1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-20-1994

Penn Medical Society v. Snider

Precedential or Non-Precedential:

Docket 93-7775

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Recommended Citation

"Penn Medical Society v. Snider" (1994). 1994 Decisions. Paper 87.

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1 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

_______________________ 

No. 93-7775 

_______________________ 

PENNSYLVANIA MEDICAL SOCIETY; 

DR. JAMES B. REGAN, M.D., 

 

v. 

KAREN F. SNIDER, Individually and in 

her Official Capacity as Secretary of Public Welfare; 

 DONNA E. SHALALA, Secretary of the 

United States Department of Health and Human Services 

 Pennsylvania Medical society; 

 James B. Regan, M.D. 

 Appellants 

_______________________ 

On Appeal from the United States District Court 

for the Middle District of Pennsylvania 

(D.C. Civ. Action No. 92-cv-00481) 

_______________________ 

Argued: May 26, 1994 

Before: COWEN, ROTH, Circuit Judges, 

 and BROWN, District Judge0 

(Filed July 20, 1994) 

_______________________ 

Robert B. Hoffman (argued) 

Reed, Smith, Shaw & McClay 

213 Market Street, 9th Floor 

P. O. Box 11844 

Harrisburg, PA 17108 

 Counsel for Appellants 

 

0Honorable Garrett E. Brown, Jr., United States District Court 

for the District of New Jersey, sitting by designation. 
2 

Peter D. Coffman 

United States Department of Justice 

Federal Programs Branch, 

Civil Division 

9th and Pennsylvania Avenue, N.W. 

P.O. Box 883 

Washington, D.C. 20530 

Richard A. Olderman (argued) 

United States Department of Justice 

Room 3617 

Civil Division 

10th and Pennsylvania Avenue, N.W. 

Washington, D.C. 20530-0001 

 Counsel for Appellee Donna E. Shalala 

Doris M. Leisch 

Room 302 

Commonwealth of Pennsylvania 

Department of Public Welfare 

1400 Spring Garden Street 

State Office Building 

Philadelphia, PA 19130 

 Counsel for Appellee Karen F. Snider 

_______________________ 

OPINION OF THE COURT

_______________________ 

COWEN, Circuit Judge. 

 Under the Medicaid Act, a state participating in the 

Medicaid program must pay certain cost-sharing expenses for 

qualified Medicare beneficiaries (QMBs) in order to make these 

QMBs eligible for certain Medicare benefits called Medicare Part 

B services. The State of Pennsylvania, which participates in the 

Medicaid program, limits its coinsurance and deductible payments 

under Medicare Part B so that the total amount of the 
3 

reimbursements does not exceed the amount that the health care 

provider would have received for the services pursuant to the 

Medicaid plan. Pennsylvania Medical Society and Dr. James B. 

Regan brought this action under 42 U.S.C. § 1983 seeking a 

declaration that the Pennsylvania Medicaid Plan violated the 

Medicare Act and the Medicaid Act. The district court denied 

relief by granting summary judgment for the defendants. This 

appeal followed.0 We have jurisdiction under 28 U.S.C. § 1291 

and our review is plenary because only purely legal questions are 

involved. We hold that the Pennsylvania limitation on payment 

violates both the Medicare Act and the Medicaid Act, and will 

reverse the judgment of the district court. 

I. 

 The question presented in this appeal implicates the 

Medicare Act and the Medicaid Act. Accordingly, we will 

summarize the relevant statutory provisions involved and sketch 

the context from which the dispute arose. 

A. 

 The Medicare Act, 42 U.S.C. §§ 1395-1395ccc, 

established the Medicare program. Under the Medicare Act, the 

federal government funds the Medicare program. Eligibility for 

Medicare benefits is based on old age or disability: an 

individual must be at least 65 years old or disabled to be 

 

0The appellants also sought an injunction requiring Pennsylvania 

to implement 42 U.S.C. § 1395v(f). By letter dated May 10, 1994 

the appellants advised the court that Pennsylvania had decided to 

voluntarily implement § 1395v(f) and thus they would not pursue 

this issue further. 
4 

eligible. 42 U.S.C. § 426(a). These individuals are commonly 

referred to as Medicare-eligible patients. 

 Medicare coverage is primarily divided into two parts. 

Part A covers all inpatient hospital expenses through an 

insurance plan. See 42 U.S.C. §§ 1395c to 1395i-4. All 

Medicare-eligible patients receive this benefit. This coverage 

is not in dispute in this case. 

 Part B covers certain physician services, hospital 

outpatient services, and other health services not covered under 

Part A. See 42 U.S.C. §§ 1395j to 1395w-4(j). Part B coverage 

is not freely or automatically available to all Medicare-eligible 

patients. To obtain this coverage, Medicare-eligible patients 

must first enroll in the Part B insurance program by paying 

insurance premiums ("Part B insurance premiums"). See §§ 1395o1395s. Once this is done, the federal government pays 80% of the 

"reasonable costs" of outpatient hospital services and 80% of the 

"reasonable charges" for physician services rendered to the 

insured. § 1395l. The Part B patients themselves must pay the 

remaining 20% of the charges for the reasonable outpatient 

hospital services and physician services (co-payments or 

coinsurance), as well as an annual deductible. Id.; 

§1395cc(a)(2)(A). Together, the Part B premiums, deductibles and 

coinsurance are generally referred to as "Part B cost-sharing." 

Reasonable costs and charges for the services covered under Part 

B are established pursuant to the Medicare Act and its 

implementing regulations. See § 1395w-4(a), (b). 
5 

 However, the payment of the Part B insurance premiums, 

the 20% coinsurance, and the deductibles poses a serious problem 

for some poor Medicare-eligible patients. Therefore, these 

individuals may have to forego Part B coverage completely. How 

Congress resolved this problem is at the heart of the dispute in 

this case. 

B. 

 The Medicaid Act, 42 U.S.C. § 1396 et seq., established 

the Medicaid program which is separate from the Medicare program. 

Under the Medicaid Act, the federal government and the states 

jointly fund the Medicaid program with the federal government 

contributing approximately between 50% and 83% of the funding, 

with the states responsible for the rest. § 1396d(b). 

Eligibility for Medicaid benefits is based on need. A patient 

becomes eligible if his or her income falls below a certain 

level. See § 1396d(a). 

 A state is not required to participate in the Medicaid 

program, but if it decides to participate, it must comply with 

the Medicaid Act and its implementing regulations. § 1396c. A 

participating state0 must propose a plan that meets certain 

statutory requirements laid down in § 1396a(a). The plan must 

establish a schedule of payment rates or payment methods for the 

various kinds of medical care that a Medicaid patient may seek. § 

1396a(a)(30). All parties agree that these rates are almost 

 

0The term "state" or "states" in the remainder of this opinion 

refers to a state or states participating in the Medicaid 

program. 
6 

always lower than the rates established under Medicare as 

reasonable costs and charges. Medicaid service providers 

(including doctors and hospitals) must accept the Medicaid 

payment as payment in full, and may not ask the Medicaid patient 

to pay any money beyond that amount. § 1320a-7b(d); 42 C.F.R. 

§447.15 (1993). To become effective, the plan must be approved 

by the Secretary of the United States Department of Health and 

Human Services ("the Secretary"). § 1396a(b). 

 Some individuals are eligible for benefits under both 

the Medicare and Medicaid Acts: they are either old-aged or 

disabled, and they are poor. These individuals are commonly 

called "dual eligibles." But some old-aged or disabled may not 

be poor enough to be eligible for Medicaid benefits. Moreover, 

for those dual eligibles who meet the Medicaid poverty 

requirement but cannot pay for Medicare Part B coverage, Medicaid 

may not provide for all the services covered by Medicare Part B. 

C. 

 Since the very inception of the Medicare and Medicaid 

programs, Congress has made several attempts to solve the 

problems as sketched above. As a result, several provisions in 

the Medicaid Act, see 42 U.S.C. §§ 1396a(a)(15) (repealed 1988), 

1396a(a)(10)(E), 1396d(p), 1396a(n), established an interplay 

between the Medicare Act and the Medicaid Act. 

