Pennsylvania Medical Society v. Snider

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit

7-20-1994

Penn Medical Society v. Snider
Precedential or Non-Precedential:

Docket 93-7775

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________________

No. 93-7775
_______________________

PENNSYLVANIA MEDICAL SOCIETY;
DR. JAMES B. REGAN, M.D.,

v.

KAREN F. SNIDER, Individually and in
her Official Capacity as Secretary of Public Welfare;
DONNA E. SHALALA, Secretary of the
United States Department of Health and Human Services

Pennsylvania Medical society;
James B. Regan, M.D.
Appellants
_______________________

On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civ. Action No. 92-cv-00481)
_______________________

Argued: May 26, 1994

Before: COWEN, ROTH, Circuit Judges,
and BROWN, District Judge0

(Filed July 20, 1994)

_______________________

Robert B. Hoffman (argued)
Reed, Smith, Shaw & McClay
213 Market Street, 9th Floor
P. O. Box 11844
Harrisburg, PA 17108

Counsel for Appellants

0
Honorable Garrett E. Brown, Jr., United States District Court
for the District of New Jersey, sitting by designation.

1
Peter D. Coffman
United States Department of Justice
Federal Programs Branch,
Civil Division
9th and Pennsylvania Avenue, N.W.
P.O. Box 883
Washington, D.C. 20530

Richard A. Olderman (argued)
United States Department of Justice
Room 3617
Civil Division
10th and Pennsylvania Avenue, N.W.
Washington, D.C. 20530-0001

Counsel for Appellee Donna E. Shalala

Doris M. Leisch
Room 302
Commonwealth of Pennsylvania
Department of Public Welfare
1400 Spring Garden Street
State Office Building
Philadelphia, PA 19130

Counsel for Appellee Karen F. Snider

_______________________

OPINION OF THE COURT
_______________________

COWEN, Circuit Judge.

Under the Medicaid Act, a state participating in the

Medicaid program must pay certain cost-sharing expenses for

qualified Medicare beneficiaries (QMBs) in order to make these

QMBs eligible for certain Medicare benefits called Medicare Part

B services. The State of Pennsylvania, which participates in the

Medicaid program, limits its coinsurance and deductible payments

under Medicare Part B so that the total amount of the

2
reimbursements does not exceed the amount that the health care

provider would have received for the services pursuant to the

Medicaid plan. Pennsylvania Medical Society and Dr. James B.

Regan brought this action under 42 U.S.C. § 1983 seeking a

declaration that the Pennsylvania Medicaid Plan violated the

Medicare Act and the Medicaid Act. The district court denied

relief by granting summary judgment for the defendants. This

appeal followed.0 We have jurisdiction under 28 U.S.C. § 1291

and our review is plenary because only purely legal questions are

involved. We hold that the Pennsylvania limitation on payment

violates both the Medicare Act and the Medicaid Act, and will

reverse the judgment of the district court.

I.

The question presented in this appeal implicates the

Medicare Act and the Medicaid Act. Accordingly, we will

summarize the relevant statutory provisions involved and sketch

the context from which the dispute arose.

A.

The Medicare Act, 42 U.S.C. §§ 1395-1395ccc,

established the Medicare program. Under the Medicare Act, the

federal government funds the Medicare program. Eligibility for

Medicare benefits is based on old age or disability: an

individual must be at least 65 years old or disabled to be

0
The appellants also sought an injunction requiring Pennsylvania
to implement 42 U.S.C. § 1395v(f). By letter dated May 10, 1994
the appellants advised the court that Pennsylvania had decided to
voluntarily implement § 1395v(f) and thus they would not pursue
this issue further.

3
eligible. 42 U.S.C. § 426(a). These individuals are commonly

referred to as Medicare-eligible patients.

Medicare coverage is primarily divided into two parts.

Part A covers all inpatient hospital expenses through an

insurance plan. See 42 U.S.C. §§ 1395c to 1395i-4. All

Medicare-eligible patients receive this benefit. This coverage

is not in dispute in this case.

Part B covers certain physician services, hospital

outpatient services, and other health services not covered under

Part A. See 42 U.S.C. §§ 1395j to 1395w-4(j). Part B coverage

is not freely or automatically available to all Medicare-eligible

patients. To obtain this coverage, Medicare-eligible patients

must first enroll in the Part B insurance program by paying

insurance premiums ("Part B insurance premiums"). See §§ 1395o-

1395s. Once this is done, the federal government pays 80% of the

"reasonable costs" of outpatient hospital services and 80% of the

"reasonable charges" for physician services rendered to the

insured. § 1395l. The Part B patients themselves must pay the

remaining 20% of the charges for the reasonable outpatient

hospital services and physician services (co-payments or

coinsurance), as well as an annual deductible. Id.;
§1395cc(a)(2)(A). Together, the Part B premiums, deductibles and

coinsurance are generally referred to as "Part B cost-sharing."

Reasonable costs and charges for the services covered under Part

B are established pursuant to the Medicare Act and its

implementing regulations. See § 1395w-4(a), (b).

4
 However, the payment of the Part B insurance premiums,

the 20% coinsurance, and the deductibles poses a serious problem

for some poor Medicare-eligible patients. Therefore, these

individuals may have to forego Part B coverage completely. How

Congress resolved this problem is at the heart of the dispute in

this case.

B.

The Medicaid Act, 42 U.S.C. § 1396 et seq., established

the Medicaid program which is separate from the Medicare program.

Under the Medicaid Act, the federal government and the states

jointly fund the Medicaid program with the federal government

contributing approximately between 50% and 83% of the funding,

with the states responsible for the rest. § 1396d(b).

Eligibility for Medicaid benefits is based on need. A patient

becomes eligible if his or her income falls below a certain

level. See § 1396d(a).

A state is not required to participate in the Medicaid

program, but if it decides to participate, it must comply with

the Medicaid Act and its implementing regulations. § 1396c. A

participating state0 must propose a plan that meets certain

statutory requirements laid down in § 1396a(a). The plan must

establish a schedule of payment rates or payment methods for the

various kinds of medical care that a Medicaid patient may seek. §

1396a(a)(30). All parties agree that these rates are almost

0
The term "state" or "states" in the remainder of this opinion
refers to a state or states participating in the Medicaid
program.

5
always lower than the rates established under Medicare as

reasonable costs and charges. Medicaid service providers

(including doctors and hospitals) must accept the Medicaid

payment as payment in full, and may not ask the Medicaid patient

to pay any money beyond that amount. § 1320a-7b(d); 42 C.F.R.

§447.15 (1993). To become effective, the plan must be approved

by the Secretary of the United States Department of Health and

Human Services ("the Secretary"). § 1396a(b).

Some individuals are eligible for benefits under both

the Medicare and Medicaid Acts: they are either old-aged or

disabled, and they are poor. These individuals are commonly

called "dual eligibles." But some old-aged or disabled may not

be poor enough to be eligible for Medicaid benefits. Moreover,

for those dual eligibles who meet the Medicaid poverty

requirement but cannot pay for Medicare Part B coverage, Medicaid

may not provide for all the services covered by Medicare Part B.

C.

Since the very inception of the Medicare and Medicaid

programs, Congress has made several attempts to solve the

problems as sketched above. As a result, several provisions in

the Medicaid Act, see 42 U.S.C. §§ 1396a(a)(15) (repealed 1988),

1396a(a)(10)(E), 1396d(p), 1396a(n), established an interplay

between the Medicare Act and the Medicaid Act.

Congress enacted § 1396a(a)(15) in 1965 which at first

required states through their Medicaid programs to pay all of the

Medicare Part A premiums for dual eligibles, and permitted states

to impose part of the Part B cost-sharing on the individuals

6
based on their ability to pay.0 Congress eliminated this

distinction in 1967, permitting states to require dual eligibles

to share in the cost-sharing for both Part A and Part B

coverage.0 This amendment did not affect the command that

together dual eligibles and states were to pay the Part B cost-

sharing in full. See New York City Health & Hosps. Corp. v.

