advance, so clearly it's possible. [00:36:25] Speaker 01: For instance, in their own briefing, they talk about when a prior authorization request is denied, [00:36:31] Speaker 01: They provide notice, but that notice is not provided 10 days in advance. [00:36:35] Speaker 01: That notice is provided at the time that that prior authorization request is denied. [00:36:39] Speaker 01: So clearly, they are able to provide notice. [00:36:42] Speaker 05: Well, all that shows, isn't it, is that they didn't think of this argument before either, right? [00:36:47] Speaker 05: That they did. [00:36:48] Speaker 05: But now we have it in front of us. [00:36:49] Speaker 05: What do we do with it? [00:36:51] Speaker 01: I also think that it would mean that there is room in the regulations for them not to provide notice 10 days in advance. [00:36:58] Speaker 05: I mean, if they're providing notice not 10 days in advance for other services, I don't think they're going to say... To me, the question goes back to what language in the regulation triggers the notice requirement that you're arguing for. [00:37:09] Speaker 05: And there isn't any. [00:37:11] Speaker 05: I mean, you could say that the regulations can't be implemented successfully without doing it this way, but you haven't been able to point to anything in the regulations that triggers the type of notice requirement that you're arguing for now, perhaps the constitutional argument. [00:37:28] Speaker 05: How would the constitutional notice look any different than the notice that's called for in the regulations? [00:37:34] Speaker 01: I mean, I think that the constitutional notice would still have to state the reasons for the denial and inform the recipient of the right to a hearing. [00:37:42] Speaker 04: I don't think the notice would be all that different, and I don't... Is this a property right, a protected right, under the due process of law of the Constitution? [00:37:52] Speaker 01: It is. [00:37:53] Speaker 04: I mean... What's your measure of authority? [00:37:57] Speaker 01: Goldberg versus Kelly, and I would also point to this court's decision in Gray Panthers versus Schweiker, where they found there was a protected property interest in Medicare benefits that were denied in the first instance. [00:38:12] Speaker 01: And I think that that's a good point, that at the end of the day, regardless of what the regulations say, [00:38:21] Speaker 01: Great Panthers versus Shryker. [00:38:24] Speaker 01: It's the Great Panthers. [00:38:26] Speaker 01: It's an organization. [00:38:30] Speaker 01: But I mean, at the end of the day, the question is what does due process require? [00:38:34] Speaker 01: And due process requires notice in this case. [00:38:38] Speaker 01: When a Medicaid recipient's claim for a Medicaid benefit is denied, the Supreme Court has made clear that notice is required and that there's no right to a hearing if notice is not provided. [00:38:53] Speaker 03: So, but it could be that the notice that's, let's just suppose we agree with you to that extended analysis. [00:38:59] Speaker 03: It could be that the notice that's required by the due process clause is the notice that's in fact received, which is to say at the time that you get your claim denied for prior authorization, you get a notice that says there was no prior authorization, now you have an opportunity to seek a hearing if you want to. [00:39:14] Speaker 03: That's in the complaint itself that there are a couple of people that got that form of notice. [00:39:19] Speaker 01: I mean, the recipients got that notice because they asked for a printout. [00:39:23] Speaker 01: But even that notice, I wouldn't even call that a notice because what they got was the rejection message that's generated by the claim system, which is really just a code. [00:39:34] Speaker 01: It doesn't tell them exactly the reason for the denial. [00:39:37] Speaker 03: But I thought it says that under the language of the complaint, I thought it said that you have an entitlement to seek a hearing. [00:39:44] Speaker 03: Isn't that what the complaint itself says? [00:39:47] Speaker 03: So you do get notice of your entitlement to seek a hearing? [00:39:51] Speaker 01: No. [00:39:52] Speaker 01: No, you don't. [00:39:53] Speaker 01: When a prescription drug claim is denied, there's no notice given whatsoever to Medicaid recipient. [00:40:12] Speaker 01: And I think perhaps you're referring to maybe in instances where a Medicaid recipient might have requested a prior authorization and