Opinion ID: 449269
Heading Depth: 2
Heading Rank: 1

Heading: Reimbursement to Providers Under the Medicare Act

Text: 3 This case arises under Title XVIII of the Social Security Act which established the federally funded health insurance program commonly known as Medicare. 42 U.S.C. Secs. 1395-1395xx (1982). Under the Medicare program, the federal government reimburses eligible hospitals, nursing facilities, and home health agencies for the reasonable cost of covered services provided to Medicare beneficiaries. 2 See 42 U.S.C. Secs. 1395f(b)(1); 1395x(v)(1)(A) (1982). 4 The statute defines reasonable cost as the cost actually incurred, excluding therefrom any part of incurred cost found to be unnecessary in the efficient delivery of needed health services. 42 U.S.C. Sec. 1395x(v)(1)(A) (1982). 3 The Secretary may employ various methods in computing a provider's reasonable costs in accordance with this statutory definition. One such method, authorized by a 1972 amendment to the statute, involves the use of a schedule of limits that sets forth the amount of costs to be recognized as reasonable. Id. The statute further directs the Secretary to provide for suitable retroactive corrective adjustments where the amount of reimbursement produced by the chosen methods of determining costs proves either inadequate or excessive. Id. 5 Pursuant to her statutory authorization, the Secretary has from time to time promulgated regulations setting forth procedures for determining the amount of provider costs to be recognized as reasonable and therefore reimbursable under the Medicare program. This litigation concerns the legality of the regulation in effect during fiscal year 1975-76. See 20 (now 42) C.F.R. Sec. 405.460 (1975). 4 The challenged regulation provided that schedules of limits, based on general cost estimates, would be promulgated and that reimbursements would be limited to the amount set forth in those schedules. 5 The regulation provided for exceptions, exemptions, and adjustments from such pre-established limits only in certain narrowly defined circumstances. See 20 (now 42) C.F.R. Sec. 405.460(f) (1975). Excepted from the cost limits were expenses attributable to the provision of atypical services or to extraordinary circumstances beyond the provider's control. Id. All expenses which exceeded the reasonable cost limit and did not fall within either category of recognized exceptions were deemed unreimbursable, without regard to whether the costs incurred were in fact reasonable.