Whitney v. Heckler

• Decision Date: 22 January 1986
• Docket Number: No. 85-8129,85-8129
• Citation: 780 F.2d 963
• Parties: , Medicare&Medicaid Gu 35,090 Douglass G. WHITNEY, M.D., W.D. Jordan, M.D., and Fred Shessel, M.D., Plaintiffs-Appellants, v. Margaret M. HECKLER, Secretary of the Department of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 963

780 F.2d 963

12 Soc.Sec.Rep.Ser. 115, Medicare&Medicaid Gu 35,090

Douglass G. WHITNEY, M.D., W.D. Jordan, M.D., and Fred Shessel, M.D., Plaintiffs-Appellants, v. Margaret M. HECKLER, Secretary of the Department of Health and Human Services, Defendant-Appellee.

No. 85-8129.

United States Court of Appeals Eleventh Circuit.

Jan. 22, 1986.

Kent Masterson Brown, Lexington, Ky., Henry Angel, Michael Jablonski, Atlanta, Ga., for plaintiffs-appellants.

Anthony J. Steinmeyer, Douglas Letter, U.S. Dept. of Justice, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court For the Northern District of Georgia.

Before RONEY and ANDERSON, Circuit Judges, and MORGAN, Senior Circuit Judge.

ANDERSON, Circuit Judge:

Douglass G. Whitney, M.D., W.D. Jordan, M.D., and Fred Shessel, M.D. ("appellants") appeal from the judgment of the district court upholding the constitutionality of certain provisions of Sec. 2306 of the Deficit Reduction Act of 1984, 42 U.S.C.A. Sec. 1395u(b)(4), (h)-(j) (West Supp.1985). See Whitney v. Heckler, 603 F.Supp. 821 (N.D.Ga.1985). Appellants make two primary arguments on appeal: (1) that the fifteen-month freeze on the fees that non-participating physicians may charge their Medicare patients violates substantive due process, ¹ and (2) that the civil penalties for non-participating physicians who raise their fees to Medicare beneficiaries during the fifteen-month freeze and the various incentives provided for doctors to become participating physicians constitute a bill of attainder prohibited by Art. I, Sec. 9 of the United States Constitution. We affirm.

I. BACKGROUND

In 1965, Congress enacted the Medicare program as Subchapter XVIII of the Social Security Act. This program is divided into two parts. Part A provides reimbursement for covered hospital and related services. 42 U.S.C. Secs. 1395c-1395i (1982). Part B establishes a voluntary program of supplemental medical insurance benefits for certain medical services, including physicians' services. Id. Secs. 1395j-1395w. This case involves Part B exclusively.

Under Part B, Medicare enrollees obtain benefits in return for the payment of monthly premiums in an amount determined by the Secretary of Health and Human Services. Id. Sec. 1395r. These premiums and contributions from the federal government make up the Federal Supplementary Medical Insurance Trust Fund, out of which payment is made for Part B benefits. Id. Sec. 1395t.

Part B enrollees are generally entitled to receive 80% of the "reasonable charge" for medical services. Id. Sec. 1395l. This "reasonable charge" is computed according to a formula provided by Sec. 1395u(b). Under this section, a physician's actual billed charge for each service is compared with what he customarily charges for that service (the "customary charge"), and with the charge made for similar services by most doctors in the locality (the "prevailing charge"), and the "reasonable charge" is the lowest of these three. ²

Prior to the enactment of the Deficit Reduction Act of 1984, a Part B enrollee could pay for medical services in one of two ways. The beneficiary could pay the physician directly and then request reimbursement from Medicare. Id. Sec. 1395u(b)(3)(B)(i). Alternatively, if a physician were willing, the beneficiary could assign to the physician the beneficiary's right to reimbursement. Id. Sec. 1395u(b)(3)(B)(ii). The physician, as the beneficiary's assignee, then collected payment directly from Medicare.

Under this program, Medicare's "customary" and "prevailing" charge data were updated each year on July 1 based on the prior year's data. Physicians were also permitted to accept or decline assignment on a claim-by-claim basis, and if a physician chose not to accept assignment, Medicare placed no limitation on the amount that he could charge a Part B enrollee. Patients of physicians not accepting assignment, however, received Medicare reimbursement only for the 80% of Medicare's "reasonable charge," and the beneficiary was responsible for the difference between that figure and the physician's actual charge.