that was denied. [00:40:23] Speaker 01: That's a different scenario. [00:40:25] Speaker 01: So that means that when a doctor requests prior authorization for a drug, [00:40:31] Speaker 01: notice will be given that that request has been denied. [00:40:35] Speaker 01: But if a Medicare recipient goes to a pharmacy and their prescription drug claim is denied because of any requirement, any limitation, or any determination by the district that it's not covered, they get no notice whatsoever at the pharmacy in any circumstance. [00:40:52] Speaker 01: And there's no notice of a hearing and the reason of the denial. [00:40:57] Speaker 03: And now in the prior authorization situation, and I can't find the specific allegations in the complaint as I sit here, but in the prior, maybe they were the prior authorization situation. [00:41:07] Speaker 03: In that situation, the individual, the beneficiary, gets a notice that says prior authorization has been denied and you can seek a hearing? [00:41:15] Speaker 01: Right, but I want to be clear that that scenario is entirely different than what's going on in our complaint. [00:41:20] Speaker 01: That is when a doctor submits a request saying, I'm seeking prior authorization. [00:41:27] Speaker 01: And the district determines that for some reason, they're not going to grant prior authorization. [00:41:31] Speaker 01: upon that request, but that's separate from when they go to the pharmacy and prior authorization hasn't been obtained, then the claim is denied and the recipient gets no notice. [00:41:42] Speaker 01: So the recipient has no idea why they've been denied the drug. [00:41:45] Speaker 01: It could be a prior authorization prior, but they wouldn't know because the district is not telling them the reason for the denial of the drug. [00:41:52] Speaker 04: Okay. [00:41:53] Speaker 04: Our due process, the constitution says that due process means the process [00:42:05] Speaker 04: What would be the notice that your contention is? [00:42:09] Speaker 04: It's getting me on a very awkward sentence. [00:42:11] Speaker 04: What would you say is sufficient notice for due process purposes under the constitutional claim? [00:42:17] Speaker 01: I think it should be written notice that states the reasons for the denial and informs the recipient of their right to a hearing. [00:42:24] Speaker 01: I think it should inform them that a denial has occurred because in many instances the recipient doesn't even know that their claim has been denied without notice. [00:42:34] Speaker 03: What happens at the pharmacy then? [00:42:36] Speaker 01: I mean basically they submit the prescription, the pharmacy submits the claim through their computer and then if a rejection message comes back the pharmacy says Medicaid has denied coverage of your drug and then the recipient is just left to walk away and try to figure it out. [00:42:55] Speaker 03: So at that point at least I take your point that as a practical matter that could be deficient but [00:43:02] Speaker 03: You've been informed that your claim has been denied. [00:43:04] Speaker 01: No, I mean, there's no guarantee. [00:43:08] Speaker 01: I mean, sometimes, that's only because the pharmacy says something. [00:43:10] Speaker 01: But the pharmacy is not required to tell them anything. [00:43:14] Speaker 04: Well, they're going to tell them something. [00:43:17] Speaker 01: They've lost it. [00:43:18] Speaker 01: And so I think the Medicare recipient knows that they can't obtain their drug for some reason or another. [00:43:24] Speaker 01: But beyond that, I mean, I don't think they really know what is taking place. [00:43:28] Speaker 01: And so that's what I mean. [00:43:32] Speaker 01: I know for a fact that some of the Medicaid recipients didn't realize that Medicaid had done anything in the case because they weren't given anything that said that Medicaid had done something. [00:43:43] Speaker 01: So that's the problem if you don't provide notice. [00:43:48] Speaker 01: The recipient has no idea what's going on. [00:43:50] Speaker 01: They just know that they can't get their drug. [00:43:51] Speaker 03: They know that they can't get the drug. [00:43:53] Speaker 03: They may not know that it's because of Medicaid. [00:43:55] Speaker 03: They definitely don't know that insofar as it's because of Medicaid, they're by the district's own admission entitled to a hearing. [00:44:01] Speaker 01: Right, absolutely. [00:44:05] Speaker 03: Thank you very much. [00:44:06] Speaker 03: The case is submitted.