Downhour v. Somani

• Decision Date: 07 June 1996
• Docket Number: No. 94-4232,94-4232
• Citation: 85 F.3d 261
• Parties: , 51 Soc.Sec.Rep.Ser. 9, Medicare & Medicaid Guide P 44,418 Warren J. DOWNHOUR, D.O., Virginia Forney, Richard E. Shaw, Warren D. Jacobs, Nino M. Camardese, M.D., George Lierenz, Sam Giallombardo, Don Daugherty, Sara Presley and Hilda Ruggles, Plaintiffs-Appellants, v. Peter SOMANI, M.D., individually and as Director of the Ohio Department of Health, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 261

85 F.3d 261

65 USLW 2043, 51 Soc.Sec.Rep.Ser. 9,

Medicare & Medicaid Guide P 44,418

Warren J. DOWNHOUR, D.O., Virginia Forney, Richard E. Shaw Warren D. Jacobs, Nino M. Camardese, M.D., George Lierenz Sam Giallombardo, Don Daugherty, Sara Presley and Hilda Ruggles, Plaintiffs-Appellants, v. Peter SOMANI, M.D., individually and as Director of the Ohio Department of Health, Defendant-Appellee.

No. 94-4232.

United States Court of Appeals, Sixth Circuit.

Argued Jan. 26, 1996.

Decided June 7, 1996.

John B. Spitzer (briefed), Hummer Legal Services Corporation, Perrysburg, OH, Kent Masterson Brown (argued and briefed), and Christopher J. Shaughnessy, Brown, Kinkead & Bulleit, Lexington, KY, for Plaintiffs-Appellants.

Dennis G. Nealon and Elise W. Porter (argued and briefed), Office of the Attorney General of Ohio, Columbus, OH, for Defendant-Appellee.

Before: MARTIN, GUY, and RYAN, Circuit Judges.

RYAN, Circuit Judge.

The plaintiffs, two health care practitioners and several of their patients, filed an action seeking declaratory and injunctive relief to restrain the defendant from enforcing OHIO REV.CODE ANN. §§ 4769.01 & 4769.02, alleging, inter alia, that the statutes violate the Supremacy Clause, U.S. CONST. art. VI, cl. 2, because they are preempted by the Medicare Act, 42 U.S.C. §§ 1395-1395ccc. The complaint also contended that the statutes are void for vagueness, violate due process and equal protection guarantees, and infringe upon the constitutional right to privacy. The plaintiffs appeal from the district court's grant of summary judgment in favor of the defendant. Concluding that none of the plaintiffs' constitutional arguments has merit, we affirm.

I.

In 1965, Congress enacted the "Federal Health Insurance for the Aged and Disabled" program, more commonly known as Medicare. 42 U.S.C. §§ 1395-1395ccc. Part A covers those services provided by institutions such as hospitals, 42 U.S.C. §§ 1395c-1395i-4; it is not implicated by this case. Part B provides supplemental medical insurance benefits for certain health care, including physician services. 42 U.S.C. §§ 1395j-1395w-4. Benefits under Part B are administered by private insurance carriers, who in turn are supervised by the Department of Health and Human Services. 42 U.S.C. § 1395u.

Under Medicare, a physician may choose to be a "participating" physician by "accepting assignments," meaning that the physician directly bills Medicare or, more precisely, the local Medicare insurance carrier for his services. If the claim is for a reimbursable, covered service, Medicare will pay 80% of what it has determined to be its approved rate, calculated pursuant to 42 U.S.C. § 1395w-4. The Medicare beneficiary is then responsible for a copayment of the remaining 20%. A participating physician agrees to accept the resulting 100% of the approved rate as full payment, even if it is less than his actual bill. See 42 U.S.C. § 1395l (a)(1).

In the alternative, a physician may choose not to accept assignments, which means he presents an itemized bill directly to a Medicare patient for his full charge. The patient applies in turn to Medicare, which will, as with participating physicians, reimburse 80% of its approved rate. Unlike in the case of a participating physician, however, the nonparticipating physician may then charge the patient for more than the 20% copayment, as Medicare provides that a nonparticipating physician is not prohibited from charging up to a total of 115% of the Medicare-approved rate. See 42 U.S.C. §§ 1395l (a)(1), 1395u(b)(3)(B)(i). The practice of charging the patient for more than 20% of the Medicare-approved rate is commonly referred to as balance billing, although this is not a term used in the Medicare statute. This 115% limit was an innovation of the Omnibus Budget Reconciliation Act of 1989, which provided that, beginning January 1, 1991, nonparticipating physicians could balance bill only up to a "limiting charge," which, for 1991, was 25% above the Medicare-determined allowable charge; for 1992, 20%; and for 1993 and thereafter, 15%. 42 U.S.C. § 1395w-4(g)(1)-(2).

