Massachusetts Medical Soc. v. Dukakis, Civ. A. No. 85-4312-K.

• Decision Date: 05 June 1986
• Docket Number: Civ. A. No. 85-4312-K.
• Citation: 637 F. Supp. 684
• Parties: MASSACHUSETTS MEDICAL SOCIETY; American Medical Association; and Joseph J. O'Connor, M.D., Plaintiffs, v. Michael S. DUKAKIS, Governor of Massachusetts; James French, Director of the Massachusetts Division of Registration; and Russell J. Rowell, M.D.; Marilyn Griffin, M.D.; Ralph A. Deterling, Jr., M.D.; Marian J. Ego, J.D., Ed. D.; Louise Liang, M.D.; and Melinda Milberg, Esq., Members of the Massachusetts Board of Registration in Medicine, Defendants, and Massachusetts Senior Action Council, Inc.; and Massachusetts Association of Older Americans, Inc., Defendant-Intervenors.
• Court: U.S. District Court — District of Massachusetts

637 F. Supp. 684

MASSACHUSETTS MEDICAL SOCIETY; American Medical Association; and Joseph J. O'Connor, M.D., Plaintiffs, v. Michael S. DUKAKIS, Governor of Massachusetts; James French, Director of the Massachusetts Division of Registration; and Russell J. Rowell, M.D.; Marilyn Griffin, M.D.; Ralph A. Deterling, Jr., M.D.; Marian J. Ego, J.D., Ed. D.; Louise Liang, M.D.; and Melinda Milberg, Esq., Members of the Massachusetts Board of Registration in Medicine, Defendants and Massachusetts Senior Action Council, Inc.; and Massachusetts Association of Older Americans, Inc., Defendant-Intervenors.

Civ. A. No. 85-4312-K.

United States District Court, D. Massachusetts.

June 5, 1986.

Jack R. Biering, Sidley & Austin, Chicago, Ill., Thayer Fremont-Smith, Choate, Hall & Stewart, Boston, Mass., Kathleen Curtis, Michael Kelly, Mass. Medical Soc., Waltham, Mass., Kirk Johnson, B.J. Anderson, American Medical Ass'n, Chicago, Ill., for plaintiffs.

Ellen Bruce, Greater Boston Elderly Legal Services, Daniel Manning, Greater Boston Legal Services, Boston, Mass., for defendants-intervenors.

Carl Valvo, Douglas H. Wilkins, Asst. Attys. Gen., Boston, Mass., for defendants.

Opinion

KEETON, District Judge.

In this civil action plaintiffs challenge the validity and enforceability of a state statute bearing upon the licensure of physicians in the Commonwealth of Massachusetts, Chapter 475 of the Massachusetts Acts of 1985 ("Chapter 475" or the "Act"). Chapter 475 provides that the Board of Registration in Medicine

shall require as a condition of granting or renewing a physician's certificate of registration, that the physician, who if he agrees to treat a beneficiary of health insurance under Title XVIII of the Social Security Act, shall also agree not to charge to or collect from such beneficiary any amount in excess of the reasonable charge for that service as determined by the United States Secretary of Health and Human Services.

The grounds of challenge include contentions that the statute and regulations implementing it violate due process and are inconsistent with preemptive federal legislation bearing upon balance billing of recipients of medical care who qualify for Medicare benefits under the Health Insurance for the Aged and Disabled Act, 42 U.S.C. §§ 1395, et seq. (Title XVIII of the Social Security Act) (the "Medicare Act").

In their amended complaint, plaintiffs also challenge the Act on the basis of Articles I and X of the Massachusetts Declaration of Rights. Defendants contend that this court has no jurisdiction over that claim, citing Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984). Plaintiffs apparently concede this point as they have failed to press the state constitutional aspect of their challenge in any of the hearings or numerous briefs which have been filed. I thus address only the federal claims raised by plaintiffs.

I.

It will be helpful at the outset to take note of terms that will appear frequently in the discussion of Chapter 475 and the Medicare Act.

Under the Medicare Act, physicians are paid for their services on the basis of the "reasonable charge" set by the Department of Health and Human Services ("HHS") for the service. The Medicare program pays 80 percent of the reasonable charge. The patient is responsible for the remainder of the physician's charge.

The reasonable charge is calculated by HHS on the basis of the physician's own "customary charge" for that service as well as the "prevailing charge" in the locality for similar services. 42 U.S.C. § 1395u(b)(3). 42 C.F.R. § 405.502(a).

