McCreary v. Offner

• Decision Date: 13 April 1999
• Docket Number: No. 98-5155,98-5155
• Citation: 172 F.3d 76
• Parties: Maurice McCREARY, M.D., et al., Appellants, v. Paul OFFNER, Commissioner of Health Care Finance of the District of Columbia Department of Human Services, and United States of America, Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 76

172 F.3d 76

335 U.S.App.D.C. 258

Maurice McCREARY, M.D., et al., Appellants, v. Paul OFFNER, Commissioner of Health Care Finance of the District of Columbia Department of Human Services and United States of America, Appellees.

No. 98-5155.

United States Court of Appeals District of Columbia Circuit.

Argued Dec. 8, 1998.

Decided April 13, 1999.

Appeal from the United States District Court for the District of Columbia (No. 97cv01524).

James A. Barker, Jr. argued the cause for appellants. With him on the briefs was Allen V. Farber.

Alisa B. Klein, Attorney, U.S. Department of Justice, argued the cause for appellees. With her 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 M. Ferren, Corporation Counsel, Charles L. Reischel, Deputy Corporation Counsel, and Lutz Alexander Prager, Assistant Deputy Corporation Counsel, were on the brief for appellee Paul Offner.

Before: WALD, TATEL and GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

Under Medicaid's "buy-in" program, states must use Medicaid funds to enroll certain needy, Medicare-eligible individuals in Medicare's Part B supplemental insurance program. In this case, we must determine whether the buy-in program requires states to reimburse Medicare providers the entire twenty percent copayment that patients normally pay for a particular service under Part B, or whether, as the United States Department of Health and Human Services has long permitted, states may limit reimbursement to the almost always lower Medicaid rate for the same service. Relying on HHS policy, the District of Columbia began capping copayment reimbursement at Medicaid rates in 1990. Appellants, a group of District of Columbia doctors, challenge the District's policy, arguing that until Congress amended the buy-in statutes in 1997, the law required the District to reimburse them at Medicare rates. Finding the pre-1997 statutes ambiguous as to state copayment reimbursement obligations, and finding HHS's interpretation reasonable, we affirm the district court's grant of summary judgment for the District.

I

Enacted in 1965, Medicare finances medical procedures for people over 65 and people with disabilities. See 42 U.S.C. §§ 1395-1395ccc (1994). Medicare has two parts, Part A and Part B. Part A provides reimbursement for inpatient hospital care and related post-hospital, home health, and hospice care. See id. §§ 1395c to 1395i-4. Enrollment in Part A is automatic. Part B is voluntary. It provides supplemental insurance for hospital out-patient services, physician services, and other medical services not covered under Part A. See id. §§ 1395j to 1395w-4. Part B imposes cost-sharing obligations on people who choose to participate. These include an annual deductible, monthly premiums, and--of particular relevance to this case--copayments. Copayments consist of twenty percent of the "reasonable charge" for the service rendered, an amount determined annually by HHS. See id. § 1395l(a). Medicare directly reimburses Part B providers for the remaining eighty percent. See id.

Also enacted in 1965, Medicaid, a cooperative federal-state program, finances medical care for the poor, regardless of age. See 42 U.S.C. §§ 1396-1396v (1994). Participating states must establish financial eligibility criteria, identify covered medical services, develop rate schedules, and submit their plans to HHS for approval. See id. §§ 1396a(a), 1396a(b). HHS approval entitles a state to substantial federal funding, ranging from fifty percent to eighty-three percent of the cost of medical services provided under the plan. See id. § 1396d(b). Doctors and other health care providers are not required to service Medicaid patients, but if they do they must accept reimbursement from the state at its Medicaid rate as payment in full; they may not demand additional payment from patients. See id. §§ 1320a-7b(d), 1396o. State Medicaid rates for any given service are almost always lower than the "reasonable charge" for the same service under Medicare Part B. Indeed, Medicaid rates are often even lower than the eighty percent of the reasonable charge that the federal government reimburses Medicare providers.

Medicare and Medicaid intersect with respect to the elderly poor--so-called "dual eligibles." While these people are eligible to purchase supplemental medical insurance through Medicare Part B, many cannot afford Part B's premiums, deductibles, and copayments. Medicaid has therefore long allowed states to use Medicaid dollars to enroll dual eligibles in Medicare Part B by paying their cost-sharing obligations. See Pub.L. No. 89-97, § 121(a), 79 Stat. 286, 346 (1965) (codified at 42 U.S.C. § 1396a(a)(15)) (repealed 1988). Because the federal government heavily subsidizes Medicaid, this "buy-in" program enables states to shift a large portion of the cost of caring for the elderly poor to the federal treasury.

