LOUIS W. SULLIVAN, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL., PETITIONERS V. SANDRA EVERHART, ET AL. No. 88-1323 In The Supreme Court Of The United States October Term, 1989 On Writ Of Certiorari To The United States Court Of Appeals For The Tenth Circuit Reply Brief For The Petitioners 1. Respondents succinctly state the agency's position in this case: the Secretary of Health and Human Services is not required to consider waiver before applying the netting regulations, 20 C.F.R. 404.504, 416.538, because (1) waiver procedures are only required when there is "adjustment" or "recovery" and netting is not "adjustment" or "recovery;" and (2) netting is just a way of determining whether "more or less" than the correct amount has been paid. Resp. Br. 9. According to respondents, both these propositions are wrong because Congress has "directly spoken to the precise question" of the meaning of the terms "adjustment" and "recovery," see Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837, 842 (1984), and has revealed through the "words, structure, and history of the statutory provisions," Resp. Br. 11, that these statutory terms refer to "all collection techniques," including the setoff of different past errors through netting. Resp. Br. 9. a. Respondents' efforts to prove that Congress has expressly disapproved the netting procedure are entirely unsuccessful. Their argument consists primarily of conclusory statements supported by disjointed excerpts from the statute, its sparse legislative history, or this Court's opinion in Califano v. Yamasaki, 442 U.S. 682 (1979). The quoted material restates the unassailable general proposition that an opportunity to request waiver must precede the Secretary's attempts to adjust, recover, or collect overpayments. However, the discussion utterly fails to show that Congress believed the key statutory terms "adjustment" and "recovery" encompass the netting practice, or that Congress has specifically required the Secretary to consider a waiver before adding together past overpayments and past underpayments to calculate the amount to be collected. For example, respondents state (Resp. Br. 16) that "(t)he broad and mandatory language of the waiver statutes unambiguously demonstrates Congressional intent to protect all deserving beneficiaries from collection activity." However, respondents point to nothing in the history or language of the statute that remotely demonstrates that the "collection activity" from which beneficiaries are to be protected includes the setoff of past errors. Moreover, in asserting that "(n)owhere has Congress evidenced any intent to restrict a beneficiary's statutory right to request waiver of overpayments" (Resp. Br. 15), they likewise beg the question of whether the Secretary's netting practice restricts the right to waiver in a way that Congress did not intend. b. Indeed, in attempting to rely on legislative history to bolster their view of the statute, respondents reveal their fundamental misunderstanding of the legal principles that govern this case. In arguing that the "legislative history of the waiver statute is consistent" with their interpretation of these provisions (Resp. Br. 15), respondents overlook the settled principle that, under Chevron and its progeny, a court can only invalidate the Secretary's interpretation as embodied in his regulations if that interpretation is inconsistent with any permissible reading of the statute. And respondents appear to adopt the erroneous belief that they have satisfied the demands of Chevron if they can demonstrate that "(t)here is no support in the legislative history for the view that Congress intended the Secretary * * * to use an open-ended 'period' rather than monthly accounting" (Resp. Br. 25) (footnote omitted). But respondents cannot prevail merely by showing that there is an absence of affirmative support for the Secretary's construction in the legislative history. Rather, they must satisfy the far more demanding requirement of showing that the statute and its history cannot be reconciled with the Secretary's reading of the statutory scheme. This respondents cannot do. As we explained in our opening brief (at 24-29), the language employed in the successive revisions of the Title II payment correction provisions from 1935 to the present plainly can be viewed as authorizing the calculation of a single past error amount that takes into account all errors that have already been made. The 1935 Act directs the SSA, following a beneficiary's death, to find whether the total amount paid over a lifetime was excessive, see Gov't Br. 24 n.9, or to determine, while the beneficiary is still alive, whether more than the correct amount has theretofore been paid, see id. at 24-25. It authorizes posthumous demand for a refund, or reduction in subsequent payments to a beneficiary who is still alive. The 1939 Act also speaks of correcting errors by "decreasing subsequent benefits payable" to surviving