Opinion ID: 789609
Heading Depth: 3
Heading Rank: 3

Heading: Limitations on direct reimbursements

Text: 27
28 The district court determined that direct reimbursement for medical expenses paid for care rendered during the retroactive-coverage period is available only if the charges were personally paid by the recipient. According to the court, the direct reimbursement must be reduced by the amount of any third-party payments made on the recipient's behalf. Such third-party payments include those made by family members, friends, and charitable organizations, as well as by those entities legally obligated to pay for the recipient's care. 29 Medicaid is essentially a payer of last resort, which means that it will not pay medical bills for which other parties are legally liable. N.Y. Dept. of Soc. Serv. v. Bowen, 846 F.2d 129, 133 (2d Cir.1988). It is, therefore, not obligated to reimburse recipients for medical bills paid by private insurers, Medicare, workers' compensation carriers, or parties liable as the result of personal injury claims. See id. But family members, friends, and charitable organizations have no legal obligation to pay for the medical needs of the poor and may expect to be repaid for their generosity in helping an individual receive needed medical care. See Greenstein v. Bane, 833 F.Supp. 1054, 1063-64 (S.D.N.Y.1993) (finding direct reimbursement appropriate for plaintiffs who had relied on charitable organizations or family members to pay their medical bills); see also Cohen v. Quern, 608 F.Supp. 1324, 1329-30 (N.D.Ill.1984) (drawing a distinction between an unobligated party who voluntarily pays a Medicaid recipient's bill and a third party who is legally obligated to make such payments for the purpose of determining the recipient's eligibility for Medicaid). The analysis of this issue in the above cases strikes us as well-reasoned. We therefore hold that the district court erred in not allowing reimbursement for medical bills paid by entities not legally obligated to make the payment. 30 2. The requirement that reimbursements be reduced by the amount that the payments allowed the recipient to become eligible for Medicaid coverage 31 The district court also allowed the defendants to deduct from direct reimbursements to individual recipients the amount of any assets reduced by the payment of medical expenses by the recipient and/or Medicaid group member in order to establish asset eligibility. Without such a limitation, recipients who lawfully dispose of assets by making payments for medical services to establish their financial eligibility for Medicaid would reap a windfall by later being reimbursed for their formerly excess assets. 32 This concept can best be illustrated with the following example: Suppose that an individual's countable assets must be less than $2,000 to qualify for Medicaid. Someone with $2,500 in assets would obviously not qualify. But if that person paid $750 to satisfy an outstanding bill for medical care provided during the previous three months and then promptly applied for Medicaid, his or her remaining assets of $1,750 would be low enough to establish Medicaid eligibility. If that person, now a Medicaid recipient, were then reimbursed $750 for the payments made during the retroactive-coverage period, he or she would recoup all of the assets disposed of to qualify for Medicaid in the first place. The $750 reimbursement would thus result in a $500 windfall for the individual. Instead, reimbursement should be limited to $250, the amount that the individual paid out-of-pocket after spending down his or her assets to establish eligibility. 33 As the above example demonstrates, the avoidance of a windfall to Medicaid applicants is an appropriate consideration to take into account. We therefore conclude that the district court did not err in placing this limitation on the reimbursements. 34 3. The requirement that reimbursements be limited to the Medicaid rate 35 The parties disagree as to whether the district court further ruled that reimbursements should be available only at the Medicaid-payment rate, which is typically much lower than the rates charged to private-pay patients. This ambiguity is due to an inconsistency in the language of the judgment issued by the district court below. With respect to the corrective-action reimbursements (not at issue in this appeal), the judgment reads: Reimbursement shall be for the recipient's out-of-pocket expenses.... (Emphasis added.) But with respect to the issue of direct reimbursement for charges incurred during the retroactive-coverage period, the judgment reads: 36 Defendants shall reimburse payment for covered services received by the recipient in one or more of the three months prior to the recipient's Medicaid application (retroactive period), which were paid by the recipient who is eligible for Medicaid at the time the services were furnished. 