 Congress enacted § 1396a(a)(15) in 1965 which at first 

required states through their Medicaid programs to pay all of the 

Medicare Part A premiums for dual eligibles, and permitted states 

to impose part of the Part B cost-sharing on the individuals 
7 

based on their ability to pay.0 Congress eliminated this 

distinction in 1967, permitting states to require dual eligibles 

to share in the cost-sharing for both Part A and Part B 

coverage.0 This amendment did not affect the command that 

together dual eligibles and states were to pay the Part B costsharing in full. See New York City Health & Hosps. Corp. v. 

Perales, 954 F.2d 854, 860 (2d Cir.), cert. denied, ___ U.S. ___, 

113 S. Ct. 461 (1992) (interpreting § 1396a(a)(15)). 

 In 1986, Congress permitted states to pay the Part B 

cost-sharing for those Medicare-eligible individuals who are too 

poor to pay the Part B cost-sharing on their own, but not poor 

enough to be Medicaid-eligible, who are termed "qualified 

Medicare beneficiaries (QMBs)." This is called the optional 

 

0In 1965, this provision read in part: 

 (15) in the case of eligible individuals 65 years 

of age or older who are covered by either or both of 

the insurance programs established by title XVIII, [the 

State Medicaid plan must] provide-- 

 (A) for meeting the full cost of any deductible 

imposed with respect to any such individual under 

the insurance program established by part A of 

such title, and 

 (B) where, under the plan, all of any deductible, 

cost sharing, or similar charge imposed with 

respect to any such individual under the insurance 

program established by part B of such title is not 

met, the portion thereof which is met shall be 

determined on a basis reasonably related 

(determined in accordance with standards approved 

by the Secretary and included in the plan) to such 

individual's income or his income and resources. 

Social Security Amendments of 1965, Pub. L. No. 89-97, § 121(a), 

79 Stat. 286, 346 (repealed 1988). 

0This was accomplished by deleting § 1396a(a)(15)(A), and the 

reference to "Part B" in § 1396a(a)(15)(B). See Social Security 

Amendments of 1967, Pub. L. No. 90-248, § 235(a)(3), 81 Stat. 

821, 908. 
8 

"buy-in" program whereby the states may pay the Part B costsharing for the individuals to enroll them in the Medicare Part B 

program. See the Omnibus Budget Reconciliation Act of 1986 (OBRA 

'86), Pub. L. No. 99-509, § 9403, 100 Stat. 1874, 2053-55 

(codified as amended at §§ 1396a(a)(10)(E), 1396d(p), 1396a(n)). 

The dispute of this case focuses on these provisions. 

 Section 1396a(a)(10)(E) provided that the states have 

an option whether to provide Part B cost-sharing to a QMB. The 

statute specifically used the language of "at the option of a 

State." Id., 100 Stat. at 2053 (repealed). A QMB was 

essentially defined in § 1396d(p)(1) as a Medicare-eligible 

individual whose income is below the federal poverty line but 

"who, but for section [1396a(a)(10)(E)] and the election of the 

State, is not eligible for medical assistance under the 

[Medicaid] plan." Id., 100 Stat. 2054. Section § 1396d(p)(3) 

defines cost-sharing as including Part B premiums, coinsurance 

and deductibles and certain other enrollment premiums. Section 

1396a(n) states that a state plan may provide a payment amount 

for Part B services exceeding the amount otherwise payable under 

a Medicaid plan. 

 The participation in the QMB program was low. By 1988 

only one State had chosen to provide this benefit to QMBs. H.R. 

Rep. No. 105(II), 100th Cong., 2d Sess. 59 (1988), reprinted in

1988 U.S.C.C.A.N. 857, 882. Concerned about this low 

participation, and recognizing that Medicare coverage was being 

expanded to cover certain services that were previously covered 

by Medicaid, giving states certain savings, Congress made the 
9 

option to provide Medicare Part B benefits for the QMBs mandatory 

by requiring the states to pay the Part B cost-sharing for the 

QMBs. See id. at 59-60, reprinted in 1988 U.S.C.C.A.N. at 882-

83. This was accomplished by deleting "at the option of a State" 

from § 1396a(a)(10)(E). Medicare Catastrophic Coverage Act of 

1988 (MCCA), Pub. L. No. 100-360, § 301(a)(1), 102 Stat. 683, 

748. No other substantive changes were made. In the same year, 

the QMB definition was broadened by repealing § 1396d(p)(1)(B). 

The Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 

100-647, § 8434(a), 102 Stat. 3342, 3805. That is, this 

amendment has the effect of making all dual eligibles QMBs. For 

the sake of clarity, we will refer to these individuals covered 

by the current definition of QMB as "QMBs and dual eligibles." 

Section 1396a(a)(15), which covered only dual eligibles, was 

deleted by the Family Support Act of 1988, Pub. L. No. 100-485, 

Title VI, § 608(a)(14)(I)(iii), 102 Stat. 2343, 2416. 

 In 1989 Congress added § 1396a(a)(10)(E)(ii) which 

mandates that participating states pay the cost-sharing for 

certain qualified disabled and working individuals described in 

§1396d(s) but limited the payment to only one item as listed in 

§1396d(p)(3)(A)(i). Pub. L. No. 101-239, § 6408(d)(1), 103 Stat. 

2106, 2268 (1989). In 1990 Congress added § 1396a(a)(10)(E)(iii) 

which requires participating states to extend certain QMB 

benefits to those Medicare-eligible individuals who are above the 

federal poverty line, but specifically limits these benefits to 

Part B premiums only. Pub. L. No. 101-508, § 4501(b)(3), 104 

Stat. 1388, 1388-165 (1990). 
10 

 In 1989 Congress further amended the Medicare Act to 

require that physicians treating QMBs accept assignment, thereby 

precluding physicians from balance-billing0 QMBs. Pub. L. No. 

101-239, § 6102(a), 103 Stat. 2106, 2181-82 (1989) (codified at 

42 U.S.C. § 1395w-4(g)(3)(A)). This provision took effect on 

April 1, 1990. Id. § 6101, 103 Stat. 2168-69. 

D. 

 The State of Pennsylvania is a participant in the 

Medicaid program and has established a Medicaid plan which was 

approved by the Secretary. Pennsylvania pays the QMBs' Medicare 

Part B premiums in full, and pays the Medicare Part B deductible 

and coinsurance only if, and to the extent that, the amount 

already paid under Medicare Part B, plus its payment, does not 

exceed the Medicaid allowance. An applicable Pennsylvania 

regulation provides in part that "[i]f a [Medicaid] recipient 

also has Medicare coverage, the [State] may be billed for charges 

that Medicare applied to the deductible or coinsurance, or both. 

Payment will be made in accordance with established [Medicaid] 

rates and fees." 55 Pa. Code § 1101.64(b). 

 It appears that this regulation leads to a result that 

Pennsylvania pays nothing once the patient's deductible has been 

exhausted and pays at its lower Medicaid rates, rather than the 

Medicare rates, before the deductible has been exhausted.0 See

 

0Balance-billing is the practice whereby a provider bills the 

patient directly for the balance of the reasonable costs and 

charges if the Medicare or Medicaid program does not pay the full 

amount of the reasonable costs and charges. 

0Under Medicaid, physicians are not permitted to bill the patient 

for the balance of the bill. 
11 

App. at 35 (Stipulation ¶ 23). However, the Secretary and the 

Pennsylvania Secretary of Public Welfare argue that Pennsylvania 

is permitted to limit its coinsurance and deductible payments 

under Medicare Part B so that the total amount of the 

reimbursements does not exceed the amount that the health care 

provider would have received for the services rendered under 

Medicaid. Although there may be some slight differences between 

the Pennsylvania regulation and the position the Secretary 

asserts before us, we will treat them as the same. Any 

difference is immaterial in the context of this appeal because 

our holding requires payment of all Part B cost-sharing. 

 Under the Pennsylvania payment system, Pennsylvania 

invariably pays little or no money for QMBs' Part B cost-sharing 

because the Medicaid rates are invariably lower than the Medicare 

rates, and are almost always lower than the Part B payment rates, 

i.e., 80% of the Medicare rates. Health care providers who 

supply services to QMBs in Pennsylvania thus may not recover the 

Part B cost-sharing that non-QMB Medicare Part B patients would 

pay on their own to service providers. 

