## Facts

- Virginia elected to participate in the Qualified Medicare Beneficiary (QMB) program, under which Medicaid covers certain Medicare premiums and cost-sharing for low-income Medicare beneficiaries.
- For Medicare Part B services, Medicare generally paid 80% of the Medicare-allowed amount, leaving 20% coinsurance.
- Virginia’s Medicaid agency implemented a payment method for QMBs that capped total provider reimbursement at the Medicaid fee schedule amount.
- Under this cap, Virginia often paid less than the full 20% Medicare Part B coinsurance when Medicare’s 80% payment already equaled or exceeded the Medicaid rate.
- A provider association sued state and federal officials seeking declaratory and injunctive relief requiring Virginia to pay the full Medicare cost-sharing for QMBs and to pay providers directly.
- The district court granted summary judgment for the association and enjoined Virginia to pay the full 20% coinsurance to providers.
- Virginia and the federal agency appealed.

## Issues

1. Whether federal QMB cost-sharing provisions require a participating state to pay the full Medicare Part B coinsurance for QMBs, or permit the state to cap its payment at the Medicaid rate.
2. Whether federal approval of the state plan and the federal agency’s interpretation allowing a Medicaid-rate cap were entitled to deference.
3. Whether prospective injunctive relief requiring full payment and direct payment to providers was proper.

## Decision

- The Fourth Circuit affirmed the district court.
- Virginia’s cap limiting QMB payments to the Medicaid rate violated federal law governing QMB cost-sharing.
- Participating states must pay the full Medicare Part B coinsurance (and applicable Medicare cost-sharing) for covered services furnished to QMBs.
- The court rejected the federal agency’s interpretation to the extent it permitted states to cap QMB cost-sharing at Medicaid rates.
- The injunction requiring prospective compliance and direct payment to providers was upheld.
- One judge concurred in part and dissented in part.

## Legal Principles

- When a state elects to cover QMBs, federal law requires the state to pay Medicare cost-sharing amounts, including Part B coinsurance, in full for covered services.
- A state may not use a Medicaid fee schedule cap that results in providers receiving less than the full Medicare-allowed amount for services to QMBs.
- Agency approval or interpretation receives no controlling deference when it conflicts with Congress’s clear statutory design and purpose regarding QMB cost-sharing.
- Prospective injunctive relief may be used to compel state Medicaid administration to comply with federal QMB payment obligations, including structuring payments to ensure providers receive the required amounts.

## Conclusion

The court held that Virginia, having elected to participate in the QMB program, could not limit payments to Medicaid rates and was required to pay the full Medicare Part B cost-sharing for QMBs, with prospective relief properly ordering direct reimbursement to providers.


Rehabilitation Ass’n of Va., Inc. v. Kozlowski, 42 F.3d 1444 (4th Cir. 1994)