beneficiaries following death. Gov't Br. 26 n.10. Moreover, contrary to respondents' suggestion, Resp. Br. 25, there is no indication in the 1939 Amendments or those introduced subsequently that Congress intended radically to revise the basic statutory framework established in 1935 by "rejecting" the practice of accounting for, and correcting, a total or net amount of error. Rather, the previous, as well as the current, versions of the Act point to a clear distinction between the past -- the period over which errors are canvassed to calculate an amount of overpayment -- and the future -- the period during which past errors are corrected out of subsequent disbursements or assets in the beneficiary's possession. Thus, the interpretive materials not only fail to rule out a scheme that takes into account multiple past errors prior to the application of the waiver provisions, but strongly suggest that Congress intended payment errors to be corrected in precisely this fashion. /1/ 2. Respondents argue that, if the Secretary is correct that the terms "adjustment" and "recovery" as used in the statute do not encompass retroactive setoffs, then the Secretary "lacks statutory authority to deal with overpayments or underpayments through a netting procedure," Resp. Br. 27-28, and the setoff of past underpayments and overpayments "cannot be done at all" (Resp. Br. 18). This reasoning is defective for several reasons. First, respondents completely ignore the language of Sections 204(a) and 1631(b)(1)(A) that directs the Secretary to determine whether "more or less" than the correct amount of benefits has been paid. As we have argued, Gov't Br. 30-31, this language provides all the authority that is needed for the practice of netting all previous errors to determine the magnitude of the error that needs to be corrected. Second, respondents assert (Br. 27) that the "adjustment" and "recovery" procedures referred to in Sections 204 and 1631(b)(1) are the "exclusive means" available to the Secretary for "correcting underpayments and overpayments," and thus, if netting is not a form of "adjustment" or "recovery," the Secretary has no authority to use administrative setoffs. Respondents err, however, in assuming that, absent express statutory authority, the Secretary would be powerless to rectify payment errors. In fact, no express grant of statutory authority is needed before the government may offset amounts mistakenly paid out against outstanding obligations to the same individual. This Court has repeatedly made clear that the United States "by appropriate action can recover funds which its agents have wrongfully, erroneously, or illegally paid." United States v. Wurts, 303 U.S. 414, 415 (1938) (citing Wisconsin Central R.R. v. United States, 164 U.S. 190, 212 (1896), and United States v. Burchard, 125 U.S. 176, 180, 181 (1888)). The United States can recapture funds by any of the accepted means of settling a debt -- including the subtraction of the overpaid sums from outstanding amounts owed to the same person (i.e., a setoff), or legal action. See Gratiot v. United States, 40 U.S. (15 Pet.) 336, 370 (1841) ("It is but the exercise of the common right which belongs to every creditor, to apply the unappropriated moneys of his debtor in his hands, in the extinguishment of the debts due to him."); Wisconsin Central R.R. v. United States, 164 U.S. at 211 ("If * * * money has been paid without authority of law and (the government) has money of the same claimant in (its) hands, (it) is not compelled to pay such money over."); see also United States v. Wurts, 303 U.S. at 416 (The government has a "long-established right to sue for money wrongfully or erroneously paid from the public treasury" which is not "barred by the passage of time."); id. at 415 (quoting United States v. Bank of the Metropolis, 40 U.S. (15 Pet.) 377, 401 (1841)) ("'No statute is necessary to authorize the United States to sue (to recover excess disbursements). The right to sue is independent of statute, . . .'"); cf., e.g., Wilson Clinic & Hosp. v. Blue Cross, 494 F.2d 50, 52 (4th Cir. 1974) ("Indisputably, the United States can always retrieve moneys misunderstandingly outlaid."). These authorities suggest that no legislation was necessary to authorize the Secretary to offset past indebtedness (overpayments) against past credits (underpayments), or to sue for a refund. However, Congress chose to provide for specified methods for rectifying errors in benefits payments (legal action, demand for refund, reduction in monthly benefits), some of which might not otherwise have been available, /2/ and to place limits on the circumstances under which those very methods could be used. In so doing, Congress created a scheme in which the Secretary could accord different treatment to two types of "setoffs": The setoff of past underpayments against current or future benefits was subject to restrictions. However, the agency was left free to setoff past underpayments against past