Arizona Health Care Cost Containment v. Mcclellan

• Decision Date: 03 December 2007
• Docket Number: No. 05-16386.,05-16386.
• Citation: 508 F.3d 1243
• Parties: ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM; Anthony D. Rodgers, in his official capacity as Director of the Arizona Health Care Cost Containment System, Plaintiffs-Appellees, v. Mark B. McCLELLAN, in his official capacity as administrator of the Centers for Medicare and Medicaid Services; Mike Leavitt, in his official capacity as Secretary of the U.S. Department of Health and Human Services; The Centers for Medicare and Medicaid Services; Thomas A. Scully, Administrator, in his official capacity as administrator of the Centers for Medicare and Medicaid Services; Department of Health & Human Services; Tommy G. Thompson, in his official capacity as Secretary of the U.S. Department of Health and Human Services, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

508 F.3d 1243

ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM; Anthony D. Rodgers, in his official capacity as Director of the Arizona Health Care Cost Containment System, Plaintiffs-Appellees, v. Mark B. McCLELLAN, in his official capacity as administrator of the Centers for Medicare and Medicaid Services; Mike Leavitt, in his official capacity as Secretary of the U.S. Department of Health and Human Services; The Centers for Medicare and Medicaid Services; Thomas A. Scully, Administrator, in his official capacity as administrator of the Centers for Medicare and Medicaid Services; Department of Health & Human Services; Tommy G. Thompson, in his official capacity as Secretary of the U.S. Department of Health and Human Services, Defendants-Appellants.

No. 05-16386.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 15, 2007.

Filed December 3, 2007.

Jonathan H. Levy, Civil Division, U.S. Department of Justice, Washington, DC, for the defendants-appellants.

Charles A. Miller and Donald J. Ridings Jr., Covington & Burling, Washington, DC, for the plaintiffs-appellees.

Appeal from the United States District Court for the District of Arizona; Paul G. Rosenblatt, District Judge, Presiding. D.C. No. CV-03-02445-PGR.

Before: DIARMUID F. O'SCANNLAIN and SANDRA S. IKUTA, Circuit Judges, and LEONARD B. SAND,^* Senior Judge.

IKUTA, Circuit Judge:

This appeal requires us to resolve conflicting statutory interpretations of § 402(e) of the Indian Health Care Improvement Act, 42 U.S.C. § 1396d(b), which requires the federal government to pay 100 percent of certain Medicaid costs for services "which are received through an Indian Health Service facility."¹ The Arizona Health Care Cost Containment System ("Arizona"), the state entity that administers Arizona's Medicaid program, interprets this language as requiring the federal government to reimburse states for all health care services provided to Medicaid-eligible Indians under referral agreements between health care service providers and the Indian Health Service ("IHS"). By contrast, the Health Care Financing Administration ("HCFA"),² the federal entity that administers Medicaid, interprets this language as requiring the federal government to reimburse states only for health care services provided by "an IHS facility which offers, is responsible for and bills Medicaid for the services provided." The district court held that Arizona's interpretation was correct and granted Arizona's motion for summary judgment. We have jurisdiction pursuant to 28 U.S.C. § 1291 and now reverse.

I

As part of its unique government-to-government relationship with American Indian Tribes and Alaska Native corporations, the federal government provides health care services to roughly 1.9 million American Indian and Alaska Native people. See 25 U.S.C. § 1601; Lincoln v. Vigil, 508 U.S. 182, 185, 113 S.Ct. 2024, 124 L.Ed.2d 101 (1993); IHS Fact Sheet (2007), http://info.ihs.gov/Files/IHSFacts-Jan2007.doc (last visited November 7, 2007). Since 1955, IHS, now a federal agency within the Department of Health and Human Services ("HHS"), has been responsible for providing these services. From its inception, IHS had sought to accomplish its objectives primarily by building and staffing its own facilities on or near Indian communities. Am. Indian Policy Review Comm'n, Report on Indian Health 94, 105 (Comm. Print 1976). Geographical logistical, and financial limitations made it impossible for IHS to provide the full range of medical services in this manner, and IHS routinely entered into different types of agreements with other health services providers to fill in gaps in IHS services. Id. at 105.

In 1965, the Medicaid program was signed into law. Medicaid, a joint federal and state medical welfare program, provides for state Medicaid agencies to reimburse health care providers for the cost of covered services delivered to Medicaid beneficiaries. 42 U.S.C. §§ 1396, 1396a. The federal government then reimburses the states for all or part of those expenditures. 42 U.S.C. §§ 1396b, 1396d(b). The rate at which the federal government reimburses the states for Medicaid expenditures, called the "federal medical assistance percentage," or "FMAP," typically ranges from 50 to 83 percent. See 42 U.S.C. § 1396d(b). The federal government recalculates the FMAP reimbursement rate annually based on each state's per capita income. See id. §§ 1396d(b), 1301(a)(8)(B). Although Medicaid-eligible Indians were entitled to use non-IHS service providers to the same extent as other citizens of a state, the degree to which Indians actually benefited from the newly established Medicaid programs is "unclear." Report on Indian Health, supra, at 85.

