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Andersen v. Leavitt

September 27, 2007


The opinion of the court was delivered by: Hurley, Senior District Judge

MEMORANDUM & ORDER on Defendants' Motion for Summary Judgment (docket no. 30) and Plaintiffs' Motion for Partial Summary Judgment (docket no. 38)

This case focuses on the often-confusing arena of Medicare and the legislation and regulations that govern it. Plaintiffs, senior citizens and Medicare beneficiaries residing in certain suburban New York counties surrounding New York City, challenge both (1) the mechanism under which health care organizations are reimbursed for providing Medicare beneficiaries with medical care and (2) the fact that, as a result of their geographic location, Plaintiffs do not share the same benefits as other Medicare beneficiaries located in different, but neighboring counties. The crux of Plaintiffs' suit against Defendants is that, as a result of locality, they must pay more for Medicare services provided by health care organizations (or HMOs) than do other seniors located in the borough counties of New York City. As a result, Plaintiffs assert they have been discriminated against and their Fifth Amendment right to equal protection under the law has been violated.

Presently before the Court are two motions: (1) Defendants' motion for summary judgment on both the Constitutional claims (the first, second, and third causes of action in the complaint) and the Freedom of Information Act ("FOIA") claim (the fourth cause of action) and (2) Plaintiffs' motion for partial summary judgment on their FOIA claim with a request for attorneys' fees. As set forth below, Defendants' motion is granted and Plaintiffs' motion is denied.


The following facts are gleaned from the Parties' Rule 56.1 Statements and are undisputed unless otherwise noted. Indeed, there are few disputes before the Court.*fn2

Established by an act of Congress in 1965, Medicare is the program that provides health insurance coverage to individuals over the age of 65 (hereinafter, "seniors" or "beneficiaries") and certain others. Generally, Medicare Part A provides insurance coverage for inpatient hospital treatment at no cost to all individuals reaching the eligible age and Medicare Part B provides insurance coverage for doctor visits and certain outpatient treatment to eligible seniors who elect to enroll by paying a monthly fee to the government. Traditional Medicare pays for beneficiaries' medical services on a "fee-for-service" basis. The fee for service basis is similar to traditional indemnity health insurance plans. Under traditional Medicare's fee for service basis, the insured is responsible for a deductible, after which Medicare pays its share and the insured pays his/her share for covered services. Medicare's share is paid pursuant to a fee schedule which depends, in part, on the geographic area in which the provider works as reflective of the geographic variation in the cost of providing services. See generally 42 U.S.C. § 1395w-4(e) (requiring the Secretary to establish geographic adjustment factors for all physician services for each fee schedule area).

In an effort to contain its costs for providing this health insurance, in 1985, Medicare began entering into "risk contracts" with managed care organizations (also known as "health management organizations" or "HMOs"*fn3 ). Under these contracts, HMOs would receive a predetermined payment each month--known as a capitation rate--to cover all Medicare services they provided to seniors, regardless of the cost of the actual services the organizations provided in a given month. Seniors were, and remain, eligible to receive benefits on a fee-for-service basis, but could elect to join an HMO.

Between 1985 and 1997, capitation rates were established for each county in the United States at the rate of 95% of the Adjusted Average Per Capita Cost ("AAPCC")*fn4 for medical services in the respective county. That is, a county's capitation rate was equal to 95% of the projected cost of providing Medicare services on a fee for service basis in that county. This method was changed with the 1997 introduction of the Medicareਚ≱ program ("M").*fn5

Under M, starting in 1998, capitation rates were to be set at the greater of three values:

(1) a minimum payment amount specified in the statute at $367 per month in 1998 and indexed for future years; (2) a minimum percent increase specified by statute over the prior year's final rate, generally 2 or 3%; and (3) a blended formula which was a weighting of something called an area-specific rate and something called a national input price-adjusted rate. Under the blended formula, the relative weight of the local figure was reduced and the weight of the national average was raised until the blended rate consisted of 50% of each. See 42 U.S.C. § 1395w- 23(c)(2).*fn6 By statute, the Centers for Medicare and Medicaid Services (the "Center") was directed to calculate the minimum payment amount, the minimum percent increase and the blended formula values for every county and apply the greater of the three to establish the capitation rate for each county.*fn7 See 42 U.S.C. § 1395w-23(c).