overpayments at any time. 3. a. Respondents contend (Br. 20-22) that the terms "adjustment" and "recovery" have a plain and definite meaning, and always refer to the setoff of past erroneous disbursements. But the very sources they cite either lend no support to this assertion, or actually undermine it. For example, 76 C.J.S. Recovery Section 171 (1972), cited in Resp. Br. 20, begins with the statement that "(w)hile it has been said that the word 'recovery' has an established meaning * * * in fact it has several meanings." /3/ Likewise, "adjustment" is not itself of precise legal meaning. * * * (I)t has various meanings according to the subject matter where it is used." 2 C.J.S. Adjustment Sections 76-77 (1972). /4/ These statements are consistent with the basic observation in our opening brief (at 20-28) that the terms "adjustment" and "recovery" do not necessarily have the same meaning in the payment collection provisions of the statute as they might have in an altogether different setting. The terms need not refer to all possible ways of settling accounts or "recapturing" sums erroneously paid out. Although both can be used to refer to a setoff, they can also refer more narrowly to the reduction of future benefits or to the collection of monies that are currently in the possession of a beneficiary. In short, it is clear that the meaning of these terms can vary, and that the words need not always be given their broadest possible scope. b. Consequently, it is of no significance that this Court's cases, or even the Secretary's own regulations, might in other contexts treat the terms "adjustment" and "recovery" as interchangeable, or might occasionally use the term "adjustment" to refer to retroactive setoff. See Resp. Br. 18-22. From the fact that these terms may sometimes, and in some contexts, take on a broader meaning it surely does not follow that the terms as they appear in Sections 204 and 1631(b)(1) could not have a more restrictive meaning. For example, respondents suggest that the term "adjustment" as used in the statute must encompass retroactive setoff because HHS regulations refer to certain setoffs other than netting as adjustments. Specifically, respondents point to overpayment regulations under Title II and Title XVI that describe the steps to be taken by the Secretary to correct an overpayment for which a beneficiary is found liable after any netting, if applicable, has taken place and an opportunity for waiver has been provided. See 20 C.F.R. 404.502 (Tit. II); 20 C.F.R. 416.543, 416.570 (Tit. XVI). One of the procedures mentioned in the regulations is a setoff against a "lump sum" payment -- that is, a setoff against an underpayment that is due for some past period. /5/ Since some setoffs of past overpayments against past underpayments are described as adjustments under these regulations, respondents argue, it follows that all setoffs -- including netting -- should be treated as adjustments in the statutory sense, which must be preceded by a waiver determination. Respondents' argument is a complete non sequitur. It is to be expected that the overpayment regulations would mention retroactive setoffs as one of the means by which the Secretary may reduce or eliminate an overpayment for which the beneficiary is found to be liable (after netting and an opportunity for a waiver). Once the Secretary has complied with all statutory requirements, he may recapture the amounts due by any means available -- including the specific types of "adjustment" and "recovery" referred to in the statute, which are only available once the waiver provisions have been applied, or retroactive setoff, which is available to the Secretary at any time regardless of whether waiver has been considered or denied. /6/ Thus, it should be apparent that the term "adjustment" is used in these overpayment regulations simply because it provides an effective way to refer to a number of the procedures that are available to reduce overpayments after the Secretary has applied the waiver provisions. From the fact that the Secretary, for reasons solely of convenience, chose to use the term broadly in selected regulations, it plainly does not follow that retroactive setoffs qualify as "adjustments" under the statute, and that such setoffs are barred prior to a waiver opportunity. 