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Blecker v. State

July 12, 1999


The opinion of the court was delivered by: Wecker, J.A.D.


Before Judges Landau and Wecker.

On appeal from the Superior Court of New Jersey, Law Division, Atlantic County.

Since 1988, federal law has required states that participate in the Medicaid program to share with the federal government the cost of providing Medicare Part B benefits to persons whose income, while too high to qualify for Medicaid benefits, is at or below the federally defined poverty level. See 42 U.S.C.A. § 1396d(p)(1), (3). Those persons are described as qualified Medicare beneficiaries, or "QMB's." *fn1 New Jersey participates in Medicaid and therefore is subject to cost-sharing for QMB's.

Medicare normally pays a physician-provider 80% of the federally adopted Medicare reimbursement rate. Ordinarily, the patient is responsible for an initial deductible and the 20% co-payment, and the provider is limited to those amounts. With respect to QMB's, the provider is limited to the state Medicaid program's cost-sharing contribution in lieu of the QMB patient's share. The question before us is the same question the District of Columbia Circuit recently faced:

"Are Medicare providers performing Part B services to QMBs entitled to state reimbursement for the entire twenty percent copayment that a non-QMB Medicare patient would normally pay, or may states limit reimbursement such that providers receive no more than the state's Medicaid rate for the same service?" McCreary v. Offner, 172 F.3d 76, 78 (D.C. Cir. 1999).

Plaintiff is a physician who has treated QMB's for a number of years and received payments from the State Medicaid program pursuant to its cost-sharing responsibility. However, for the period between 1988 and February 10, 1995, the Division of Medical Assistance and Health Services (the "Division") allowed co-payments to providers such as plaintiff only at the generally lower Medicaid rates established pursuant to 42 U.S.C.A. § 1396a(a)(13), and not at the rates allowed under Medicare for non-state-subsidized patients. The Division interpreted the then controlling federal law, 42 U.S.C.A. 1396a(n), *fn2 to permit the lower Medicaid reimbursement rates to govern cost-sharing payments for QMB's.

As of February 10, 1995, the State conformed its Medicare cost- sharing plan to the ruling of the Third Circuit in a case challenging Medicaid rates paid for QMB's under a similar Pennsylvania plan. See Pennsylvania Medical Soc'y. v. Snider, 29 F.3d 886 (1994). From February 10, 1995 until July 20, 1998, New Jersey's Medicare co-payments for QMB's were based upon the higher Medicare maximums. The Department of Human Services amended N.J.A.C. 10:49-7.3(e)(1)(i) after Congress enacted § 4714 of the Balanced Budget Act of 1997, Pub.L. 105-33, Title IV, 111 Stat. 509-510 (1997), to again limit co-payments for QMB's to the lower Medicaid maximums as of July 20, 1998.

Plaintiff claims that he and others similarly situated *fn3 were entitled to payments at the higher Medicare levels prior to February 10, 1995. Section 4714(a) of the Balanced Budget Act of 1997, codified at 42 U.S.C.A. 1396a(n)(2), explicitly permits states to limit their Medicare cost-sharing payments to Medicaid rates. Section 4714(c) provides that § 4714(a) applies to pending lawsuits raising the issue. Plaintiff's complaint was pending in the Law Division when § 4714 was enacted.

The Law Division Judge granted defendants' motions to dismiss for failure to state a claim and for summary judgment, citing decisions of the Seventh and Ninth Circuits. See Paramount Health Sys., Inc. v. Wright, 138 F.3d 706, 711 (7th Cir.), cert. denied, --- U.S. ----, 119 S. Ct. 335, 142 L. Ed. 2d 276 (1998); Beverly Community Hosp. Ass'n v. Belshe, 132 F.3d 1259 (9th Cir.1997), cert. denied, --- U.S. ----, 119 S. Ct. 334, 142 L. Ed. 2d 276 (1998). Both courts held that federal law applicable to the period in dispute permits states to limit their cost- sharing obligation to Medicaid levels.

Plaintiff argues before us that § 4714 is not a binding interpretation of prior law; that Congress's attempt to clarify a prior statute violates constitutionally mandated separation of powers; that § 4714 violates his Fifth Amendment right to substantive due process; and that his complaint states claims for breach of contract and violation of 42 U.S.C.A. § 1983. We have carefully considered the briefs and arguments of counsel in light of applicable law. We are satisfied that the Division was authorized to limit reimbursement to medical providers such as plaintiff to the maximum Medicaid rate. Plaintiff is not entitled to any further payments, and we affirm the judgment dismissing plaintiff's complaint.


The Massachusetts Supreme Judicial Court has recently set forth the relevant statutory background in a case raising virtually the same issues we face. See Briggs v. Commonwealth, 707 N.E.2d 355 (Mass. 1999).

"Because this case concerns the interplay between two complex statutory schemes, Medicare and Medicaid, a Discussion of the relevant aspects of each will provide the context for the dispute. Medicare, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., first enacted in 1965, provides two types of federally funded medical benefits to certain disabled individuals and people over the age of sixty-five years, regardless of financial need. 42 U.S.C. § 426(a), 1395c. Medicare Part A essentially covers hospital, post-hospital, and other inpatient services, and coverage is automatic. 42 U.S.C. § 1395c--1395i-4. Medicare Part B is a supplemental, voluntary insurance program providing coverage for physician and outpatient services. To obtain Part B coverage, patients must pay monthly premiums, and coverage does not begin until patients meet an annual deductible (§100). 42 U.S.C. §§ 1395l(b), 1395r, 1395s. Most important, once the deductible is met, Medicare covers only eighty per cent of the "reasonable charges" for a covered service; the patient is responsible for the remaining twenty per cent, known as the copayment. 42 U.S.C. §§ 1395l(a), 1395w-4. Collectively, the premium, deductibles, and copayment are referred to as "cost-sharing." 42 U.S.C. § 1396d(p)(3). Medicaid, Title XIX of ...

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