Perales, 954 F.2d 854, 860 (2d Cir.), cert. denied, ___ U.S. ___,

113 S. Ct. 461 (1992) (interpreting § 1396a(a)(15)).

In 1986, Congress permitted states to pay the Part B

cost-sharing for those Medicare-eligible individuals who are too

poor to pay the Part B cost-sharing on their own, but not poor

enough to be Medicaid-eligible, who are termed "qualified

Medicare beneficiaries (QMBs)." This is called the optional

0
In 1965, this provision read in part:
(15) in the case of eligible individuals 65 years
of age or older who are covered by either or both of
the insurance programs established by title XVIII, [the
State Medicaid plan must] provide--
(A) for meeting the full cost of any deductible
imposed with respect to any such individual under
the insurance program established by part A of
such title, and
(B) where, under the plan, all of any deductible,
cost sharing, or similar charge imposed with
respect to any such individual under the insurance
program established by part B of such title is not
met, the portion thereof which is met shall be
determined on a basis reasonably related
(determined in accordance with standards approved
by the Secretary and included in the plan) to such
individual's income or his income and resources.
Social Security Amendments of 1965, Pub. L. No. 89-97, § 121(a),
79 Stat. 286, 346 (repealed 1988).
0
This was accomplished by deleting § 1396a(a)(15)(A), and the
reference to "Part B" in § 1396a(a)(15)(B). See Social Security
Amendments of 1967, Pub. L. No. 90-248, § 235(a)(3), 81 Stat.
821, 908.

7
"buy-in" program whereby the states may pay the Part B cost-

sharing for the individuals to enroll them in the Medicare Part B

program. See the Omnibus Budget Reconciliation Act of 1986 (OBRA

'86), Pub. L. No. 99-509, § 9403, 100 Stat. 1874, 2053-55

(codified as amended at §§ 1396a(a)(10)(E), 1396d(p), 1396a(n)).

The dispute of this case focuses on these provisions.

Section 1396a(a)(10)(E) provided that the states have

an option whether to provide Part B cost-sharing to a QMB. The

statute specifically used the language of "at the option of a

State." Id., 100 Stat. at 2053 (repealed). A QMB was

essentially defined in § 1396d(p)(1) as a Medicare-eligible

individual whose income is below the federal poverty line but

"who, but for section [1396a(a)(10)(E)] and the election of the

State, is not eligible for medical assistance under the

[Medicaid] plan." Id., 100 Stat. 2054. Section § 1396d(p)(3)

defines cost-sharing as including Part B premiums, coinsurance

and deductibles and certain other enrollment premiums. Section

1396a(n) states that a state plan may provide a payment amount

for Part B services exceeding the amount otherwise payable under

a Medicaid plan.

The participation in the QMB program was low. By 1988

only one State had chosen to provide this benefit to QMBs. H.R.

Rep. No. 105(II), 100th Cong., 2d Sess. 59 (1988), reprinted in
1988 U.S.C.C.A.N. 857, 882. Concerned about this low

participation, and recognizing that Medicare coverage was being

expanded to cover certain services that were previously covered

by Medicaid, giving states certain savings, Congress made the

8
option to provide Medicare Part B benefits for the QMBs mandatory

by requiring the states to pay the Part B cost-sharing for the

QMBs. See id. at 59-60, reprinted in 1988 U.S.C.C.A.N. at 882-

83. This was accomplished by deleting "at the option of a State"

from § 1396a(a)(10)(E). Medicare Catastrophic Coverage Act of

1988 (MCCA), Pub. L. No. 100-360, § 301(a)(1), 102 Stat. 683,

748. No other substantive changes were made. In the same year,

the QMB definition was broadened by repealing § 1396d(p)(1)(B).

The Technical and Miscellaneous Revenue Act of 1988, Pub. L. No.

100-647, § 8434(a), 102 Stat. 3342, 3805. That is, this

amendment has the effect of making all dual eligibles QMBs. For

the sake of clarity, we will refer to these individuals covered

by the current definition of QMB as "QMBs and dual eligibles."

Section 1396a(a)(15), which covered only dual eligibles, was

deleted by the Family Support Act of 1988, Pub. L. No. 100-485,

Title VI, § 608(a)(14)(I)(iii), 102 Stat. 2343, 2416.

In 1989 Congress added § 1396a(a)(10)(E)(ii) which

mandates that participating states pay the cost-sharing for

certain qualified disabled and working individuals described in

§1396d(s) but limited the payment to only one item as listed in

§1396d(p)(3)(A)(i). Pub. L. No. 101-239, § 6408(d)(1), 103 Stat.

2106, 2268 (1989). In 1990 Congress added § 1396a(a)(10)(E)(iii)

which requires participating states to extend certain QMB

benefits to those Medicare-eligible individuals who are above the

federal poverty line, but specifically limits these benefits to

Part B premiums only. Pub. L. No. 101-508, § 4501(b)(3), 104

Stat. 1388, 1388-165 (1990).

9
 In 1989 Congress further amended the Medicare Act to

require that physicians treating QMBs accept assignment, thereby

precluding physicians from balance-billing0 QMBs. Pub. L. No.

101-239, § 6102(a), 103 Stat. 2106, 2181-82 (1989) (codified at

42 U.S.C. § 1395w-4(g)(3)(A)). This provision took effect on

April 1, 1990. Id. § 6101, 103 Stat. 2168-69.

D.

The State of Pennsylvania is a participant in the

Medicaid program and has established a Medicaid plan which was

approved by the Secretary. Pennsylvania pays the QMBs' Medicare

Part B premiums in full, and pays the Medicare Part B deductible

and coinsurance only if, and to the extent that, the amount

already paid under Medicare Part B, plus its payment, does not

exceed the Medicaid allowance. An applicable Pennsylvania

regulation provides in part that "[i]f a [Medicaid] recipient

also has Medicare coverage, the [State] may be billed for charges

that Medicare applied to the deductible or coinsurance, or both.

Payment will be made in accordance with established [Medicaid]

rates and fees." 55 Pa. Code § 1101.64(b).

It appears that this regulation leads to a result that

Pennsylvania pays nothing once the patient's deductible has been

exhausted and pays at its lower Medicaid rates, rather than the

Medicare rates, before the deductible has been exhausted.0 See

0
Balance-billing is the practice whereby a provider bills the
patient directly for the balance of the reasonable costs and
charges if the Medicare or Medicaid program does not pay the full
amount of the reasonable costs and charges.
0
Under Medicaid, physicians are not permitted to bill the patient
for the balance of the bill.

10
App. at 35 (Stipulation ¶ 23). However, the Secretary and the

Pennsylvania Secretary of Public Welfare argue that Pennsylvania

is permitted to limit its coinsurance and deductible payments

under Medicare Part B so that the total amount of the

reimbursements does not exceed the amount that the health care

provider would have received for the services rendered under

Medicaid. Although there may be some slight differences between

the Pennsylvania regulation and the position the Secretary

asserts before us, we will treat them as the same. Any

difference is immaterial in the context of this appeal because

our holding requires payment of all Part B cost-sharing.

Under the Pennsylvania payment system, Pennsylvania

invariably pays little or no money for QMBs' Part B cost-sharing

because the Medicaid rates are invariably lower than the Medicare

rates, and are almost always lower than the Part B payment rates,

i.e., 80% of the Medicare rates. Health care providers who

supply services to QMBs in Pennsylvania thus may not recover the

Part B cost-sharing that non-QMB Medicare Part B patients would

pay on their own to service providers.

II.

