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
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
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
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
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