The American Medical Association and the state of Minnesota have separately sued the federal government over parts of the Balanced Budget Act of 1997, charging the government's payment methods are unconstitutional.
The suits, which were filed within two weeks of each other, aren't tied legally, but they are linked through timing. Both come as hospitals and physicians are staring at even lower Medicare reimbursement this year.
The AMA has sued the Department of Health and Human Services for underpaying Medicare claims. The nation's largest physician organization says the country's doctors are owed $3 billion because HHS won't pay what the AMA says is the difference between the estimated cost of caring for Medicare patients and the actual cost. When Congress passed the Balanced Budget Act of 1997, it mandated that HCFA pay the difference between the estimated and actual cost.
Minnesota Attorney General Mike Hatch is going after HHS and HCFA for inequitable payments for Minnesota recipients enrolled in Medicare Plus Choice, a program created under the budget act. Hatch contends it is unconstitutional to pay different rates for recipients in different locations. He further asserts that those differences deprive people of their right to travel.
A HCFA spokeswoman says the department's policy is not to comment on pending lawsuits.
In its suit, the AMA says HHS, which oversees HCFA, won't pay the $3 billion in underpaid claims despite a congressional mandate to do so. That suit was filed Dec. 3 in District Court for the Northern District of Illinois.
The AMA has been working with HCFA to correct the errors, says D. Ted Lewers, M.D., chairman of the AMA Board of Trustees.
"They say 'we can't correct it,"' Lewers says. "We have a number of legal opinions that says they can. And they haven't."
According to the AMA, the problem started with how HHS calculated the Sustainable Growth Rate in 1998 and 1999. The SGR, a complex formula that was created and mandated by the 1997 budget act, is used to determine Medicare reimbursement for physician services.
Every year, HHS estimates the growth rate and then pays physicians based on that number and other geographic factors. At the end of the year, the actual rate for that year is calculated. HHS, according to the lawsuit, is required by the budget act to settle up for the difference between the estimated and actual rate.
The AMA alleges that HHS Secretary Donna Shalala promised in a rule published in the Federal Register in October 1997 that she would do that, then unilaterally decided not to pay.
According to the lawsuit, HHS estimated the real GDP growth per capita in 1998 would be 1.1%. In fact, the real GDP growth per capita in 1998 was 2.8%.
In 1999 alone, failure to make the adjustments will result in physicians being paid $430 million less in Medicare funds than they should receive, the AMA suit says. The $3 billion being sought by the AMA represents the difference between what physicians were paid and what they should have been paid since 1997 when the budget act laws were enacted.
Lewers estimates each physician in the country is owed $4,500 each.
It isn't physician reimbursement that caught the attention of Minnesota's attorney general. Hatch is upset because Minnesota's Medicare recipients are responsible for what he says is a significantly higher portion of their healthcare costs than people receiving the same benefits in other states.
In its complaint, Minnesota says that the Medicare managed care reimburses $676.64 in Broward County, Fla., but only $394.42 in Dakota County, Minn., a county that encompasses suburbs of St. Paul and Minneapolis.
"In New York, Florida or Arizona, they get everything for free, including rides to the clinic," says David Aafedt, Minnesota's assistant attorney general. He says that this is the first suit challenging Medicare Plus Choice. "In Minnesota, (Medicare recipients) pay for everything from prescriptions to copays to higher premiums. They get nothing here."
Minnesota based its suit on the 10th Amendment, claiming that its sovereignty rights have been infringed. The state isn't asking for refunds for its Medicare recipients but rather to have the payment system declared unconstitutional.
The suit also lists a Florida woman as a plaintiff. Mary Sarno and her husband wanted to move from Florida to Minnesota but they decided they couldn't because under the Florida program, the Sarnos' prescriptions are covered. Under Minnesota's Medicare Plus Choice program, they wouldn't be.
"It's an interesting tactic," says Chris Conover, assistant research professor at Duke University's Center for Health Policy, Law and Management. "There have been suits before, where states have tried to impose residency requirements for welfare, that were thrown out of the court because it prohibits interstate travel. . . . You can't have those kinds of restrictions. This suit by the state of Minnesota is a parallel logic using the same sorts of ideas."