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UNITED STATES v. CAPITAL BLUE CROSS

June 5, 1992

UNITED STATES OF AMERICA, Plaintiff
v.
CAPITAL BLUE CROSS, Defendant



The opinion of the court was delivered by: SYLVIA H. RAMBO

 Before the court are the cross Motions for Summary Judgment filed by the plaintiff, the United States of America, and by the defendant, Capital Blue Cross ("CBC," "Blue Cross"). These motions, which address precisely the same issues, are ripe for disposition and will be disposed of simultaneously.

 Background

 Both parties agree that there are no disputed material facts in the present case, and that summary judgment is the proper device for resolving this dispute.

 The core of this matter involves Blue Cross' refusal to reimburse the federal government for the reasonable cost of health care furnished to veterans at the Department of Veterans Affairs' ("VA") hospital in Martinsburg, West Virginia.

 The complaint names five veterans who received treatment at that facility for non-service related maladies. Each of these veterans is eligible to receive Medicare benefits, and each had purchased a Medicare supplemental policy from CBC which would cover certain medical expenses not encompassed by Medicare. These policies are generically known as "Medigap" policies; CBC's designation for them is "65 Special."

 The VA tendered claims for reimbursement involving the five veterans to Blue Cross. Blue Cross demurred, stating that since the VA charges were not reimbursable by Medicare, Blue Cross' Medicare supplemental coverage was not implicated.

 The United States subsequently brought this action, arguing that the 65 Special policies, either as drafted or as applied by CBC, discriminated against the United States government (as compared to private health care facilities) with regard to the payment of benefits. Plaintiff seeks a declaratory judgment stating that CBC's contracts and conduct discriminate against the United States in contravention of 38 U.S.C. § 1729 and that VA facilities should be treated as any private facility with regard to reimbursement under CBC's "65 Special" policies. Plaintiff also desires reimbursement for such costs attributed to the five veterans described in the complaint (and, the court may assume, additional qualified veterans which Plaintiff might find in the future).

 Discussion

 The standards for the award of summary judgment under Federal Rule of Civil Procedure 56 are well known. As the Third Circuit Court of Appeals recently capsulized:

 
Summary judgment may be entered if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). An issue is "genuine" only if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986); Equimark Comm. Finance Co. v. C.I.T. Financial Serv. Corp., 812 F.2d 141, 144 (3d Cir. 1987). If evidence is "merely colorable" or "not significantly probative" summary judgment may be granted. Anderson, 106 S. Ct. at 2511; Equimark, 812 F.2d at 144. Where the record, taken as a whole, could not "lead a rational trier of fact to find for the nonmoving party, summary judgment is proper." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986).

 Hankins v. Temple Univ., 829 F.2d 437, 440 (3d Cir. 1987). Once the moving party has shown that there is an absence of evidence to support the claims of the nonmoving party, the nonmoving party may not simply sit back and rest on the allegations in his complaint, but instead must "go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). The court will consider the parties' motions under these standards.

 I. Section 1729 and the Abolition of Discriminatory Health Care Contracts

 Title 38 U.S.C. § 1729(a) provides:

 
In any case in which a veteran is furnished care or services under this chapter for a non-service-connected disability . . . the United States has the right to recover or collect the reasonable cost of such care or services . . . from a third party to the extent that the veteran (or the provider of the care or services) would be eligible to receive payment for such care or services from such third party if the care or services had not been furnished by a department or agency of the United States.

 38 U.S.C. § 1729(a)(1).

 The definitions section defines "health-plan contract" as "an insurance policy or contract, medical or hospital service agreement, membership or subscription contract, or similar arrangement, under which health services for individuals are provided or the expenses of such services are paid." 38 U.S.C. § 1729(I)(1)(A). The term does not include Medicare and Medicaid, and thus the government is excluded from recovering from those programs.

 
The reported bill would strengthen and clarify the Veterans' Administration's authority to recover the costs of veterans' nonservice-connected care . . . where a veteran would have entitlement to a payment or reimbursement by a third party for appropriate medical care furnished in a non-federal hospital.

 H.R. Rep. No. 97-79, 97th Cong., 1st Sess., reprinted in 1981 U.S.C.C.A.N. 1685, 1693.

 The United States argues that, as the "65 Special" contracts offered by CBC deny the VA the opportunity to collect reimbursement in the same manner as private hospitals, they are contracts which discriminate both on their face and in practice against the government in contravention of § 1729. Plaintiff proffers two principal cases in support of its argument, United States v. New Jersey; Violent Crimes Compensation Board, 831 F.2d 458 (3d Cir. 1987) and United States v. Maryland, 914 F.2d 551 (4th Cir. 1990).

 In United States v. New Jersey; Violent Crimes Compensation Board, 831 F.2d 458 (3d Cir. 1987), the United States had brought suit against New Jersey's Violent Crimes Compensation Board to reclaim costs expended in treating two military veterans who had been injured as victims of crime. The state commission was empowered to pay compensation for medical expenses, etc. to innocent victims of violent crimes, but refused to reimburse the VA because the veterans had themselves paid no funds to the VA in obtaining their care. Construing § 1729, *fn2" the Third Circuit held that the United States was entitled to recover from the state board. The court stated:

 
[Section 1729] requires that a recovery claim by the United States be analyzed as if the veteran had received care in a hospital other than a VA hospital -- in other words, as if the veteran had been treated by a provider that charged patients for care. . . .
 
One must assume that the veteran would have been billed for such care. One cannot assume that the veteran could have gone out and found care given by a non-federal provider without incurring ...

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