Opinion ID: 511795
Heading Depth: 2
Heading Rank: 1

Heading: Participation Decision

Text: 2 The facts in this case, although more complex than our legal analysis, provide a necessary backdrop to what follows. The Medicare Program furnishes two distinct alternative means of reimbursement for physicians' services. A physician can charge his patients on the basis of an itemized bill, 42 U.S.C. Sec. 1395u(b)(3)(B)(i), following which Medicare reimburses the patient 80% of the doctor's reasonable charge. 1 42 C.F.R. Sec. 410.152. The patient ends up paying the difference between the actual charge and 80% of the reasonable charge. 3 Otherwise, the physician can accept assignment, pursuant to 42 U.S.C. Sec. 1395u(b)(3)(B)(ii), and thereby bill the Medicare carrier directly for 80% of the reasonable charge, leaving the patient initially responsible for the remaining 20% of the reasonable charge. The doctor, however, agrees to accept no more than the reasonable charge for his services. 4 Originally, the Medicare Act permitted doctors to choose whether to accept assignment on a case-by-case basis. Legislation enacted in 1984, however, required every doctor periodically to decide whether to sign a participation agreement and thereby to accept assignment for all services furnished to Medicare Part B recipients during the following year. 2 A physician who did not sign a participation agreement remained free to accept assignment on a case-by-case basis. The same statute temporarily froze the fees that non-participating physicians could charge to Medicare beneficiaries and so controlled those fees from July 1, 1984 through December 31, 1986. Additionally, non-monetary incentives, such as Medicare directories listing only participating physicians, were included to encourage physicians to sign participation agreements. See, e.g., 42 U.S.C. Sec. 1395u(h) (2)-(6). 5 This litigation was spawned, paradoxically, by the law that terminated the price freeze but substituted a new form of price control for non-participating doctors. Section 9331 of the Omnibus Budget Reconciliation Act (OBRA) of 1986, Pub.L. No. 99-509, 100 Stat. 1874, 2018-22 (1986), caps non-participating physicians' charges to Medicare beneficiaries according to the newly-invented maximum allowable actual charge (MAAC). 42 U.S.C. Sec. 1395u(j)(1)(B)(i). While the reasonable charge formula for reimbursement of participating physicians remained constant after OBRA, the MAAC significantly altered the reimbursement formula for non-participating physicians in a way that only legislators and accountants can appreciate. To say that the calculation of individual MAAC's by every physician for every medical service that may be performed (some 10,000 in all) is complex is to understate the matter ridiculously. 3 6 Congress enacted OBRA on October 21, 1986. The act required physicians to make their 1987 participation decision by January 1, 1987. However, the Health Care Financing Administration, the sub-agency of the Department of Health and Human Services (HHS) which administers Medicare, did not require that MAACs be supplied to non-participating physicians until March 1, 1987. HHS instructed the health insurance carriers that administer the Medicare plan to respond to physicians' requests for information within three working days. 4 Unfortunately, many of the physicians who actually requested the information necessary to compute their MAACs did not receive it prior to the participation deadline. 7 Although the district court found that no doctor [was] without at least some means for estimating his 1987 MAAC, most physicians could not precisely calculate their MAACs prior to the participation decision deadline. 659 F.Supp. 1143, 1147. Even if a physician's records contained his charges to Medicare beneficiaries for the 1984 base quarter, he would lack two key parts of the calculation. First, he would not have known the prevailing charges for each service. Second, he would not know in which of the approximately 10,000 categories the carrier has classified his services. Moreover, physicians were probably unable to determine the reasonable charge that participating physicians would be allowed to charge. Thus, physicians were left with only a rough estimate of the fee limit differences between participating and non-participating status at the participation decision deadline. 8 This is not the end of the story. Congress made further changes to the Medicare program in the OBRA of 1987. Pub.L. No. 100-203, 101 Stat. 1330. Congress avoided the transitional problems caused by the 1986 Act by extending the effectiveness of the 1987 participation agreements and fee ceilings through the first quarter of 1988. Pub.L. No. 100-203, Sec. 4041, 101 Stat. 1330-83. With this extra time, HHS was able to provide physicians with updated customary and prevailing charges and MAACs more than a month before the April 1, 1988 participation decision deadline. HHS Dear Doctor Letter 4 Medicare and Medicaid Guide (CCH) Sec. 37,006 (1988). 9 The crux of appellants' complaint is the way in which the MAAC fee limits were folded into the existing Medicare payment system. Appellants contend that they were forced by HHS to make 1987 participation decisions in the dark, without knowing or having the ability to ascertain what their MAACs would be, and consequently without knowing whether Medicare reimbursement would be higher for participants or non-participants. This necessity for blind decisionmaking, together with warnings by HHS that non-participating doctors whose 1987 charges exceeded their MAACs would be subject to enforcement proceedings, underlie the appellants' due process claim. They thus contend that their statutory right to make voluntary participation decisions, 42 U.S.C. Sec. 1395u(h), was denied by the implementation of MAACs, and that they were effectively coerced into signing participation agreements.