The opinion of the court was delivered by: Haight, District Judge:
MEMORANDUM OPINION AND ORDER
Plaintiffs Medical Society of the State of New York et al.
("Plaintiffs") move for summary judgment pursuant to F.R.C.P.
56. Plaintiffs contend that Chapter 572 of the Laws of New
York (codified at N.Y. Public Health Law § 19) is (1) preempted
by the Health Insurance for the Aged Act ("Medicare Act;" the
"Act"), 42 U.S.C. § 1395 et seq. and (2) violative of the Due
Process Clause of the Fourteenth Amendment to the United States
Constitution. Defendants Mario M. Cuomo and David M. Axelrod,
M.D., respectively the Governor of New York and at the
pertinent times its Commissioner of Health, contest plaintiffs'
assertions, and cross-move for summary judgment. For the
reasons stated below, this Court finds that Chapter 572 is not
preempted by the federal statute, nor does it violate the
The federal Medicare program was established in 1965 with
the enactment of the Medicare Act. Persons 65 years and older
are eligible under the provisions of the Act, as well as
certain disabled individuals, regardless of ability to pay.
Part B of the Medicare Act ("Supplementary Medical Insurance
Benefits for the Aged and Disabled"), § 1395j-1395w, provides
an insurance plan under which medical services for eligible
persons are paid by the Federal Supplementary Medical Insurance
Trust Fund via a local carrier. In most instances, the program
covers 80% of the "reasonable charge"*fn1 for services
with the beneficiary paying the remainder.
Two billing methods were devised for payment of benefits.
§ 1395u(b)(3)(B). The first method provides for payment "on the
basis of an itemized bill." This method, commonly known as
"balance billing," is the source of the controversy at bar.
Balance billing allows a physician to bill a Medicare
beneficiary an amount in excess of the reasonable charge, with
the local carrier reimbursing the beneficiary for 80% of the
reasonable charge. The second method, "assignment," restricts a
physician's fee to the reasonable charge, with the physician
being reimbursed by the local carrier for 80% of the fee and
the remaining 20% being paid by the beneficiary.
Under both payment plans, Medicare pays for 80% of the
reasonable charge. The difference lies in the actual fee.
Balance billing "provides a `safety valve' for physicians who
believe that the fee schedule does not adequately reflect the
quality of services they provide." Physician Payment Review
Commission ("PPRC"), 1989 Annual Report to Congress at 137.
Supporters of balance billing argue that it gives beneficiaries
access to quality medical services. Although the total cost of
medical services is higher than the reasonable charge level,
they say that Medicare pays a large enough portion of the
physician's fee to justify the excess cost.
Not surprisingly, opponents of balance billing assert that
"extra bills become out-of-pocket liabilities." PPRC, 1988
Annual Report to Congress at 130. They also note that many
beneficiaries are unaware of their insurance options and so may
not learn that their physicians balance bill until after the
medical services are performed. The beneficiaries only learn of
their personal liability after the fact — when it is too late
to make other arrangements.
Recognizing the growing concern over balance billing,
Congress, in the mid to late 1980's, adopted several plans to
remedy the situation. In 1984, Congress initiated the
"Participating Physician's Program." This program required
physicians to either accept assignment for all billings in the
coming year (a "participating physician"), or decide whether
to balance bill on a case-by-case basis (a "non-participating
physician"). To encourage physicians to participate and agree
to assignment of all claims, several incentives were created:
(1) participating physicians were listed in a special
directory distributed to beneficiaries; (2) a higher
reasonable charge was allowed for participating physicians,
§ 1395u(b)(4)(A)(iv); and (3) a freeze was placed on the amount
physicians could balance bill § 1395u(j)(1).
In 1986, the freeze was lifted and replaced with a "maximum
allowable actual charge" ("MAAC"), which capped the yearly
increase allowed for physicians who balance bill. §
1395u(j)(1). In addition, the PPRC was established to "make
recommendations to Congress . . . regarding adjustments to the
reasonable charge levels for physicians' services . . . and
changes in the methodology for determining the rates of
payments, and for making payment, for physicians' services . .
." § 1395w-1(b)(1).
Finally, in 1989, balance billing was capped at a "limiting
charge." Under the new provisions, a cap of 25% (or in some
instances 40%) above the "recognized payment amount"*fn2 was
imposed for 1991. The cap was lowered to 20% for 1992 and 15%
beginning in 1993. § 1395w-4(g)(2).
At the same time that Congress was considering changes in
the balance billing program, various states considered, and in
several cases adopted, their own restrictions on balance
billing. Massachusetts prohibited the practice altogether in
1985. Physicians who failed to comply with the new state law
could not obtain or renew their Massachusetts medical license.
243 C.M.R. 2.07(15); Mass. G.L.c. 112, § 2. In addition,
disciplinary action could be taken against violators. 243
C.M.R. 103(8), 1.05(5); Mass. G.L.c. 112, § 5 (1986 Supp.). The
legislation prompted a legal challenge, but in Massachusetts
Medical Society v. Dukakis, 815 F.2d 790 (1st Cir. 1987), cert.
denied 484 U.S. 896, 108 S.Ct. 229, 98 L.Ed.2d 188 (1987), the
First Circuit upheld the state statute, ruling that it was not
preempted by the Medicare Act.
In the years that followed, Congress enacted the amendments
discussed above. After passage of the 1989 Amendments,
Pennsylvania enacted its own law prohibiting balance billing.
In Pennsylvania Medical Society v. Marconis, 755 F. Supp. 1305
(W.D.Pa. 1991), the district court upheld the state statute
against a challenge, on preemption grounds, by the Pennsylvania
Medical Society. The Third Circuit affirmed. 942 F.2d 842 (3d.
The Supremacy Clause of the United States Constitution,
Article IV, Cl. 2, lies at the heart of this case. It
This Constitution, and the Laws of the United
States which shall be made in pursuance thereof;
and all Treaties made, or which shall be made,
under the Authority of the United States, shall
be the supreme Law of the Land; and the Judges in
every State shall be bound thereby, any Thing in
the Constitution or Laws of any State to the
The case at bar involves a law — the Medicare Act — that
has been promulgated by the United States Congress. As its
constitutionality has not been challenged, it is presumptively
made "in pursuance" of the Constitution and is thus the
"Supreme Law of the Land." What remains to be decided is