4. a. Respondents claim that the netting regulations are arbitrary and capricious for two reasons. First, they argue that the netting period depends on "when the Secretary notifies a claimant of a (net error), rather than the date the Secretary detects (an error)." Second, they maintain that the netting procedure "provide(s) for an arbitrary interval between the discovery of an erroneous payment and its formal determination" /7/ (Resp. Br. 32). Both statements are wrong, and result from a misreading of the regulations. Respondents observe correctly that the "initial determination" of an error, which marks the end of the netting period, may not always occur in the month an error is first detected or the Secretary initially becomes aware that an error might have been made. /8/ Rather, the initial determination takes place only after the Secretary has documented and verified that an error has been made, has reduced any net amount due (or owed) to a sum certain, and is ready to notify the beneficiary and to take steps to correct the error. By the same token, the "initial determination" does not always take place in the month in which the beneficiary receives notice of a net error, /9/ since administrative delay in the completion of paperwork can result in the lapse of several months between the initial determination and the date the notice is sent. /10/ The Secretary's scheme for making an initial determination is designed to minimize the interval between the "discovery" of an error and its "formal determination." The netting period is closed no later than absolutely necessary to determine and document the actual amount due, and is not arbitrarily prolonged for reasons unrelated to the need to complete the determination. Thus, contrary to respondents' suggestion, the netting regulations, far from providing for an arbitrary interval between "discovery" and determination, are highly protective of beneficiaries by ensuring that the period is as short as administratively possible. b. Respondents also contend that the netting regulations are arbitrary in the sense "that the Secretary controls when the netting initial determination is made" (Resp. Br. 33). They imply that the Secretary has an incentive to ignore errors, since delay may result in the generation of new errors that can be offset against old mistakes through the application of netting. Ibid.; see also Amicus Br. 15. In addition, they claim that the practice of netting unfairly conditions waiver rights on the timing of "administrative decisions." As an initial matter, we note that the possibility that the agency might misapply the netting regulations can have no bearing on whether they represent a valid exercise of the Secretary's discretion. For one thing, the agency is entitled to a presumption of good faith compliance with its own regulations. See FCC v. Schreiber, 381 U.S. 279, 296 (1965); Fahey v. Mallonee, 332 U.S. 245, 256 (1947). Moreover, if the mere possibility that administrative procedures could be misapplied or abused would render those procedures invalid, few regulations would withstand review. In any event, for reasons of administrative efficiency, fairness and good accounting practice, individual program officers are directed to seek out and rectify errors expeditiously. See, e.g., POMS, GN 02201.005 (1989) (stating Social Security Administration's policy to resolve overpayments as quickly as possible). Moreover, habitual tardiness in correcting errors would not be a particularly effective way for the agency to gain a long-term advantage, since the benefits that can be expected from such a strategy in any given case are entirely speculative. It is impossible to predict whether a beneficiary will continue to be paid benefits, let alone whether new errors will be made or whether they will serve to offset past mistakes. Respondents' related assertion that the Secretary's netting practice makes entitlement to statutory waiver rights depend on "the timing of administrative decisions" ignores administrative reality. The fact that an overpayment error might come to light sooner (resulting in netting against an underpayment) rather than later (resulting in separate consideration under waiver provisions, because the underpayment has already been paid) stems from the agency's lack of omniscience, not from any premeditated administrative strategy. The agency simply lacks the resources to review and scrutinize every payment a beneficiary has ever received each time an error is discovered. Inevitably, the agency will miss some errors, which may only be picked up at a later time. In sum, the failure to discover some errors until others have been corrected is hardly the result of deliberate delay, as respondents imply. c. Furthermore, it is entirely reasonable and consistent with the provisions of the statute for the Secretary to condition the right to seek forgiveness on whether uncorrected errors from the same period are simultaneously outstanding. Although this factor may vary with the timing of discovery, it bears directly on the reason for providing waiver rights. The existence of an outstanding underpayment means that the Secretary can reduce some portion of a past overpayment without reducing future benefits or demanding that the beneficiary pay a refund. And, if the setoff results in a net underpayment, the Secretary can avoid such recovery entirely, and there would be no reason to provide a waiver hearing. In contrast, an isolated overpayment that is discovered after other past errors have been corrected and forgotten can only be collected out of present disbursements to the beneficiary or by requiring the beneficiary