Five years later, in 2003, Congress passed the Medicare Modernization Act. The Medicare Modernization Act renamed the M program as Medicare Advantage (MA).*fn8 More importantly, this legislation added a fourth value to be considered by the Center in determining a county's capitation rate, namely, 100% of AAPCC.*fn9 Similar to the earlier statute, the Center was required to determine the capitation rate for every U.S. county, but now it had to calculate four formulas and choose the one that yielded the highest rate. In 2005, the blended rate and minimum amounts were eliminated, resulting in the capitation rates set as the higher of a 2% increase over the previous year's capitation rate or 100% of the AAPCC.

The Parties dispute whether the Center has discretion to consider capitation rates of other counties when establishing the capitation rate for a particular county. Relying on the Declaration of Solomon Mussey, director of the Medicare and Medicaid Cost Estimates Group within the Office of the Actuary of the Center, Defendants assert that "[the Center] does not, and cannot, consider the capitation rate in one county when establishing the capitation rate in another." (Defs.' Rule 56.1 Stmt., ¶ 11 (citing Mussey Decl., ¶ 8).) Plaintiffs counter that "[the Center] is required to fix capitation rates 'on the basis of actual experience or retrospective actuarial equivalent based upon an adequate sample and other information and data,' 42 U.S.C. § 1395mm(a)(4), and has the discretion--and the duty--to consider capitation rates in counties in the same health-care area." (Pls.' Rule 56.1 Counterstmt., ¶ 11.) They do not cite to any statutory authority or evidence to support this latter assertion.

It is undisputed that the capitation rates for the counties that comprise New York City, i.e., Bronx, Kings, New York, Queens, and Richmond counties (the "borough counties") are not (and never were) the same as those of Nassau, Rockland, Suffolk, and Westchester counties (the "Plaintiffs' counties" or "suburban counties"). And, as compared to each other, the capitation rates of the Plaintiffs' counties are not (and never have been) the same.

Regarding M, Defendants state "[c]ost sharing and supplemental benefits above and beyond required benefits under Medicare are determined by each managed care organization." (Defs.' Rule 56.1 Stmt., ¶ 15 (citing Downs Decl., ¶ 3).) Defendants continue by stating that (until February 2006) it was the Center's Division of Financial Benefits that was responsible for, inter alia, reviewing and approving Adjusted Community Rate ("ACR") Proposals and Plan Benefit Packages presented by HMOs participating in the M௳ program. (See id.) Plaintiffs retort: "Cost-sharing and supplemental benefits above and beyond required benefits under Medicare are proposed by each managed care organization, but cannot take effect unless approved by [the Center]." (Pls.' Rule 56.1 Counterstmt., ¶ 15 (also citing Downs Decl., ¶ 3).)

Defendants' Rule 56.1 Statement continues with the explanation that (1) an ACR Proposal was the rate filing an M organization annually submitted to the Center that explained what benefits the organization wished to offer seniors and the pricing structure for those benefits;*fn10 and (2) a Plan Benefit Package sets forth the benefits that the organization proposed to provide seniors. Before 2006, the Center's role was to review the ACR Proposals and Plan Benefit Packages and, if in compliance with applicable rules and regulations, approve them. (See Downs Decl., ¶ 8 ("[the Center] had no discretion to equalize benefits or cost sharing among organizations in the same or different counties. Its only role was to ensure that the organizations were following the rules and regulations that exist for the MA program.") Therefore, the Center ensured (a) that participating HMOs offered at least the required Medicare-covered benefits, and (b) that if the average capitation rate for a county was greater than the ACR (i.e., the HMO's cost of providing benefits), then the HMO would provide additional benefits or would reduce participating seniors' cost-sharing payments. The Center was also required to ensure that the sum of the actuarial values of the ACR plus any proposed cost-sharing was no greater than the capitation rate. The Center's review process was known as a "desk review". Its standard of review was to ensure compliance with legal requirements and to ensure that the actuarial assumptions made by the organizations were reasonable; the Center did not verify the accuracy of an organization's information, nor did it compare benefits or ACR proposals made by different organizations or in different counties. Thus, Defendants state:

