Medicaid program use Medicaid funds to pay the premiums to enroll a QMB in the Medicare Part B insurance program. Similarly, the state pays the deductibles and coinsurance payments that the QMB incurs under Part A or Part B with Medicaid funds. In essence, states use their Medicaid funds to buy their QMBs into the federal program, thereby shifting the primary payment for costs from the state's Medicaid plan to the federal Medicare program.
Plaintiff furnishes enteral-feeding supplies to Medicare and Medicaid eligible patients including QMBs in Illinois. Wright, as the Director of IDPA, administers the Illinois Medical Assistance Program that was established pursuant to the Medicaid Act. The Secretary administers the Medicaid and Medicare Acts. In addition, the Secretary is also responsible for reviewing state plans for medical assistance and approving those plans that comply with the requirements of the Medicaid Act.
Plaintiff alleges that IDPA has a policy and practice of denying service providers their statutory right to full and direct reimbursement of the reasonable costs of supplies and services, as determined under the Medicare Act, rendered to QMBs in Illinois. More specifically, plaintiff alleges that pursuant to IDPA's policy and practice, approved by the Secretary, Medicare Part B providers are denied their right to full and direct payment, because the coinsurance payments they receive are at the lower rates at which IDPA reimburses Medicaid providers pursuant to the state's Medicaid program.
Plaintiff seeks an order declaring that Wright's administration of the Illinois medical assistance program, with the consent and approval of the Secretary, violates the Medicare and Medicaid Acts. Plaintiff also asks this court to enjoin any further violation of the Medicare and Medicaid Acts. Defendants contend that plaintiff lacks standing to bring this action because defendants did not cause plaintiff a direct injury. In addition, defendants assert that plaintiff lacks standing because plaintiff cannot establish an enforceable right.
As a Medicare Part B provider, plaintiff is entitled to receive 100% of the lesser of the provider's customary charge or the reasonable costs and charges as determined by the Secretary. 42 U.S.C. §§ 13951, 1395cc(a)(2)(A); Perales, 954 F.2d at 858. IDPA pays providers of enteral feeding supplies to QMBs not residing in nursing facilities the full Medicare Part B rate. If the QMB resides in a nursing facility, however, IDPA does not reimburse these providers directly. Instead, reimbursement for such supplies is made via the per diem rate paid to nursing facilities by the IDPA for residents' care.
The state Medicaid plan classifies plaintiff's feeding supplies as durable medical equipment ("DME"). 89 Ill. Adm. Code Ch. I, § 140.476(a). Under the Illinois Medicaid Plan, nursing facilities are reimbursed the costs incurred in providing feeding equipment to Medicaid recipients according to the IDPA's nursing facility rate. Feeding equipment, under the state Medicaid plan, is classified as a supply cost for reimbursement purposes. Supply costs are bundled together with other costs and paid on a per diem basis subject to IDPA's nursing facility rate. The IDPA Provider Handbook mandates that payments for DME be made directly to the nursing facilities, which, in turn, pay providers such as plaintiff.
Defendants argue that under plaintiff's provider agreement with IDPA, plaintiff must seek payment from the nursing facilities. Accordingly, defendants assert that plaintiff lacks standing to bring this suit because any injury suffered by plaintiff is not traceable to defendant because the nursing facilities are responsible for paying suppliers.
Under Article III of the United States Constitution, the federal courts adjudicate only "cases" and "controversies." Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 471-76, 70 L. Ed. 2d 700, 102 S. Ct. 752 (1982). The party invoking federal jurisdiction bears the burden of establishing standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S. Ct. 2130, 2136, 119 L. Ed. 2d 351 (1992). To establish standing, a plaintiff must allege a personal injury that is traceable to the defendants' allegedly unlawful conduct, which is likely to be redressed by the requested relief. Allen v. Wright, 468 U.S. 737, 751, 82 L. Ed. 2d 556, 104 S. Ct. 3315 (1984). If the plaintiff is unable to establish standing, the court must dismiss the case for lack of subject matter jurisdiction. Hope Inc. v County of DuPage, Illinois, 738 F.2d 797, 804 (7th Cir. 1984).
Plaintiff asserts that because it renders Part B services to QMBs in Illinois it has a right to full and direct payment of Medicare Part B coinsurance for items and services rendered to QMBs pursuant to 42 U.S.C. §§ 1396a(a)(10)(E), 1396(p), regardless of whether the QMB resides in a nursing facility. Plaintiff alleges that under the Illinois medical assistance program, the state reimburses plaintiff less than its reasonable costs as determined under the Medicare Act because defendant bundles the reimbursement for medical supplies provided to nursing home patients into the lower per diem rate that IDPA pays to nursing homes.
Defendants argue that because plaintiff is not a skilled nursing facility, IDPA's per diem reimbursement rates do not adversely effect plaintiff. Defendants further argue that plaintiff cannot show an improper Medicaid rate limitation that directly injures plaintiff because when plaintiff provides supplies to a skilled nursing facility, the nursing facility is then considered the "provider" under Medicaid, which is reimbursed for QMB cost-sharing. The court disagrees.
Plaintiff alleges an injury that results from the implementation and administration of the Illinois medical assistance program in an amount in excess of $ 3,000,000. Plaintiff's request to enjoin any further unlawful conduct will redress this alleged wrong. Accordingly, the only aspect of standing that warrants the court's consideration is whether the alleged injury is traceable to defendants.
In Rehabilitation Association of Virginia, Inc. v Kozlowski, 42 F.3d 1444 (4th Cir. 1994), cert. denied, 116 S. Ct. 60, 133 L. Ed. 2d 23, the Fourth Circuit addressed a similar standing issue. Under the Virginia plan rehabilitation agencies were prohibited from billing the state Medicaid administrator directly for Medicare Part B deductibles and coinsurance on behalf of QMBs. Instead, rehabilitation agencies were to seek reimbursement from the nursing facilities where the beneficiaries resided. Like IDEA in the instant case, the state bundled these costs into a per diem rate that it paid to the nursing facilities. The court held that such a practice was inconsistent with the state agency's obligation to provide direct payment to the service provider. Kozlowski, 42 F.3d at 1460-61.
As in the instant case, the Secretary in Kozlowski argued that the rehabilitation association lacked standing because the nursing facilities, and not the members of the Rehabilitation Association, were the service providers. Addressing this argument the court stated (42 F.3d at 1460-61):
We note first the logical fallacy in the Secretary's analysis; just because one is required to see that service is provided does not make one the provider of service. While the long term care facility is required to provide certain service under the Medicaid Act, it is not, in fact, the actual provider of the services in question. . . . While the nursing facility may be required to provide the service under the Medicaid Act, in this instance it contracts with these third parties who "provide" the service.