II. 

 The question presented is whether the Pennsylvania plan 

and regulations (the "Penn Plan") limiting Medicaid payment to 

the extent that the Medicaid payment, plus Medicare payment, does 

not exceed the payment otherwise available under Medicaid 

violates either the Medicare Act or the Medicaid Act. We hold 

that the Penn Plan violates both the Medicare Act and the buy-in 

provisions of the Medicaid Act. In so holding, we find support 
12 

in the statutory language, statutory context and legislative 

history, as well as New York City Health & Hosps. Corp. v. 

Perales, 954 F.2d 854 (2d Cir.), cert. denied, ___ U.S. ___, 113 

S. Ct. 461 (1992), a decision of the Court of Appeals for the 

Second Circuit, the only court of appeals that has tackled the 

precise question before us.0 

A. 

 Under the Medicare Act, the Secretary is authorized to 

determine the reasonable costs or charges for Medicare Part B 

services. 42 U.S.C. § 1395w-4(b). Once the reasonable costs and 

charges are determined, a provider of Medicare services is 

entitled to recover 100% of the reasonable amount: 80% from the 

federal government, § 1395l, and 20% from the patient, 

§1395cc(a)(2)(A). See also §§ 1395w-4(a)(1), 1395u(b)(3)(B). No 

matter from whom, "providers who furnish medical care to 

Medicare-eligible patients have the right to collect 100% of 

their reasonable costs or charges." Perales, 954 F.2d at 858. 

Furthermore, the Medicare Act contains no exception to the 

reimbursement of 100% of the reasonable costs and charges for 

QMBs and dual eligibles. Id. The Pennsylvania limitation on 

payment of Part B cost-sharing in effect creates an exception to 

the reimbursement for QMBs and dual eligibles. This violates the 

Medicare Act. See id.

 

0A district court in the Fourth Circuit took the same position as 

the Court of Appeals for the Second Circuit. See Rehabilitation 

Ass'n of Va., Inc. v. Kozlowski, 838 F. Supp. 243, 247-54 (E.D. 

Va. 1993). Another district court took the contrary view. See

Haynes Ambulance Serv., Inc. v. Alabama, 820 F. Supp. 590, 592-95 

(M.D. Ala. 1993). 
13 

 The Secretary argues that QMBs and dual eligibles 

should be treated as primarily Medicaid rather than Medicare 

patients. We disagree. The obvious fact is that Congress did 

not by statute make QMBs Medicaid-eligible (namely, receiving 

Medicaid services). By requiring the states to enroll QMBs and 

dual eligibles in the Medicare Part B program, Congress thereby 

made them eligible for Medicare Part B benefits. The statutory 

language is simply not susceptible of a reading that QMBs and 

dual eligibles are primarily Medicaid patients. As the Perales

court articulated, 

The Secretary's interpretation of dual eligibles as 

primarily Medicaid patients leads to some oddities. If 

Medicaid alone controlled with respect to dual 

eligibles, then it would make little sense for Medicare 

Part B to pay 80% of the Medicare rate for crossover 

care. If Medicaid were in fact the controlling 

program, then one would expect providers to be 

compensated at the Medicaid rate, instead of at 80% of 

the Medicare rate. Moreover, if crossovers [dual 

eligibles] were "primarily Medicaid patients," there 

would be no basis for Medicare to allow (as it does), 

as a hospital's bad debt expense, the uncollected 

Medicare cost-sharing amounts. 

Perales, 954 F.2d at 858-59. 

 Legislative history indicates that Congress intended 

that QMBs would be considered Medicaid beneficiaries primarily 
14 

for one purpose only--the provision of federal matching fund. 

Congress explained that 

Unlike those elderly and disabled covered under section 

4602, individuals receiving assistance with Medicare 

cost-sharing obligations would not be treated as 

Medicaid beneficiaries for all purposes. However, as 

in the case of the elderly and disabled covered under 

section 4602, a State opting to offer this more limited 

coverage would receive Federal matching payments for 

its expenditures on behalf of these individuals. 

H.R. Rep. No. 727, 99th Cong., 2d Sess. 105 (1986), reprinted in

1986 U.S.C.C.A.N. 3607, 3695. 

 Thus both the statutory framework and legislative 

history reflect that Congress intended QMBs to be Medicare 

patients rather than Medicaid patients. However, because QMBs 

are poor and cannot financially shoulder the burden of paying the 

Medicare Part B cost-sharing as can non-QMBs, Congress required 

the states opting to cover QMBs to stand in the shoes of QMBs 

with respect to the Part B cost-sharing payments. See id. at 

106, reprinted in 1986 U.S.C.C.A.N. at 3696 ("For elderly and 

disabled individuals whom the State chose to cover, the Medicaid 

program would pay for the Part B deductible and the beneficiary's 

20 percent coinsurance on Part B services."). 

 Accordingly, Medicare Part B service providers who 

supply service to QMBs are entitled to recover 100% of the 

reasonable costs and charges. The Penn Plan violates the 

Medicare Act by limiting its payment of Part B cost-sharing to 
15 

the extent that its payment, plus the Medicare payment, would not 

exceed the payment otherwise available under the Medicaid Act. 

B. 

 Concluding that the Pennsylvania limitation on payment 

of the Part B cost-sharing violates the Medicare Act does not end 

the matter. The Secretary contends that Pennsylvania is 

permitted by the buy-in provisions in the Medicaid Act, 

§1396a(a)(10)(E)(i), 1396a(n), to limit its QMB Part B costsharing payment to the extent that its payment, plus Medicare 

Part B payment, does not exceed the Medicaid payment that would 

otherwise be payable under the Medicaid plan. If so, we must 

resolve the conflict between the buy-in provisions of the 

Medicaid Act and the Medicare Act. However, the appellants 

contend that the buy-in provisions, especially § 1396d(p)(3), 

require the states participating in the Medicaid program to pay 

the full amount of the Part B cost-sharing as defined in 

§1396d(p)(3). We agree with the appellants and see no conflict 

between the Medicare Act and the buy-in provisions of the 

Medicaid Act. 

(a) 

 We are called upon to determine the meaning of the buyin provisions of the Medicaid Act, §§ 1396a(a)(10)(E)(i), 

1396d(p)(3), 1396a(n). "The task of resolving the dispute over 

the meaning of [a statute] begins . . . with the language of the 

statute itself." United States v. Ron Pair Enters., Inc., 489 

U.S. 235, 241, 109 S. Ct. 1026, 1030 (1989). Accordingly, we 
16 

must first examine the language of the relevant statutory 

provisions. 

 The current version of § 1396a(a)(10)(E)(i) provides: 

 A State plan for medical assistance must . . 

 (10) provide -- 

(E) (i) for making medical assistance available 

for medicare cost-sharing (as defined in 

section 1396d(p)(3) of this title) for 

qualified medicare beneficiaries described in 

section 1396d(p)(1) of this title; 

 . . . 

except that . . . (VIII) the medical assistance made 

available to a qualified medicare beneficiary described 

in section 1396d(p)(1) of this title who is only 

entitled to medical assistance because the individual 

is such a beneficiary shall be limited to medical 

assistance for medicare cost-sharing (described in 

section 1396d(p)(3) of this title), subject to the 

provisions of subsection (n) of this section and 

section 1396o(b). . . . 

§ 1396a(a)(10)(E)(i). Section 1396o(b) is not implicated in this 

case. Section 1396d(p)(1) essentially defines the term 

"qualified medicare beneficiary (QMB)" as an individual who is 

eligible for Medicare Part A and who has an income below the 

federal poverty line. Section § 1396d(p)(3) states: 

The term "medicare cost-sharing" means the following 

costs incurred with respect to a qualified medicare 

beneficiary, without regard to whether the costs 

incurred were for items and services for which medical 

assistance is otherwise available under the plan: 

 (A)(i) premiums under section 1395i-2 or 1395i-2a 

of this title, and 

 (ii) premiums under section 1395r of this title. 
17 

 (B) Coinsurance under subchapter XVIII of this 

chapter (including coinsurance described in 

section 1395e of this title). 

 (C) Deductibles established under subchapter XVIII 

of this chapter (including those described in 

section 1395e and section 1395l(b) of this title). 

