CHRISTIAN BRIGGS vs. COMMONWEALTH & another [Note 1]

MARSHALL, J. Two elderly patients insured by the Federal

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Medicare program received identical medical services from a physician. Medicare did not dispute the physician's charges, and paid him eighty per cent, as provided by Medicare. The physician then billed the first patient for her twenty per cent "copayment." She paid him, as she had agreed to do under the Medicare program. The second patient could not afford to pay her twenty per cent "copayment," so the physician turned to the division of medical assistance, the Massachusetts agency responsible for administering the Medicaid program. The division refused to pay the physician. It said he was entitled to the Medicaid, not the Medicare, rate of reimbursement for his services, and that the eighty per cent he had already received from Medicare was more than the division would pay for treating a Medicaid patient. The physician sued. This illustrative example presents the question to be decided: must the division pay the physician the remaining twenty per cent of his charges.

In more technical terms, this case concerns a dispute between the division and a physician-provider [Note 2] regarding the method of calculating certain deductible and coinsurance reimbursements made by the division on behalf of a class of Medicare beneficiaries known as qualified Medicare beneficiaries (QMBs). On April 28, 1997, the plaintiff filed his class action in the Superior Court. He filed an amended complaint on July 21, 1997. On September 25, 1997, the Commonwealth and the Commissioner (collectively the division) filed a motion to dismiss, claiming that s. 4714 of the Balanced Budget Act of 1997 (BBA), Pub. L. 105-33, Title IV, s. 4714, Ill Stat. 509510 (1997), barred the plaintiff's claims. A judge in the Superior Court granted the motion. Judgment entered on March 9, 1998, and the plaintiff took an appeal. We granted the plaintiffs application for direct appellate review. We conclude that the division was authorized to cap reimbursements for medical services provided to QMBs at the applicable Medicaid rate. We affirm the dismissal of the complaint.

I

Because this case concerns the interplay between two

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complex statutory schemes, Medicare and Medicaid, a discussion of the relevant aspects of each will provide the context for the dispute [Note 3]. Medicare, Title XVIII of the Social Security Act, 42 U.S.C. H 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. s. 426(a), 1395c. Medicare Part A essentially covers hospital, post-hospital, and other inpatient services, and coverage is automatic [Note 4]. 42 U.S.C. H 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. H 13951(b), 1395r, 1395s. Most important, once the deductible is met, Medicare covers only eighty per cent of the "reasonable charge [Note 5]" for a covered service; the patient is responsible for the remaining twenty per cent, known as the copayment. 42 U.S.C. s. 13951(a), 1395w-4. Collectively, the premium, deductibles, and copayment are referred to as "cost-sharing." 42 U.S.C. s. 1396d(p)(3).

Medicaid, Title XIX of the Social Security Act, 42 U.S.C. s. 1396 et seq., also enacted first in 1965, provides necessary medical assistance for certain low-income individuals, based on financial need [Note 6]. Administered by the States [Note 7], the program provides Federal financial assistance to States that elect to

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provide medical services to low-income individuals. A State that chooses to participate in Medicaid must submit a plan (Medicaid State plan) for approval to the Secretary of the United States Department of Health and Human Services (Secretary or HHS), and must comply with all Federal statutes and regulations. 42 U.S.C. s. 1396. Massachusetts has chosen to participate in this public assistance program.

The Federal government reimburses Massachusetts for some, but by no means all, of the costs of participating in Medicaid. See 42 U.S.C. s. 1396a, 1396b, 1396d(b). States must establish a schedule of reimbursement rates for Medicaid covered services. See 42 U.S.C. s. 1396a(a)(13). Because the State Medicaid reimbursement rates generally are lower than the Federal Medicare rates, service providers who participate in the Medicaid program generally receive less than the "reasonable charge" determined by the Secretary for the same service covered under Medicare. See Rehabilitation Ass'n of Va., Inc. v. Kozlowski, 42 F.3d 1444, 1447 (4th Cir. 1994), cert. denied, 516 U.S. 811 (1995). The Medicaid rate frequently is even less than the eighty per cent of the "reasonable charge" paid to providers by the Federal government under Medicare. Id.

