United Seniors Assc. v. Shalala

Citation182 F.3d 965
Decision Date16 July 1999
Docket NumberNo. 98-5142,98-5142
Parties(D.C. Cir. 1999) United Seniors Association, Inc., et al.,Appellants v. Donna E. Shalala, Secretary, United States Department of Health and Human Services, Appellee
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Appeal from the United States District Court for the District of Columbia(No. 97cv03109)

Kent Masterson Brown argued the cause for appellants. With him on the briefs was Frank M. Northam. Jerome P. Friedlander, II, entered an appearance.

Thomas M. Bondy, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief were

Frank W. Hunger, Assistant Attorney General, Wilma A. Lewis, U.S. Attorney, and Barbara C. Biddle, Attorney, U.S. Department of Justice.

John S. Hoff, Arthur B. Spitzer and Jeffrey P. Altman were on the brief for amici Citizens Against Government Waste, et al.

Before: Williams, Sentelle and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Garland.

Garland, Circuit Judge:

Section 4507 of the Balanced Budget Act of 1997 provides that, for certain medical services, a doctor may not contract with a Medicare beneficiary outside of Medicare unless the doctor agrees to abstain from participating in the Medicare program for two years. Plaintiffs, a senior citizens' organization and four individual Medicare beneficiaries, contend that section 4507 is unconstitutional on a number of grounds. The district court found the statute constitutional and granted summary judgment for the Secretary of Health and Human Services. We affirm the grant of summary judgment without reaching the constitutional questions because the Secretary's recently-clarified interpretation of section 4507, to which we must defer, eliminates the injury that is the basis of plaintiffs' constitutional attack.

I

Medicare is a comprehensive insurance program designed to provide health insurance benefits for individuals 65 and over, as well as for certain others who come within its terms. See 42 U.S.C. §§ 1395c, 1395j. The program is administered by the Health Care Financing Administration (HCFA), a part of the U.S. Department of Health and Human Services (HHS). In broad terms, Medicare Part A, which is not at issue in this case, covers care provided by institutional health care providers including hospitals. See id. §§ 1395c-1395i.Medicare Part B, which is the focus here, covers medical services including those provided by physicians. See id. §§ 1395j to 1395w-4. Part B is financed by a combination of government funding and premiums paid by beneficiaries. See id. § 1395j. Doctors who provide medical services to Part B beneficiaries must submit claim forms identifying the services provided. See id. § 1395w-4(g)(4)(A)(i). They receive compensation in accordance with fee schedules that limit the amount they may charge and be paid. See id. § 1395w4(g)(2)(C), (D).1

Certain kinds of medical services, such as routine physical checkups, are categorically excluded from Medicare coverage.See id. § 1395y(a)(7). Those that are not categorically excluded may only be reimbursed when medically "reasonable and necessary." Id. § 1395y(a)(1)(A). If a service is deemed not to have been reasonable and necessary, Medicare will not make payment and the doctor generally is prohibited from charging the patient. See id. § 1395u(b)(3)(B)(ii), (l)(1)(A).2

Because at the time a physician provides a service it may not be certain whether Medicare will regard it as reasonable and necessary, the Medicare program includes a provision for an "Advance Beneficiary Notice" ("ABN"). Under this provision, in advance of providing a service the doctor may give the patient an ABN, which advises that Medicare may not pay for the service. See id. § 1395u(l)(1)(C)(ii). If the patient agrees to pay from his or her own funds if Medicare does not, and if Medicare subsequently denies payment, the doctor may bill the patient directly. See id.

In August 1997, Congress enacted section 4507 of the Balanced Budget Act of 1997, Pub. L. 105-33, § 4507, 111 Stat. 251, 439 (codified at 42 U.S.C. § 1395a). The section establishes rules for what it describes as "the use of private contracts by medicare beneficiaries." Id. Section 4507(b)(1) permits doctors and patients to contract for certain services outside of Medicare and without its fee limitations:

Subject to the provisions of this subsection, nothing inthis title shall prohibit a physician or practitioner fromentering into a private contract with a medicare benefi-ciary for any item or service --

(A) for which no claim for payment is to be submittedunder this title, and(B) for which the physician or practitioner receives... no reimbursement under this title....42 U.S.C. § 1395a(b)(1); see id. § 1395a(b)(4). Section 4507(b)(2), entitled "[b]eneficiary protections," lists certain provisions that private contracts authorized by (b)(1) must include:

