In the complex world of Florida Personal Injury Protection (PIP) claims, one issue that continues to spark legal debate is whether insurers may apply Medicare’s Budget Neutrality Adjustment (BNA) when determining reimbursements owed to medical providers. The short answer? No. Under current Florida law, a PIP insurer is not permitted to apply the BNA when reimbursing providers under the Medicare Part B Fee Schedule.

To understand this issue, we need to start with how Florida’s PIP statute works. Section 627.736(5)(a), Florida Statutes permits insurance carriers to limit payments to a percentage of the Medicare fee schedules, so long as the reimbursement does not fall below the 2007 Medicare Part B Non-Facility Participating Price. However, if treatment was provided in either Miami-Dade or Monroe Counties, reimbursement cannot fall below the slightly higher 2007 Medicare Part B Non-Facility Limiting Charge as held in Priority Medical Centers, LLC v. Allstate Ins. Co. In this framework, the Medicare Fee Schedule operates as a statutory minimum-or floor-not a ceiling, for provider reimbursement.

The Medicare Fee Schedule itself is based on a general formula that takes into account various factors like the Relative Value Units (RVUs) for physician work, practice expense (PE), and malpractice insurance, each adjusted by geographic indices (GPCIs), and then multiplied by a conversion factor (CF). This well-established formula ensures consistency and fairness in payments to providers.

However, Medicare, as a federal payer, occasionally inserts a Budget Neutrality Adjustor Value (BNAV) into this formula. This adjuster modifies the “Work RVU” component and is used strictly to control overall Medicare expenditures. The purpose is to balance the federal budget-not to change the actual RVU structure or suggest reductions for use by private insurers.

In fact, the Centers for Medicare and Medicaid Services (CMS) has been explicit about this. In a 2006 press release and subsequent rulemaking, CMS clarified that the BNA was designed solely for Medicare’s internal fiscal use. CMS even cautioned that the adjusted formula should not be relied upon by private payers to determine payment rates. This was a deliberate move to protect the integrity of the Medicare Fee Schedule, recognizing that many private insurers like PIP carriers rely on it to determine reasonable charges.

Florida courts have reinforced this position. In Nationwide Mutual Fire Ins. Co. v. AFO Imaging, Inc., the Second DCA held that the Medicare Part B participating physician’s schedule is the operative bench-mark. And more recently, in Priority Medical Centers, LLC v. Allstate Ins. Co., the Third DCA found that a PIP insurer’s use of the BNA to reduce payments fell below the statutorily mandated minimum, resulting in an underpayment and breach of contract.

The legal principle is clear: while PIP insurers may elect to pay benefits based on a percentage of Medicare rates, they must use the unadjusted Medicare Part B Fee Schedule. They are not Medicare, nor are they acting under Medicare’s statutory mandates. Therefore, they cannot adopt payment reductions-like the BNA-intended solely for federal budgeting purposes.

Allowing the use of the BNA by PIP insurers would effectively let them pay less than the statutory floor established by the Legislature, contradicting both the spirit and the letter of Florida’s No-Fault law. As noted in SOCC, P.L. v. State Farm, the statute incorporates a specific Medicare fee schedule, not a version modified for federal budgeting goals.

In sum, Florida PIP insurers are bound by the Medicare Fee Schedule’s structure as it existed for the applicable year without the Budget Neutrality Adjustment. Any attempt to do otherwise risks violating statutory requirements, underpaying providers, and exposing insurers to liability for breach of contract.