[the Center] had no discretion in its review of ACR Proposals and [Plan Benefit Packages]. Its only role was to ensure that the organizations were following the rules and regulations that existed for the MA program. If an organization had an "excess" (that is, its ACR was lower than the capitation rate in a particular county), the organization [, and not the Center,] had the discretion to determine what, if any, additional benefits it would provide, and/or whether cost sharing would be reduced. The Center had no input in determining how the excess was to be allocated [e.g., providing additional benefits or reducing cost-sharing payments by seniors].

(Defs.' Rule 56.1 Stmt., ¶ 22 (emphasis added).) Rather, it only ensured that any "excess" did get allocated. Plaintiffs dispute Defendants' position that the Center lacked discretion in executing its review of ACR Proposals and Plan Benefit Packages, positing "[the Center] possesses discretion to use its best judgment to insure that the ACR proposals are a 'realistic reflection of the actual medical costs.'" (Pls,' Rule 56.1 Counterstmt., ¶ 22 (citing Downs' Dep. at 119, 121).)

Under the current Medicare statute, organizations no longer submit ACR proposals. Now, HMOs submit bids which substantially contain the same information as previously found in ACR proposals. Review of these bids are now done by the Office of the Actuary within the Center, but the review process is similar to that previously done.


A. Standard for Summary Judgment

Summary judgment pursuant to Federal Rule of Civil Procedure 56 is appropriate only where admissible evidence in the form of affidavits, deposition transcripts, or other documentation demonstrates the absence of a genuine issue of material fact and one party's entitlement to judgment as a matter of law. See Viola v. Philips Med. Sys. of N. Am., 42 F.3d 712, 716 (2d Cir. 1994). The relevant governing law in each case determines which facts are material; "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). No genuinely triable factual issue exists when the moving party demonstrates, on the basis of the pleadings and submitted evidence, and after drawing all inferences and resolving all ambiguities in favor of the non-moving party, that no rational jury could find in favor of the non-moving party. See Chertkova v. Conn. Gen'l Life Ins. Co., 92 F.3d 81, 86 (2d Cir. 1996) (citing Fed. R. Civ. P. 56(c)).

To defeat a summary judgment motion properly supported by affidavits, depositions, and/or other documentation, the non-movant must offer similar materials setting forth specific facts that show that there is a genuine issue of material fact to be tried. See Rule v. Brine, Inc., 85 F.3d 1002, 1011 (2d Cir. 1996). The non-movant must present more than a "scintilla of evidence," Delaware & Hudson Ry. Co. v. Consol. Rail Corp., 902 F.2d 174, 178 (2d Cir. 1990) (quoting Anderson, 477 U.S. at 252), or "some metaphysical doubt as to the material facts," Aslanidis v. U.S. Lines, Inc., 7 F.3d 1067, 1072 (2d Cir. 1993) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)), and cannot rely on the allegations in his or her pleadings, conclusory statements, or on "mere assertions that affidavits supporting the motion are not credible." Gottlieb v. County of Orange, N.Y., 84 F.3d 511, 518 (2d Cir. 1996) (internal citations omitted). Affidavits submitted in opposition to summary judgment must be based on personal knowledge, must "set forth such facts as would be admissible in evidence," and must show that the affiant is "competent to testify to the matters stated therein." Patterson v. County of Oneida, N.Y., 375 F.3d 206, 219 (2d Cir. 2004) (citing Fed. R. Civ. P. 56(e)). "Rule 56(e)'s requirement that the affiant have personal knowledge and be competent to testify to the matters asserted in the affidavit also means that an affidavit's hearsay assertions that would not be admissible at trial if testified to by the affiant is insufficient to create a genuine issue for trial." Id. (citing Sarno v. Douglas Elliman-Gibbons & Ives, Inc., 183 F.3d 155, 160 (2d Cir. 1999)).