The question presented is whether the Pennsylvania plan

and regulations (the "Penn Plan") limiting Medicaid payment to

the extent that the Medicaid payment, plus Medicare payment, does

not exceed the payment otherwise available under Medicaid

violates either the Medicare Act or the Medicaid Act. We hold

that the Penn Plan violates both the Medicare Act and the buy-in

provisions of the Medicaid Act. In so holding, we find support

11
in the statutory language, statutory context and legislative

history, as well as New York City Health & Hosps. Corp. v.

Perales, 954 F.2d 854 (2d Cir.), cert. denied, ___ U.S. ___, 113

S. Ct. 461 (1992), a decision of the Court of Appeals for the

Second Circuit, the only court of appeals that has tackled the

precise question before us.0

A.

Under the Medicare Act, the Secretary is authorized to

determine the reasonable costs or charges for Medicare Part B

services. 42 U.S.C. § 1395w-4(b). Once the reasonable costs and

charges are determined, a provider of Medicare services is

entitled to recover 100% of the reasonable amount: 80% from the

federal government, § 1395l, and 20% from the patient,

§1395cc(a)(2)(A). See also §§ 1395w-4(a)(1), 1395u(b)(3)(B). No

matter from whom, "providers who furnish medical care to

Medicare-eligible patients have the right to collect 100% of

their reasonable costs or charges." Perales, 954 F.2d at 858.

Furthermore, the Medicare Act contains no exception to the

reimbursement of 100% of the reasonable costs and charges for

QMBs and dual eligibles. Id. The Pennsylvania limitation on

payment of Part B cost-sharing in effect creates an exception to

the reimbursement for QMBs and dual eligibles. This violates the

Medicare Act. See id.

0
A district court in the Fourth Circuit took the same position as
the Court of Appeals for the Second Circuit. See Rehabilitation
Ass'n of Va., Inc. v. Kozlowski, 838 F. Supp. 243, 247-54 (E.D.
Va. 1993). Another district court took the contrary view. See
Haynes Ambulance Serv., Inc. v. Alabama, 820 F. Supp. 590, 592-95
(M.D. Ala. 1993).

12
 The Secretary argues that QMBs and dual eligibles

should be treated as primarily Medicaid rather than Medicare

patients. We disagree. The obvious fact is that Congress did

not by statute make QMBs Medicaid-eligible (namely, receiving

Medicaid services). By requiring the states to enroll QMBs and

dual eligibles in the Medicare Part B program, Congress thereby

made them eligible for Medicare Part B benefits. The statutory

language is simply not susceptible of a reading that QMBs and

dual eligibles are primarily Medicaid patients. As the Perales

court articulated,

The Secretary's interpretation of dual eligibles as

primarily Medicaid patients leads to some oddities. If

Medicaid alone controlled with respect to dual

eligibles, then it would make little sense for Medicare

Part B to pay 80% of the Medicare rate for crossover

care. If Medicaid were in fact the controlling

program, then one would expect providers to be

compensated at the Medicaid rate, instead of at 80% of

the Medicare rate. Moreover, if crossovers [dual

eligibles] were "primarily Medicaid patients," there

would be no basis for Medicare to allow (as it does),

as a hospital's bad debt expense, the uncollected

Medicare cost-sharing amounts.

Perales, 954 F.2d at 858-59.
Legislative history indicates that Congress intended

that QMBs would be considered Medicaid beneficiaries primarily

13
for one purpose only--the provision of federal matching fund.

Congress explained that

Unlike those elderly and disabled covered under section

4602, individuals receiving assistance with Medicare

cost-sharing obligations would not be treated as

Medicaid beneficiaries for all purposes. However, as

in the case of the elderly and disabled covered under

section 4602, a State opting to offer this more limited

coverage would receive Federal matching payments for

its expenditures on behalf of these individuals.

H.R. Rep. No. 727, 99th Cong., 2d Sess. 105 (1986), reprinted in

1986 U.S.C.C.A.N. 3607, 3695.

Thus both the statutory framework and legislative

history reflect that Congress intended QMBs to be Medicare

patients rather than Medicaid patients. However, because QMBs

are poor and cannot financially shoulder the burden of paying the

Medicare Part B cost-sharing as can non-QMBs, Congress required

the states opting to cover QMBs to stand in the shoes of QMBs

with respect to the Part B cost-sharing payments. See id. at

106, reprinted in 1986 U.S.C.C.A.N. at 3696 ("For elderly and
disabled individuals whom the State chose to cover, the Medicaid

program would pay for the Part B deductible and the beneficiary's

20 percent coinsurance on Part B services.").

Accordingly, Medicare Part B service providers who

supply service to QMBs are entitled to recover 100% of the

reasonable costs and charges. The Penn Plan violates the

Medicare Act by limiting its payment of Part B cost-sharing to

14
the extent that its payment, plus the Medicare payment, would not

exceed the payment otherwise available under the Medicaid Act.

B.

Concluding that the Pennsylvania limitation on payment

of the Part B cost-sharing violates the Medicare Act does not end

the matter. The Secretary contends that Pennsylvania is

permitted by the buy-in provisions in the Medicaid Act,

§1396a(a)(10)(E)(i), 1396a(n), to limit its QMB Part B cost-

sharing payment to the extent that its payment, plus Medicare

Part B payment, does not exceed the Medicaid payment that would

otherwise be payable under the Medicaid plan. If so, we must

resolve the conflict between the buy-in provisions of the

Medicaid Act and the Medicare Act. However, the appellants

contend that the buy-in provisions, especially § 1396d(p)(3),

require the states participating in the Medicaid program to pay

the full amount of the Part B cost-sharing as defined in

§1396d(p)(3). We agree with the appellants and see no conflict

between the Medicare Act and the buy-in provisions of the

Medicaid Act.

(a)

We are called upon to determine the meaning of the buy-

in provisions of the Medicaid Act, §§ 1396a(a)(10)(E)(i),

1396d(p)(3), 1396a(n). "The task of resolving the dispute over

the meaning of [a statute] begins . . . with the language of the

statute itself." United States v. Ron Pair Enters., Inc., 489

U.S. 235, 241, 109 S. Ct. 1026, 1030 (1989). Accordingly, we

15
must first examine the language of the relevant statutory

provisions.

The current version of § 1396a(a)(10)(E)(i) provides:
A State plan for medical assistance must . .
(10) provide --
(E) (i) for making medical assistance available
for medicare cost-sharing (as defined in
section 1396d(p)(3) of this title) for
qualified medicare beneficiaries described in
section 1396d(p)(1) of this title;
. . .

except that . . . (VIII) the medical assistance made

available to a qualified medicare beneficiary described

in section 1396d(p)(1) of this title who is only

entitled to medical assistance because the individual

is such a beneficiary shall be limited to medical

assistance for medicare cost-sharing (described in

section 1396d(p)(3) of this title), subject to the

provisions of subsection (n) of this section and

section 1396o(b). . . .
§ 1396a(a)(10)(E)(i). Section 1396o(b) is not implicated in this

case. Section 1396d(p)(1) essentially defines the term

"qualified medicare beneficiary (QMB)" as an individual who is

eligible for Medicare Part A and who has an income below the

federal poverty line. Section § 1396d(p)(3) states:
The term "medicare cost-sharing" means the following
costs incurred with respect to a qualified medicare
beneficiary, without regard to whether the costs
incurred were for items and services for which medical
assistance is otherwise available under the plan:
(A)(i) premiums under section 1395i-2 or 1395i-2a
of this title, and
(ii) premiums under section 1395r of this title.

16
 (B) Coinsurance under subchapter XVIII of this
chapter (including coinsurance described in
section 1395e of this title).
(C) Deductibles established under subchapter XVIII
of this chapter (including those described in
section 1395e and section 1395l(b) of this title).
(D) The difference between the amount that is paid
under section 1395l(a) of this title and the
amount that would be paid under such section if
any reference to "80 percent" therein were deemed
a reference to "100 percent".