The Deficit Reduction Act of 1984 made several changes in physician reimbursement under Medicare Part B. ³ First, Sec. 2306(a) freezes both the "prevailing" and "customary" charge levels for a fifteen-month period beginning July 1, 1984, at levels no higher than the levels that were set for the twelve-month period beginning July 1, 1983. 42 U.S.C.A. Sec. 1395u(b)(4) (West Supp.1985). ⁴ In addition to this freeze, Sec. 2306(c) requires physicians to decide before October 1 of each year whether they will be "participating" or "non-participating" doctors for that year. 42 U.S.C.A. Sec. 1395u(h) (West Supp.1985). ⁵ A "participating" physician agrees to accept payment on an assignment basis for services furnished to Medicare beneficiaries during the twelve-month period beginning October 1. Thus, a "participating" physician's fees are effectively limited to the "reasonable" charge. Id. Sec. 1395u(b)(3)(B). A "non-participating" physician, however, may still continue to accept assignment on a case-by-case basis.

Section 2306(c) also provides that a non-participating physician may not charge a Medicare patient in excess of the physician's actual charges for the calendar quarter beginning on April 1, 1984. 42 U.S.C.A. Sec. 1395u(j) (West Supp.1985). There is no restriction on fees charged to patients who do not receive Medicare assistance. This subsection also requires the Secretary to monitor each non-participating physician's actual charges to Medicare beneficiaries, and if the physician "knowingly and willfully bills ... [beneficiaries] for actual charges in excess of such physician's actual charges for the calendar quarter beginning on April 1, 1984," the Secretary may bar such physician from participation in the Medicare Program for a period of up to five years and/or impose a civil penalty of up to $2,000 for each violation. Id. Sec. 1395u(j)(1), (2).

Finally, Sec. 2306 also provides several incentives for physicians to become "participating" doctors. Under subsections 1395u(h)(2), 1395u(h)(3) and 1395u(j), the Secretary is required to: (1) publish a directory of participating physicians, which is to be made available to Medicare enrollees; (2) maintain a toll-free number for enrollees to obtain the names and specialties of participating physicians; (3) publish a list of the percentage of patients accepted by each physician on an assignment basis; and (4) provide for electronic receipt of claims from participating physicians so that their claims can be processed more rapidly. In addition, subsection 1395u(b)(4)(D) specifies that in determining the customary charges of "non-participating" physicians for the twelve-month periods beginning October 1, 1985 and October 1, 1986, the Secretary shall not "recognize increases in actual charges for services furnished" during the fifteen-month freeze period. The increase in "participating" physicians' actual charges, however, will be recognized by the Secretary in computing their customary charge levels once the freeze is lifted.

In September 1984, appellants, who are practicing physicians in the Atlanta, Georgia area, filed suit seeking a temporary restraining order to stay operation of Sec. 2306 before they had to elect in October 1984 whether to become "participating" physicians for the upcoming year. They contended that the temporary freeze on the fees that non-participating physicians could charge Part B enrollees, the possible civil penalties for violation of the freeze, the requirement that the Secretary monitor their billing practices, and the exclusion of non-participating physicians from the lists of doctors made available to Medicare enrollees violated the Fifth Amendment to the Constitution and constituted a bill of attainder prohibited by Article I, Sec. 9 of the Constitution. The district court denied both their motion for a temporary restraining order and their request for a stay pending appeal.

In October, appellants filed an amended complaint alleging, inter alia, that they did not elect to become "participating" physicians under the Deficit Reduction Act prior to October 1, 1984, that they planned to raise their fees to their patients covered by Medicare Part B within the fifteen-month period beginning July 1, 1984, that 50-60% of their patients are Medicare Part B enrollees, and that 85% of these patients have supplemental health insurance. After a hearing, the district court granted judgment for the Secretary, upholding the constitutionality of Sec. 2306. See Whitney, 603 F.Supp. at 825-29. First, the district court concluded that Sec. 2306 was not a deprivation of due process because the legislation is a "reasonable" means for Congress to reduce federal spending without shifting the burden of cost reduction to the Medicare beneficiaries. Id. at 825-26. The district court also rejected appellants' contention that the fee freeze and incentive provisions constituted a taking in violation of the Fifth Amendment, reasoning that there is no unconstitutional taking of property in the instant case because the regulated action is voluntary--i.e., appellants can simply decline to treat Medicare patients if they wish to avoid federal regulation. Id. at 826-27. Finally, the court held that Sec. 2306 is not a bill of attainder because this section cannot reasonably be construed as a legislative determination of guilt and imposition of punishment. Id. at 827-29.

II. FIFTH AMENDMENT CHALLENGES

A. Substantive Due Process Challenge to the Fee Freeze

Appellants' principal contention on appeal is that the fifteen-month freeze on the fees non-participating physicians may charge their Medicare patients deprives them of their property in violation of the Due Process Clause of the Fifth Amendment. ⁶ Appellants concede that Congress has the power to regulate medical services and charges, Appellants' Brief at...