to refund the money. An opportunity to seek forgiveness therefore becomes necessary to protect beneficiaries from the special hardships that might result from reductions in payments that may barely be adequate for basic needs, or from the obligation to repay from resources currently on hand. Thus, there are good reasons to accord different treatment to beneficiaries whose errors come to light at different times, even though the pattern of their payment errors may be similar. /11/ 5. In the final section of their brief, respondents attempt to demonstrate that the invalidation of the netting regulations will not impose significant new procedural and financial burdens on the government. Most notably, they insist that "immediate and automatic reimbursement" of all separate underpayments is not required by the Tenth Circuit's decision or by their interpretation of the statute. Rather, they claim, the Secretary need do nothing more than notify each individual of underpayment and overpayment errors and offer the option of waiver of the entire, separate overpayment amount. Absent a waiver request, the agency can proceed to net. If waiver is requested, they further assert, the Secretary may consider waiving all or some of the separate overpayment (including only the net amount). See Resp. Br. 36. Only a decision to waive the entire overpayment would effectively bar netting, since the underpayment would then have to be separately reimbursed. a. Respondents' proposed procedure represents a dramatic shift from their position in the courts below. Before the district court, respondents consistently represented that the statute required immediate reimbursement of the entire amount of underpayments; they adamantly resisted any remedial order that did not involve immediate reimbursement, and opposed the Secretary's request to stay automatic payment to the named plaintiff-intervenors of the netted portion of their underpayment amounts. /12/ Respondents never once suggested that an appropriate remedy would consist of an order to the Secretary to consider whether the netted portion of the plaintiff-intervenors' overpayments should be waived, and then to issue a reimbursement check only if it was decided that a waiver of the entire amount was justified. b. The scenario now proposed by respondents admittedly would not force HHS to pay out and then attempt to retrieve underpayments that otherwise would have been netted against overpayments. Cf. Gov't. Br. 34-38. Nevertheless, respondents' proposal would still be significantly more difficult to administer than the current system, and would place heavy new procedural burdens on the agency. As noted in our opening brief (at 38), if the present netting procedure were invalidated, the number of persons entitled to request a waiver by virtue of being considered overpaid would automatically double. Given the agency's (very conservative) estimate that 6% of beneficiaries that are eligible for forgiveness can be expected to request it, this would result, at a minimum, in the need to process more than 12,000 new requests for waiver every year. See Gov't Br. 38 n.19. Because the processing of waiver requests is extremely time-consuming, complicated, and labor intensive, see Gov't Br. 38-39 & n.20, this would represent a considerable increase in the agency's workload. Thus, the relief requested by respondents would indeed entail a "needless * * * multiplication of procedural obligations." Gov't Br. 36. c. Moreover, it is not clear what, if anything, beneficiaries would gain from the additional proceedings that respondents seek. Under the statute, the Secretary has broad discretion to determine the circumstances under which equity and good conscience, or the fundamental goals of the Social Security programs, would warrant the waiver of all or part of an overpayment. In formulating the criteria for waiver, it would be reasonable for the Secretary to assume that any deliberate payment of more than the amount to which an individual is entitled would be "against the purposes of the Act." As compared to a waiver of a net overpayment -- which would require the Secretary only to forgive an overpayment that has already been made by mistake -- the waiver of a gross overpayment would require the Secretary intentionally to pay out more than the correct amount due. It would therefore be permissible for the Secretary always to decline to waive the entire amount of a gross overpayment, since such a waiver would necessarily require the agency to turn a "method for correcting errors into a method for making errors." Gov't Br. 35. In addition, the Secretary could sensibly conclude that it would never be against equity and good conscience to refuse to waive the entire amount of an overpayment while simultaneously reimbursing the claimant for an underpayment. As respondents themselves concede, Resp. Br. 36, the fact that a beneficiary would be due to receive a check for a past underpayment necessarily undermines a