The Medicare and Medicaid statutes overlap for coverage of the population of elderly or disabled persons (eligible for Medicare) who are also poor (eligible for Medicaid). Referred to as QMBs, they are individuals who qualify for Medicare but who cannot afford to pay for the optional Medicare Part B premiums, deductibles, and copayments [Note 8]. 42 U.S.C. s. 1396d(p)(1). QMBs, in turn, fall into two groups: those who are not poor enough to qualify for Medicaid ("pure" QMBs) and those whose level of financial need is so great as to qualify them for Medicaid ("dual eligibles").

Because QMBs are poor and unable to pay for Part B coverage, those for whom the Medicare safety net is most needed are at risk of being excluded from the full range of Medicare protection. From the beginning of Medicare and Medicaid, at least as to dual eligibles, Congress has attempted to address this conundrum. In the intervening thirty-four years, Congress has

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visited and revisited the issue [Note 9]. Of relevance to this lawsuit, QMBs no longer have to pay for Medicare Part B cost sharing. The State bears these costs because, since 1988, Federal law has made a State's participation in the Medicaid program conditional on the State's agreeing to pay on behalf of all QMBs the Part B costs that Medicare does not reimburse, 42 U.S.C. s. 1396a(a)(10)(E)(i), 1396d(p)(3) [Note 10]. Medicare (administered by the Federal government) and the division (administering the Medicaid program) employ an automatic crossover billing process by which providers first submit their bills for Medicare Part B services provided to QMBs to Medicare. After Medicare pays its eighty per cent share, the bills automatically are sent to the division for payment of the remaining charges. (Individuals who are not QMBs, of course, pay any additional sums themselves.)

II

Briggs, a physician who practices in Nantucket, provided medical services to Medicare Part B eligible patients, including QMBs [Note 11]. From 1988 to 1996, he claims, the division impermissibly capped reimbursements of QMB copayments at the lower amounts allowable under the Commonwealth's Medicaid State plan, rather than paying him the (higher) Medicare rates [Note 12].

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Briggs alleges several theories of liability: breach by the division of its Medicare contract with the Federal government (claiming he was an intended beneficiary); breach of his Medicaid provider agreement (claiming the Federal requirement that the division reimburse full Part B cost-sharing for QMBs was incorporated by reference into his provider agreement); and violation of the Medicaid Act. He also alleges that the division's refusal to reimburse him at the Medicare rate deprived him of his property without due process of law in violation of his Federal constitutional rights. Briggs sought damages for the full amount of unreimbursed Medicare cost-sharing for Medicare Part B services provided to QMBs from 1988 to January 31, 1996.

In 1988, Congress amended the Medicaid Act to require participating States to enroll all QMBs in Medicare Part B by paying the insurance premiums, deductibles, and twenty per cent copayments with Medicaid funds, or risk losing Federal matching funds [Note 13]. Medicare Catastrophic Coverage Act of 1988, Pub. L. 100-360, Title III, s. 301(a)(1), 102 Stat. 683, 748,

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codified at 42 U.S.C. s. 1396a(a)(10)(E)(i). Specifically, s. 1396a(a)(10)(E)(i) provides that -[a] State plan for medical assistance must. . . provide . . . for making medical assistance available for medicare cost-sharing (as defined in section 1396d[p][3] of this title) [Note 14] for [QMBs]" (emphasis added). Two years previously, in 1986, Congress had amended the Medicaid Act to provide:

"In the case of medical assistance furnished under this subchapter for medicare cost-sharing respecting the furnishing of a service or item to a [QMB], the State plan may provide payment in an amount with respect to the service or item that results in the sum of such payment amount . . . exceeding the amount that is otherwise payable under the State plan for the item or service for eligible individuals who are not [QMBs]" (emphasis added).

