Warren J. Downhour, D.O., Virginia Forney, Richard E. Shaw, Warren D. Jacobs, Nino M. Camardese, M.D., George Lierenz, Sam Giallombardo, Don Daugherty, Sara Presley and Hilda Ruggles v. Peter Somani, M.D., Individually and as Director of the Ohio Department of Health
Docket: 94-4232
Court: Court of Appeals for the Sixth Circuit; June 7, 1996; Federal Appellate Court
Plaintiffs, comprising health care practitioners and patients, sought declaratory and injunctive relief against the enforcement of Ohio statutes (OHIO REV.CODE ANN. 4769.01, 4769.02), claiming they violated the Supremacy Clause by being preempted by the Medicare Act. They also argued that the statutes were void for vagueness, violated due process and equal protection rights, and infringed on privacy rights. The district court granted summary judgment in favor of the defendant, Peter Somani, M.D., leading to this appeal. The Sixth Circuit Court found no merit in the plaintiffs' constitutional arguments and affirmed the lower court's decision.
The Medicare Act, enacted in 1965, provides health insurance for the aged and disabled, with Part A covering institutional services and Part B covering supplemental medical insurance, including physician services. Physicians can choose to be "participating" by accepting Medicare assignments, which allows them to bill Medicare directly and receive 80% reimbursement of the approved rate, with patients responsible for a 20% copayment. Nonparticipating physicians can bill patients directly for their full charges and are allowed to charge up to 115% of the Medicare-approved rate, a practice known as balance billing, regulated by limits set in the Omnibus Budget Reconciliation Act of 1989.
On January 14, 1993, Ohio implemented statutes governing the practice of balance billing by health care practitioners for Medicare patients, defining "health care practitioner" to include physicians and podiatrists. Initially, balance billing was defined as charging amounts exceeding Medicare reimbursement for covered services. The original statutes limited balance billing to Medicare patients with family incomes below 600% of poverty guidelines. However, an amendment on November 24, 1995, expanded the prohibition to include all Medicare beneficiaries, regardless of income, and clarified that balance billing applies only after a Medicare claim is filed. Enforcement relies on beneficiary complaints rather than state investigations, with violations subject to civil penalties.
The plaintiffs, who are physicians, filed a lawsuit challenging the balance billing statutes, claiming they were impliedly preempted by Medicare and violated equal protection and due process rights due to the differential treatment based on income. They also argued that the statutes were void for vagueness and infringed upon their privacy rights by necessitating the filing of Medicare claims and disclosure of patients' financial information.
The district court granted summary judgment in favor of the defendant, dismissing all claims, leading the plaintiffs to file an appeal. The appellate court reviews the case de novo as it involves purely legal issues.
Plaintiffs argue that Ohio statutes are preempted by Medicare, challenging the presumption against federal preemption of state law. Historically, courts favor state law unless Congress's intent to preempt is clear and manifest. The regulation of public health is traditionally within state powers, but the plaintiffs claim the Ohio statutes pertain solely to medical costs, which they argue falls outside this scope. They reference a dissenting opinion in Pennsylvania Medical Society v. Marconis suggesting that medical billing is not a state concern. However, the court disagrees, asserting that billing practices are closely tied to public health and therefore fall within state regulatory authority. The court concludes that Ohio statutes cannot be deemed preempted by Medicare unless a clear congressional intent to preempt is demonstrated.
Congress can preempt state law in three ways: through an express command, by implied preemption due to conflict with federal law, or by exhaustive federal regulation of a legislative field. The court notes that Medicare does not explicitly preempt state law, and plaintiffs' arguments rely solely on implied preemption.