claim of financial inability to repay the portion of their overpayment that would otherwise have been offset against the reimbursement amount. Because it would not be unreasonable to regard individuals who are about to receive a lump sum from the government as necessarily possessing the means to honor their debt to the government, the Secretary could conclude that waiver of more than the net overpayment amount would never be justified. In sum, regardless of what the statute requires with respect to the timing of a waiver hearing, it would virtually never be unreasonable, or violate principles of equity and good conscience, to waive no more than a net overpayment in excess of entitlements. And, with very rare exceptions, it would always be well within the Secretary's discretion to treat past overpayments as effective compensation for past underpayments. Hence, application of respondents' newly proposed version of a pre-netting waiver procedure would leave beneficiaries no better off than the current procedure, and the outcome under both schemes would very likely be the same. It follows that there can be no justification for ordering the Secretary to replace the current netting method with respondents' proposed system of "contingent netting." This Court should decline to do so. For the foregoing reasons, and those stated in our opening brief, the judgment of the court of appeals should be reversed. Respectfully submitted. KENNETH W. STARR Solicitor General NOVEMBER 1989 /1/ Respondents seek to rely on the so-called "basic statutory (monthly) accounting period," which Judge Gibbons, in his dissent in Lugo v. Schweiker, 776 F.2d 1143, 1153 (3d Cir. 1985), identified as precluding the netting of errors from different months. But as we demonstrated in our opening brief (at 19-20) there is no statutory monthly accounting system, and the text of the statutory provisions at issue here make no mention of monthly payments. Besides, if the reason that netting is invalid is that payments must be given month-by-month treatment under every statutory provision, then respondents fail to explain why their proposal for separate treatment for underpayments and overpayments -- which is potentially less advantageous for some beneficiaries than strict monthly accounting -- satisfies the requirements of the statute. See Gov't Br. 36 n.16. /2/ An express grant of statutory authority may have been necessary before the Secretary could reduce monthly benefits currently due because it would be possible to construe the statutory provisions setting the amount and conditions of entitlement as barring any reduction of the level of current benefit payments to eligible individuals. Also, a specific grant of statutory authority may have been needed before the government could collect from one person money unlawfully paid to another person. In this sense, respondents are correct in stating that, when Congress realized that the methods specified in the statute were "too narrow, (it) then amended the statute to give the Secretary another means of recovery" (Resp. Br. 27). In the 1939 and 1967 amendments of the payment correction provisions, Congress expanded the scope of recovery to allow recoupment of overpayments that had been made to the primary Title II beneficiary by adjusting subsequent payments to other individuals receiving benefits on the same earnings record. The 1939 version of Section 204(a) added an authorization to reduce benefits paid to survivors following the death of the primary beneficiary. See Gov't Br. 26 n.10. And the 1967 amendment included a new provision permitting the reduction of benefits paid to others on the same earnings record while the primary beneficiary was still alive but no longer receiving benefits himself. See Gov't Br. 28. /3/ "Recovery" can be used to refer to the restoration of property by legal action, or, more broadly, to the repossession, receipt, or collection of something in the possession of another by any means. Alternatively, it can mean the vindication of a right to "ret(ain) possession already had and which has not been disturbed," -- a definition that would appear to encompass setoff of past errors, where money previously transferred to the beneficiary has already been "repossessed" by the agency through a mistaken underpayment. 