 (D) The difference between the amount that is paid 

under section 1395l(a) of this title and the 

amount that would be paid under such section if 

any reference to "80 percent" therein were deemed 

a reference to "100 percent". 

Such term also may include, at the option of a State, 

premiums for enrollment of a qualified medicare 

beneficiary with an eligible organization under section 

1395mm of this title. 

§ 1396d(p)(3). This definition includes all of the cost-sharing 

that a non-QMB Medicare Part B patient would have to pay in order 

to obtain Part B coverage. Part B deductibles are included in 

§1396d(p)(3)(C). Subsection (p)(3)(D) obviously refers to the 

20% coinsurance payment. Section 1396a(n) is entitled "Payment 

amounts." It provides that 

In the case of medical assistance furnished under this 

subchapter 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 with respect to the service or item that results 

in the sum of such payment amount and any amount of 

payment made under subchapter XVIII of this chapter 

[Medicare Part B] with respect to the service or item 

exceeding the amount that is otherwise payable under 

the State plan for the item or service for eligible 
18 

individuals who are not qualified medicare 

beneficiaries. 

§ 1396a(n) (emphasis added). 

 "The apparent meaning" of § 1396d(p)(3), read together 

with § 1396a(a)(10)(E)(i), according to the Perales court, is 

that "the states that participate in Medicaid must allocate 

Medicaid funds to the enrollment of all dual eligibles and QMBs 

in Part B of Medicare and to the payment of 20% of reasonable 

costs or charges along with the annual deductibles incurred in 

this program." Perales, 954 F.2d at 859. We agree. Section 

1396a(a)(10)(E)(i) uses the term "must" to impose an obligation 

on the states participating in the Medicaid program to pay the 

Medicare Part B cost-sharing, and the scope of that obligation is 

defined by § 1396d(p)(3).0 The logical reading of these 

provisions is that a Medicaid plan must pay everything listed in 

§ 1396d(p)(3) unless this section qualifies the obligation. 

Section 1396d(p)(3)(A)(ii) lists Part B premiums. Section 

1396d(p)(3)(C) lists Part B deductibles. Section 1396d(p)(3)(D) 

specifically includes the 20% coinsurance that is the 

responsibility of a non-QMB Medicare Part B patient. Because 

§1396d(p)(3) does not contain any qualification on the obligation 

to pay the Part B cost-sharing, § 1396a(a)(10)(E)(i) therefore 

obligates states participating in Medicaid to pay the entire 

amount of the Part B cost-sharing. 

 

0The state Medicaid plans may impose only a nominal cost-sharing 

on QMBs. See § 1396o(a) (imposition of certain charges in case 

of individuals described in § 1396a(a)(10)(E)(i)). 
19 

 The Secretary points out that the statutory language 

itself does not state that the states must make payments in full. 

We believe the explicit language of "payment in full" is 

unnecessary in this context. Since § 1396d(p)(3) lists the Part 

B premiums, the deductibles and the 20% coinsurance as part of 

the scope of payment obligation, § 1396a(a)(10)(E)(i) which 

imposes the payment obligation requires payment for the entire 

amount of the Part B premiums, the deductibles and the 20% 

coinsurance unless otherwise specifically qualified. Such a 

qualification is absent from the § 1396d(p)(3). We thus read 

§§1396a(a)(10)(E)(i) and § 1396d(p)(3) as requiring payment in 

full. This was obviously the understanding of Congress when it 

enacted the QMB program. The contemporaneous legislative history 

language expressly and specifically stated that the states opting 

to provide the QMB benefits must make payment in full either to 

the provider or to the QMB. H.R. Rep. No. 727, 99th Cong., 2d 

Sess. 106, reprinted in 1986 U.S.C.C.A.N. 3607, 3696 ("the 

Medicaid program would pay for the Part B deductible and the 

beneficiary's 20 percent coinsurance on Part B services" to the 

provider if it took assignment, or to the beneficiary who would 

"submit the claim for the 20% coinsurance requirement to the 

State Medicaid programs"). 

 The Secretary contends that because § 1396a(n), which 

is titled "Payment amounts," uses the permissible term "may" 

rather than "must," we should not read the requirement to pay 

Part B cost-sharing as a requirement of paying 100% of the Part B 

cost-sharing. We disagree. 
20 

 In rejecting the Secretary's interpretation the Perales

court stated: 

A statute requiring Medicaid funds to be made available 

for Medicare cost-sharing can only sensibly be read as 

requiring the funds to be made available to cover all

Medicare cost-sharing. It is counter-intuitive that a 

statute requiring Medicaid funds to be made available 

for cost-sharing only to the extent of the Medicaid 

scheduled rates would not specify that qualification 

expressly. Furthermore, it appears that the reason 

that section a(n) authorizes payment beyond the 

Medicaid amount, when it is required by another 

section, is to clarify that the Medicaid Act does not 

prohibit a provider from accepting more than the 

Medicaid rate. 

954 F.2d at 859 (footnote omitted). 

 The Perales court is correct in stating that had 

Congress intended a qualification on the amount of the payment, 

it would have specifically so stated. The statutory context 

bears this out. In one instance in the "buy-in" provisions, 

Congress expressly specified what part of the cost-sharing is 

optional for the state. In the last paragraph of § 1396d(p)(3), 

Congress stated that cost-sharing "also may include, at the 

option of a State, premiums for enrollment of a [QMB] with an 

eligible organization under section 1395mm of this title." 

§1396d(p)(3) (§ 1395mm is part of Part C). In other instances, 

Congress specifically limited the payment of cost-sharing to one 
21 

of the items listed in § 1396d(p)(3), with respect to certain 

non-QMB individuals. See § 1396a(a)(10)(E) (ii) (limiting costsharing payments for certain individuals to premiums described in 

§ 1396d(p)(3)(A)(i)); 1396a(a)(10)(E)(iii) (limiting cost-sharing 

payments for individuals whose income is above the federal 

poverty line to premiums described in § 1396d(p)(3)(A)(ii)). This 

statutory context strongly indicates that if Congress wanted the 

payment to deviate from those Part B cost-sharing items listed in 

§ 1396d(p)(3), it would have specifically so stated. The fact 

that these subsections within §§ 1396a(a)(10)(E), 1396d(p)(3) 

expressly provide for optional payment or limitations on the 

payment supports the conclusion that if Congress intended to 

permit the states to choose among the Part B cost-sharing items 

to pay or to pay a certain percentage of an item, it surely would 

have expressly so provided. 

 Moreover, we note that the Secretary does not argue the 

states may pay only part of the Part B premium. She only argues 

that the states may pay only part of the deductible and/or 

coinsurance. Accordingly, the Secretary would have us read a 

statute which on the face equally applies to the Part B premium, 

deductible and coinsurance in a manner so as to permit disparate 

treatment for the Part B premium, deductible and coinsurance. We 

reject this proposition. We have found no basis in the statutory 

language, context or legislative history for treating the Part B 

cost-sharing items differently. Congress did not state that 

under § 1396a(a)(10)(E)(i) the states may choose to pay an item 
22 

or part of an item out of those listed in § 1396d(p)(3), i.e., 

the Part B premiums, coinsurance and deductibles. 

 We believe § 1396a(n) was intended not to give states 

the discretion to pay the Part B cost-sharing, but rather to 

serve another important purpose in the context of the Medicaid 

Act: to give the states the authority to make payments pursuant 

to the rates set forth under the Medicare Act rather than those 

set forth in the Medicaid plans, that is, to deviate from the 

Medicaid payment schedules or payment methods. As is clear from 

the Medicaid Act, a state plan must set forth a payment schedule 

or payment methods for certain services. § 1396a(a)(30); 42 

C.F.R. § 447.201(b), 447.203(a) (1993). Federal funding is 

limited to expenditures made pursuant to such schedules or 

payment methods established in a plan. § 1396b(a)(1) (the 

Secretary shall pay the federal share of the "total amount 

expended during such quarter as medical assistance under the 

State [Medicaid] plan"). States may not subsequently deviate 

from these payment schedules or payment methods without losing 

the right to receive federal funding. See id.; §§ 1396c, 1316. 