Any contract to provide items and services to whichparagraph (1) applies shall clearly indicate ... that bysigning such contract the Beneficiary --

(i) agrees not to submit a claim (or to request that the physician or practitioner submit a claim) under this title for such items or services even if such items or services are otherwise covered by this subchapter;(ii) agrees to be responsible, whether through insurance or otherwise, for payment of such items or ser-vices and understands that no reimbursement will be provided under this title for such items or services;(iii) acknowledges that no limits under this title ...apply to amounts that may be charged for such items or services;

... ; and

(v) acknowledges that the medicare beneficiary has the right to have such items or services provided by other physicians or practitioners for whom payment would be made under this title .

Id. § 1395a(b)(2)(B).

Finally, section 4507(b)(3) further provides that such private contracts are authorized only if the physician signs an affidavit which states that he or she

will not submit any claim under this title for any item or service provided to any medicare beneficiary (and will not receive any [Medicare] reimbursement ... for anysuch items or service) during the 2-year period beginning on the date the affidavit is signed....

Id. § 1395a(b)(3)(B)(ii). This means that a doctor who enters into a section 4507 private contract with even a single patient is barred from submitting a claim to Medicare on behalf of any patient for a two-year period.

II

Plaintiffs contend that section 4507 effectively makes it impossible for them to contract for medical services outside of the Medicare system--particularly for services Medicare will not cover, either because they are categorically excluded or because Medicare deems them unreasonable or unnecessary in a particular case. As plaintiffs read the section, it governs almost any agreement between a doctor and patient to provide medical services outside of Medicare, without regard to whether Medicare would pay for the service if a claim were submitted. Plaintiffs argue that it will be virtually impossible to find a doctor willing to enter into such an agreement, given the importance of Medicare to doctors' practices and the two year bar the statute imposes for entering into even a single private contract.3 The Secretary concedes that very few doctors will be willing to opt out of Medicare, Oral Arg. Tr. at 22, and generally agrees that the two-year restriction "represents a substantial barrier to the receipt of contracted services." United Seniors Ass'n., Inc. v. Shalala, 2 F. Supp. 2d 39, 41 (D.D.C. 1998).

Plaintiffs also reject the suggestion that the ABN procedure provides a way to relieve the constraints imposed by section 4507. They recognize that an agreement under an ABN is not a "private contract" under section 4507, and hence is not subject to its two-year bar. See 63 Fed. Reg. 58,814, 58,851 (1998). In theory this should mean that patients can obtain services they and their doctors consider reasonable or necessary, even if Medicare ultimately does not, by executing ABNs. But plaintiffs regard the ABN option as unworkable. First, it does not apply to services categorically excluded from Medicare. Second, plaintiffs contend that under HCFA rules, doctors who routinely use ABNs to obtain reimbursement for services Medicare deems unreasonable or unnecessary are subject to penalties and sanctions. Thus, plaintiffs do not view ABNs as a practical solution to the problem created by section 4507.

Nor, plaintiffs contend, is it realistic to suggest that senior citizens can avoid the restrictions of section 4507 by simply opting out of Medicare Part B altogether. Notwithstanding the government's repeated suggestion that "plaintiffs may disenroll at any time" from Part B, see, e.g., HHS Br. at 3, 27, 28, 29, at oral argument it conceded there is no "meaningful equivalent to Medicare" in the private market. Oral Arg. Tr. at 18-19.4 Accordingly, opting out is hardly a viable way for patients to bypass section 4507.

Plaintiffs' complaint charges that the restrictions imposed by section 4507 violate the First, Fourth, Fifth, Ninth, Tenth and Fourteenth Amendments to the Constitution, as well as the Spending Clause of Article I, section 8. Plaintiffs contend those restrictions violate their liberty to contract privately for health care services, violate their ability to maintain the privacy of their medical information by requiring them to file claims for all medical services, and violate their equal protection and due process rights by denying them the same liberty to contract enjoyed by other citizens. They also contend that section 4507 exceeds Congress' powers under the Spending Clause, and invades the reserved powers of the States and the people under the Tenth Amendment, by regulating health care for which the federal government does not pay.

Critical to our analysis is that the injury plai...

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