76 C.J.S. Recovery Sections 171-172 (1972). /4/ Webster's Third New International Dictionary 1898 (1976) confirms that "adjustment" and "recovery" can be used to refer broadly to the recapture of assets by a range of methods, or, more narrowly, to recapture by certain specified methods. For example, "recovery" may serve to denote the "obtaining in a suit at law of a right to something;" or it can mean the return of "anything lost * * * in any way." /5/ See 20 C.F.R. 404.502 (adjustment of net overpayment found due against "lump sum" or monthly benefit under Title II), 416.570 (adjustment of overpayment against "any payment due" to beneficiary under Title XVI); see also 20 C.F.R. 416.543 ("Any underpayment for which an individual is eligible is used to reduce any overpayment determined to exist * * * for a different period."); Program Operation Manual Systems (POMS), GN 02301.020A.2.e (1988) (an underpayment due on behalf of a living person is payable only after adjustment for any outstanding overpayment for which the underpaid person is liable). The term "lump sum payment" is used to designate the amount of reimbursement that would be payable on an underpayment error that was not included in a particular netting determination, either because the error was made following the close of the netting period, or was made during the netting period but discovered too late to be included in the calculation of the original net amount. A "lump sum payment" can also be a one-time payment to the widow or widower after the death of a Title II beneficiary. See 42 U.S.C. 402(i). The status of such a payment, for the purpose of applying the waiver provisions, would depend on whether it was currently due or whether it was due in the past but mistakenly left unpaid. If the payment is currently due, a reduction against it would be an "adjustment" within the meaning of the statute, and waiver would have to be offered on any overpayment that would thus be adjusted. /6/ Because the Secretary interprets the statute only to bar reductions in future benefits or demand for refund before a waiver is considered, the agency may, at any time, effect an administrative setoff -- that is, the agency may always apply a net overpayment against "lump sums" determined to be owed the beneficiary on past underpayments. No consideration of waiver need precede this procedure. However, under the netting and overpayment recovery regulations, see note 5, supra, any error (e.g., an underpayment) that might be made in months after a netting period has closed cannot be applied against a net overpayment from the closed period unless waiver of the overpaid amount has already been considered. To the extent that the regulations thus bar the setoff of errors from different netting periods prior to consideration of waiver, they place more stringent limits on the Secretary's freedom to deal with past errors than the statute would require. But the fact that the regulations do not go to the limit of statutory power in no way undercuts the validity of the netting regulations. /7/ Respondents correctly note that, under the Title XVI netting regulation, 20 C.F.R. 416.538, the netting period ends the month of the initial determination of an error, whereas, under Title II, see 20 C.F.R. 404.504 and SSR 81-19a (1981), the period closes the month before the month in which the Secretary makes an initial determination. Contrary to respondents' suggestion, there is ample justification for this difference. See Resp. Br. 8 & 31 n.28. The netting period closes one month earlier under Title II because Title II benefits for a given month are paid at the close of the month whereas Title XVI benefits are paid on the first of the month, see 20 C.F.R. 416.502. Hence, the different rule is necessary to insure that errors under both Titles receive uniform treatment, since permitting the Secretary to close the Title II netting period in the same month as an "initial determination" would effectively allow the taking into account of errors made after the initial determination was complete. /8/ Although in our opening brief (at 6) we described the netting period as closing when an error is first "discovered," this is not strictly correct if "discover" is taken to mean that the Secretary merely has some reason to believe that an error might have been made. In some instances, after the Secretary becomes aware of an error in this sense, additional time may be needed to gather information, verify the error, and calculate the exact amount of a discrepancy. If so, the Secretary regards the "initial determination" as taking place at the point at which this process is complete and the agency is in the position to notify or repay the beneficiary. /9/ Respondents are mistaken in their repeated assertion that the "initial determination" takes place when notice is sent to a beneficiary. Although the regulations imply that notice of error sent to a beneficiary is an initial determination, see 20 C.F.R. 404.902, 416.1402, they also state that the initial determination is the "determination we make about your entitlement * * * to benefits or about any other matter," 20 C.F.R. 404.900, 416.1400 (emphasis added). See also 20 C.F.R. 404.902, 416.1402 (initial determination is the agency decision that is subject to review), 20 C.F.R. 404.904, 416.1404, 416.558 (notice of initial determination). /10/ In both the Wise and Everhart cases, there was a delay of a few months between the initial determination and notice. In both cases, the Secretary did not take into account any errors that might have been made in that interval, and thus applied the regulations correctly. The Everharts