Such term also may include, at the option of a State,

premiums for enrollment of a qualified medicare

beneficiary with an eligible organization under section

1395mm of this title.

§ 1396d(p)(3). This definition includes all of the cost-sharing

that a non-QMB Medicare Part B patient would have to pay in order

to obtain Part B coverage. Part B deductibles are included in

§1396d(p)(3)(C). Subsection (p)(3)(D) obviously refers to the

20% coinsurance payment. Section 1396a(n) is entitled "Payment

amounts." It provides that

In the case of medical assistance furnished under this

subchapter for medicare cost-sharing respecting the

furnishing of a service or item to a qualified medicare

beneficiary, the State plan may provide payment in an

amount with respect to the service or item that results

in the sum of such payment amount and any amount of

payment made under subchapter XVIII of this chapter

[Medicare Part B] with respect to the service or item

exceeding the amount that is otherwise payable under

the State plan for the item or service for eligible

17
 individuals who are not qualified medicare

beneficiaries.

§ 1396a(n) (emphasis added).

"The apparent meaning" of § 1396d(p)(3), read together

with § 1396a(a)(10)(E)(i), according to the Perales court, is

that "the states that participate in Medicaid must allocate

Medicaid funds to the enrollment of all dual eligibles and QMBs

in Part B of Medicare and to the payment of 20% of reasonable

costs or charges along with the annual deductibles incurred in

this program." Perales, 954 F.2d at 859. We agree. Section

1396a(a)(10)(E)(i) uses the term "must" to impose an obligation

on the states participating in the Medicaid program to pay the

Medicare Part B cost-sharing, and the scope of that obligation is

defined by § 1396d(p)(3).0 The logical reading of these

provisions is that a Medicaid plan must pay everything listed in

§ 1396d(p)(3) unless this section qualifies the obligation.

Section 1396d(p)(3)(A)(ii) lists Part B premiums. Section

1396d(p)(3)(C) lists Part B deductibles. Section 1396d(p)(3)(D)

specifically includes the 20% coinsurance that is the

responsibility of a non-QMB Medicare Part B patient. Because

§1396d(p)(3) does not contain any qualification on the obligation

to pay the Part B cost-sharing, § 1396a(a)(10)(E)(i) therefore

obligates states participating in Medicaid to pay the entire

amount of the Part B cost-sharing.

0
The state Medicaid plans may impose only a nominal cost-sharing
on QMBs. See § 1396o(a) (imposition of certain charges in case
of individuals described in § 1396a(a)(10)(E)(i)).

18
 The Secretary points out that the statutory language

itself does not state that the states must make payments in full.

We believe the explicit language of "payment in full" is

unnecessary in this context. Since § 1396d(p)(3) lists the Part

B premiums, the deductibles and the 20% coinsurance as part of

the scope of payment obligation, § 1396a(a)(10)(E)(i) which

imposes the payment obligation requires payment for the entire

amount of the Part B premiums, the deductibles and the 20%

coinsurance unless otherwise specifically qualified. Such a

qualification is absent from the § 1396d(p)(3). We thus read

§§1396a(a)(10)(E)(i) and § 1396d(p)(3) as requiring payment in

full. This was obviously the understanding of Congress when it

enacted the QMB program. The contemporaneous legislative history

language expressly and specifically stated that the states opting

to provide the QMB benefits must make payment in full either to

the provider or to the QMB. H.R. Rep. No. 727, 99th Cong., 2d

Sess. 106, reprinted in 1986 U.S.C.C.A.N. 3607, 3696 ("the

Medicaid program would pay for the Part B deductible and the

beneficiary's 20 percent coinsurance on Part B services" to the

provider if it took assignment, or to the beneficiary who would

"submit the claim for the 20% coinsurance requirement to the

State Medicaid programs").

The Secretary contends that because § 1396a(n), which

is titled "Payment amounts," uses the permissible term "may"

rather than "must," we should not read the requirement to pay

Part B cost-sharing as a requirement of paying 100% of the Part B

cost-sharing. We disagree.

19
 In rejecting the Secretary's interpretation the Perales

court stated:

A statute requiring Medicaid funds to be made available

for Medicare cost-sharing can only sensibly be read as

requiring the funds to be made available to cover all

Medicare cost-sharing. It is counter-intuitive that a

statute requiring Medicaid funds to be made available

for cost-sharing only to the extent of the Medicaid

scheduled rates would not specify that qualification

expressly. Furthermore, it appears that the reason

that section a(n) authorizes payment beyond the

Medicaid amount, when it is required by another

section, is to clarify that the Medicaid Act does not

prohibit a provider from accepting more than the

Medicaid rate.

954 F.2d at 859 (footnote omitted).

The Perales court is correct in stating that had

Congress intended a qualification on the amount of the payment,

it would have specifically so stated. The statutory context

bears this out. In one instance in the "buy-in" provisions,

Congress expressly specified what part of the cost-sharing is

optional for the state. In the last paragraph of § 1396d(p)(3),

Congress stated that cost-sharing "also may include, at the

option of a State, premiums for enrollment of a [QMB] with an

eligible organization under section 1395mm of this title."

§1396d(p)(3) (§ 1395mm is part of Part C). In other instances,

Congress specifically limited the payment of cost-sharing to one

20
of the items listed in § 1396d(p)(3), with respect to certain

non-QMB individuals. See § 1396a(a)(10)(E) (ii) (limiting cost-

sharing payments for certain individuals to premiums described in

§ 1396d(p)(3)(A)(i)); 1396a(a)(10)(E)(iii) (limiting cost-sharing

payments for individuals whose income is above the federal

poverty line to premiums described in § 1396d(p)(3)(A)(ii)). This

statutory context strongly indicates that if Congress wanted the

payment to deviate from those Part B cost-sharing items listed in

§ 1396d(p)(3), it would have specifically so stated. The fact

that these subsections within §§ 1396a(a)(10)(E), 1396d(p)(3)

expressly provide for optional payment or limitations on the

payment supports the conclusion that if Congress intended to

permit the states to choose among the Part B cost-sharing items

to pay or to pay a certain percentage of an item, it surely would

have expressly so provided.

Moreover, we note that the Secretary does not argue the

states may pay only part of the Part B premium. She only argues

that the states may pay only part of the deductible and/or

coinsurance. Accordingly, the Secretary would have us read a

statute which on the face equally applies to the Part B premium,

deductible and coinsurance in a manner so as to permit disparate

treatment for the Part B premium, deductible and coinsurance. We

reject this proposition. We have found no basis in the statutory

language, context or legislative history for treating the Part B

cost-sharing items differently. Congress did not state that

under § 1396a(a)(10)(E)(i) the states may choose to pay an item

21
or part of an item out of those listed in § 1396d(p)(3), i.e.,

the Part B premiums, coinsurance and deductibles.

We believe § 1396a(n) was intended not to give states

the discretion to pay the Part B cost-sharing, but rather to

serve another important purpose in the context of the Medicaid

Act: to give the states the authority to make payments pursuant

to the rates set forth under the Medicare Act rather than those

set forth in the Medicaid plans, that is, to deviate from the

Medicaid payment schedules or payment methods. As is clear from

the Medicaid Act, a state plan must set forth a payment schedule

or payment methods for certain services. § 1396a(a)(30); 42

C.F.R. § 447.201(b), 447.203(a) (1993). Federal funding is

limited to expenditures made pursuant to such schedules or

payment methods established in a plan. § 1396b(a)(1) (the

Secretary shall pay the federal share of the "total amount

expended during such quarter as medical assistance under the

State [Medicaid] plan"). States may not subsequently deviate

from these payment schedules or payment methods without losing

the right to receive federal funding. See id.; §§ 1396c, 1316.

