Pennsylvania Medical Soc. v. Marconis
| Decision Date | 26 August 1991 |
| Docket Number | No. 91-3085,91-3085 |
| Citation | 942 F.2d 842 |
| Court | U.S. Court of Appeals — Third Circuit |
| Parties | , 34 Soc.Sec.Rep.Ser. 550, Medicare & Medicaid Guide P 39,577, 2 NDLR P 60 PENNSYLVANIA MEDICAL SOCIETY, American Medical Association, Crawford County Medical Society and Robert N. Moyers, M.D., v. Joseph MARCONIS, M.D., Shirley F. Fox, R.N., James A. Kane, M.D., Guy L. Kratzer, M.D., Gary W. Lyons, M.D., Joshua A. Perper, M.D., Mark N. Richards, M.D., George L. Shevlin, Barbara K. Shore, Ph.D., Jason C. Shu, M.D. and Mary Ellen Weinberg. Pennsylvania Medical Society, American Medical Association, Crawford County Medical Society and Robert N. Moyers, M.D., Appellants. |
Jack R. Bierig (argued), David F. Graham, James C. Dechene, Richard D. Raskin, Sidley & Austin, Chicago, Ill., Robert B. Hoffman, Reed Smith Shaw & McClay, Harrisburg, Pa. (Kirk B. Johnson, Edward B. Hirshfeld, Michael L. Ile, Chicago, Ill., and Kenneth B. Jones, Elizabeth B. Metz, Pennsylvania Medical Soc., Harrisburg, Pa., of counsel), for appellants.
Ernest D. Preate, Jr., Atty. Gen., Susan J. Forney (argued), Calvin R. Koons, Sr. Deputy Attys. Gen., John G. Knorr, III, Chief Deputy Atty. Gen., Chief, Litigation Section, Harrisburg, Pa., for appellees.
Alison E. Hirschel, Philadelphia, Pa., Richard P. Weishaupt, Lisa M. Day, Philadelphia, Pa., for amici curiae Donald English, Sarah Philyaw, Helena White and Action Alliance of Senior Citizens of Greater Philadelphia.
Alfred J. Chiplin, Jr., National Senior Citizens Law Center, Washington, D.C., Bess M. Brewer, National Senior Citizens Law Center, Los Angeles, Cal., Steven Zaleznick, Cheryl Matheis, American Ass'n of Retired Persons, Washington, D.C., Michael J. Campbell, Pennsylvania Health Law Project, Chester, Pa., for amici curiae Gray Panthers Advocacy Committee and The American Ass'n of Retired Persons.
Gregory H. Knight, Hetrick, Zaleski, Ernico & Pierce, P.C., Harrisburg, Pa., for amicus curiae Pennsylvania Optometric Ass'n.
Before SLOVITER, Chief Judge, and GREENBERG and SEITZ, Circuit Judges.
This case involves a constitutional challenge to the Pennsylvania Health Care Practitioners Medicare Fee Control Act which regulates certain billing practices of physicians treating Medicare patients. The appellants contend that the Fee Control Act is invalid under the Supremacy Clause of the United States Constitution, art. VI, cl. 2, because it is preempted by the federal Medicare Act. 1 The district court found that the appellants had failed to prove congressional intent to preempt the Fee Control Act and granted summary judgment for the appellees. We will affirm that order.
Medicare is the federal insurance program to pay for medical care of persons 65 and older. See 42 U.S.C.A. § 1395 et seq. (West 1983 & West Supp.1991). It is composed of two main parts, Part A which covers hospitalization and institutional charges, and is not implicated in this case, and Part B. Id. at §§ 1395c-1395i-2. Part B establishes an insurance program to pay for physicians' services. Id. at §§ 1395j-1395w. Benefits under Part B are administered by local insurance carriers under the supervision of the United States Department of Health and Human Services. Id. at § 1395u. Medicare is funded by the federal government without state administrative or financial participation.
While benefits are paid on a fee-for-service basis, the "fee" that Medicare pays is not necessarily that charged by the physician, for Medicare has established a "reasonable charge" 2 for each procedure. Beneficiaries are covered for 80% of Part B costs, but Medicare pays no more than 80% of the reasonable charge regardless of what the doctor actually charges. Id. at § 1395l (a)(1). Beneficiaries are responsible for the remaining 20% as a co-payment.
Physicians have two payment options under Part B. They can "accept assignment" which means that they bill Medicare directly and accept the reasonable charge as full payment for their services in which event they receive 80% from Medicare and 20% from the patient. Id. at § 1395u(b)(3)(B)(ii). One advantage of "accepting assignment" is that Medicare guarantees prompt payment of the 80%. Alternatively, physicians can charge "on the basis of an itemized bill" and not be bound by the Medicare reasonable charge. Id. at § 1395u(b)(3)(B)(i). A physician using this option bills the patient for 100% of the charge directly, with Medicare reimbursing the patient for 80% of the reasonable charge. Billing in excess of the allowable reasonable charge is "balance billing."