42 U.S.C. s. 1396a(n). The division took the position (as did the Secretary) [Note 15] that s. 1396a(n) authorized it to reimburse QMB providers at the Commonwealth's Medicaid plan rate, not the Medicare rate. See 130 Code Mass. Regs. s. 450.317(A) and s. 450.318 (1989), the relevant portions of which are set out in the margin [Note 16]. There matters stood until 1996 when, apparently in response to decisions of four Courts of Appeals (discussed later), the division changed its position regarding Part B

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reimbursement for QMBs and promulgated a "new policy" permitting a provider to be reimbursed by the division at the full Medicare "reasonable charge [Note 17]."

In the wake of that policy change Briggs filed this action. Relying primarily on the mandatory ("must") language of s. 1396a(a)(10)(E)(i) of the Medicaid Act, he sought reimbursement for the full amount of the Medicare "reasonable charge" for all medical services delivered to QMBs between 1988 and 1996. Before his claims could be adjudicated, Congress revisited the area and, in August, 1997, enacted the BBA that "clarified" that a State is not required to reimburse QMB providers at the Medicare rate, but may utilize the lower Medicaid rate. 42 U.S.C. s. 1396a(n)(2), inserted by Pub. L. 105-33, s. 4714, 111 Stat. 509-510 [Note 18]. The 1997 amendment is applicable to all payments for services provided after the date of enactment, as well as to payments for services rendered before the date of enactment "if such payment is the subject of a lawsuit that is based

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on [the sections of the Medicare and Medicaid Acts that define 'Medicare cost-sharing']" and was "pending as of, or is initiated after, the date of the enactment" of the BBA. Pub. L. 10533, s. 4714(c), 111 Stat. 509-510. See McCreary v. Offner, I F. Supp. 2d 32, 35 (D.D.C. 1998).

Briggs filed his amended complaint in July, 1997, and as such his lawsuit was "pending as of . . . the date of the enactment" of s. 4714. His claims are, accordingly, subject to the 1997 amendment. He contends that, prior to 1997, the law governing Part B reimbursements for QMBs required the division to reimburse providers at the Medicare rate. Far from being a "clarification," he continues, s. 4714 is a substantial amendment to this settled law, and its retroactive application gives rise to serious constitutional problems. The division counters that, before 1997, the relevant statutory provisions did not reflect Congress's clear intention regarding QMB reimbursement, and s. 4714 is, as it was labeled by Congress, only a "clarification" of the law [Note 19].

III

We consider first Briggs's argument that before 1997, the Medicaid Act unambiguously required the division to reimburse him at the Medicare "reasonable charge" rate for all medical services he provided to QMBs. Briggs relies primarily on the decisions of four United States Courts of Appeals to that effect. See Rehabilitation Ass'n of Va., Inc. v. Kozlowski, 42 F.3d 1444 (4th Cir. 1994); Haynes Ambulance Serv. Inc. v. State, 36 F.3d 1074 (11th Cir. 1994); Pennsylvania Medical Soc'y v. Snider, 29 F.3d 898 (3d Cir. 1994); New York City Health & Hosps. Corp. v. Perales, 954 F.2d 854 (2d Cir. 1992). The focus in each case was an interpretation of the 1986 provision of the Medicaid Act, s. 1396a(n), that the State Medicaid plan 'may' provide payment to providers for services to QMBs in an amount exceeding the Medicaid rate. In each case, the Secretary

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argued that "may" should be read as permissive, and took the position that States had the option to pay or to deny payment for claims in excess of the maximum allowed in each State Medicaid plan [Note 20]. Providers invoked a different section of the Medicaid Act, 42 U.S.C. s. 1396a(a)(10)(E)(i), providing that States participating in Medicaid "must" provide for "making medical assistance available for medicare cost-sharing [Note 21]." The four Courts of Appeals were asked to reconcile what appeared to be the permissive ("may") language of s. 1396a(n) with the mandatory ("must") language of s. 1396a(a)(10)(E)(i).