In 1976, Congress found that many IHS facilities were "inadequate, outdated, inefficient, and undermanned," and enacted the Indian Health Care Improvement Act ("IHCIA") to "implement the Federal responsibility for the care and education of the Indian people by improving the services and facilities of Federal Indian health programs and encouraging maximum participation of Indians in such programs." IHCIA, Pub.L. No. 94-437, 90 Stat. 1400 (1976). Title IV of the IHCIA contained numerous provisions aimed at upgrading the overall quality of IHS facilities. See IHCIA §§ 401-03.

Relevant here, § 402(a) of the IHCIA amended the Social Security Act to permit IHS facilities to obtain Medicaid reimbursement for services provided to Medicaid-eligible Indians. See IHCIA § 402(a), 42 U.S.C. § 1396j. As a result, IHS facilities could receive reimbursement from Medicaid as well as funding through direct Congressional appropriations. Because states previously did not provide Medicaid funding for IHS health care services, this enactment would have imposed an additional burden on states' Medicaid programs. To avoid this result, Congress amended § 1905(b) of the Social Security Act, 42 U.S.C. § 1396d(b), by inserting the following language:

Notwithstanding the first sentence of this section [explaining how the "federal medical assistance percentage" will be calculated for each state], the Federal medical assistance percentage shall be 100 per centum with respect to amounts expended as medical assistance for services which are received through an Indian Health Service facility.

IHCIA § 402(e), 42 U.S.C. § 1396d(b) (emphasis added).

Immediately after the enactment of the IHCIA, and for the next twenty years, HCFA interpreted this language as requiring a FMAP reimbursement rate of 100 percent for health care services provided by IHS for Medicaid-eligible Indians, when IHS billed Medicaid directly for those services. HCFA did not allow a FMAP reimbursement rate of 100 percent for health care services provided by non-IHS providers, even when IHS had entered into referral agreements with those providers.

HCFA's interpretation of § 402(e) corresponded to the different types of agreements IHS had used to supplement its services. In some cases, an IHS facility would offer a health care service to its Indian patients, and provide the service by purchasing it from a contractor (a non-IHS health service provider). After the enactment of the IHCIA, IHS billed Medicaid directly for these services. IHS also entered into referral agreements with non-IHS providers. Under these agreements, the non-IHS provider agreed to furnish medical services at a rate no higher than the prevailing Medicare allowable rates to Medicaid-eligible Indians referred by IHS. Reimbursement Rates for Health Care Services Authorized Under the Indian Health Service Contract Health Service Regulations, 51 Fed.Reg. 23,540 (June 30, 1986). IHS did not bill Medicaid for such services. Before 1997, Arizona neither received nor claimed a FMAP reimbursement rate of 100 percent for services provided to Medicaid-eligible Indians under these referral agreements.

In 1997, HCFA issued a memorandum to an associate regional administrator in HCFA Region IX³ in response to Arizona's question whether non-emergency transportation provided to Indians was eligible for a FMAP reimbursement rate of 100 percent. The HCFA memo stated:

[W]e do not agree that non-emergency transportation is a service provided "through an IHS facility." Our position on this issue is that in order for IHS services to qualify for 100% FMAP, the service must be: (1) provided by IHS, or a contractual agent of an IHS or tribal facility, (2) considered as a "facility service"; that is, a service that would be within the proper scope of services which can be claimed by that facility, and (3) claimed by the IHS facility as a service of that facility. These services are referred to in regulation at 42 CFR 440.10 ("Inpatient hospital services") and 42 CFR 440.20 ("Outpatient hospital services and rural health facility services")[.]

For most facilities, services are furnished within the physical confines of the facility. Satellite facilities owned or leased, and operated by IHS or tribal 638 programs, are also considered to be within the physical confines of an IHS/tribal facility.⁴ Referred services, provided through a contractual arrangement, can also be considered provided "through an IHS facility" and reimbursed at the 100% FMAP rate as long as these are services that could be provided as a "facility service", as referenced by regulation above. Any other type of services, such as nonemergency transportation, are not considered to be "facility services", and therefore should be reimbursed at the normal State/Federal match rate.

Memorandum from the Acting Dir., Medicaid Bureau, to the Assoc. Reg'l Adm'r, Div. of Medicaid, Region IX (May 15, 1997) (emphasis added).

Arizona interpreted the memorandum's statement that a FMAP reimbursement rate of 100 percent applied to "[r]eferred services, provided through a contractual arrangement" as extending to all health care services provided under referral agreements between IHS and non-IHS service providers. As a result of...