In 1986, Congress expanded the buy-in program beyond dual eligibles to include a newly created category of "qualified medicare beneficiaries" ("QMBs"): elderly people not quite poor enough to qualify for Medicaid but who nonetheless met certain neediness criteria. See Pub.L. No. 99-509, § 9403, 100 Stat. 1874, 2053-55 (1986) (codified at 42 U.S.C. §§ 1396a(a)(10)(E), 1396d(p)(1) (1994)). Initially optional, the QMB buy-in program became mandatory in 1988. See Pub.L. No. 100-360, § 301, 102 Stat. 683, 748 (1988) (deleting "at the option of a State" from 42 U.S.C. § 1396a(a)(10)(E)). Also in 1988, Congress redefined the term "QMB" to include dual eligibles. See Pub.L. No. 100-485, § 608(d), 102 Stat. 2343, 2416 (1988).

This appeal presents the following issue: Are Medicare providers performing Part B services to QMBs entitled to state reimbursement for the entire twenty percent copayment that a non-QMB Medicare patient would normally pay, or may states limit reimbursement such that providers receive no more than the state's Medicaid rate for the same service? For example, suppose that the reasonable charge for a given Part B service is $100, but a state's Medicaid rate for the same service is only $90. If a Medicare doctor performs that service, the federal government reimburses the doctor $80, whether or not the patient is a QMB. If the patient is a QMB, does the buy-in scheme require the state to reimburse the doctor for the patient's entire $20 Medicare Part B copayment? Or may the state give the doctor only $10 so that total reimbursement, including the federal government's $80, equals $90, the Medicaid rate? If the Medicaid rate for the particular service is $70, may the state refuse to reimburse the doctor at all because the $80 provided by the federal government already exceeds the Medicaid rate? See Paramount Health Sys., Inc. v. Wright, 138 F.3d 706, 708 (7th Cir.1998) (using this example).

Four statutory provisions added to the buy-in scheme in 1986 frame this issue. Read alone, two suggest that states must use Medicaid funds to reimburse Medicare providers performing Part B services to QMBs for the full twenty percent copayment ($20 in the above example) for which nonQMB Medicare patients would be responsible. Under 42 U.S.C. § 1396a(a)(10)(E)(i), a state Medicaid plan "must" provide for "making medical assistance available for medicare cost-sharing ... for qualified medicare beneficiaries." Section 1396d(p)(3)(D) in turn defines "medicare cost-sharing" to include Medicare premiums, deductibles, and "[t]he difference between the [80 percent of the reasonable charge that the federal government reimburses providers under Part B] and the amount that would be paid ... if any reference to '80 percent' ... were deemed a reference to '100 percent.' " Section 1396a(a)(10)(E)(i)'s mandatory language coupled with section 1396d(p)(3)(D)'s reference to specific percentages suggests that states must use buy-in funds to reimburse providers for the entire twenty percent Part B copayment.

The other two provisions enacted in 1986 suggest a different interpretation. Section 1396a(a)(VIII) provides that "medical assistance made available to [QMBs] ... shall be limited to medical assistance for medicare cost-sharing ..., subject to the provisions of [section 1396a(n) ]." Before its amendment in 1997, section 1396a(n), entitled "Payment amounts," in turn provided:

In the case of [Medicaid funds provided] for medicare cost-sharing respecting the furnishing of a service or item to a qualified medicare beneficiary, the State plan may provide payment in an amount ... that results in a sum of such payment amount and any amount of payment made [by the federal government under Medicare Part B for] the service or item exceeding the amount that is otherwise payable under the State [Medicaid] plan for the item or service for eligible individuals who are not qualified medicare beneficiaries.

Id. § 1396a(n) (amended 1997) (emphasis added). Section 1396a(n)'s use of the word "may" rather than "shall" suggests that states are permitted, not obligated, to reimburse Part B providers above the Medicaid rate--$10 if as in the above example the Medicaid rate were $90, or zero if the Medicaid rate were $80 or less.

Even before the 1986 enactment of these four QMB provisions, HHS had long taken the position that the buy-in scheme required states to reimburse providers for Part B copayments only in an amount equal to the difference, if any, between the Medicaid payment and the eighty percent of the Medicare Part B charge that the federal government pays. See Policy Information Memorandum from Director, Bureau of Program Policy, Department of Health and Human Services, to Associate Regional Administrators (Sept. 29, 1981) ("California's payment of amounts only up to its standard maximum allowable rate under its [Medicaid] program is acceptable."); Policy Information...