Each court concluded that the disputed provisions unambiguously precluded the States from capping QMB copayment reimbursements at the lower State Medicaid plan rates. But the opinions make abundantly clear that the statutory provisions in question are susceptible to differing, and arguably plausible, interpretations. The United States Court of Appeals for the Second Circuit, the first to consider the question, reasoned that the "may" language of s. 1396a(n) "clarified]" that "the Medicaid Act does not prohibit a provider from accepting more than the Medicaid rate" (emphasis added). New York City Health & Hosps. Corp. v. Perales, supra at 859. In contrast, the United States Court of Appeals for the Third Circuit, the next to consider the issue, concluded that s. 1396a(n) "authorizes the states to deviate" from their State plans with respect to QMB Part B cost-sharing payments~ "thus carving out an exception to the general requirement to comply with the Medicaid fee schedules or payment methods" (emphasis added). Pennsylvania Medical Soc'y v. Snider, supra at 895. The Snider court expressly rejected the Secretary's interpretation of s. 1396a(n), and ruled that the provision did not create an option for States to reimburse at either the Medicare or Medicaid rate. "Unable to improve upon [that] analysis . . . " the United States Court of Appeals for the Eleventh Circuit adopted the same reasoning. Haynes Ambulance Serv., Inc. v. State, supra at 1076. Finally, in Kozlowski the court concluded that s. 1396a(n) permitted States to pay more for a "pure" QMB than for a "dual eligible"

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person. Rehabilitation Ass'n of Va., Inc. v. Kozlowski, supra at 1454. In short, while four appellate courts agreed that States were prohibited from imposing State Medicaid plan limitations on QMB cost-sharing payments, they did so interpreting the 1986 and 1988 amendments to the Medicaid Act in very different ways [Note 22].

If confusion concerning the meaning of s. 1396a(n) was not already apparent, there were dissenting views expressed in Perales and Kozlowski, as well as by several Federal District Court judges who later considered the same issue. See, e.g., New York City Health & Hosps. Corp. v. Perales, supra at 863 (Cardamone, J., dissenting); Rehabilitation Ass'n of Va., Inc. v. Kozlowski, supra at 1462 (Niemeyer, J., concurring in part and dissenting in part); Dameron Physicians Medical Group, Inc. v. Shalala, 961 F. Supp. 1326 (N.D. Cal. 1997); Kulkarni vs. Leean, U.S. Dist. Ct. No. 96-C-884-S (W.D. Wis. 1997). Those judges agreed with the Secretary that the statutory scheme was indeed ambiguous, and did not clearly express what Congress had intended concerning the rate of QMB cost-sharing reimbursement. Circuit Judge Cardamone concluded that, because "When majority's interpretation of these Acts simply does not lay out a 'clear' plan of Congress contrary to the Secretary's construction of the same statutes," deference to the Secretary's reasonable interpretation was warranted (emphasis in original). New York City Health & Hosps. Corp. v. Perales, supra at 864, 867 (Cardamone, J., dissenting). Circuit Judge Niemeyer, writing separately in the Kozlowski case, concluded that Congress had not spoken directly to the issue of the reimbursement rate for providers of medical services to QMBs, and that deference to the Secretary's interpretation was appropriate, noting that "the fact that well-intentioned and intelligent experts at legal exegesis have arrived at three or four seemingly plausible readings of a particular text may be the best evidence that this interpretive puzzle has no definitive answer [Note 23]." Rehabilitation

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Ass'n of Va., Inc. v. Kozlowski, supra at 1462-1463 (Niemeyer, J., concurring in part and dissenting in part).

We need not conclude for ourselves which of the many plausible interpretations of s. 1396a(n) represents the most probable intent of Congress. Our own review of the statutory provisions at issue, their accompanying legislative histories, and the numerous judicial interpretations of the statute before and after the 1997 "clarification" of the BBA, confirms for us that prior to 1997, Congress was not clear in its intentions regarding the reimbursement rate for providers of Part B medical services to QMBs prior to the 1997 enactment of the BBA. We are not alone in reaching that view. See, e.g., Paramount Health Sys., Inc. v. Wright, 138 F.3d 706 (7th Cir.), cert. denied, 119 S. Ct. 335 (1998); Beverly Community Hosp. Ass'n v. Belshe, 132 EM 1259 (9th Cir. 1997), cert. denied, 119 S. Ct. 334 (1998). Dameron Physicians Medical Group, Inc. v. Shalala, supra; Kulkarni vs. Leean, supra. We agree with the United States Court of Appeals for the Seventh Circuit that "[t]he Act is a hopeless muddle so far as [QMB] reimbursement is concerned," Paramount Health Sys., Inc. v. Wright, supra at 711. We certainly have little difficulty in rejecting Briggs's claim that between 1988 and 1996 Federal law unambiguously mandated the division to reimburse providers for Medicare Part B services provided to QMBs at the Medicare rate [Note 24].