received a check in January 1985 for net underpayments due for the period August 1984 to January 1985, but were not formally notified of an underpayment error until March 1985. Although the letters the Everharts received did not state when the initial determination took place, they are completely consistent with the conclusion that the netting period ended in January 1985, the very month that the Secretary issued a check to the Everharts covering the period August 1984 to January 1985. See Exhibits B and C (letters of March 26, 1985), attached to Brief in Support of Plaintiffs' Motion for Summary Judgment. In the case of Berline Wise, the Appeals Council found that the Secretary had made an initial determination of error, which closed the netting period, in December 1983 (Wise Tr. 10). As respondents note, Ms. Wise was notified two months later, in February 1984 (Wise Tr. 98). The Appeals Council found that the Secretary had only taken into account monthly errors through November 1983, see Wise Tr. 98. Therefore, the netting period was closed at the proper time. /11/ Amicus complains that there is great potential for error or unfairness in the application of the netting regulations because beneficiaries are rarely "told that netting has taken place." They complain that even though beneficiaries may "realize that their benefits check is much lower than expected, they have no practical way of determining how or why this has happened." Amicus Br. 8. However, the Secretary's regulations do not permit monthly benefits checks to be "lower(ed)" to recoup overpayments without notice or an opportunity for a hearing. "Lump sum" reimbursements for past underpayments may be lower than "expected," but this would only be the result of a valid application of netting -- of which a beneficiary would receive notice -- or the proper application of the lump sum against a separate past overpayment amount for which the beneficiary has been found liable after notice and opportunity for waiver. See pp. 8-10 & n.5, infra. Moreover, contrary to Amicus' suggestion, the Secretary's regulations provide for adequate notice of the Secretary's error determinations, and give beneficiaries ample opportunity to challenge applications of the netting regulations in a timely fashion. Net overpaid beneficiaries under Title II must always be notified that a net overpayment has been made, and that waiver is available, before the agency attempts to collect the amount. See 20 C.F.R. 404.502a. Net underpaid beneficiaries receive a reimbursement check and are entitled to be notified under the general provision for written notice of an "initial determination," 20 C.F.R. 404.904. Under Title XVI, the agency is required to notify all individuals receiving benefits on the affected account every time there is a determination of a net overpayment or underpayment. 20 C.F.R. 416.558. Although notices received by beneficiaries under these regulations may not always contain a comprehensive or detailed review of the basis for an initial determination, all beneficiaries may obtain a more detailed explanation by requesting reconsideration of the notice decision. See 20 C.F.R. 404.907, 416.1407; Gov't Br. 32 n.13. As the case of the Everharts reveals, this scheme enables beneficiaries adequately to monitor and question determinations concerning their benefits accounts. After the Everharts received their net reimbursement check in January 1985, but before their initial notice arrived, they requested reconsideration from the Secretary. In response, on March 26, they received an explanation of the net underpayment, including information concerning the period over which errors were netted. See Exhibits B and C attached to Brief in Support of Plaintiffs' Motion for Summary Judgment. Their subsequent lawsuit was based on an objection to the netting practice, not on any quarrel with the accuracy or correctness of the calculations or of the agency's application of the netting method. /12/ See, e.g., Plaintiffs' Brief in Response to Defendants' Motion for Stay of Injunction 5-6 ("(I)f the netting methodology is not applied * * *, the Secretary would be required to remit the netted amounts to the plaintiffs, * * * (and then) to allow the plaintiffs the opportunity to request waiver of the entire overpayment."); see also affidavits from Emil Zweizen and Berline Wise attached as Exhibits A and C to the Brief (requesting immediate reimbursement). See also Plaintiffs' Proposed Order Granting Summary Judgment and Injunctive Relief 2 (submitted by respondents to the district court on February 10, 1987) ("(t)he Secretary shall immediately refund to the named plaintiffs and the plaintiff-intervenor the underpaid funds previously netted and retained by the Secretary"). The district court denied the government's motion for a stay of the injunction as to the named plaintiff-intervenors. Pet. App. 17a-19a. Soon thereafter, all were reimbursed the outstanding portion of their gross underpayments.