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In reviewing whether a person who functions in judicial or quasi-judicial capacities, a court starts from the presumption that the hearing officers are unbiased. This presumption can be rebutted by a showing of conflict of interest or some other specific reason for disqualification. But the burden of establishing a disqualifying interest rests on the party making the assertion.
Part B of the Medicare program provided medical insurance benefits covering a portion of the costs of certain physician services, outpatient physical therapy, x-rays, laboratory tests, and other medical and health care. Congress authorized the Secretary of Health and Human Services to contract with private insurance carriers to administer the payment of qualifying Part B claims. The Secretary would pay the participating carriers' costs of claims administration, and, in return, the carriers would act as the Secretary's agents. They would review and pay Part B claims for the Secretary according to a particular process. If it determined that the claims met certain criteria, the carrier would pay the claim out of a government trust fund. Should the carrier refuse on behalf of the Secretary to pay a portion of a claim, a claimant would be entitled to a "review determination," in which claimants would submit written evidence and arguments of fact and law. If the amount in dispute was $ 100 or more, a still-dissatisfied claimant then has a right to an oral hearing. An officer chosen by the carrier, who has not participated personally in the case prior to the hearing stage, would preside over this hearing. Neither the applicable federal statute nor the regulations make provision for further review of the hearing officer's decision. Three claimants who were denied partial or total reimbursement for certain medical procedures sued to challenge the constitutional adequacy of the hearings afforded them. The United States District Court for the Northern District of California concluded that the hearing procedures violated the claimant's right to due process insofar as the final, unappealable decision regarding claims disputes was made by carrier appointees. The court concluded that due process required additional protection to reduce the risk of erroneous deprivation of benefits and that the claimants were entitled to a de novo hearing by a Social Security Administration administrative law judge.
Did the Part B hearing procedure violate appellees' right to due process?
On appeal, the Court held that the hearings on disputed claims under Part B of Medicare may, consistently with due process, be held by private insurance carriers, without a further right of appeal where the hearing officers appointed by the carriers who preside over claim disputes at oral hearings did not have any disqualifying interests for due process purposes in view of the fact that the carriers pay claims from federal funds and not out of their own funds, the salaries of the hearing officers were paid by the federal government, and the carriers operated under contracts that require compliance with standards prescribed by the statute and the Secretary. According to the Court, the fact that the hearing officer must be either an attorney or another "qualified" individual who must have a "thorough knowledge" of the Medicare program undermined the contention that procedures prescribed by Congress and the Secretary were not fair or that different or additional procedures would reduce the risk of erroneous deprivation of Part B benefits.