Because we conclude that, before 1997, Congress had not

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"directly spoken to the precise question at issue," Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842 (1984), and in light of the many interpretations of the applicable provisions that have been suggested since judges first grappled with the issue, deference to the interpretation of the Health Care Financing Administration (HCFA), the agency charged with the interpretation and enforcement of the Medicare and Medicaid statutes, is warranted. Id. at 845. See Gateley's Case, 415 Mass. 397, 399 (1993); Berrios v. Department Of Pub. Welfare, 411 Mass. 587, 595 (1992) (interpretation of agency charged with primary responsibility for administering statute entitled to substantial deference). At least as early as 1971, when it took the position that State contribution toward Part B cost-sharing was entirely optional, and consistently over the ensuing years, HCFA has maintained that States have the option of capping reimbursements for Medicare Part B services provided to QMBs at the lower State Medicaid plan rate. See notes 13 and 15, supra. The division followed the Secretary's lead, and took the same position. See notes 16 and 24, supra [Note 25].

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Deference to the Secretary's interpretation is particularly appropriate where, as here, congressional reports reveal that Congress was aware of HCFA's interpretation that States could cap cost-sharing payments at the lower Medicaid rates, and expanded QMB coverage on that basis. See note 13, supra, and accompanying text. In 1988 Congress took the critical step of making coverage for "pure" QMBs mandatory. That had the potential of imposing significant financial burdens on the States, albeit for costs that could, in part, be recouped from the Federal coffers through Medicaid matching fund provisions. See note 10, supra. In connection with that 1988 amendment, s. 1396a(a)(10)(E)(i), the House Committee Report stated:

"The bill would require States to pay Medicare costsharing, including coinsurance, on behalf of eligible individuals. It is the understanding of the Committee that, with respect to dual Medicaid-Medicare eligibles, some States pay the coinsurance even if the amount that Medicare pays for the service is higher than the State Medicaid payment rate, while others do not. Under the Committee bill, States would not be required to pay the Medicare coinsurance in the case of a bill where the amount reimbursed by Medicare - i.e., 80 percent of the reasonable charge - exceeds the amount Medicaid would pay for the same item or service. However, if a State chooses to pay some or all of the coinsurance in this circumstance, Federal matching funds would, as under current law, be available for this cost." (Emphasis added.)

H.R. Rep. No. 105(H), 100th Cong., 2d Sess., 61, reprinted in 1988 U.S.C.C.A.N. 857, 884 [Note 26].

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IV

Finally, we consider Briggs's constitutional challenge to the retroactive application of s. 4714 of the BBA, "clarifying" (as Congress captioned the legislation) that States are not required to reimburse providers for medical services to QMBs at Medicare rates. As a clarification of the law, s. 4714 may be applied retroactively without constitutional concern. If, on the other hand, s. 4714 amends the prior law, any retroactive application opens a Pandora's box of constitutional issues.

Resolution of the question turns, in part, on the weight we accord to the expression of earlier congressional intent in later enacted legislation. In Loving v. United States, 517 U.S. 748, 770 (1996), the Supreme Court observed that "[s]ubsequent legislation declaring the intent of an earlier statute is entitled to great weight in statutory construction." Id., quoting Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 118 n.13 (1980). It was essentially on that basis that the United States Court of Appeals for the Ninth and Seventh Circuits concluded that the 1997 legislation could be applied retroactively to providers such as Briggs. See Paramount Health Sys., Inc., supra at 711; Beverly Community Hosp. Ass'n v. Belshe, supra 27 at 1265-1266 [Note 27]. We need not enter the debate concerning the circumstances in which it is appropriate for a court to give weight to expressions in congressional legislation of the intent of an earlier enacted congressional statute, see 2B Singer, Sutherland Statutory Construction s. 49.11, at 83-84 (5th ed. 1992),

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because we have no doubt that the 1997 legislation did not retroactively abrogate any obligation of the division to compensate Briggs at the full Medicare cost-sharing rates for Part B services.