In recent years, Congress has encouraged physicians to accept assignment rather than balance bill. The Deficit Reduction Act of 1984 (DEFRA) created the "Participating Physicians Program" under which physicians decide annually whether to enter into a "participation agreement." A participating physician agrees to accept assignment for all items and services furnished to Medicare patients under Part B and is precluded from balance billing during the term of the participation agreement. See 42 U.S.C.A. § 1395u(h)(1) (West Supp.1991). A non-participating physician can accept assignment in an individual case or balance bill. DEFRA also temporarily froze the fees that non-participating physicians could charge Medicare patients. See AMA v. Bowen, 857 F.2d 267, 268 (5th Cir.1988).
DEFRA provided incentives for physicians to accept assignment. Whitney v. Heckler, 780 F.2d 963, 967 (11th Cir.), cert. denied, 479 U.S. 813, 107 S.Ct. 65, 93 L.Ed.2d 23 (1986). Among other incentives, participating physicians could receive a 5% increase over the charge allowable for a non-participating physician. See 42 U.S.C.A. § 1395u(b)(4)(A)(iv) (West Supp.1991). In addition, participating physicians are listed in an annual directory published by Medicare and made available to beneficiaries. Id. at § 1395u(h)(4)-(6). See also Whitney v. Heckler, 780 F.2d at 970-72.
The Omnibus Budget Reconciliation Act of 1986 (OBRA '86) lifted the DEFRA freeze and substituted a system of "maximum allowable actual charges" (MAACs) as a new form of "price control for non-participating doctors." AMA v. Bowen, 857 F.2d at 268-69. MAACs placed an across-the-board limit on the amount non-participating physicians could charge (balance bill) Medicare beneficiaries. See 42 U.S.C.A. § 1395u(j)(1)(C) (West Supp.1991). Significantly, OBRA '86 also established the Physician Payment Review Commission (PPRC) as an advisory body to Congress to submit annual recommendations for rates and methods of payment for services under Medicare Part B. Id. at §§ 1395w-1(a) and (b)(1).
The PPRC has never recommended that balance billing be banned. In its 1988 and 1989 annual reports, the PPRC characterized balance billing as a possible "safety valve" against the reduction of access to medical care for Medicare beneficiaries. See PPRC, 1988 Annual Report to Congress 173; PPRC, 1989 Annual Report to Congress 137. In its 1989 report, the PPRC recommended that a national fee schedule be substituted for the existing reasonable charge program and recommended that charges for unassigned claims (i.e., balance billing charges) should be limited to a fixed percentage of the fee schedule amount, a limit which would replace MAACs. The Report stated that the PPRC
advocates limits on charges for the same reason that it advocates a fee schedule based primarily on resource costs. The reason is that the market for physicians' services does not function well enough to provide financial protection for Medicare beneficiaries. The PPRC Survey of Beneficiaries found that balance bills fall on low-income beneficiaries as well as those better able to pay them. On the other hand, the Commission does not recommend mandatory assignment at this time. Mandatory assignment would be unacceptable to many physicians and inconsistent with the Commission's goal of orderly change.
PPRC, 1989 Annual Report to Congress xxiii (footnote omitted) [Emphasis added].
Based on PPRC reports, Congress set three additional constraints on balance billing in the Omnibus Budget Reconciliation Act of 1989 (OBRA '89). It banned balance billing of persons eligible for both Medicare and Medicaid and thus, when treating the elderly poor, a treating physician must accept assignment. See 42 U.S.C.A. § 1395w-4(g)(3) (West Supp.1991). Second, Congress imposed caps on balance billing for certain procedures and limited balance billing to 125% of the allowable charge. Id. at §§ 1395u(j)(1)(D); 1395u(b)(14)(A). Third, Congress replaced MAACs with "limiting charges" (LCs). Beginning on January 1, 1991, non-participating physicians may balance bill only up to the LC. The LC is no more than 25% above the allowable charge in 1991, 20% in 1992, and 15% in 1993 and afterward. Id. at § 1395w-4(g)(1-2). 3 The limiting charges place a cap on balance billing applicable to all Medicare beneficiaries and all medical services covered by Medicare.
Against this backdrop of federal legislation, Pennsylvania enacted the Health Care Practitioners Medicare Fee Control Act on July 10, 1990, effective on September 8, 1990. See Pa.Stat.Ann. tit. 35, § 449.31 et seq. (Purdon Supp.1991). The Fee Control Act provides that it is "unlawful" for "any health care practitioner ... to balance bill," id. at § 449.34, which is defined as charging Medicare patients "an amount in excess of the reasonable charge for the service provided, as determined by the United States Secretary of Health and Human Services." Id. at § 449.33. The act provides that the prohibition is intended to address a "continuing escalation of costs for health care services" that results in "limited access to appropriate and timely health care" and "undermin[es] the quality of health care services currently being provided." Id. at §...
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