Section 1396a(n) authorizes the states to deviate from their 

schedules or payment methods with respect to QMB Part B costsharing payments, thus carving out an exception to the general 

requirement to comply with the Medicaid fee schedules or payment 

methods. Without the authorization under § 1396a(n), there would 

be an apparent conflict between § 1396a(a)(10)(E)(i) and the 

command that states only make payments according to their 

schedules or payment methods as approved by the Secretary. The 
23 

legislative history buttresses this reading. The House Report 

stated that "the total of Medicaid payments for Medicare costsharing charges under this provision together with Medicare 

payments may exceed the amounts otherwise payable under the State 

Medicaid plan for such services." H.R. Conf. Rep. No. 1012, 99th 

Cong., 2d Sess. 395-96 (1986), reprinted in 1986 U.S.C.C.A.N. 

3868, 4040-41. This language emphasizes the comparison between 

the Medicare and Medicaid rates of payment, rather than the 

discretion of the states. 

 Even assuming that § 1396a(n) authorizes the states to 

make discretionary payments, as the Secretary argues, this would 

at best lead to a conflict between § 1396a(a)(10)(E)(i) and 

§1396a(n). Given this conflict, the Secretary would not 

necessarily prevail. Any conflict, if it exists, must be 

resolved under the relevant statutory interpretation principles. 

We must do so by giving full effect to all provisions. It is 

well settled that "[s]tatutory construction is a holistic 

endeavor . . . and, at a minimum, must account for a statute's 

full text, language as well as punctuation, structure, and 

subject matter." United States Nat'l Bank of Oregon v. 

Independent Ins. Agents of Am., Inc., ___ U.S. ___, ___, 113 S. 

Ct. 2173, 2182 (1993) (internal quotation marks and citations 

omitted). Put another way, "`[i]n expounding a statute, we must 

not be guided by a single sentence or member of a sentence, but 

look to the provisions of the whole law, and to its object and 

policy.'" Id. (quoting United States v. Heirs of Boisdore, 49 

U.S. (8 How.) 113, 122, 12 L.Ed. 1009 (1849)). "[W]e are 
24 

obligated to give effect, if possible, to every word Congress 

used." Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S. Ct. 

2326, 2331 (1979). That is, "[a] statute should be construed so 

that effect is given to all its provisions, so that no part will 

be inoperative or superfluous, void or insignificant." 2A Norman 

J. Singer, Sutherland Statutory Construction § 46.06, at 119-20 

(5th ed. 1992) (citations omitted). 

 Since § 1396a(a)(10)(E)(i) provides that states must 

pay the entire amount of the Part B cost-sharing, and § 1396a(n) 

provides that states may pay more than the Medicaid amounts, both 

sections may be reconciled by interpreting them as requiring 

payment for the entire amount of the Part B cost-sharing. Such a 

reading gives full effect to both and does no harm to either. On 

the other hand, permitting payment up to only the Medicaid rates 

would do irreconcilable harm to § 1396a(a)(10)(E)(i) which 

requires payment of the entire amount of the Part B cost-sharing. 

 However, we reiterate that such a conflict resolution 

is not necessary here because, as we concluded above, there is 

simply no conflict: § 1396a(n) serves no purpose other than 

giving the states the authority to deviate from the Medicaid 

payment schedules or payment methods. Reading § 1396a(n) this 

way gives full effect to this section without engendering a 

conflict between it and § 1396a(a)(10)(E)(i). 

 Our reading of the statutory provisions is confirmed by 

congressional intent as expressed in 1986. Congress itself did 

not read § 1396(a)(n) as authorizing states to make discretionary

payments in excess of Medicaid rates. Nor did Congress intend 
25 

for this provision to detract from the command stated in 

§1396a(a)(10)(E)(i). When Congress enacted both § 

1396a(a)(10)(E) and § 1396a(n) in 1986, it explained that a state 

must pay 100% of the Part B cost-sharing if it opted to enroll 

QMBs in Medicare Part B. This cannot be more clearly stated than 

the House Report: 

For elderly and disabled individuals whom the State 

chose to cover, the Medicaid program would pay for the 

Part B deductible and the beneficiary's 20 percent 

coinsurance on Part B services. If the beneficiary 

uses a physician who takes assignment, Medicaid would 

pay the physician directly for the 20 percent 

coinsurance and the patient could not be billed for any 

amounts above the Medicare reasonable charge. However, 

if the physician elects not to take assignment, the 

beneficiary would submit the claim for the 20 percent 

coinsurance requirement to the State Medicaid program 

and would be liable for an additional amount charged by 

the physician. 

H.R. Rep. No. 727, 99th Cong., 2d Sess. 106 (1986), reprinted in

1986 U.S.C.C.A.N. 3607, 3696. This House Report clearly 

indicated that in addition to the Part B deductibles, the 

Medicaid program must pay the 20% coinsurance payments for Part B 

services either to the physician or to the patient directly. 

Obviously, § 1396a(a)(10)(E) and 1396a(n), which were enacted by 

Congress together in 1986, were understood by Congress as 

requiring the states to pay 100% of the Part B cost-sharing, if 
26 

the states decided to participate in the QMB program. That is to 

say, the option for the states is whether to join or not to join, 

and not how much they have to pay. Once the states joined the 

QMBs program, they were required to pay 100% of the Part B costsharing, including the 20% coinsurance payment. 

 Since § 1963a(n) was not understood by Congress in 1986 

to give states opting to participate in the QMB program the 

discretion to pay only a portion of the Part B cost-sharing, it 

cannot be read to give such discretion in 1994 when no change has 

been made to § 1396a(n) or any other operative provisions with 

respect to the scope of the Part B cost-sharing payment. The 

evolution of the statutory provisions demonstrate that Congress 

has not made any substantive amendment to those operative 

provisions with respect to how much the states must pay under 

§§1396a(a)(10)(E)(i), 1396d(p)(3) and § 1396a(n). The change 

concerns whether the states have to pay at all. It merely 

eliminated the states' option whether or not to join the program. 

Now the states have no option; they must join. See H.R. Conf. 

Rep. No. 661, 100th Cong., 2d Sess. 253 (1988), reprinted in 1988 

U.S.C.C.A.N. 923, 1031 (the amendment "[m]akes mandatory the 

current option for States to pay Medicare premiums, deductibles 

and coinsurance"). This change in the option to join or not to 

join does not affect the amount that the states are obligated to 

pay. Therefore, the statute's established meaning as to how much

a state Medicaid plan must pay (that is, requiring payment of all 

Part B cost-sharing) must be adhered to. It would be a strange 

way to make a change in the content of an existing statutory 
27 

provision regarding the scope of payment without ever so slightly 

modifying the language of those provisions specifying how much a 

state must pay. Cf. Pierce v. Underwood, 487 U.S. 552, 567, 108 

S. Ct. 2541, 2551 (1988) ("Quite obviously, reenacting precisely 

the same language would be a strange way to make a change."). The 

Secretary neither explicitly argues nor provides a rationale for 

the proposition that changing the option whether or not to pay 

the Part B cost-sharing at all into a mandate to pay somehow 

changed the amount of the Part B cost-sharing which the states 

are required to pay, where the statute defining the scope of the 

payment had not been amended at all. She completely ignores the 

House Report written in 1986 which explained the scope of Part B 

cost-sharing payment. 

 Nor does the amendment broadening the definition of QMB 

as including dual eligibles previously covered by § 1396a(a)(15) 

substantively affect the operative provisions relating to the 

obligation to pay all the Part B cost-sharing. First, no matter 

what treatment dual eligibles received under § 1396a(a)(15), they 

now receive the same treatment as QMBs under § 1396a(a)(10)(E)(i) 

because they are brought under the coverage of 

§1396a(a)(10)(E)(i). QMBs were not brought into the coverage of 

§1396a(a)(15). The plain fact is that § 1396a(a)(15) was 

repealed. 

 Moreover, § 1396a(a)(15) had been construed by the 

Secretary as requiring states and dual eligibles combined to pay 

the Part B cost-sharing in full at least until 1983, as set forth 

in a 1981 memorandum and in the Secretary's position before a 
28 

district court in a 1983 case. See New York City Health & Hosps. 