Section 4714 is consistent with Congress's over-all legislative reimbursement scheme - long in place - that differentiates between Federal Medicare reimbursement for medical services to the elderly and disabled on the one hand, and State Medicaid payments for medical services to the financially needy on the other. Medicaid is an insurer of last resort. In mandating that States pay for Medicare Part B cost-sharing for all QMBs, some of whom do not even qualify for Medicaid, the Secretary was surely not unreasonable in interpreting the law to allow States to limit the costs they were now required to incur where the statutes did not precisely express otherwise. In our view, HCFA interpreted the statutes in a way that is, and presumably was thought by Congress to be, consistent with the statutory scheme. See notes 13 and 15, supra. Nevertheless, the decisions of not one, but four Courts of Appeals threw a "wrench in the works," interpreting the statutes to require reimbursement at the higher Medicare rate. Congress then "clarified" the law. In these circumstances it is appropriate for us to respect the congressional expression concerning the earlier enacted statutory amendments. See Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 596 (1980) (when precise intent of enacting Congress is obscure, view of subsequent Congress entitled to significant weight). To do otherwise is to suggest that Congress must remain mute while courts do battle with an agency to which Congress has delegated interpretative action, even where Congress has acquiesced in the agency's interpretation.

The 1997 Conference Report made clear that this is what motivated Congress to act in 1997. It expressed its view that, under then current law, States were permitted to limit reimbursement of cost-sharing charges to the Medicaid rate and acknowledged that this had long been the States' practice:

"The amount of required payment has been the subject of some controversy. State Medicaid programs frequently have lower payment rates for services than the rates that would be paid under Medicare. Program guidelines permit states to pay either (1) the full Medicare deductible and coinsurance amounts or (2) cost-sharing charges only to

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the extent that the Medicare provider has not received the full Medicaid rate for an item or service."

H.R. Rep. 217, 105th Cong., 1st Sess., at 870, reprinted in 1997 U.S.C.C.A.N. 491. It acknowledged that "[s]ome courts have forced state Medicaid programs to reimburse Medicare providers to the full Medicare allowable rates for services provided to QMBs and dually eligible individuals," and went on to explain that the 1997 amendment:

"[c]larifies that state Medicaid programs may limit Medicare cost-sharing to amounts that, with the medicare payment, do not exceed what the state's Medicaid program would have paid for such service to a recipient who is not a QMB. [It] [s]pecifies that the Medicare payment plus the state's Medicaid payment will be considered payment in full and the QMB will not be liable for payment to a provider or managed care entity. . . " (emphasis added).

Id. at 870-871, reprinted in 1997 U.S.C.C.A.N. 491-492. Because the 1997 "clarification" was just that, and did not amend settled law, we see no constitutional impediment to the retroactive application of s. 4714 to Briggs's pending claims. See Paramount Health Sys., Inc. v. Wright, supra at 711; Beverly Community Hosp. Ass'n v. Belshe, supra at 1265-1266; McCreary v. Offner, 1 F.Supp. 2d 32, 37 (D.D.C. 1998).

V

The division's policies and regulations, capping reimbursements for Part B services provided to QMBs at the Commonwealth's Medicaid State plan rates between 1988 and January 31, 1996, were consistent with the Medicare and Medicaid Acts. The division's refusal to reimburse ]Briggs more than the applicable rates of the Commonwealth's Medicaid plan did not constitute a breach of either the division's Medicare contract with the Federal government, or its Medicaid contract with Briggs. Section 4714 may be applied retroactively without depriving Briggs of any constitutional or contractual rights.

Judgment affirmed.