D.Me.: Medicaid not a "taking"

Maine’s federal district court held that Maine’s Medicaid program was not an unconstitutional regulatory taking, because health care providers were not compelled to participate in the program. Franklin Memorial Hospital v. Harvey, ___ F.Supp.2d ___, 2008 WL 240286 (D.Me. Jan. 29, 2008) (No. 07-cv-125-GZS).

The court interpreted the state’s free medical care law not to require providers to provide free care to Medicaid recipients, but to allow them to refer them to Medicaid-participating providers, thus avoiding a Takings Clause problem. 

 

            Like every other state, Maine participates in the federal Medicaid program; its version is called MaineCare. In addition, Maine’s free care statute requires the provision of a broad range of inpatient and outpatient services to qualifying low-income individuals, and prohibits providers from billing the individual. 22 Me. Rev. Stat. § 1715 et seq. Eligibility requirements for free care include that “the individual is not covered by any insurance nor eligible for coverage by state or federal programs of medical assistance.” The law further provides, however, that free care includes any amounts for medically necessary care that are not covered by a medical assistance program.

 

            The plaintiff hospital made two claims: (1) the free care statute violated the Takings Clause, and (2) that given the existence of the free care law, MaineCare also violated the Takings Clause. The court’s decision addressed only the challenge to the MaineCare program. The logic of this claim was that the two laws left the hospital with the untenable choice of either providing care under MaineCare and being reimbursed at Medicaid levels, or providing free care and not being reimbursed at all. Because MaineCare reimbursement levels were lower than the hospital’s actual costs for services, the hospital argued that this “forced” participation was a regulatory taking.

 

            Maine’s Department of Health and Human Services argued that the takings claim was based on a misinterpretation of the free care statute. The Department’s interpretation was that Medicaid-eligible individuals were not eligible for free care. Therefore, providers who chose not to participate in MaineCare could refer eligible individuals to a participating provider or else attempt to bill them, unhindered by the free care law.

 

            The court deferred to the Department’s interpretation, saying that it was reasonable, and that it was preferable for the court to reach a conclusion that avoided constitutional questions. Under this reading, the statute created no compulsion to participate in Medicaid, so the Takings Clause claim must fail.

 

            The hospital’s challenge to the free care statute, by itself, was not addressed by the court’s decision and remains to be decided.