Opinion ID: 576643
Heading Depth: 1
Heading Rank: 1

Heading: introduction

Text: 4 Before addressing the merits of the controversy before us, it is important that we clarify various terms of the relevant statutes. Under the Medicare Act, the federal government provides people who are 65 years of age and older and certain disabled individuals (people who are Medicare-eligible) with an inpatient hospital insurance plan known as Part A. 42 U.S.C. §§ 1395c-1395i-4. The Medicare Act also provides that people who are Medicare-eligible may voluntarily obtain supplementary insurance for other medical care, including certain physician services, hospital outpatient services, and other health services generally not covered under Part A. 42 U.S.C. §§ 1395j-1395w-4(j). This coverage is known as Part B and is the part of the Medicare statute involved in this appeal. To obtain this coverage, a Medicare-eligible person must pay insurance premiums. Once Part B coverage is obtained, the federal government pays 80% of the reasonable costs of outpatient hospital services and 80% of reasonable charges for physician services rendered to the insured. Reasonable costs and charges are established pursuant to the Medicare Act and regulations. Medicare patients themselves are responsible for paying the remaining coinsurance amount (20% of the reasonable costs of hospital services and 20% of the reasonable charges for physician services) and the annual deductible. 5 The Medicaid Act, a statute separate from the Medicare Act, provides for a joint federal and state funded system which subsidizes medical care for the needy, regardless of age. If a state decides to participate in Medicaid, it proposes a plan which must be approved by the Secretary as conforming with federal requirements. 42 U.S.C. §§ 1396a(a), 1396a(b). The plan must include, among other things, a schedule of payment rates which the state designates for the various kinds of medical care that a Medicaid patient might seek. Id. If the Secretary approves a state's plan, then the Federal government will assist the state in its reimbursement program with federal Medicaid funds. Those doctors and hospitals who are willing to treat Medicaid patients must agree to accept the designated Medicaid rate and not ask the patient to pay any money beyond that amount. 42 U.S.C. §§ 1320a-7b(d), formerly 42 U.S.C. § 1396h(d), and 42 C.F.R. § 447.15 (1989). New York State is a participant in the Medicaid program. 6 Returning to Medicare, the authors of the statute recognized in addressing the needs of Medicare patients that the poor Medicare-eligible (those who are eligible for Medicaid as well) generally would not be able to afford to enroll in the optional Part B Medicare coverage described above, because they would not be able to pay the insurance premiums, the 20% coinsurance and the annual deductible. The Act therefore provides, in 42 U.S.C. § 1395v, as elaborated by 42 C.F.R. § 407.40-407.50 (1990), that a state may agree to pay Part B Medicare insurance premiums on behalf of such poor elderly and disabled--whom we shall call dual eligibles or crossovers--and thereby acquire Part B Medicare coverage for them. By so doing, a state enrolls these crossovers in the Medicare Part B program just as less needy individuals enroll themselves when they individually choose to obtain Part B Medicare coverage and pay the insurance premiums. The federal government contributes funds to subsidize these state buy-in arrangements. New York has such a buy-in agreement with the Secretary. 7 Until 1987, New York paid not only the premiums but also the full cost-sharing amounts--the annual deductible and the 20% of reasonable costs or charges beyond what Medicare covers--for buy-in crossovers. Effective January 1, 1987, however, New York changed its practice by enacting the Regulation at issue in this case. The Regulation provided that in the case of crossovers covered by Part B through a buy-in agreement, New York will not pay any cost-sharing amounts except under one set of circumstances: When the 80% of reasonable costs or charges that Medicare reimburses amounts to less than the Medicaid rate, New York will pay the difference (Medicaid rate minus 80% reasonable costs or charges). A letter sent by New York State to health care providers illustrates the way that the Regulation operates: 8 Example: Medicaid Fee or Rate = $45.00 Medicare [80%] Balance Approved Medicare Paid Due $80.00 $63.00 $0.00 A claim should not be submitted to Medicaid in this example.    Example: Medicaid Fee or Rate = $50.00 Medicare [80%] Balance Approved Medicare Paid Due $60.00 $48.00 $2.00 A claim should be submitted to Medicaid for the amount of $2.00. ---------- 9 The Regulation also prohibits Medicare providers from collecting any money from buy-in dual eligibles themselves. 10 One effect of the Regulation is that in New York State a dual eligible's providers may almost never collect more than 80% of their reasonable costs or charges, because the scheduled Medicaid payments are almost invariably less than 80% of the corresponding reasonable costs or charges of a given type of care under Medicare. 2 The Regulation has been modified to extend to a group of Medicare-eligible patients who are not poor enough to qualify for Medicaid but have incomes at or below the poverty line. This group is referred to as qualified Medicare beneficiaries (QMBs). 42 U.S.C. §§ 1396d(p)(1), 1396d(p)(2)(A). The QMBs may, like dual eligibles, be provided with Part B coverage through a buy-in agreement. 42 U.S.C. § 1396d(p)(3). The modified New York regulation limits New York's contribution to QMBs' cost-sharing coverage in the same way it does that of dual eligibles, on the basis of Medicaid rates.