37 The parties disagree as to the significance of the district court's failure to explicitly state that direct reimbursement for payment for services provided during the retroactive-coverage period should be for out-of-pocket expenses, as it did in reference to the corrective-action reimbursements. Levy essentially argues that the court's failure to do so was simply an oversight, but the defendants contend that it was an indication that reimbursement was to be limited to the Medicaid rate. If in fact the court imposed such a restriction, however, we conclude that it erred in doing so. 38 On first impression, permitting reimbursement at the reduced Medicaid rate seems to provide a reasonable compromise to a complicated situation. Given that the medical services have been rendered and the provider already compensated, either the Medicaid recipient or the state Medicaid agency will unfortunately be forced to bear the differential cost. The recipient, who had to make payments in order to receive continuing care after being initially denied Medicaid coverage, will lose the money paid for the care if not reimbursed. Conversely, the state agency, which eventually accepted the recipient into the program, will lose if it is forced to pay at a rate higher than the Medicaid rate. Allowing reimbursement at the Medicaid rate is essentially a way of splitting the baby. The state agency would be in the same position that it would have been in had it paid the provider directly, whereas the recipient, while still not fully reimbursed, would recoup at least some of the money spent for medical care. 39 Two courts have in fact endorsed this compromise. One is the Supreme Court of Wisconsin, which held in Keup v. Wisconsin Department of Health and Family Services, 269 Wis.2d 59, 675 N.W.2d 755 (2004), that private-pay patients who are later found to be eligible for Medicaid are not entitled to be reimbursed by the provider for the amount paid out-of-pocket in excess of the Medicaid rate. The Keup court reasoned that because the plaintiff was neither a Medicaid applicant nor a recipient at the time she received treatment, the providers were entitled to charge her at their private-pay rate so long as she had notice of the applicable rate. 675 N.W.2d at 766. Similarly, the Court of Appeals of New York noted that [t]he intent of the retroactive reimbursement provision of the federal statute is to provide financial assistance to those individuals who were unaware of their Medicaid eligibility. Nowhere in this statute is it required that, in this situation, the State make these individuals whole. Seittelman v. Sabol, 91 N.Y.2d 618, 674 N.Y.S.2d 253, 697 N.E.2d 154, 158 (1998). 40 Although the rationale of the Keup and Seittelman courts has an initial appeal, it does not address the fact that all of the arguments that support permitting direct reimbursement in the first place also support reimbursement at the out-of-pocket rate. Singling out a group of recipients for partial payment and providing full reimbursement to others violates the comparability provision of the Medicaid Act in the same way that distinguishing between those who paid for their care and those whose bills remain unpaid violates the provision. Where some Medicaid recipients are forced to pay for a portion of their treatment out-of-pocket while others are required to pay nothing for their treatment, the recipients have not received medical assistance of equal value. See Greenstein v. Bane, 833 F.Supp. 1054, 1074 (S.D.N.Y.1993); see also Conlan v. Bonta, No. 987697, slip op. (Cal Cal.Super. Ct. March 3, 2004) (enforcing Conlan v. Bonta, 102 Cal.App.4th 745, 754, 125 Cal.Rptr.2d 788 (2002), which held that the Medicaid compliance plan must fully reimburse participants for their out-of-pocket expenses); Kurnik v. Dept. of Health & Rehabilitative Servs., 661 So.2d 914, 918 (Fla.App. 1 Dist.1995) (holding that the plaintiffs were entitled to be made whole for out-of-pocket expenditures made before eligibility is determined). 41 The Medicaid program, like all public benefit programs, requires a careful balancing of costs and benefits. Seittelman, 674 N.Y.S.2d 253, 697 N.E.2d at 159. Both the financial integrity of the program and the needs of individual recipients must be considered. Failure to reimburse recipients for all of their expenses, however, shifts the burden of spiraling health care costs onto those who can least afford it, which is inconsistent with the very purpose of the Medicaid program. Keup, 675 N.W.2d at 775 (Abrahamson, J., dissenting). We therefore hold that direct reimbursements to those initially denied Medicaid coverage should not be limited to the Medicaid rate, but instead should be for the full out-of-pocket amount paid by the recipient. 42 If the state is unhappy with having to reimburse recipients at a rate higher than what it pays providers, it has the option of requiring that providers issue refunds to individuals who pay for services rendered during the retroactive-coverage period and then seek payment from Medicaid at the reduced rate. See 42 C.F.R § 447.15 (requiring states to limit participation in Medicaid to providers who accept the Medicaid rate as payment in full); see also Cohen, 608 F.Supp. at 1330-32 (ordering providers to refund payments made by Medicaid recipients for services rendered during the retroactive-coverage period, but declining to order direct reimbursement because the state agency lacked the authority to issue payments to Medicaid recipients directly). Because Michigan has not elected to pursue this avenue of reimbursement for recipients, its Medicaid program should fully reimburse recipients such as Levy for their out-of-pocket payments.