The state of Minnesota filed suit against the federal government last week, alleging that payment rates to the state's Medicare HMOs are so low that they discriminate against beneficiaries and taxpayers.
The lawsuit, filed Nov. 17 in U.S. District Court in Minneapolis, is believed to be the first legal challenge by a state to geographic disparities in Medicare payment rates for managed-care plans.
The lawsuit contends Medicare reimbursement formulas punish states like Minnesota that have had historically low medical costs.
For example, the 1999 per-member-per-month reimbursement rate in Broward County, Fla., was almost $677 compared with a monthly reimbursement rate of just $394 in Dakota County, Minn., and $422 in Hennepin County, Minn., where Minneapolis is located.
The low reimbursement rates mean Minnesota residents pay higher premiums and greater out-of-pocket costs while receiving fewer benefits than people enrolled in Medicare managed care elsewhere, according to the lawsuit (See chart).
"What this suit demonstrates is that government needs to take the steps necessary to make this program viable across the country," said Susan Pisano, spokeswoman for the American Association of Health Plans.
The named plaintiffs in the case are the Minnesota attorney general, a Minnesota seniors advocacy group and Mary Sarno, a 72-year-old Medicare beneficiary who lives in Florida. Sarno wants to move to Minnesota to be near her daughter but says she can't because the Medicare managed-care coverage there isn't as good as in Florida.
HHS, whose secretary, Donna Shalala, is a named defendant in the suit, released a statement on the lawsuit from Robert Berenson, M.D., director of the center for health plans and providers at HCFA.
Berenson said the variations in payment rates are legal and appropriate to ensure high-quality care for Medicare beneficiaries enrolled in HMOs.
The state is asking the court to stop the Medicare funding disparities. It also is seeking compensation for costs of the lawsuit and "other such relief as this court may deem just and proper."