Corp. v. Perales, 954 F.2d 854, 861-62 (2d Cir. 1992) 

(summarizing the Secretary's position). In Perales, the Court of 

Appeals for the Second Circuit interpreted this provision, then 

already repealed, as meaning "if the state chooses not to pay the 

entire [Part B] cost-sharing amount, the state must pay what 

remains after patients are allocated that portion of the 

liability commensurate with their ability to pay." Id. at 860. 

The legislative history indicates that Congress intended that the 

individuals were to "share in the cost," S. Rep. No. 404, 89th 

Cong., 1st Sess. 80 (1965), reprinted in 1965 U.S.C.C.A.N. 1943, 

2020, with the state. Together, dual eligibles and states were 

to pay the Part B cost sharing in full. Thus, before dual 

eligibles were brought into the coverage of § 1396a(a)(10)(E)(i), 

they were treated as favorably as QMBs. To the extent that the 

repealed § 1396a(a)(15) had any relevance to the interpretation 

of § 1396a(a)(10)(E)(i), it is consistent with our reading of the 

latter. Perales, 954 F.2d at 860.0 

(b) 

 To support its position that § 1396a(n) permits the 

states to pay only a portion of the Part B cost-sharing, the 

Secretary relies heavily on certain language0 in a House Report 

 

0But see Samuel v. California Dept. of Health Serv., 570 F. Supp. 

566, 570 & n.2, 571 (N.D. Cal. 1983) (amended 572 F. Supp. 273 

(1983)). 

0 The House Report stated: 

The bill would require States to pay Medicare costsharing, including coinsurance, on behalf of eligible 

individuals. It is the understanding of the Committee 

that, with respect to dual Medicaid-Medicare eligibles, 
29 

that was written in 1988 when Congress deleted the "at the option 

of a State" language from § 1396a(a)(10)(E). The language as set 

out in footnote 10 purported to recognize a state practice of not 

paying the full amount of Part B cost-sharing. Obviously that 

language addressed the state practice relating to dual eligibles. 

That is, the practice mentioned therein is a practice under 

§1396a(a)(15). See Perales, 954 F.2d at 861. Its relevance to 

§1396a(a)(10)(E)(i) is obscure at best. First, there was no 

state practice as to QMB Part B cost-sharing payments under 

§1396a(a)(10)(E). It is not clear how much states actually paid 

for the Part B cost-sharing for QMBs at that time, because 

"[w]hile States could protect this population [QMBs] through the 

 

some States pay the coinsurance even if the amount that 

Medicare pays for the service is higher than the State 

Medicaid payment rate, while others do not. Under the 

Committee bill, States would not be required to pay the 

Medicare coinsurance in the case of a bill where the 

amount reimbursed by Medicare--i.e., 80 percent of the 

reasonable charge--exceeds the amount Medicaid would 

pay for the same item or service. However, if a State 

chooses to pay some or all of the coinsurance in this 

circumstance, Federal matching funds would, as under 

current law, be available for this cost. For example, 

assume that a physician actually charges a "buy-in" 

patient $60 for performing a particular procedure; that 

Medicare recognizes $50 as the reasonable charge; and 

that the State Medicaid program only pays $35 for this 

procedure. Whether or not the physician takes 

assignment, Medicare will pay only 80 percent of $50, 

leaving a $10 coinsurance obligation for the 

beneficiary. However, since the State only recognizes 

$35 as the fee for the procedure in question, and since 

the Medicare program has already paid the physician 

$40, the State is not required to pay any of the $10 

coinsurance. If the State chooses to pay some or all 

of the $10, however, its cost would qualify for Federal 

matching payments at the regular rate for services. 

H.R. Rep. No. 105(II), 100th Cong., 2d Sess. 61 (1988), reprinted

in 1988 U.S.C.C.A.N. 857, 884. 
30 

Medicaid `buy-in' option under current law, it is the Committee's 

understanding that, to date, only one State [had] chosen to 

implement this coverage." H.R. Rep. No. 105(II) at 59, reprinted 

in 1988 U.S.C.C.A.N. at 882 (emphasis added).0 Second, as stated 

above, in 1988 Congress did not amend the operative provisions 

related to how much states should pay, but only mandated that the 

states participate in the QMB program. Finally, the language of 

the House Report, quoted in footnote 10, expressly refers to 

"dual Medicaid-Medicare eligibles" and not to "QMBs." 

 As the Perales court pointed out, the 1988 House Report 

language did not purport to interpret § 1396a(a)(15). Perales, 

954 F.2d at 861. It merely took notice of a state practice of 

not paying the Part B cost-sharing in full for dual eligibles. 

Because § 1396a(a)(15) has been repealed, that language has 

little value. Nor did that language purport to interpret

§1396a(a)(10)(E)(i) or § 1396d(p)(3) as to the scope of the 

states' obligation to make payments for the Part B cost-sharing. 

 The Perales court rejected the Secretary's reliance on 

the 1988 legislative history language for the additional reason 

that it is post-enactment legislative history. Perales, 954 F.2d 

at 861. We agree. The legislative history relied upon by the 

Secretary is not post-enactment history as to the mandate 

requiring the states to join the QMB program, but this mandate 

does not affect the amount of the payment. The legislative 

 

0By letter dated May 12, 1994 (p. 9), the Secretary informed us 

that she did not know how the one state which elected the 

optional coverage of QMBs treated the coinsurance amounts. 
31 

history is post-enactment history as far as the payment amount is 

concerned because Congress did not make any substantive 

amendments to the operative provisions related to the scope of 

the Part B cost-sharing payment at the time the House Report was 

written. The House Report purported to comment on the language 

that was not drafted by the reporting Committee in 1988 because 

this language was already in the statute after the enactment of 

OBRA '86. See Pierce v. Underwood, 487 U.S. 552, 568, 108 S. Ct. 

2541, 2551 (1988). 

 Post-enactment legislative history is not a reliable 

source for guidance. "[E]ven when a subsequent House Committee 

has actually commented upon an earlier statute, the 

interpretation carries little weight with the courts." Perales, 

954 F.2d at 861. As the Supreme Court teaches, "[t]he views of a 

subsequent Congress form a hazardous basis for inferring intent 

of an earlier one." Untied States v. Price, 361 U.S. 304, 313 80 

S. Ct. 326, 332 (1960). 

 We will disregard, as the Perales court did, the 

legislative history relied upon by the Secretary. The Supreme 

Court has rejected attempts to smuggle subsequent legislative 

commentary into an existing statute. Pierce, 487 U.S. at 566-68, 

108 S. Ct. at 2551; Consumer Product Safety Comm'n v. GTE 

Sylvania, Inc., 447 U.S. 102, 116-20, 100 S. Ct. 2051, 2060-64 

(1980); see also City of Chicago v. Environmental Defense Fund, 

___ U.S. ___, 114 S. Ct. 1588, 1593 (1994). We do the same in 

this case, not simply because of the Supreme Court's general 

warning regarding the troublesome nature of subsequent 
32 

legislative history, but also because there are more specific 

problems with relying upon the 1988 House Report. 

 Similar to those legislative materials discounted by 

the Supreme Court in GTE Sylvania, Inc. and Pierce, the 1988 

House Report commented on language that was not drafted by the 

reporting Committee. The fact that in 1988 Congress deleted "at 

the option of a State" from § 1396a(10)(E)(i) does not change the 

fact that the 1988 reporting Committee did not draft the 

provisions relating to the scope of payment. These provisions 

were enacted in 1986. The Pierce Court disregarded legislative 

comments made on the meaning of "substantially justified" in 28 

U.S.C. § 2412(d)(1)(A), a provision which was contemporaneously 

reenacted as those comments were written, although it was drafted 

and enacted by a previous Congress to take effect provisionally 

for five years. 487 U.S. at 566-68, 108 S. Ct. at 2551. Since 

those comments were not given any weight by the Supreme Court in 

Pierce, we will not give any weight to the comments in the 1988 

House Report when Congress did not reenact or amend the 

provisions defining the scope of payment. See also GTE Sylvania, 

Inc., 447 U.S. at 118 n.13, 100 S. Ct. at 2061 n.13 ("[E]ven when 

it would otherwise be useful, subsequent legislative history will 

rarely override a reasonable interpretation of a statute that can 

be gleaned from its language and legislative history prior to its 

enactment."). 