Section 1396a(n) authorizes the states to deviate from their

schedules or payment methods with respect to QMB Part B cost-

sharing payments, thus carving out an exception to the general

requirement to comply with the Medicaid fee schedules or payment

methods. Without the authorization under § 1396a(n), there would

be an apparent conflict between § 1396a(a)(10)(E)(i) and the

command that states only make payments according to their

schedules or payment methods as approved by the Secretary. The

22
legislative history buttresses this reading. The House Report

stated that "the total of Medicaid payments for Medicare cost-

sharing charges under this provision together with Medicare

payments may exceed the amounts otherwise payable under the State

Medicaid plan for such services." H.R. Conf. Rep. No. 1012, 99th

Cong., 2d Sess. 395-96 (1986), reprinted in 1986 U.S.C.C.A.N.

3868, 4040-41. This language emphasizes the comparison between

the Medicare and Medicaid rates of payment, rather than the

discretion of the states.

Even assuming that § 1396a(n) authorizes the states to

make discretionary payments, as the Secretary argues, this would

at best lead to a conflict between § 1396a(a)(10)(E)(i) and

§1396a(n). Given this conflict, the Secretary would not

necessarily prevail. Any conflict, if it exists, must be

resolved under the relevant statutory interpretation principles.

We must do so by giving full effect to all provisions. It is

well settled that "[s]tatutory construction is a holistic

endeavor . . . and, at a minimum, must account for a statute's

full text, language as well as punctuation, structure, and

subject matter." United States Nat'l Bank of Oregon v.

Independent Ins. Agents of Am., Inc., ___ U.S. ___, ___, 113 S.

Ct. 2173, 2182 (1993) (internal quotation marks and citations

omitted). Put another way, "`[i]n expounding a statute, we must

not be guided by a single sentence or member of a sentence, but

look to the provisions of the whole law, and to its object and

policy.'" Id. (quoting United States v. Heirs of Boisdore, 49
U.S. (8 How.) 113, 122, 12 L.Ed. 1009 (1849)). "[W]e are

23
obligated to give effect, if possible, to every word Congress

used." Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S. Ct.

2326, 2331 (1979). That is, "[a] statute should be construed so

that effect is given to all its provisions, so that no part will

be inoperative or superfluous, void or insignificant." 2A Norman

J. Singer, Sutherland Statutory Construction § 46.06, at 119-20

(5th ed. 1992) (citations omitted).

Since § 1396a(a)(10)(E)(i) provides that states must

pay the entire amount of the Part B cost-sharing, and § 1396a(n)

provides that states may pay more than the Medicaid amounts, both

sections may be reconciled by interpreting them as requiring

payment for the entire amount of the Part B cost-sharing. Such a

reading gives full effect to both and does no harm to either. On

the other hand, permitting payment up to only the Medicaid rates

would do irreconcilable harm to § 1396a(a)(10)(E)(i) which

requires payment of the entire amount of the Part B cost-sharing.

However, we reiterate that such a conflict resolution

is not necessary here because, as we concluded above, there is

simply no conflict: § 1396a(n) serves no purpose other than

giving the states the authority to deviate from the Medicaid

payment schedules or payment methods. Reading § 1396a(n) this

way gives full effect to this section without engendering a

conflict between it and § 1396a(a)(10)(E)(i).

Our reading of the statutory provisions is confirmed by

congressional intent as expressed in 1986. Congress itself did

not read § 1396(a)(n) as authorizing states to make discretionary
payments in excess of Medicaid rates. Nor did Congress intend

24
for this provision to detract from the command stated in

§1396a(a)(10)(E)(i). When Congress enacted both §

1396a(a)(10)(E) and § 1396a(n) in 1986, it explained that a state

must pay 100% of the Part B cost-sharing if it opted to enroll

QMBs in Medicare Part B. This cannot be more clearly stated than

the House Report:

For elderly and disabled individuals whom the State

chose to cover, the Medicaid program would pay for the

Part B deductible and the beneficiary's 20 percent

coinsurance on Part B services. If the beneficiary

uses a physician who takes assignment, Medicaid would

pay the physician directly for the 20 percent

coinsurance and the patient could not be billed for any

amounts above the Medicare reasonable charge. However,

if the physician elects not to take assignment, the

beneficiary would submit the claim for the 20 percent

coinsurance requirement to the State Medicaid program

and would be liable for an additional amount charged by

the physician.

H.R. Rep. No. 727, 99th Cong., 2d Sess. 106 (1986), reprinted in

1986 U.S.C.C.A.N. 3607, 3696. This House Report clearly

indicated that in addition to the Part B deductibles, the

Medicaid program must pay the 20% coinsurance payments for Part B

services either to the physician or to the patient directly.

Obviously, § 1396a(a)(10)(E) and 1396a(n), which were enacted by

Congress together in 1986, were understood by Congress as

requiring the states to pay 100% of the Part B cost-sharing, if

25
the states decided to participate in the QMB program. That is to

say, the option for the states is whether to join or not to join,

and not how much they have to pay. Once the states joined the

QMBs program, they were required to pay 100% of the Part B cost-

sharing, including the 20% coinsurance payment.

Since § 1963a(n) was not understood by Congress in 1986

to give states opting to participate in the QMB program the

discretion to pay only a portion of the Part B cost-sharing, it

cannot be read to give such discretion in 1994 when no change has

been made to § 1396a(n) or any other operative provisions with

respect to the scope of the Part B cost-sharing payment. The

evolution of the statutory provisions demonstrate that Congress

has not made any substantive amendment to those operative

provisions with respect to how much the states must pay under

§§1396a(a)(10)(E)(i), 1396d(p)(3) and § 1396a(n). The change

concerns whether the states have to pay at all. It merely

eliminated the states' option whether or not to join the program.

Now the states have no option; they must join. See H.R. Conf.

Rep. No. 661, 100th Cong., 2d Sess. 253 (1988), reprinted in 1988

U.S.C.C.A.N. 923, 1031 (the amendment "[m]akes mandatory the

current option for States to pay Medicare premiums, deductibles

and coinsurance"). This change in the option to join or not to

join does not affect the amount that the states are obligated to

pay. Therefore, the statute's established meaning as to how much
a state Medicaid plan must pay (that is, requiring payment of all

Part B cost-sharing) must be adhered to. It would be a strange

way to make a change in the content of an existing statutory

26
provision regarding the scope of payment without ever so slightly

modifying the language of those provisions specifying how much a

state must pay. Cf. Pierce v. Underwood, 487 U.S. 552, 567, 108

S. Ct. 2541, 2551 (1988) ("Quite obviously, reenacting precisely

the same language would be a strange way to make a change."). The

Secretary neither explicitly argues nor provides a rationale for

the proposition that changing the option whether or not to pay

the Part B cost-sharing at all into a mandate to pay somehow

changed the amount of the Part B cost-sharing which the states

are required to pay, where the statute defining the scope of the

payment had not been amended at all. She completely ignores the

House Report written in 1986 which explained the scope of Part B

cost-sharing payment.

Nor does the amendment broadening the definition of QMB

as including dual eligibles previously covered by § 1396a(a)(15)

substantively affect the operative provisions relating to the

obligation to pay all the Part B cost-sharing. First, no matter

what treatment dual eligibles received under § 1396a(a)(15), they

now receive the same treatment as QMBs under § 1396a(a)(10)(E)(i)

because they are brought under the coverage of

§1396a(a)(10)(E)(i). QMBs were not brought into the coverage of

§1396a(a)(15). The plain fact is that § 1396a(a)(15) was

repealed.

Moreover, § 1396a(a)(15) had been construed by the

Secretary as requiring states and dual eligibles combined to pay

the Part B cost-sharing in full at least until 1983, as set forth

in a 1981 memorandum and in the Secretary's position before a

27
district court in a 1983 case. See New York City Health & Hosps.

