A federal appeals court has upheld geographic variations in reimbursements under Medicare's managed-care program.
In a decision released this month, the 8th U.S. Circuit Court of Appeals in St. Louis affirmed a lower-court decision that found no grounds for a lawsuit challenging the reimbursement formula for Medicare+Choice, which results in wide geographic differences based on local healthcare costs. Although the case was filed on behalf of Medicare beneficiaries, some providers have complained that they, too, are hurt by Medicare payment disparities.
The plaintiffs, a Medicare beneficiary and a senior citizens' advocacy group called the Minnesota Senior Federation, argued that the formula violates beneficiaries' constitutional rights to travel and to equal protection of the law. The beneficiary, Mary Sarno, a resident of Broward County, Fla., wanted to live with her daughter in Dakota County, Minn., where the monthly reimbursement rate paid to Medicare HMOs is significantly lower.
In 1999, the Medicare+Choice program paid $342.92 per month in Dakota County vs. $676.64 in Broward. Enrollees in Dakota County also received fewer benefits. Enrollees in Broward enjoyed unlimited prescription drugs, no annual premium and no copayments for physician services, while those in Dakota County received no drug coverage and were required to pay an annual premium of $1,137, as well as copayments for physician service.
Congress adopted the 1997 Medicare+Choice program in an effort to contain costs and expand delivery options for Medicare. The program allows managed-care organizations to offer cost-effective alternatives to Medicare's fee-for-service program and pass the savings on to beneficiaries in the form of extra benefits.
According to court records, Sarno argued that Medicare+Choice violated her constitutional right to travel because she couldn't afford to sacrifice the generous benefits she received in Florida if she moved. She also accused Medicare of geographic discrimination.
A three-judge appeals panel rejected those claims. "The fact that not all elderly Americans...enjoy the same windfall as others is unfortunate, but not unconstitutional," the panel wrote. It said any unfairness is "a matter for legislative, rather than judicial, consideration."
Barbara Kaufman, who leads the federation's Medicare Justice Campaign to eliminate benefit disparities, said last week that the federation was disappointed in the decision but had not decided whether to appeal to the U.S. Supreme Court.
Wendy Krasner, a Washington lawyer specializing in Medicare+Choice issues at McDermott, Will & Emery, said the decision could discourage future geographic discrimination lawsuits over Medicare benefits.
"The panel sent a clear signal that issues like this should be resolved by Congress, not by courts," Krasner said.