Opinion ID: 574343
Heading Depth: 2
Heading Rank: 1

Heading: The Medicaid Act State Reimbursement Provision

Text: 28 The provision in the Medicaid Act addressing the reimbursement methodology allowed in state medical assistance plans has undergone some change since Congress initially enacted the Act in 1965. See generally, Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, ----, 110 S.Ct. 2510, 2515, 110 L.Ed.2d 455 (1990). At its inception, the Act required states to provide reimbursement for the reasonable cost of in-patient services that facilities rendered to Medicaid recipients. Id. In 1972, Congress altered this reasonable cost standard to give states more flexibility to develop methods and standards for reimbursement. Id. Under the Act, as amended, states were required to reimburse Medicaid facilities on a reasonable cost basis as determined in accordance with methods and standards which shall be developed by the State and reviewed and approved by the Secretary. Pub.L. No. 92-603, § 232(a), 86 Stat. 1329, 1410-11 (1972). The Secretary judged Pennsylvania's 1980 proposed amendment by this standard. 29 In 1980, Congress, in a laudable effort to contain escalating Medicaid costs and reduce potentially stifling and expensive federal oversight of state methodologies, enacted the Boren Amendment, creating a new standard for reimbursement of nursing and intermediate care facilities. West Virginia Univ. Hosps., Inc. v. Casey, 885 F.2d 11, 23 (3rd Cir.1989), aff'd in part, --- U.S. ----, 111 S.Ct. 1138, 113 L.Ed.2d 68 (1991). The Boren Amendment modified the state reimbursement provision to require states to provide reimbursement to SNFs and ICFs through the use of rates which the State finds, and makes assurances to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities. Pub.L. No. 96-499, § 962(a), 94 Stat. 2650 (emphasis added). 3 30 The Secretary reviewed Pennsylvania's 1982 plan amendment under the Boren Amendment standard. In 1982, the Medicaid regulations required the State to submit assurances to the HCFA that it had made findings that its plan's methods and rates provided reasonable and adequate reimbursement to facilities servicing Medicaid recipients. 42 C.F.R. § 447.255(a) (1982). 4 The regulations thus did not require the State to submit its findings, but only to accompany its assurances with related information. Id. § 447.255(b). The regulations then required HCFA to review the related information which pertained to the significant effect the change in payment rates would have on the availability of the relevant health care services, type of care and extent of provider participation, and the degree to which costs were covered in facilities serving a disproportionate number of indigent patients with special needs. Id. § 447.256(a). 5 In 60 days, HCFA was to inform the state agency whether the agency's assurances regarding proposed rates were acceptable. Id. 31 Our task is to determine whether, under the 1982 Medicaid provisions, the Secretary's approval of Pennsylvania's 1982 medical assistance plan amendment was arbitrary, capricious or manifestly contrary to the purposes of the Medicaid Act. See New York by Perales v. Sullivan, 894 F.2d 20, 24 (2nd Cir.1990). Because we review an administrative decision made by the Secretary, whom Congress has entrusted to administer the Medicaid statute, we accord substantial deference to his view of the regulations he has promulgated to fill any gap left, explicitly or implicitly, by Congress in the statute. Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984); Connecticut Dept. of Income Maintenance v. Heckler, 471 U.S. 524, 532, 105 S.Ct. 2210, 2214, 85 L.Ed.2d 577 (1985). In reviewing the district court's summary judgment order in favor of the Secretary, we exercise plenary review over the court's interpretation of legal precepts and its statutory construction. Bechtel v. Robinson, 886 F.2d 644, 647 (3rd Cir.1989). 32