Corp. v. Perales, 954 F.2d 854, 861-62 (2d Cir. 1992)

(summarizing the Secretary's position). In Perales, the Court of

Appeals for the Second Circuit interpreted this provision, then

already repealed, as meaning "if the state chooses not to pay the

entire [Part B] cost-sharing amount, the state must pay what

remains after patients are allocated that portion of the

liability commensurate with their ability to pay." Id. at 860.

The legislative history indicates that Congress intended that the

individuals were to "share in the cost," S. Rep. No. 404, 89th

Cong., 1st Sess. 80 (1965), reprinted in 1965 U.S.C.C.A.N. 1943,

2020, with the state. Together, dual eligibles and states were

to pay the Part B cost sharing in full. Thus, before dual

eligibles were brought into the coverage of § 1396a(a)(10)(E)(i),

they were treated as favorably as QMBs. To the extent that the

repealed § 1396a(a)(15) had any relevance to the interpretation

of § 1396a(a)(10)(E)(i), it is consistent with our reading of the

latter. Perales, 954 F.2d at 860.0

(b)

To support its position that § 1396a(n) permits the

states to pay only a portion of the Part B cost-sharing, the

Secretary relies heavily on certain language0 in a House Report

0
But see Samuel v. California Dept. of Health Serv., 570 F. Supp.
566, 570 & n.2, 571 (N.D. Cal. 1983) (amended 572 F. Supp. 273
(1983)).
0
The House Report stated:
The bill would require States to pay Medicare cost-
sharing, including coinsurance, on behalf of eligible
individuals. It is the understanding of the Committee
that, with respect to dual Medicaid-Medicare eligibles,

28
that was written in 1988 when Congress deleted the "at the option

of a State" language from § 1396a(a)(10)(E). The language as set

out in footnote 10 purported to recognize a state practice of not

paying the full amount of Part B cost-sharing. Obviously that

language addressed the state practice relating to dual eligibles.

That is, the practice mentioned therein is a practice under

§1396a(a)(15). See Perales, 954 F.2d at 861. Its relevance to

§1396a(a)(10)(E)(i) is obscure at best. First, there was no

state practice as to QMB Part B cost-sharing payments under

§1396a(a)(10)(E). It is not clear how much states actually paid

for the Part B cost-sharing for QMBs at that time, because

"[w]hile States could protect this population [QMBs] through the

some States pay the coinsurance even if the amount that
Medicare pays for the service is higher than the State
Medicaid payment rate, while others do not. Under the
Committee bill, States would not be required to pay the
Medicare coinsurance in the case of a bill where the
amount reimbursed by Medicare--i.e., 80 percent of the
reasonable charge--exceeds the amount Medicaid would
pay for the same item or service. However, if a State
chooses to pay some or all of the coinsurance in this
circumstance, Federal matching funds would, as under
current law, be available for this cost. For example,
assume that a physician actually charges a "buy-in"
patient $60 for performing a particular procedure; that
Medicare recognizes $50 as the reasonable charge; and
that the State Medicaid program only pays $35 for this
procedure. Whether or not the physician takes
assignment, Medicare will pay only 80 percent of $50,
leaving a $10 coinsurance obligation for the
beneficiary. However, since the State only recognizes
$35 as the fee for the procedure in question, and since
the Medicare program has already paid the physician
$40, the State is not required to pay any of the $10
coinsurance. If the State chooses to pay some or all
of the $10, however, its cost would qualify for Federal
matching payments at the regular rate for services.
H.R. Rep. No. 105(II), 100th Cong., 2d Sess. 61 (1988), reprinted
in 1988 U.S.C.C.A.N. 857, 884.

29
Medicaid `buy-in' option under current law, it is the Committee's

understanding that, to date, only one State [had] chosen to

implement this coverage." H.R. Rep. No. 105(II) at 59, reprinted

in 1988 U.S.C.C.A.N. at 882 (emphasis added).0 Second, as stated

above, in 1988 Congress did not amend the operative provisions

related to how much states should pay, but only mandated that the

states participate in the QMB program. Finally, the language of

the House Report, quoted in footnote 10, expressly refers to

"dual Medicaid-Medicare eligibles" and not to "QMBs."

As the Perales court pointed out, the 1988 House Report

language did not purport to interpret § 1396a(a)(15). Perales,

954 F.2d at 861. It merely took notice of a state practice of

not paying the Part B cost-sharing in full for dual eligibles.

Because § 1396a(a)(15) has been repealed, that language has

little value. Nor did that language purport to interpret

§1396a(a)(10)(E)(i) or § 1396d(p)(3) as to the scope of the

states' obligation to make payments for the Part B cost-sharing.

The Perales court rejected the Secretary's reliance on

the 1988 legislative history language for the additional reason

that it is post-enactment legislative history. Perales, 954 F.2d
at 861. We agree. The legislative history relied upon by the

Secretary is not post-enactment history as to the mandate

requiring the states to join the QMB program, but this mandate

does not affect the amount of the payment. The legislative

0
By letter dated May 12, 1994 (p. 9), the Secretary informed us
that she did not know how the one state which elected the
optional coverage of QMBs treated the coinsurance amounts.

30
history is post-enactment history as far as the payment amount is

concerned because Congress did not make any substantive

amendments to the operative provisions related to the scope of

the Part B cost-sharing payment at the time the House Report was

written. The House Report purported to comment on the language

that was not drafted by the reporting Committee in 1988 because

this language was already in the statute after the enactment of

OBRA '86. See Pierce v. Underwood, 487 U.S. 552, 568, 108 S. Ct.

2541, 2551 (1988).

Post-enactment legislative history is not a reliable

source for guidance. "[E]ven when a subsequent House Committee

has actually commented upon an earlier statute, the

interpretation carries little weight with the courts." Perales,

954 F.2d at 861. As the Supreme Court teaches, "[t]he views of a

subsequent Congress form a hazardous basis for inferring intent

of an earlier one." Untied States v. Price, 361 U.S. 304, 313 80

S. Ct. 326, 332 (1960).

We will disregard, as the Perales court did, the

legislative history relied upon by the Secretary. The Supreme

Court has rejected attempts to smuggle subsequent legislative

commentary into an existing statute. Pierce, 487 U.S. at 566-68,
108 S. Ct. at 2551; Consumer Product Safety Comm'n v. GTE

Sylvania, Inc., 447 U.S. 102, 116-20, 100 S. Ct. 2051, 2060-64

(1980); see also City of Chicago v. Environmental Defense Fund,

___ U.S. ___, 114 S. Ct. 1588, 1593 (1994). We do the same in

this case, not simply because of the Supreme Court's general

warning regarding the troublesome nature of subsequent

31
legislative history, but also because there are more specific

problems with relying upon the 1988 House Report.

Similar to those legislative materials discounted by

the Supreme Court in GTE Sylvania, Inc. and Pierce, the 1988

House Report commented on language that was not drafted by the

reporting Committee. The fact that in 1988 Congress deleted "at

the option of a State" from § 1396a(10)(E)(i) does not change the

fact that the 1988 reporting Committee did not draft the

provisions relating to the scope of payment. These provisions

were enacted in 1986. The Pierce Court disregarded legislative

comments made on the meaning of "substantially justified" in 28

U.S.C. § 2412(d)(1)(A), a provision which was contemporaneously

reenacted as those comments were written, although it was drafted

and enacted by a previous Congress to take effect provisionally

for five years. 487 U.S. at 566-68, 108 S. Ct. at 2551. Since

those comments were not given any weight by the Supreme Court in

Pierce, we will not give any weight to the comments in the 1988

House Report when Congress did not reenact or amend the

provisions defining the scope of payment. See also GTE Sylvania,
Inc., 447 U.S. at 118 n.13, 100 S. Ct. at 2061 n.13 ("[E]ven when

it would otherwise be useful, subsequent legislative history will

rarely override a reasonable interpretation of a statute that can

be gleaned from its language and legislative history prior to its

enactment.").