The Medicare Act provides for two methods of payment. In the first, the physician accepts "assignment." This means that the physician agrees to accept the reasonable charge set by HHS as payment in full. The physician receives 80 percent of the reasonable charge from Medicare and collects the remaining 20 percent of the reasonable charge, but no more, from the patient. 42 U.S.C. § 1395u(b)(3)(B)(ii).

Under the second method, the physician bills the patient directly for the service. 42 U.S.C. § 1395u(b)(3)(B)(i). The patient then collects reimbursement from Medicare in the amount of 80 percent of the reasonable charge. The physician's actual charge under this method may be greater than the reasonable charge. In that circumstance the patient is responsible not only for the remaining 20 percent of the reasonable charge, but also for whatever amount in excess of the reasonable charge the physician has billed. The physician practice of charging an amount greater than the reasonable charge is called "balance billing."

In 1984 Congress established a provision whereby physicians were given certain incentives to become "participating physicians." 42 U.S.C. § 1395u(h)(1). Participating physicians agree to accept on assignment all of the Medicare beneficiaries whom they treat. That is, in return for certain advantages that do not go to "nonparticipating physicians," participating physicians agree not to balance bill. "Non-participating physicians" are, as the name would suggest, those physicians who do not sign participating physician agreements.

"Medex" is a form of private insurance available to supplement medical care costs of Medicare beneficiaries in Massachusetts.

II.

Under the Supremacy Clause a state law that "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," is impermissible. Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941). To determine whether a particular state law stands as such an obstacle, a court must determine whether there is either "a congressional design to preempt the field," or "such actual conflict between the two schemes of regulation that both cannot stand in the same area." See Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 141, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963).

In this case, plaintiffs contend that Chapter 475 violates the Supremacy Clause under both of these tests. First, they claim that when Congress enacted the Medicare Act, and those portions of the Deficit Reduction Act of 1984 that amended the Medicare Act ("1984 amendments"), it occupied the field of charges by and payments to physicians treating Medicare patients. Plaintiffs contend also that Chapter 475 directly conflicts with various provisions of the Medicare Act. Defendants contend that Congress did not manifest any intention to push the states out of the field of physician billing of Medicare recipients. Nor, according to defendants, does Chapter 475 conflict with any provision of the Medicare Act.

The first branch of the Supremacy Clause test—whether Congress has manifested its design to occupy the field—is purely a question of law. I conclude that Congress has not manifested any intent to preempt the states from enacting the kind of legislation at issue in this case.

In a case such as this, it advances the analysis little to ask merely whether Congress manifested an intent to occupy. There must be, as well, a determination of what the "field" is.

Plaintiffs would have the court define that field broadly. In support of their contention that Congress intended to preclude states from enacting legislation such as Chapter 475, plaintiffs point to the fact that the system of Medicare payments is funded and administered entirely by the federal government. See, e.g., 42 U.S.C. § 1395j ("There is hereby established a voluntary insurance program ... financed from premium payments by enrollees together with contributions from funds appropriated by the Federal Government.") Plaintiffs place particular emphasis on a statement by Congressman Wilbur Mills, Chairman of the House Ways and Means Committee and a leader in the passage of the Medicare Act, that "it will not be possible for a state agency to administer Medicare." 111 Cong. Rec. H18382 (daily ed. July 27, 1965).

Plaintiffs' references to the statute and to legislative history do not support a contention that the "field" that Congress occupied was all matters relating to the billing of Medicare recipients. Instead, they support a reading that Congress designed an exclusively federal program for payment of benefits toward the medical bills of Medicare recipients. That is, Congress provided that the "administration" of the voluntary medical insurance system called Medicare would be in the hands of the federal government only.

In the context of this question of the scope of the field that Congress occupied, the parties have engaged in some debate over §§ 1395 and 1395x(r). These sections provide respectively that no federal agency or official will interfere with the practice of medicine and that the definition of "physician" is left to the states as a matter of state law. Defendants argue that these sections evidence Congress' design to give the states an affirmative role in regulating physician behavior as it relates to Medicare patients, including billing practices. Plaintiffs contend that these sections do no more than proscribe any federal interference with physicians' choice of treatment plans and recognize the states' traditional role in determining technical proficiency requirements for physician licensure.

The most accurate reading of these sections lies somewhere between these contentions. Clearly the "practice of medicine," with which the federal government is not to interfere, includes more than treatment choice. So also, the states' role in determining who shall practice medicine and subject to what conditions must include more than the regulation of technical proficiency. The economics of physician practice play a role in both the practice of medicine and the licensure and supervision of physicians; in §§ 1395 and 1395x(r) Congress expressly indicated that both practice and licensure were outside its field of occupation.

On the other hand, defendants' reading of those sections taken broadly...