 Moreover, the Secretary's interpretation of the 1988 

House Report language directly conflicts with language in the 

1986 House Report explaining that the states must pay the 20% 
33 

coinsurance either to the service provider if it took assignment 

or to the QMB if the provider did not take assignment. H.R. Rep. 

No. 727 at 106, reprinted in 1986 U.S.C.C.A.N. at 3696. This 

conflict weakens any force of the Secretary's reliance on the 

post hoc 1988 legislative history. See Pierce, 487 U.S. at 567, 

108 S. Ct. at 2551. 

 Finally, the value of the 1988 House Report language 

cited by the Secretary is further reduced because it, as 

interpreted by the Secretary as giving states discretion to pay 

only part of the deductibles, apparently conflicts with language 

in another section of the same House Report, which purported to 

illustrate the QMB program in the context of prescription drug 

benefits. See H.R. Rep. No. 105(II) at 50-51, reprinted in 1988 

U.S.C.C.A.N. at 873-74. There the House Report stated that the 

entire amount of the drug deductible must be paid by states to 

service providers or patients who would pay to the service 

providers, or that states may provide the actual drugs.0 The 

 

0The House Report stated: 

 The Committee bill would require States, through 

their Medicaid programs, to cover both the Medicare 

Part B premium (including any increment attributable to 

the prescription drug benefit), as well as the $500 

prescription drug deductible, for all elderly and 

disabled Medicare beneficiaries with incomes below 100 

percent of the Federal poverty guidelines. . . . The 

purpose of this provision, which parallels the general 

Medicaid "buy-in" requirement found at section 208 of 

the Committee bill, is to assure effective protection 

against catastrophic drug costs for poor Medicare 

beneficiaries. 

 With respect to coverage of the deductible, the 

bill would give the States two options. A State could 

either offer the Medicare beneficiary the same 

prescription drug benefit that it offers to its 
34 

Secretary maintains that the legislative history language she 

cites0 permits states to pay only part of the Part B deductibles. 

See App. at 35 (Stipulation ¶ 23). The statutory provision0 and 

 

categorically needy Medicaid eligibles until the 

deductible is satisfied and Medicare coverage begins. 

Or, it could simply reimburse the beneficiary directly 

for the charges incurred for prescription drugs up to 

$500. Whatever method the State selects must apply to 

all qualified Medicare beneficiaries. If the State 

elected to offer its Medicaid prescription drug 

benefit, the calculation of whether the Medicare 

deductible had been satisfied would have to be based on 

the actual charges for the drugs used, not on the 

amounts that the State actually reimbursed for the 

drugs through its Medicaid program. 

 State expenditures for Medicare prescription drug 

premiums and deductibles would be subject to Federal 

Medicaid matching payments at the State's regular 

matching rate for services. This buy-in requirement 

would, on July 1, 1988, take effect whether or not 

implementing regulations have been issued. Thus, 

States would begin paying the monthly Part B premium 

increments beginning July 1988, and would begin 

assisting qualified beneficiaries to meet the 

deductible with respect to drugs dispensed on or after 

January 1, 1989. 

H.R. Rep. No. 105(II) at 50-51, reprinted in 1988 U.S.C.C.A.N. at 

873-74. 

0See supra note 10. 

0The statute provided that states may treat drug deductibles as 

one of the deductibles listed in § 1396d(p)(3)(C) (the buy-in 

provision) which states must pay for, or states must provide QMBs 

with drugs under the Medicaid program until the cost of the drugs 

reached the amount of the deductible: 

In a State which provides medical assistance for 

prescribed drugs under section 1396d(a)(12), instead of 

providing to qualified medicare beneficiaries, under 

paragraph (3)(C), medicare cost-sharing with respect to 

the annual deductible for covered outpatient drugs 

under section 1395m(c)(1), the State may provide to 

such beneficiaries, before charges for covered 

outpatient drugs for a year reach such deductible 

amount, benefits for prescribed drugs in the same 

amount, duration, and scope as the benefits made 

available under the State plan for individuals 

described in section 1396a(a)(10)(A)(i). 
35 

the legislative history language regarding drug benefits0 make 

clear that states had two options to satisfy the obligation to 

pay for the drug deductibles: either to provide drugs in kind or 

reimburse $500 under the buy-in provision §1396d(p)(3)(C). 

Neither option excuses the state from paying the full $500. It 

is clear Congress envisioned the drug deductibles as part of the 

Part B cost-sharing listed in § 1396d(p)(3)(C), not as a special 

benefit separate from that provided by the buy-in provision. See

§ 1396d(p)(4), Pub. L. No. 100-360, §301(d)(2), 102 Stat. 671, 

749 (1988) (repealed 1990) (referring to § 1396d(p)(3)(C)). 

Assuming that the language relied upon by the Secretary could be 

read to allow states to pay only part of any item of the Part B 

cost-sharing listed in § 1396d(p)(3), that reading conflicts with 

the language regarding the drug benefits. The fact that § 

1396d(p)(4) as set out in note 14, supra, was repealed 

subsequently, see Pub. L. No. 101-234, § 201(a)(1), (b)(2), (e), 

103 Stat. 1981, 1985 (1989), does not eliminate the conflict 

between the legislative comments as they existed in 1988. Such 

commentary, therefore, at most exhibited confusion on the part of 

the reporting Committee, which is one of the reasons why such 

post hoc comments should not be given much weight. 

 The post-enactment legislative history language relied 

upon by the Secretary thus conflicts with a logical reading of 

the statutory provisions, with contemporaneous legislative 

 

42 U.S.C. § 1396d(p)(4), Pub. L. No. 100-360, § 301(d)(2), 102 

Stat. 671, 749 (1988) (repealed 1990, Pub. L. No. 101-234, 

§201(a)(1), (b)(2), (e), 103 Stat. 1981, 1985 (1989)). 

0See supra note 12. 
36 

history, as well as language in another section of the same House 

Report. "Even in the ordinary situation, [a] House Report would 

not suffice to fix the meaning of language which that reporting 

Committee did not even draft." Pierce, 487 U.S. at 567, 108 S. 

Ct. at 2551. Given all the problems discussed above, we will 

give no effect to the subsequent legislative history language 

relied upon by the Secretary. 

(c) 

 The Secretary and the district court also relied upon 

§1395w-4(g)(3)(A), a statutory provision enacted in 1989 which 

requires providers to take assignment of payment with respect to 

the services provided to QMBs. See Pub. L. No. 101-239, 

§6102(a), 103 Stat. 2181-82. This requirement took effect in 

April 1990. Id. § 6101, 103 Stat. 2169. This section, which 

only set forth a payment method, should not affect the 

interpretation of how much the states must pay under 

§1396a(a)(10)(E). Indeed, the legislative history states that 

the amendment "does not change the current policy regarding the 

amount which a Medicaid program must reimburse on such claims." 

H.R. Rep. No. 247, 101st Cong., 1st Sess. 364, reprinted in 1989 

U.S.C.C.A.N. 1906, 2090. Because taking assignment itself does 

not affect the amount of payment, particularly if the payment 

amount is considered to be the whole amount of the Part B costsharing, taking assignment means only that providers are to 

receive the whole amount from the states, rather than from QMBs 

in whole or in part. The fact that between 1988 and April 1990, 

service providers were permitted to balance-bill QMBs indicates 
37 

congressional intent that service providers be entitled to 

collect the deductibles and the 20% coinsurance in full, if not 

from the Medicaid plans, then from QMBs. A statutory provision 

obligating service providers to take assignment and prohibiting 

balance-billing does not reduce the amount of the payment but 

regulates where the payment can come from.0 

 The Secretary and the district court also relied upon 

the legislative history language relevant to § 1395w-4(g)(3)(A) 

which again asserted that there was a current practice of not 

paying Part B cost-sharing in full. See H.R. Rep. No. 247 at 

364, reprinted in 1989 U.S.C.C.A.N. at 2090. This reliance is 

misplaced for the same reasons that reliance upon the 1988 House 

Report is misplaced. See supra Part II.B(b). 