Moreover, the Secretary's interpretation of the 1988

House Report language directly conflicts with language in the

1986 House Report explaining that the states must pay the 20%

32
coinsurance either to the service provider if it took assignment

or to the QMB if the provider did not take assignment. H.R. Rep.

No. 727 at 106, reprinted in 1986 U.S.C.C.A.N. at 3696. This

conflict weakens any force of the Secretary's reliance on the

post hoc 1988 legislative history. See Pierce, 487 U.S. at 567,

108 S. Ct. at 2551.

Finally, the value of the 1988 House Report language

cited by the Secretary is further reduced because it, as

interpreted by the Secretary as giving states discretion to pay

only part of the deductibles, apparently conflicts with language

in another section of the same House Report, which purported to

illustrate the QMB program in the context of prescription drug

benefits. See H.R. Rep. No. 105(II) at 50-51, reprinted in 1988

U.S.C.C.A.N. at 873-74. There the House Report stated that the

entire amount of the drug deductible must be paid by states to

service providers or patients who would pay to the service

providers, or that states may provide the actual drugs.0 The

0
The House Report stated:
The Committee bill would require States, through
their Medicaid programs, to cover both the Medicare
Part B premium (including any increment attributable to
the prescription drug benefit), as well as the $500
prescription drug deductible, for all elderly and
disabled Medicare beneficiaries with incomes below 100
percent of the Federal poverty guidelines. . . . The
purpose of this provision, which parallels the general
Medicaid "buy-in" requirement found at section 208 of
the Committee bill, is to assure effective protection
against catastrophic drug costs for poor Medicare
beneficiaries.
With respect to coverage of the deductible, the
bill would give the States two options. A State could
either offer the Medicare beneficiary the same
prescription drug benefit that it offers to its

33
Secretary maintains that the legislative history language she

cites0 permits states to pay only part of the Part B deductibles.

See App. at 35 (Stipulation ¶ 23). The statutory provision0 and

categorically needy Medicaid eligibles until the
deductible is satisfied and Medicare coverage begins.
Or, it could simply reimburse the beneficiary directly
for the charges incurred for prescription drugs up to
$500. Whatever method the State selects must apply to
all qualified Medicare beneficiaries. If the State
elected to offer its Medicaid prescription drug
benefit, the calculation of whether the Medicare
deductible had been satisfied would have to be based on
the actual charges for the drugs used, not on the
amounts that the State actually reimbursed for the
drugs through its Medicaid program.
State expenditures for Medicare prescription drug
premiums and deductibles would be subject to Federal
Medicaid matching payments at the State's regular
matching rate for services. This buy-in requirement
would, on July 1, 1988, take effect whether or not
implementing regulations have been issued. Thus,
States would begin paying the monthly Part B premium
increments beginning July 1988, and would begin
assisting qualified beneficiaries to meet the
deductible with respect to drugs dispensed on or after
January 1, 1989.
H.R. Rep. No. 105(II) at 50-51, reprinted in 1988 U.S.C.C.A.N. at
873-74.
0
See supra note 10.
0
The statute provided that states may treat drug deductibles as
one of the deductibles listed in § 1396d(p)(3)(C) (the buy-in
provision) which states must pay for, or states must provide QMBs
with drugs under the Medicaid program until the cost of the drugs
reached the amount of the deductible:
In a State which provides medical assistance for
prescribed drugs under section 1396d(a)(12), instead of
providing to qualified medicare beneficiaries, under
paragraph (3)(C), medicare cost-sharing with respect to
the annual deductible for covered outpatient drugs
under section 1395m(c)(1), the State may provide to
such beneficiaries, before charges for covered
outpatient drugs for a year reach such deductible
amount, benefits for prescribed drugs in the same
amount, duration, and scope as the benefits made
available under the State plan for individuals
described in section 1396a(a)(10)(A)(i).

34
the legislative history language regarding drug benefits0 make

clear that states had two options to satisfy the obligation to

pay for the drug deductibles: either to provide drugs in kind or

reimburse $500 under the buy-in provision §1396d(p)(3)(C).

Neither option excuses the state from paying the full $500. It

is clear Congress envisioned the drug deductibles as part of the

Part B cost-sharing listed in § 1396d(p)(3)(C), not as a special

benefit separate from that provided by the buy-in provision. See

§ 1396d(p)(4), Pub. L. No. 100-360, §301(d)(2), 102 Stat. 671,

749 (1988) (repealed 1990) (referring to § 1396d(p)(3)(C)).

Assuming that the language relied upon by the Secretary could be

read to allow states to pay only part of any item of the Part B

cost-sharing listed in § 1396d(p)(3), that reading conflicts with

the language regarding the drug benefits. The fact that §

1396d(p)(4) as set out in note 14, supra, was repealed

subsequently, see Pub. L. No. 101-234, § 201(a)(1), (b)(2), (e),

103 Stat. 1981, 1985 (1989), does not eliminate the conflict

between the legislative comments as they existed in 1988. Such

commentary, therefore, at most exhibited confusion on the part of

the reporting Committee, which is one of the reasons why such

post hoc comments should not be given much weight.
The post-enactment legislative history language relied

upon by the Secretary thus conflicts with a logical reading of

the statutory provisions, with contemporaneous legislative

42 U.S.C. § 1396d(p)(4), Pub. L. No. 100-360, § 301(d)(2), 102
Stat. 671, 749 (1988) (repealed 1990, Pub. L. No. 101-234,
§201(a)(1), (b)(2), (e), 103 Stat. 1981, 1985 (1989)).
0
See supra note 12.

35
history, as well as language in another section of the same House

Report. "Even in the ordinary situation, [a] House Report would

not suffice to fix the meaning of language which that reporting

Committee did not even draft." Pierce, 487 U.S. at 567, 108 S.

Ct. at 2551. Given all the problems discussed above, we will

give no effect to the subsequent legislative history language

relied upon by the Secretary.

(c)

The Secretary and the district court also relied upon

§1395w-4(g)(3)(A), a statutory provision enacted in 1989 which

requires providers to take assignment of payment with respect to

the services provided to QMBs. See Pub. L. No. 101-239,

§6102(a), 103 Stat. 2181-82. This requirement took effect in

April 1990. Id. § 6101, 103 Stat. 2169. This section, which

only set forth a payment method, should not affect the

interpretation of how much the states must pay under

§1396a(a)(10)(E). Indeed, the legislative history states that

the amendment "does not change the current policy regarding the

amount which a Medicaid program must reimburse on such claims."

H.R. Rep. No. 247, 101st Cong., 1st Sess. 364, reprinted in 1989
U.S.C.C.A.N. 1906, 2090. Because taking assignment itself does

not affect the amount of payment, particularly if the payment

amount is considered to be the whole amount of the Part B cost-

sharing, taking assignment means only that providers are to

receive the whole amount from the states, rather than from QMBs

in whole or in part. The fact that between 1988 and April 1990,

service providers were permitted to balance-bill QMBs indicates

36
congressional intent that service providers be entitled to

collect the deductibles and the 20% coinsurance in full, if not

from the Medicaid plans, then from QMBs. A statutory provision

obligating service providers to take assignment and prohibiting

balance-billing does not reduce the amount of the payment but

regulates where the payment can come from.0

The Secretary and the district court also relied upon

the legislative history language relevant to § 1395w-4(g)(3)(A)

which again asserted that there was a current practice of not

paying Part B cost-sharing in full. See H.R. Rep. No. 247 at

364, reprinted in 1989 U.S.C.C.A.N. at 2090. This reliance is

misplaced for the same reasons that reliance upon the 1988 House

Report is misplaced. See supra Part II.B(b).

