Supreme Court to Hear Multiple Health Care Cases in 2022 | Foley Hoag LLP – Medicaid and the Law
Recently my colleague Regina DeSantis told you about the ongoing saga involving disputes between contract pharmacies 340B and pharmaceutical manufacturers. We often write about the 340B program on our blog because of the link between this program and the Medicaid Prescription Drug Reimbursement Program.
Well, we’re doing it again: this time, because the United States Supreme Court just announced that it is going to hear a dispute between certain hospitals (340B covered entities) and CMS during the Court’s next term which will start in October. And not just that: The court also announced that it will hear several more healthcare cases over the next term, three of which – including this 340B case – touch (at least tangentially) to the Medicaid program, so we have thought we would all mention in our article today.
340B Case of reduction of outpatient payment
We have already told you about the latent dispute between hospitals and CMS over the agency’s revised reimbursement policy for drugs that hospital-covered entities acquire under the 340B program and then distribute them to patients in the hospital. Medicare whose care is paid under the Medicare Prospective Outpatient Payment System, or OPPS. To recap: Medicare typically pays hospitals for outpatient drugs at the drug’s average selling price plus 6%. But, in 2018, CMS announced that if the hospital purchased an outpatient drug under the 340B program, it would reimburse the hospital at the drug’s average selling price minus 22.5%. CMS theory is that because the 340B program allows the hospital to acquire the drug at a large discount, it should not be able to profit from the difference between the purchase price and the sale price of the drug. (Economists call this practice arbitrage, and CMS tries to limit – but not eliminate – arbitrage). Of course, 340B hospitals disagree and note that the goal of the 340B program is to help hospitals that serve a disproportionate share of low-income people and that the price difference was an expected outcome of the program.
As you might expect, when CMS adopted this policy, 340B Hospitals objected and sued CMS in federal court. They won at the level of the court of first instance. However, CMS appealed and, in a ruling last summer called Association of American Hospitals Against Azar, 967 F.3d 818 (DC Cir. 2020), the United States Court of Appeals for the DC Circuit ruled that the OPPS policy was a valid exercise of CMS’s regulatory power. (The court also found, by the way, that despite the government’s arguments, the case was not immune from judicial review on the whole.)
Here on the Medicaid and the Law blog, we were a little surprised that the Supreme Court agreed to review this case. After all, there is no conflict between the courts of appeal over CMS policy and the policy does not interfere with the national administration of the Medicare program. As a rule, courts give great deference to an agency’s interpretation of the law (a legal concept called “Chevron deference ”) and we thought the Supreme Court would overrule it. Obviously we were wrong, so we wondered what was going on.
We believe that the Supreme Court’s decision to hear the case (the legal term is that they granted a writ of certiorari filed by the American Hospital Association) could involve two much broader legal issues, so we wait with look forward to the court’s decision the next quarter. The first possibility is that the Court questions the scope of Chevron deference at all levels. If so, it has broad government-wide implications that would go far beyond Medicare and Medicaid programs. The second possibility is that the Supreme Court thinks the DC Circuit’s analysis of exclusion from judicial review was incorrect and may wish to correct it. We believe this to be a possibility because in their granting of certiorari, the Court asked both parties to answer this question, although neither party raised it in their submissions on the request for certiorari. revision. This, too, is potentially important because Congress frequently includes terms in Medicare and Medicaid statutes (as well as other federal programs) blocking judicial review of policy choices Congress makes. If the court is to clarify how lower courts should apply these exclusions from review, that also has government-wide implications.
DSH Formula Case
We also want to mention two other health care cases on the agenda for the next term. The first is another case that involves a Medicare payment policy but has implications for hospitals that treat large numbers of Medicaid patients. This case, Empire Health Foundation c. Becerra, 958 F.3d 873 (9e Cir. 2020) involves the mathematical formula used to determine a hospital’s disproportionate Medicare adjustment. This formula depends on the sum of two fractions: a Medicare fraction and a Medicaid fraction. The Medicare fraction numerator is the total of all patient days in a year for low-income Medicare-eligible patients (those receiving Supplemental Security Income benefits) and the denominator is the total of all days. -patients attributable to persons entitled to Medicare. The numerator of the Medicaid fraction is the total of all patient days in a year for Medicaid eligible patients and the denominator is the total number of patient days.
Have you noticed the change in wording used by Congress that we quoted above? “Eligible” for Medicare but “eligible” for Medicaid? Do you think it makes a difference?
Well, the United States Court of Appeals for the 9e The circuit does. In a 1996 case called Legacy Emanuel Hospital and Health Center v. Shalala, 97 F.3d 1261 (9e Cir. 1996), 9e Circuit ruled that “eligible” for Medicaid simply meant that a patient met the basic legal requirements to receive the benefit. Instead, they defined “entitled” to mean that the patient had an absolute right to payment. And so the problem in the Empire The case is this: How should CMS count patient days in both the numerator and denominator of the Medicare fraction in the case of Medicare beneficiaries who have exhausted their Medicare benefits and therefore no longer ” right “to Medicare? This could happen, for example, if a patient reaches the limit of 90 days of Medicare benefits per period of illness.
CMS issued a rule in 2005 that a Medicare patient should be counted in the numerator and denominator of the Medicare fraction. still whether Medicare is paying for the patient’s care. In the Empire Health decision on 9e Circuit invalidated this rule, arguing that it had “unambiguously[ly]”Interpreted the expression” entitled to “in the Emmanuel Hospital decision and that the CMS 2005 Rule clearly violated that interpretation. The Supreme Court will reconsider this decision in the next term and, again, may decide to assess the scope of Chevron respect.
Medicaid recovery case
Finally, the Supreme Court also announced that it would review a Medicaid case called Gallardo vs. Martsiller, 963 F.3d 1167 (11e Cir. 2020). the Gallardo case focuses on the tragic plight of a young girl, Gianinna Gallardo, who was seriously injured and remains in a persistent vegetative state after being struck by a car exiting her school bus in Florida in 2008. The girl’s parents received a settlement of $ 800,000 which allocated $ 35,000 to account for past medical expenses. The question here is whether the state is entitled to collect more of the settlement.
Section 1902 (a) (25) (A) of the Social Security Act requires that a state Medicaid plan “take all reasonable steps to determine the legal liability of third parties” to pay for care and services. provided under the State Medicaid plan, and Subparagraph (H) of this article requires that, where the State has already made the payment when a third party is liable for the payment, the State is deemed to have acquired the recipient’s entitlement to Medicaid payment. In other words, in the Gallardo So, is the Florida Medicaid program entitled to a share of the $ 800,000 settlement, and if so, how much?
In the civil litigation that arose out of the accident, the parties agreed (without Florida Medicaid’s involvement) that just over $ 35,000 would be set aside for Gianinna’s health care expenses. The state of Florida has incurred more than $ 800,000 in medical costs. Simply put, the question before the 11e Circuit is: is the state limited to recovering the $ 35,000, or is it entitled to a larger amount? The district court limited the state’s recovery to the $ 35,000 the parties agreed to, but the United States Court of Appeals for the 11e Circuit overturned that decision. Because the 11e The circuit’s decision conflicts with an earlier decision of the Florida Supreme Court – and because the Florida Supreme Court’s decision conflicts with other decisions of the State Supreme Court – the State Supreme Court – United agreed to settle the dispute.
All in all, this will be a loaded health care mandate in the Supreme Court next year, and three of those cases we discussed above involve at least the Medicaid program. We will be watching them closely on our blog.