273 F.3d 805 (8th Cir. 2001), 00-3139, Minnesota Senior Fed'n v United States

Docket Nº:00-3139
Citation:273 F.3d 805
Party Name:MINNESOTA SENIOR FEDERATION, METROPOLITAN REGION; MARY SARNO, PLAINTIFFS-APPELLANTS, v. UNITED STATES OF AMERICA; TOMMY G. THOMPSON[*], SECRETARY OF HEALTH AND HUMAN SERVICES, DEFENDANTS-APPELLEES.
Case Date:December 13, 2001
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Page 805

273 F.3d 805 (8th Cir. 2001)

MINNESOTA SENIOR FEDERATION, METROPOLITAN REGION; MARY SARNO, PLAINTIFFS-APPELLANTS,

v.

UNITED STATES OF AMERICA; TOMMY G. THOMPSON[*], SECRETARY OF HEALTH AND HUMAN SERVICES, DEFENDANTS-APPELLEES.

No. 00-3139

United States Court of Appeals, Eighth Circuit

December 13, 2001

Submitted: May 17, 2001

Appeal from the United States District Court for the District of Minnesota.

Page 806

Before Loken, Ross, and Fagg, Circuit Judges.

Loken, Circuit Judge.

The "Medicare+Choice" program was enacted as part of the Balanced Budget Act of 1997 and is now codified at 42 U.S.C. §§ 1395w-21 to w-28. The program includes reimbursement provisions that encourage managed health care organizations to be cost-effective and to pass cost savings on to their members in the form of additional benefits or reduced charges. As under prior law, cost effectiveness

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is measured by a formula based primarily on "fee-for-service" health care costs in each local community, an approach that results in substantial geographic variations. Though Congress intended to reduce these disparities, the Medicare+Choice formula still produces wide variations in the payments Medicare provides to managed health care providers. Because "excess" payments may be passed on to Medicare beneficiaries, the end result is that Medicare benefits are more generous in some communities than in others.

In this case, the Minnesota Senior Federation and Mary Sarno, a Florida resident who would like to live with her daughter in Minnesota, seek a declaratory judgment that the Medicare+Choice formula violates their constitutional rights to travel and to equal protection of the law. The district court1 granted defendants' motion to dismiss for failure to state a claim upon which relief may be granted. Minnesota v. United States, 102 F.Supp.2d 1115 (D. Minn. 2000).2 The Federation and Sarno appeal. Reviewing the dismissal de novo, and taking all facts alleged in the complaint as true, see Knapp v. Hanson, 183 F.3d 786, 788 (8th Cir. 1999) (standard of review), we affirm.

I. Background

Medicare was established in 1965 and presently serves some thirty-nine million elderly and disabled Americans. Uniform benefits were initially provided under Medicare Part A and Medicare Part B, and these programs continue today. See 42 U.S.C. §§ 1395c-1395i-5; 1395j-1395w-4. For beneficiaries who enroll in Parts A and B and elect to obtain benefits on a "fee-for-service" basis, Medicare payments are made for each service rendered. Amounts Medicare pays to providers vary in part because of geographic differences in the fees charged for providing those services.

In 1972, Congress enacted Medicare Part C, a program that permits managed health care organizations to enter into "risk contracts" under which the organization provides a full range of Medicare services and receives a single monthly capitation payment for each enrollee. See 42 U.S.C. § 1395mm; 42 C.F.R. § 417.594. Capitation payments are determined by a formula that is based upon the projected cost of treating beneficiaries under the traditional fee-for-service system. Thus, the formula incorporates wide geographic variations in health care costs. But under Medicare Part C, the variations can result in different benefits to Medicare beneficiaries because, when a managed care organization receives more in capitation payments from Medicare than it costs to provide Medicare services to its enrollees (an "excess" that is determined by a complex formula), it may pass this cost saving on to enrollees in the form of reduced premiums, reduced co-payments, or additional health care benefits. See 42 U.S.C. § 1395mm(g)(2); 42 C.F.R. § 417.592.

Medicare+Choice, which is the new Medicare Part C, was enacted in 1997 to "allow beneficiaries to have access to a wide array of private health plan choices in addition to traditional fee-for-service...

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