 We also note that the ban on balance-billing appears to 

apply only to an item of service that is covered by a Medicaid 

state plan. See § 1395w-4(g)(3)(A) ("Payment for physicians' 

services . . . with respect to such services under a State plan

approved [by the Secretary] may only be made on an assignmentrelated basis" (emphasis added)). It appears, therefore, that 

this provision does not apply to an item of service that is not 

available under a State plan but available under Medicare Part B. 

We do not know whether in such a situation a provider may 

 

0For the same reason, we believe the legislative history language 

indicating that Congress intended to codify the practice relating 

to the dual eligibles, see H.R. Rep. No. 247 at 364, reprinted in

1989 U.S.C.C.A.N. at 2090, refers only to the method of payment, 

not the amount of payment. The codification addresses from where 

the payment comes and from whom service providers may seek 

payment, not about how much that payment could be. 
38 

balance-bill a QMB patient. We need not decide this question; it 

suffices to point out that the Secretary's reliance on this 

provision is fraught with problems. 

(d) 

 Finally, the Secretary's interpretation leads to an odd 

result and defeats congressional intent in creating the QMB 

program. The odd result is that if an item of service is 

available under Medicare Part B but not Medicaid, then no payment 

is required by the buy-in provisions of the Medicaid Act; the 

states have no basis to make any payment calculations. This is 

exactly what the Secretary by regulation provides: "State 

payment of Part B premiums on behalf of a Medicaid recipient does 

not obligate it to pay on the recipient's behalf the Part B 

deductible and coinsurance amounts for those Medicare Part B 

services not covered in the Medicaid State plan." 42 C.F.R. 

§431.625(c)(1) (1993). We believe this result contradicts clear 

statutory command that states pay the Part B cost-sharing 

including deductibles and coinsurance payments on behalf of QMBs, 

regardless of whether an item of Part B service is available 

under Medicaid. See § 1396d(p)(3)("without regard to whether the 

costs incurred were for items and services for which medical 

assistance is otherwise available under the [Medicaid] plan"). 

The language, context and history of the buy-in provisions of the 

Medicaid Act do not permit viewing the obligation to pay the Part 

B cost-sharing as depending upon whether an item of service is 

available under Medicaid. 
39 

 Moreover, because the Medicaid rates are invariably 

lower that than those under Medicare Part B, the Secretary's 

interpretation would lead to the result that states almost always 

would not have to pay any amount at all. This conflicts with the 

congressional intent in creating the QMB program: to put the 

states opting to participate in the program in the shoes of QMBs 

with respect to the responsibility for the Part B cost-sharing 

payments. See H.R. Rep. No. 727 at 106, reprinted in 1986 

U.S.C.C.A.N. at 3696 ("For elderly and disabled individuals whom 

the State chose to cover, the Medicaid program would pay for the 

Part B deductible and the beneficiary's 20 percent co-insurance 

on Part B services."). In so doing, Congress took notice of the 

fact that the Medicare beneficiaries faced substantial out of 

pocket expenses. See id. at 102-03, reprinted in 1986 

U.S.C.C.A.N. at 3692-93. QMBs were so poor that they could not 

afford the Part B cost-sharing as did non-QMBs in order to obtain 

Medicare Part B services, nor were they poor enough to obtain 

certain coverage under Medicaid. The buy-in provisions thus were 

designed to alleviate this plight of QMBs by requiring the states 

to pay for the out of pocket expenses for them, if the states 

opted to join the QMB program. 

 When changing the option into a mandate to join the QMB 

program by deleting "at the option of a State" from 

§1396a(a)(10)(E)(i), Congress was motivated primarily by one 

consideration: the savings for the Medicaid programs that would 

result from the expansion of Medicare coverage to services 

previously covered by Medicaid. The House Committee on Energy 
40 

and Commerce believed that expansions in the Medicare program to 

be made by the 1988 amendments would provide states with a 

windfall of savings. See H.R. Rep. 105 (II) at 59-60, reprinted 

in 1988 U.S.C.C.A.N. at 882-83. To channel that windfall into 

the QMB program was the intent behind the 1988 amendment: "In the 

view of the Committee, this Medicaid `windfall' should be 

redirected toward catastrophic protection for the elderly and 

disabled poor. Accordingly, the Committee bill would essentially 

make mandatory the Medicaid `buy-in' option in current law." Id.

Thus, forcing states to use the windfall savings to pay for the 

QMB Part B cost-sharing was the unmistakable purpose of the 1988 

amendment. The Secretary's interpretation would require service 

providers to foot the bill rather than redirecting the Medicaid 

"windfall" to pay for the Part B cost-sharing, thus defeating the 

congressional intent in passing the amendment in 1988.0

III. 

 The Secretary contends that she should be given 

deference under Chevron, U.S.A., Inc., v. Natural Resources 

Defense, 467 U.S. 837, 104 S. Ct. 2778 (1984). The Chevron rule 

is predicated on the fact "the statute is silent or ambiguous 

with respect to the specific issue." Id. at 843, 104 S. Ct. at 

2782. Our analysis reflects that although interpreting the 

relevant statutory provisions is not a simple task, there is in 

 

0We do not know whether the windfall referred to in the House 

Report still exists at present time. If not, the states may have 

considerable burden in providing payments for the Part B costsharing. Such a problem, if it indeed exists, must be resolved 

by Congress through corrective legislation, rather than by us 

through questionable judicial interpretation of the statute. 
41 

fact no ambiguity as to how much states have to pay. Complexity 

alone is not enough to trigger Chevron. As our discussion makes 

clear, the statutory language, context and legislative history 

demonstrate that Congress has spoken on the issue. Accordingly, 

Chevron has no application. INS v. Cardoza-Fonseca, 480 U.S. 

421, 446-48, 107 S. Ct. 1207, 1221 (1987); Chevron, 467 U.S. at 

843 & n.9, 104 S. Ct. at 2781 & n.9; Perales, 954 F.2d at 861. 

 Moreover, we note that the Secretary has changed her 

position with respect to the issue of how much states must pay 

for dual eligibles and QMBs. As the Perales court stated: 

In a 1981 policy memorandum, the Secretary announced 

that with respect to dual eligibles who have buy-in 

Medicare coverage, "if the MediCal [Medicaid] agency 

has made no payment at all, the physician/supplier may 

collect coinsurance [i.e. 20% of reasonable charges] 

and deductibles from the MediCal . . . eligible 

patient." Department of Health & Human Services 

Memorandum, September 29, 1981. 

954 F.2d at 862 (alteration in Perales). The Secretary urged the 

same position in a case before a district court at about the same 

time. Id. This makes clear that the Secretary "presumed that 

providers have the right to receive 100% of their reasonable 

costs or charges for services to patients enrolled in Part B 

Medicare pursuant to a buy-in arrangement, a right that providers 

could assert even against indigent, Medicaid-eligible patients." 

Id. 
42 

 The Secretary's change of position erodes the 

confidence that a court should have when it defers to the 

judgment of another decisionmaker. "An agency interpretation of a 

relevant provision which conflicts with the agency's earlier 

interpretation is `entitled to considerably less deference' than 

a consistently held agency view." INS v. Cardoza-Fonseca, 480 

U.S. at 446 n.30, 107 S. Ct. at 1221 (citations omitted). See 

also Perales, 954 F.2d at 861; Samaritan Health Serv. v. Bowen, 

811 F.2d 1524, 1529 (D.C. Cir. 1987) ("[a]ny deference that an 

interpretative rule may claim depends on [among other things] . . 

. `its consistency with earlier and later pronouncements.'" 

(quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct. 

161, 164 (1944)). Applying these principles, we will not give 

any deference to the Secretary's new position.0 

IV. 

 For the foregoing reasons, we hold that Pennsylvania 

must pay the entire amount of the Part B cost-sharing on behalf 

of QMBs. We will reverse the judgment of the district court and 

remand the case with instructions that the district court enter 

judgment for the appellants. 

 

0In Thomas Jefferson University v. Shalala, U.S. , 62 

U.S.L.W. 4601, 1994 W.L. 276674 (U.S. June 24, 1994), the Supreme 

Court gave substantial deference to the Secretary's 

interpretation of her own regulation, namely, 42 C.F.R. 

§413.85(c) (1993). As that case does not involve an issue of the 

Secretary's interpretation of a statute, it has no relevance to 

our analysis in the case sub judice.