When determining whether a genuinely disputed factual issue exists, "a trial judge must bear in mind the actual quantum and quality of proof necessary to support liability," or "the substantive evidentiary standards that apply to the case." Anderson, 477 U.S. at 254-55. A district court considering a summary judgment motion must also be "mindful of the underlying standards and burdens of proof," Pickett v. RTS Helicopter, 128 F.3d 925, 928 (5th Cir. 1997) (citing Anderson, 477 U.S. at 252), because the evidentiary burdens that the respective parties will bear at trial guide the court in its determination of the summary judgment motion. See Brady v. Town of Colchester, 863 F.2d 205, 211 (2d Cir. 1988). Where the non-moving party will ultimately bear the burden of proof on an issue at trial, the moving party's burden under Rule 56 will be satisfied if he can point to an absence of evidence supporting an essential element of the non-movant's claim. See id. at 210-11. In such an instance, in order to defend against the motion for summary judgment, the non-movant must offer "persuasive evidence that [her] claim is not 'implausible.'" Brady, 863 F.2d at 211 (citing Matsushita, 475 U.S. at 587). And, in deciding a summary judgment motion, a court must resolve all factual ambiguities and draw all reasonable inferences in favor of the non-moving party. Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir. 1987).

B. A General Description of Medicare

Medicare, the federal government's health insurance plan for the elderly and certain persons with disabilities, automatically provides coverage to qualifying individuals for inpatient treatment and related services under Medicare Part A. Medicare Part B, which covers visits to doctors and certain other outpatient treatment, is a voluntary program offering supplemental insurance coverage for those persons already enrolled in the Medicare "Part A" program.

Matthews v. Leavitt, 452 F.3d 145, 147 n.1 (2d Cir. 2006) (internal citations and quotations omitted; emphasis added). "Medicare Part C . . . allows a managed care organization to enter into a 'risk contract' to provide an enrollee a full range of Medicare services in exchange for monthly payments that the organization receives from the government." Id. (citations omitted).

Medicare Part D provides coverage for prescription medications to qualifying enrollees.

Medicareਚ≱ was the revised form of Part C enacted as part of the Balanced Budget Act of 1997 . . . . Medicareਚ≱ was intended to allow beneficiaries to have access to a wide array of private health plan choices in addition to traditional fee-for-service Medicare . . . [and to] enable the Medicare program to utilize innovations that have helped the private market contain costs and expand health care delivery options. The Medicare Prescription Drug Act has since replaced Medicareਚ≱ with the Medicare Advantage Program . . . .

Generally, an enrollee is eligible to take part in Medicare Part C only if he is entitled to benefits under Part A . . . and enrolled under Part B. A participating organization must provide enrollees the benefits and services (other than hospice care) that are available to people living in the area served by the plan under Medicare Parts A and B and may also offer supplemental benefits approved by the Secretary of Health and Human Services.

Id. (citations and quotations omitted; brackets and parenthesis in original). (See also Proposed Joint Pre-Trial Order, Part G, "Statement of Undisputed Facts" (providing an overview of the Medicareਚ≱ program and discussing "Benefits, Copays and Premiums" for M plans) (doc. #22).)

C. Defendants' Motion for Summary Judgment on Plaintiffs' Equal Protection Challenge

1. Applicable Standard of Review: Rational-Basis

"When a federal economic or social welfare program is challenged on equal protection grounds, and no suspect class or fundamental constitutional right is implicated, the proper standard of judicial review is rational basis, the 'paradigm of judicial restraint.'" Minnesota Senior Fed'n, Metro. Region v. United States, 273 F.3d 805, 808 (8th Cir. 2001) (quoting FCC v. Beach Commc'ns, Inc., 508 U.S. 307, 314 (1993)). Thus, "[o]n rational-basis review, a classification in a statute . . . comes to [a court] bearing a strong presumption of validity." Beach Commc'ns, Inc., 508 U.S. at 314 (citing Lyng v. Auto. Workers, 485 U.S. 360, 370 (1988)). Indeed, the party challenging the rationality of a legislative classification has "the ...

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