New York City Health & Hospitals Corp. v. Perales

954 F.2d 854, 1992 WL 17012
CourtCourt of Appeals for the Second Circuit
DecidedFebruary 3, 1992
DocketNo. 142, Docket 91-6123
StatusPublished
Cited by12 cases

This text of 954 F.2d 854 (New York City Health & Hospitals Corp. v. Perales) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New York City Health & Hospitals Corp. v. Perales, 954 F.2d 854, 1992 WL 17012 (2d Cir. 1992).

Opinions

FEINBERG, Circuit Judge:

This case involves a challenge to New York State’s elimination of the rights of health care providers to receive reasonable compensation when they treat poor Medicare patients. Plaintiff-appellant New York City Health and Hospitals Corporation is a New York public benefit corporation created by New York State. It is a principal provider of hospital services to the low-income population of the City. Plaintiff-Appellant Medical Society of the State of New York, the largest voluntary association of physicians in New York, is a non-profit corporation organized and existing under the laws of New York State. Plaintiffs-appellants Sidney Finkel, M.D., and John A. Bleski, M.D., are physicians who participate in the Medicare program; many of their patients are eligible under both Medicare and Medicaid. Defendant-appellee Cesar A. Perales is the New York State Commissioner of Social Services. Defendant-appellee Louis W. Sullivan, M.D., is Secretary of the United States Department of Health and Human Services (the Secretary). Perales concurs with the views of Sullivan as set out in his brief.

Appellants appeal from a judgment of the United States District Court for the Southern District of New York, Mary Johnson Lowe, J., dismissing plaintiffs’ complaint challenging a regulation of the New York State Department of Social Services as violative of the Medicare Act, Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395ccc, and the Medicaid Act, Title XIX of the Social Security Act, 42 U.S.C. §§ 1396, et seq. The Medicare program provides funds that help subsidize medical care for the elderly and for certain disabled individuals. The Medicaid program subsidizes medical assistance for the poor.

Appellants claim that the regulation at issue, N.Y.Comp.Codes R. & Regs. tit. 18, § 360.10 (1988),1 which has been approved by the Secretary, violates the Medicare and Medicaid Acts. For the reasons given below, we agree. Accordingly, we reverse [856]*856and remand with directions to grant summary judgment for appellants.

I. Introduction

Before addressing the merits of the controversy before us, it is important that we clarify various terms of the relevant statutes. Under the Medicare Act, the federal government provides people who are 65 years of age‘and older and certain disabled individuals (people who are Medicare-eligible) with an inpatient hospital insurance plan known as "Part A”. 42 U.S.C. §§ 1395c-1395i-4. The Medicare Act also provides that people who are Medicare-eligible may voluntarily obtain supplementary insurance for other medical care, including certain physician services, hospital outpatient services, and other health services generally not covered under Part A. 42 U.S.C. §§ 1395j-1395w-4(j). This coverage is known as “Part B” and is the part of the Medicare statute involved in this appeal. To obtain this coverage, a Medicare-eligible person must pay insurance premiums. Once Part B coverage is obtained, the federal government pays 80% of the “reasonable costs” of outpatient hospital services and 80% of “reasonable charges” for physician services rendered to the insured. Reasonable costs and charges are established pursuant to the Medicare Act and regulations. Medicare patients themselves are responsible for paying the remaining “coinsurance” amount (20% of the reasonable costs of hospital services and 20% of the reasonable charges for physician services) and the annual deductible.

The Medicaid Act, a statute separate from the Medicare Act, provides for a joint federal and state funded system which subsidizes medical care for the needy, regardless of age. If a state decides to participate in Medicaid, it proposes a plan which must be approved by the Secretary as conforming with federal requirements. 42 U.S.C. §§ 1396a(a), 1396a(b). The plan must include, among other things, a schedule of payment rates which the state designates for the various kinds of medical care that a Medicaid patient might seek. Id. If the Secretary approves a state’s plan, then the Federal government will assist the state in its reimbursement program with federal Medicaid funds. Those doctors and hospitals who are willing to treat Medicaid patients must agree to accept the designated Medicaid rate and not ask the patient to pay any money beyond that amount. 42 U.S.C. §§ 1320a-7b(d), formerly 42 U.S.C. § 1396h(d), and 42 C.F.R. § 447.15 (1989). New York State is a participant in the Medicaid program.

Returning to Medicare, the authors of the statute recognized in addressing the needs of Medicare patients that the poor Medicare-eligible (those who are eligible for Medicaid as well) generally would not be able to afford to enroll in the optional Part B Medicare coverage described above, because they would not be able to pay the insurance premiums, the 20% coinsurance and the annual deductible. The Act therefore provides, in 42 U.S.C. § 1395v, as elaborated by 42 C.F.R. § 407.40-407.50 (1990), that a state may agree to pay Part B Medicare insurance premiums on behalf of such poor elderly and disabled — whom we shall call “dual eligibles” or “crossovers”— and thereby acquire Part B Medicare coverage for them. By so doing, a state enrolls these crossovers in the Medicare Part B program just as less needy individuals enroll themselves when they individually choose to obtain Part B Medicare coverage and pay the insurance premiums. The federal government contributes funds to subsidize these state “buy-in” arrangements. New York has such a buy-in agreement with the Secretary.

Until 1987, New York paid not only the premiums but also the full cost-sharing amounts — the annual deductible and the 20% of reasonable costs or charges beyond what Medicare covers — for buy-in crossovers. Effective January 1,1987, however, New York changed its practice by enacting the Regulation at issue in this case. The Regulation provided that in the case of crossovers covered by Part B through a buy-in agreement, New York will not pay any cost-sharing amounts except under one set of circumstances: When the 80% of reasonable costs or charges that Medicare reimburses amounts to less than the [857]*857Medicaid rate, New York will pay the difference (Medicaid rate minus 80% reasonable costs or charges). A letter sent by New York State to health care providers illustrates the way that the Regulation operates:

Example: Medicaid Fee or Rate = $45.00

Medicare [80%] Balance
Approved Medicare Paid Due
$80.00 $63.00 $0.00

Free access — add to your briefcase to read the full text and ask questions with AI

Related

McCreary, Maurice v. Offner, Paul
172 F.3d 76 (D.C. Circuit, 1999)
K & a RADIOLOGIC TECHNOLOGY SERVICES, INC. v. Wing
13 F. Supp. 2d 264 (N.D. New York, 1998)
Paramount Health Systems, Inc. v. Wright
138 F.3d 706 (Seventh Circuit, 1998)
Rehabilitation Ass'n of Virginia, Inc. v. Kozlowski
42 F.3d 1444 (Fourth Circuit, 1994)
Serbin v. Ziebart International Corp.
11 F.3d 1163 (Third Circuit, 1993)
Himes v. Shalala
999 F.2d 684 (Second Circuit, 1993)

Cite This Page — Counsel Stack

Bluebook (online)
954 F.2d 854, 1992 WL 17012, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-york-city-health-hospitals-corp-v-perales-ca2-1992.