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Appeals Court Rules in United Seniors Association v. Shalala

October 5, 1999

Constitutionality Not Addressed

On July 16, 1999, after nine months of deliberation, the U.S. Circuit Court of Appeals for the District of Columbia handed down its ruling in United Seniors Association v. Shalala. The court ruled that seniors may contract privately for services Medicare doesn't cover, but it failed to address the key question of whether seniors have a constitutional right to contract privately for Medicare-covered services (the majority of seniors' health care).

Brief History of the Case

The case challenged the constitutionality of Section 4507 of the Balanced Budget Act of 1997, which says doctors can accept private payment for Medicare services only if they stop seeing Medicare patients for two years.

In December 1997, United Seniors Association (USA) filed a lawsuit claiming that Section 4507 is unconstitutional. On April 14, 1998, the U.S. District Court for the District of Columbia ruled that seniors have no constitutional right to contract privately for medical care. The court based its opinion on the principle that if government pays, citizens must play by its rules.

USA appealed the ruling. Some 15 groups--including the Institute for Health Freedom-signed on to an amicus brief supporting USA's assertion that Americans have a constitutional right to contract privately for health care.

On October 23, 1998, attorney Kent Masterson Brown argued the USA case before the appeals court. He argued that Section 4507 violated seniors' constitutional rights under the First, Fourth, Fifth, Ninth, Tenth, and Fourteenth Amendments.

Brown also argued that Section 4507 violates seniors' ability to protect the privacy of their medical information.

Government's Stealth Tactic

Justice Department attorney Thomas Bondy represented the Medicare agency (the Health Care Financing Administration). He announced during the appellate hearing that the federal government was planning to promulgate new Medicare regulations on private contracting.

Medicare had not previously published formal regulations regarding Section 4507, and no one could be certain how it would interpret the law. Thus, the suit was filed. Ten days after the hearing Medicare published the new regulations (see the Federal Register, November 2, 1998). Government officials waited until the seniors and other groups had spent thousands of dollars on legal fees before it officially clarified the law. The federal government narrowed its interpretation of Section 4507, permitting seniors to pay privately for non-Medicare services.

Legal Victory?

By taking Medicare to court, the government was forced to draft regulations pertaining to Section 4507. The appeals court affirmed Medicare's interpretation that seniors can pay privately for non-covered services. But this is no great concession because it's unlikely that Medicare could get away with preventing seniors from spending their own money on services it doesn't pay for. For example, it's unlikely the courts would allow Medicare to prevent seniors from spending their own money on the prescription drugs Medicare doesn't cover.

The appeals court acknowledged that "The meaning of Section 4507 is hardly plain on its face." It further noted that "if a statute is ambiguous we must defer to an agency's reasonable interpretation of its terms. . . . This is so regardless whether there may be other reasonable, or even more reasonable interpretations." In other words, Medicare gets the final say.

This latest ruling is a good example of how government works and why Congress needs to write clearer laws. Currently, Congress writes laws that are vague and open to much interpretation. It then delegates power to government agencies to "interpret" the vague statutes. These agencies are often free to change their interpretation any time.

Appeals Court Eluded Constitutional Challenge

It is important for seniors to realize that while the court ruling affirmed that seniors may spend their own money on services not covered by Medicare, it eluded the important question of whether Medicare beneficiaries have a constitutional right to contract privately for covered services (the largest share of seniors' medical care).

USA should be commended for its efforts in clarifying that seniors may contract privately for services not covered by Medicare. But it is important to remember that Medicare can change the definition of "covered services" at any time. Thus, if Medicare decided to cover prescription drugs tomorrow, seniors could be restricted from spending their own money on those drugs. This is a serious constitutional issue that still needs to be addressed.

The actual court decision is posted [here].

This article was originally published in the September/October 1999 issue of Health Freedom Watch.