We also note that the ban on balance-billing appears to

apply only to an item of service that is covered by a Medicaid

state plan. See § 1395w-4(g)(3)(A) ("Payment for physicians'

services . . . with respect to such services under a State plan

approved [by the Secretary] may only be made on an assignment-

related basis" (emphasis added)). It appears, therefore, that

this provision does not apply to an item of service that is not

available under a State plan but available under Medicare Part B.

We do not know whether in such a situation a provider may

0
For the same reason, we believe the legislative history language
indicating that Congress intended to codify the practice relating
to the dual eligibles, see H.R. Rep. No. 247 at 364, reprinted in
1989 U.S.C.C.A.N. at 2090, refers only to the method of payment,
not the amount of payment. The codification addresses from where
the payment comes and from whom service providers may seek
payment, not about how much that payment could be.

37
balance-bill a QMB patient. We need not decide this question; it

suffices to point out that the Secretary's reliance on this

provision is fraught with problems.

(d)

Finally, the Secretary's interpretation leads to an odd

result and defeats congressional intent in creating the QMB

program. The odd result is that if an item of service is

available under Medicare Part B but not Medicaid, then no payment

is required by the buy-in provisions of the Medicaid Act; the

states have no basis to make any payment calculations. This is

exactly what the Secretary by regulation provides: "State

payment of Part B premiums on behalf of a Medicaid recipient does

not obligate it to pay on the recipient's behalf the Part B

deductible and coinsurance amounts for those Medicare Part B

services not covered in the Medicaid State plan." 42 C.F.R.

§431.625(c)(1) (1993). We believe this result contradicts clear

statutory command that states pay the Part B cost-sharing

including deductibles and coinsurance payments on behalf of QMBs,

regardless of whether an item of Part B service is available

under Medicaid. See § 1396d(p)(3)("without regard to whether the

costs incurred were for items and services for which medical

assistance is otherwise available under the [Medicaid] plan").

The language, context and history of the buy-in provisions of the

Medicaid Act do not permit viewing the obligation to pay the Part

B cost-sharing as depending upon whether an item of service is

available under Medicaid.

38
 Moreover, because the Medicaid rates are invariably

lower that than those under Medicare Part B, the Secretary's

interpretation would lead to the result that states almost always

would not have to pay any amount at all. This conflicts with the

congressional intent in creating the QMB program: to put the

states opting to participate in the program in the shoes of QMBs

with respect to the responsibility for the Part B cost-sharing

payments. See H.R. Rep. No. 727 at 106, reprinted in 1986

U.S.C.C.A.N. at 3696 ("For elderly and disabled individuals whom

the State chose to cover, the Medicaid program would pay for the

Part B deductible and the beneficiary's 20 percent co-insurance

on Part B services."). In so doing, Congress took notice of the

fact that the Medicare beneficiaries faced substantial out of

pocket expenses. See id. at 102-03, reprinted in 1986

U.S.C.C.A.N. at 3692-93. QMBs were so poor that they could not

afford the Part B cost-sharing as did non-QMBs in order to obtain

Medicare Part B services, nor were they poor enough to obtain

certain coverage under Medicaid. The buy-in provisions thus were

designed to alleviate this plight of QMBs by requiring the states

to pay for the out of pocket expenses for them, if the states

opted to join the QMB program.

When changing the option into a mandate to join the QMB

program by deleting "at the option of a State" from

§1396a(a)(10)(E)(i), Congress was motivated primarily by one

consideration: the savings for the Medicaid programs that would

result from the expansion of Medicare coverage to services

previously covered by Medicaid. The House Committee on Energy

39
and Commerce believed that expansions in the Medicare program to

be made by the 1988 amendments would provide states with a

windfall of savings. See H.R. Rep. 105 (II) at 59-60, reprinted

in 1988 U.S.C.C.A.N. at 882-83. To channel that windfall into

the QMB program was the intent behind the 1988 amendment: "In the

view of the Committee, this Medicaid `windfall' should be

redirected toward catastrophic protection for the elderly and

disabled poor. Accordingly, the Committee bill would essentially

make mandatory the Medicaid `buy-in' option in current law." Id.

Thus, forcing states to use the windfall savings to pay for the

QMB Part B cost-sharing was the unmistakable purpose of the 1988

amendment. The Secretary's interpretation would require service

providers to foot the bill rather than redirecting the Medicaid

"windfall" to pay for the Part B cost-sharing, thus defeating the

congressional intent in passing the amendment in 1988.0

III.

The Secretary contends that she should be given

deference under Chevron, U.S.A., Inc., v. Natural Resources

Defense, 467 U.S. 837, 104 S. Ct. 2778 (1984). The Chevron rule

is predicated on the fact "the statute is silent or ambiguous

with respect to the specific issue." Id. at 843, 104 S. Ct. at
2782. Our analysis reflects that although interpreting the

relevant statutory provisions is not a simple task, there is in

0
We do not know whether the windfall referred to in the House
Report still exists at present time. If not, the states may have
considerable burden in providing payments for the Part B cost-
sharing. Such a problem, if it indeed exists, must be resolved
by Congress through corrective legislation, rather than by us
through questionable judicial interpretation of the statute.

40
fact no ambiguity as to how much states have to pay. Complexity

alone is not enough to trigger Chevron. As our discussion makes

clear, the statutory language, context and legislative history

demonstrate that Congress has spoken on the issue. Accordingly,

Chevron has no application. INS v. Cardoza-Fonseca, 480 U.S.

421, 446-48, 107 S. Ct. 1207, 1221 (1987); Chevron, 467 U.S. at

843 & n.9, 104 S. Ct. at 2781 & n.9; Perales, 954 F.2d at 861.

Moreover, we note that the Secretary has changed her

position with respect to the issue of how much states must pay

for dual eligibles and QMBs. As the Perales court stated:

In a 1981 policy memorandum, the Secretary announced

that with respect to dual eligibles who have buy-in

Medicare coverage, "if the MediCal [Medicaid] agency

has made no payment at all, the physician/supplier may

collect coinsurance [i.e. 20% of reasonable charges]

and deductibles from the MediCal . . . eligible

patient." Department of Health & Human Services

Memorandum, September 29, 1981.

954 F.2d at 862 (alteration in Perales). The Secretary urged the

same position in a case before a district court at about the same

time. Id. This makes clear that the Secretary "presumed that

providers have the right to receive 100% of their reasonable

costs or charges for services to patients enrolled in Part B

Medicare pursuant to a buy-in arrangement, a right that providers

could assert even against indigent, Medicaid-eligible patients."

Id.

41
 The Secretary's change of position erodes the

confidence that a court should have when it defers to the

judgment of another decisionmaker. "An agency interpretation of a

relevant provision which conflicts with the agency's earlier

interpretation is `entitled to considerably less deference' than

a consistently held agency view." INS v. Cardoza-Fonseca, 480

U.S. at 446 n.30, 107 S. Ct. at 1221 (citations omitted). See

also Perales, 954 F.2d at 861; Samaritan Health Serv. v. Bowen,

811 F.2d 1524, 1529 (D.C. Cir. 1987) ("[a]ny deference that an

interpretative rule may claim depends on [among other things] . .

. `its consistency with earlier and later pronouncements.'"

(quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct.

161, 164 (1944)). Applying these principles, we will not give

any deference to the Secretary's new position.0

IV.

For the foregoing reasons, we hold that Pennsylvania

must pay the entire amount of the Part B cost-sharing on behalf

of QMBs. We will reverse the judgment of the district court and

remand the case with instructions that the district court enter

judgment for the appellants.

0
In Thomas Jefferson University v. Shalala, U.S. , 62
U.S.L.W. 4601, 1994 W.L. 276674 (U.S. June 24, 1994), the Supreme
Court gave substantial deference to the Secretary's
interpretation of her own regulation, namely, 42 C.F.R.
§413.85(c) (1993). As that case does not involve an issue of the
Secretary's interpretation of a statute, it has no relevance to
our analysis in the case sub judice.

42