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DAMERON PHYSICIANS MED. GROUP v. SHALALA

February 25, 1997

DAMERON PHYSICIANS MEDICAL GROUP, INC., et al, Plaintiffs,
v.
DONNA SHALALA, Secretary of Health and Human Services; S. KIMBERLY BELSHE, Director of the California Department of Health Services, Defendants.



The opinion of the court was delivered by: LEGGE

 Plaintiffs, a group of California doctors, psychiatrists, psychologists, and other health care providers, bring this action under 42 U.S.C. § 1983 against defendants the Secretary of the United States Department of Health and Human Services ("HHS") and the Director of the California Department of Health Services ("DHS"). Plaintiffs contend that California's policy of "capping" reimbursements at the Medi-Cal limits violates federal law because health care providers receive less than the amount required by the federal Medicare statutes.

 Defendants move for summary judgment that California's system for reimbursing health care providers does not violate the Medicare or Medicaid statutes. Plaintiffs cross-move for summary judgment that California may not "cap" its payments to health care providers at levels below those established by the Medicare system. The parties filed briefs in support of their motions, oppositions to the opposing parties' motions, and reply briefs in support of their own motions. This court heard oral argument on these motions and took them under submission. The issues in these cross-motions present only issue of law, and there are no genuine issues of material fact.

  I.

 Under the Medicaid Act, a state must share certain expenses for qualified Medicare beneficiaries (QMB's) in order to make these QMB's eligible for Medicare Part B benefits. California participates in the Medicaid program as "Medi-Cal." Medi-Cal limits California's contributions under Medicare Part B so that the total reimbursements to a health care provider do not exceed the amounts that the provider would have received for the services under Medi-Cal alone.

 Resolving the issues to determine whether California can cap its contributions under Medicare Part B requires interpreting the statutory provisions governing Medicare and Medicaid, which "are among the most completely impenetrable texts within human experience." Rehabilitation Ass'n of Virginia, Inc. v. Kozlowski, 42 F.3d 1444, 1450 (4th Cir. 1994), cert. denied 133 L. Ed. 2d 23, 116 S. Ct. 60 (1995).

 A.

 Eligibility for benefits under the Medicare Act, 42 U.S.C. §§ 1395-1395ccc, is based on old age or disability. An individual must be at least 65 years old or disabled to be eligible. 42 U.S.C. § 426 (1996). Medicare Part B provides optional insurance for medical benefits and requires the insured to pay a premium. Under Part B, Medicare pays 80% of "reasonable charges" and the patient pays the remaining 20%, which is referred to as the "co-payment" or "coinsurance." Under the Medicare Act, the HHS Secretary is authorized to determine the reasonable costs or charges for Medicare Part B services. 42 U.S.C. § 1395w-4(b) (1996).

 The Medicaid Act, 42 U.S.C. § 1396 et seq., established the Medicaid program, a federal-state program providing medical benefits for indigents. Among other things, Medicaid pays for Medicare Part B premiums, deductibles and copayments for certain people too poor to afford this coverage. As stated, "Medi-Cal" is California's Medicaid program.

 A QMB is either a person who qualifies for both Medicare and Medicaid ("dual eligibles"), or a person who qualifies for Medicare, is below the federal poverty level, but is not poor enough to qualify for Medicaid ("pure QMBs").

 Medicare Part B benefits also cover some Medi-Cal patients. When this occurs, Medicare Part B pays 80% of the "reasonable" charge for the services and Medi-Cal pays some or all of the remaining 20% directly to the provider. The patient pays either nothing or a nominal charge. However, Medi-Cal often pays less than the remaining 20%, because the DHS has established maximum charges for each medical service covered by Medi-Cal. If the Medi-Cal maximum is less than the "reasonable charge" set by Medicare, Medi-Cal pays only the difference between what Medicare paid and the Medi-Cal maximum. As a result, the health care provider's total compensation is capped by the Medi-Cal maximum, which is less than the "reasonable charge" set by Medicare.

 B.

 Plaintiffs contend that federal law requires Medicaid states to pay the full 20% of the federally allowed amount, so that health care providers receive 100% of the Medicare "reasonable" charges for their services. Defendants contend that California's payment cap is allowed by federal law. *fn1"

 II.

 The primary issue is whether federal law requires Medi-Cal to pay the full difference between the Medicare Part B payments and the "reasonable" charge for the medical services determined by Medicare. The Ninth Circuit has not addressed this issue.

 A.

 The statutory language is the starting point for interpretation. If the language of the statute is clear, then that is the end of the inquiry and a court need not defer to a federal agency's contrary interpretation of the statutory scheme. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984).

 The Medicare Act requires the federal government to pay:

 
in the case of each individual who is covered under the insurance program established by this part and incurs expenses for services with respect to which benefits are payable under this part, amounts equal to . . .
 
(1) in the case of services described in section 1395k(a)(1) of this title -- 80 percent of the reasonable charges for the services. . . .

 42 U.S.C. § 13951(a) (1996) (emphasis added).

 The same Act provides:

 
A provider of services may charge such individual or other person (i) the amount of any deduction or coinsurance imposed pursuant to 1395e(a)(1), (a)(3), or (a)(4), section 13951(b) or section 1395x(y)(3) of this title with respect to such items and services (not in excess of the amount customarily charged for such items and services by such provider), and (ii) an amount equal to 20 per centum of the reasonable charges for such items and services (not in excess of 20 per centum of the reasonable charges for such items and services by such provider) for which payment is made under part B of this subchapter or which are durable medical equipment furnished as home health services . . . .

 42 U.S.C. § 1395cc(a)(2)(A) (1996) (emphasis added).

 Under the Medicaid Act:

 
(a) A State plan for medical assistance must --
 
(10) provide --
 
(E)(i) for making medical assistance available for medicare cost-sharing (as defined in section 1396d(p)(3) of this title) for qualified medical beneficiaries described ...

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