Balance billing, initially intended to aid physicians dissatisfied with federal compensation rates, has become controversial due to rising out-of-pocket costs for Medicare beneficiaries. Critics argue that many patients are unaware of balance billing until after receiving services, leading to unexpected financial burdens that are not covered by other insurance, contrary to Medicare's purpose of reducing healthcare costs. In response, several states have enacted laws to ban or limit balance billing, which have withstood legal challenges on preemption grounds in federal courts. Additionally, Congress has attempted to discourage balance billing through legislation. Proponents of balance billing cite the Medicare Act's language, suggesting that provisions regarding reasonable charges and the option for physicians to voluntarily participate in Medicare imply an allowance for balance billing practices. They further argue that the limiting charge established for nonparticipating physicians, which caps charges at 115% of the recognized payment amount, indicates a legislative intent to permit balance billing up to that threshold.
The plaintiffs argue that Congress has established an inviolable right to balance billing that states cannot override, asserting that such an option is essential for aligning with congressional goals of providing affordable medical services while ensuring access to higher-fee physicians. However, courts have consistently rejected this view, emphasizing that demonstrating a congressional intent for a particular balance does not preclude state involvement. The district court's opinion, affirmed by the Third Circuit, highlights that states can manage local interests without federal uniformity, as the federal government lacks a compelling interest in maintaining a uniform balance billing policy. The First Circuit further supports this, suggesting that states are likely more attuned to their residents' needs and economic conditions, allowing them to effectively balance affordability and access. The plaintiffs' claim that Ohio's law conflicts with the Medicare Act is examined, concluding that compliance with both state and federal law is possible. The Medicare Act's provision limiting billing does not imply a right to bill up to that limit; rather, it merely prohibits billing beyond it. There is no evidence in the statute or legislative history suggesting a need for uniformity on balance billing, and state-specific regulations are viewed as more beneficial. Consequently, the plaintiffs' assertion of implied preemption based on an actual conflict with the Medicare Act is rejected.
The plaintiffs assert that Medicare's intricate regulations of physician fees imply an intention to preempt state laws. However, the comprehensiveness of Medicare's regulatory framework alone does not demonstrate congressional intent to preempt state authority, as established in Hillsborough County. The Medicare balance billing provisions explicitly state that they do not grant federal oversight over the practice of medicine or compensation of health providers, signaling congressional respect for state regulatory authority. Courts have recognized this language as a clear indication that Congress did not intend for Medicare to occupy the balance billing field. Additionally, Congress has been aware of state laws prohibiting balance billing and has not indicated any intention to preempt these laws, as evidenced by reports from the Physician Payment Review Commission and the General Accounting Office during the 1989 Medicare revisions. These documents acknowledged existing state restrictions and court rulings without suggesting federal preemption.
Congressional inaction, particularly regarding balance billing restrictions, is typically viewed as insufficient evidence of legislative intent. However, the context of the 1989 Medicare amendments is significant, as Congress was aware of existing state laws against balance billing and chose not to include a preemption clause. The lack of explicit preemption, despite Congress's oversight and amendments to Medicare, suggests intent to allow state regulations to stand. The Marconis court emphasized that congressional silence is particularly meaningful in this case, indicating no intention to displace state laws on balance billing.
Additionally, Congress's longstanding awareness of state bans on balance billing and the judicial support for those bans further reinforces the argument that congressional silence should be interpreted as a lack of intent to override state law. The plaintiffs have not demonstrated a clear congressional purpose to dominate the field of balance billing.
Regarding the plaintiffs' remaining claims, which are based on language rendered obsolete by recent statutory amendments, there are doubts about their viability. The Ohio Department of Health's intent to follow the amended law complicates the mootness of these claims, though the plaintiffs maintain their position. The court opts to forgo an in-depth mootness analysis and will focus on the merits of the claims instead.
Plaintiffs argue that certain Ohio statutes are void for vagueness, violate due process and equal protection by differentiating based on income, and infringe on the constitutional right to privacy by requiring Medicare claims and personal financial information. The court rejects these claims, stating that the statutes clearly define conduct and are not vague. The differentiation among Medicare recipients based on income serves a legitimate state interest in controlling medical costs for low-income individuals. Additionally, the court finds no requirement for filing Medicare claims is imposed by the Ohio statute, as this is mandated by federal law. The constitutional right to privacy does not protect individuals from disclosing financial information in this context. The court affirms the lower ruling.