On January 14, 1993, a group of statutes relating to the ability of health care practitioners to balance bill Medicare patients became effective in Ohio. The term "health care practitioner" includes "[a] physician authorized ... to practice medicine and surgery, osteopathic medicine and surgery, or podiatry," OHIO REV.CODE ANN. § 4769.01(C)(6) (Anderson 1994), and thus includes the plaintiff-physicians. Balance billing was originally defined as "charging or collecting an amount in excess of the amount reimbursable under the medicare program for medicare-covered services or supplies provided to a beneficiary of the program," OHIO REV.CODE ANN. § 4769.01(B) (Anderson 1994) (emphasis added). In the plaintiffs' view, this language imposed a requirement that a Medicare claim be filed whenever a service was performed, in order to determine what amount was "reimbursable" under Medicare. Also, as originally written, the statutes prohibited health care providers from balance billing only those Medicare patients whose family incomes were less than 600% of the poverty guidelines, but allowed balance billing of other, wealthier patients. OHIO REV.CODE ANN. § 4769.02 (Anderson 1994).

Effective November 24, 1995, however, the statute was amended, and now provides simply that "[n]o health care practitioner ... shall balance bill for any supplies or service provided to a medicare beneficiary." OHIO REV.CODE ANN. § 4769.02 (Supp.1995). Thus, the prohibition is no longer tied to the income level of the Medicare beneficiaries. Moreover, balance billing is now defined as "charging or collecting from a medicare beneficiary an amount in excess of the medicare reimbursement rate for medicare-covered services or supplies provided to a medicare beneficiary." OHIO REV.CODE ANN. § 4769.01(B) (Supp.1995). In other words, the statute now makes plain that it only applies once a Medicare claim has been filed, and that it imposes no independent requirement of filing a claim; if no claim is filed, the Ohio prohibition on balance billing simply is not activated. The statutory prohibition is enforced through complaints filed by those Medicare beneficiaries who believe they have been overcharged and who object to it; that is, there are no independent state investigations. Violations are punished by civil penalties. See generally OHIO REV.CODE ANN. §§ 4769.03-.10 (Supp.1995).

The plaintiffs filed suit challenging only OHIO REV.CODE ANN. §§ 4769.01-.02, which define and prohibit balance billing; the plaintiffs did not challenge the enforcement provisions of the statutory scheme. The first amended complaint alleged, inter alia, that the statutes were impliedly preempted by Medicare. In addition, the complaint alleged that the statute's original language, then in effect, providing for differential treatment of Medicare recipients based on their income was violative of the Equal Protection Clauses and the Due Process Clauses of the Fifth and Fourteenth Amendments. The plaintiffs further contended that the statutes were void for vagueness, because of the failure to define terms such as "family income." Finally, the plaintiffs asserted that the Ohio law required them to file Medicare claims in order to determine whether a claim was "reimbursable," and that this requirement violated their constitutional right to privacy; likewise, their constitutional right to privacy was violated by an implicit requirement that patients provide their personal financial information in order to determine whether they met the 600%-of-poverty-level threshold.

On the parties' cross-motions for summary judgment, the district court granted summary judgment in favor of the defendant, dismissing all of the plaintiffs' claims. The plaintiffs then filed this timely appeal.

II.

When a district court's disposition of a case on cross-motions for summary judgment involves purely legal issues, this court's review is plenary. Schilz v. City of Taylor, 825 F.2d 944, 946 (6th Cir.1987).

III.

A.

At the heart of the plaintiffs' appeal is their argument that the Ohio statutes in question are preempted by Medicare. There has traditionally been a presumption against federal preemption of state law. Broyde v. Gotham Tower, Inc., 13 F.3d 994, 997 (6th Cir.) (citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992)), cert. denied, --- U.S. ----, 114 S.Ct. 2137, 128 L.Ed.2d 866 (1994); see New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., --- U.S. ----, ----, 115 S.Ct. 1671, 1676, 131 L.Ed.2d 695 (1995). There is, moreover, an additional and related judicial " 'assumption that the historic police powers of the States [are] not to be superseded by ... Federal [law] unless that was the clear and manifest purpose of Congress.' " Interstate Towing Ass'n, Inc. v. City of Cincinnati, 6 F.3d 1154, 1161 (6th Cir.1993) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947)); see New York State Conference, --- U.S. at ----, 115 S.Ct. at 1676. Accordingly, if the subject matter of the state statute is one within the state's traditional powers, the party arguing federal preemption must show that preemption was the "clear and manifest purpose of Congress." Pacific Gas & Elec. Co. v. State Energy Resources Conservation & Dev. Comm'n, 461 U.S. 190, 206, 103 S.Ct. 1713, 1723, 75 L.Ed.2d 752 (1983).

As an initial matter, the parties disagree whether the Ohio statutes address a subject traditionally regulated by the states, thus requiring the plaintiffs to satisfy the high "clear and manifest purpose" standard. While public health care is indisputably such a traditionally regulated matter, see New York State Conference, --- U.S. at ---- - ----, 115 S.Ct. at 1676-77; Hillsborough County v. Automated Medical Lab., Inc., 471 U.S. 707, 719, ...