:: Another Look At The Legality Of “Balance Billing” Practices

The federal laws which Plaintiffs argue preempt the state lien law are provisions concerning what is referred to as “balance billing.” These provisions mandate that state programs which receive Medicaid funds must only distribute those funds to providers who agree to accept those funds as payment in full and not bill individual patients for the difference between the amount paid by the state and the provider’s customary charge. See 42 U.S.C. § 1396a(a)(25)(c); 42 C.F.R. § 447.15.

Lizer v. Eagle Air Med Corp., 308 F. Supp. 2d 1006, 1008 (D. Ariz. 2004)

The practice of balance billing patients for what is not paid under Medicaid has been before the federal courts on several occasions.  A frequent fact pattern arises in the context of personal injury settlements.

The district court opinion in Lizer frames the issue well:

The applicable statue specifically states that when a person receives Medicaid assistance for a service rendered for which a third party is liable the provider:

may not seek to collect from the individual (or any financially responsible relative or representative of that individual) payment of an amount for that service (i) if the total of the amount of the liabilities of third parties for that service is at least equal to the amount payable for that service under the plan. . . .

(citing 42 U.S.C. § 1396a(a)(25)(C))

The court also noted that the accompanying regulation requires that “[a] state plan must provide that the Medicaid agency  must limit participation in the Medicaid program to providers who accept, as payment in full, the amounts paid by the agency plus any deductible, coinsurance or copayment required by the plan to be paid by the individual.” 42 C.F.R. § 447.15.

The Sixth Circuit  addressed the issue in Spectrum Health Continuing Care Group v. Anna Marie Bowling Irrevocable Trust, 410 F.3d 304, 313 (6th Cir. 2005).  There the Court held that:

Though the Medicaid rates are typically lower than a service provider’s  [*314]  customary fees, “medical service providers must accept the state-approved Medicaid payment as payment-in-full, and may not require that patients pay anything beyond that amount.” Barney, 110 F.3d at 1210. Moreover, even when a third party is subsequently found liable for the Medicaid beneficiary’s medical expenses, the service provider “may not seek to collect from the individual (or any financially responsible relative or representative of that individual) payment of an amount for that service.” 42 U.S.C. § 1396a(a)(25)(C).

Were the problem so simply resolved.  Unfortunately, here, as well as in the case of PPO agreements, the prospect of a full serving from a personal injury settlement often finds the provider looking askance at the portion meted out on the agreed rate. Balance billing remains a significant issue and, in the Medicaid context, one that is typically borne by those least able to afford it.

Note:  Other authorities on this issue cited by the Sixth Circuit:

All the courts which have considered the issue of whether a service provider, who has already accepted a Medicaid payment, may recover additional sums after a patient has received damages in a personal injury lawsuit have denied the provider’s claim. See Michael K. Beard, The Impact of Changes in Health Care Provider Reimbursement Systems on the Recovery of Damages for Medical Expenses in Personal Injury Suits, 21 Am. J. Trial Advoc. 453, 470 n.98 (1998). In Evanston Hospital v. Hauck, 1 F.3d 540, 542 (7th Cir. 1993), cert. denied, 510 U.S. 1091, 127 L. Ed. 2d 215, 114 S. Ct. 921 (1994), a hospital provided a patient medical care in exchange for Medicaid reimbursement at the state’s prescribed rates. . . .

The court explained that to permit recovery would be to transform Medicaid  into “an insurance program for hospitals rather than for indigent patients,” because the hospital “wants to be reimbursed when the patient is indigent and still retain the right to sue patients who later become solvent — a classic example of wanting to both have and eat cake.” Id. at 544; see also Mallo v. Pub. Health Trust, 88 F. Supp. 2d 1376, 1387 (S.D. Fla. 2000) (holding that the balance-billing provision forces providers to make a calculated choice because once the provider has chosen Medicaid, it is “barred from billing the patient an amount in excess of the State’s Medicaid disbursement”)