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Justices Skeptical of HHS Changes to Hospitals’ Extra Payments

Nov. 29, 2021, 5:24 PM

A majority of justices on the Supreme Court seemed reluctant Monday to reinstate a 2005 rule that in many cases decreased the amount of additional Medicare payments hospitals get for serving a larger share of poor patients.

The case was a complicated one that seemed to frustrate the justices during the hour-long arguments. Justice Clarence Thomas called the language in the rule indecipherable, Justice Stephen Breyer said he was exhausted by the dispute, and Justice Brett Kavanaugh rattled off at least five problems with the Department of Health and Human Services regulation.

“We’ve whacked agency rules for much less than that,” he said.

At issue are changes the HHS made to how the supplemental payments, known as disproportionate share hospital (DSH) adjustments, are calculated.

The formula the agency uses is based on the sum of two percentages—the Medicare fraction and Medicaid fraction. The Medicare fraction is the percentage of a hospital’s Medicare patients who are entitled to Medicare Part A and to Supplemental Security Income (SSI). The Medicaid fraction is the percentage of a hospital’s patients who are eligible for Medicaid but not Medicare Part A.

In its rule, the HHS changed how the Medicare fraction is calculated. The agency said patients entitled to Medicare Part A means those who are eligible for those benefits, and patients entitled to SSI means only those who have an absolute right to SSI benefits and actually receive them.

The interpretation counted patients who had already exhausted their Medicare Part A benefits and decreased DSH payments for most hospitals, Empire Health Foundation argued in challenging the rule.

The HHS rule reduces the Medicaid fraction by expanding the population of patients who are excluded from it as “entitled to” benefits under Medicare Part A. Though patients excluded from the Medicaid fraction can be included in the Medicare fraction, they often aren’t because they aren’t entitled to SSI benefits, so in many cases the Medicare fraction is also reduced, the provider said.

‘Awful Qualm About Using Chevron’

Chief Justice John Roberts noted that Congress grew extremely frustrated with what the agency was doing over time to limit DSH payments and tightened the language of the statute. He said he thinks the court ought to be particularly precise in interpreting the language Congress used “without any gloss added by the agency.”

Both Justices Sonia Sotomayor and Stephen Breyer, of the court’s liberal wing, struggled with the idea of deferring to the agency’s interpretation of the statute.

“I’m still stuck on what’s actually a pretty difficult case for us,” Breyer said. “I have an awful qualm about using Chevron here.”

The U.S. Court of Appeals for the Ninth Circuit tossed out the rule, finding it violated the Medicare Act. The government argued the ruling created a split among the regional appeals courts that the justices must resolve. Both the D.C. and Sixth Circuits expressly upheld the secretary’s interpretation as reflecting at least a permissible construction of the statute, the Justice Department said.

The case is Becerra v. Empire Health Found., U.S., No. 20-1312, argument 11/29/21.

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editor responsible for this story: Brent Bierman at bbierman@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com

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