Supreme Court hears case over disproportionate share hospital payments

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Hundreds of millions of dollars in reimbursement are at stake; $3-4 billion from 2005 to 2013.

The Supreme Court was expected to hear oral arguments today over notice and rulemaking requirements for Medicare reimbursement.

The outcome of Azar vs. Allina Health Services could greatly affect reimbursement for hospitals that serve a disproportionate share of low-income patients. The DSH payment calculation is based on the percentage of low-income patients served.

The government wants to add Part C, or Medicare Advantage beneficiaries into the calculation, a move hospitals fear would decrease payments based on their belief that MA members are, on average, wealthier than Medicare Part A beneficiaries.

But the lawsuit is about how the Department of Health and Human Services went about attempting to implement its rule.

The hospitals in the lawsuit argue that HHS is required to conduct notice and comment rulemaking before providing the instructions to a Medicare administrative contractor that makes the initial determinations of payments due under Medicare. Medicare uses private contractors to administer its reimbursements to providers.

The case went to the District of Columbia Circuit Court, which vacated the rule. The hospitals argue that after the circuit court’s decision, CMS simply tried to make the same change without undertaking notice and comment.

The judge in the District of Columbia Circuit Court case was Brett Kavanaugh, who as Supreme Court Justice, is recusing himself in the HHS case Azar vs. Allina Health.

WHY THIS MATTERS

CMS’s proposed rule changes affect hundreds of millions of dollars in reimbursement for hospitals. The government estimates that the DSH payments from 2005 to 2013 totaled $3 to $4 billion, according to SCOTUSblog.

Hospitals suing HHS said the Centers for Medicare and Medicaid Services “botched” attempted rulemaking in 2004, when the department tried to change the standard governing Medicare payment to hospitals nationwide for services furnished to low-income patients.

The Medicare Act requires the agency to engage in notice-and-comment rulemaking, the hospitals argue.

HHS disagrees, saying the Medicare Act does not require HHS to issue formal notice-and-comment rulemaking prior to changing the DSH calculation formula. Doing so would cripple the Medicare program, requiring the agency to use rulemaking for any change in its lengthy and detailed operations manuals, it argues.

The hospitals involved in the lawsuit are Allina Health System and its affiliated hospitals, Abbott Northwestern, United, and Unity; Florida Health Sciences Center; Montefiore Medical Center; Mount Sinai Medical Center, New York-Presbyterian/Queens; New York Presbyterian Brooklyn Methodist Hospital; and New York and Presbyterian Hospital.

ON THE RECORD

“The agency botched that rulemaking: the final rule was not the ‘logical outgrowth’ of the proposed rule, and the D.C. Circuit vacated it,” Allina and other health systems said.

HHS Secretary Alex Azar said in court documents, “As the government has explained, respondents’ theory, if adopted, has the potential to substantially undermine effective administration of the Medicare program, not least because its rationale would encompass not just the Medicare fractions at issue here but nearly every instruction to the agency’s contractors, including those contained in the Provider Reimbursement Manual.”

 

 

Health Law Could Be Hard to Knock Down Despite Judge’s Ruling

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Could a federal judge in Texas be the catalyst that finally brings down the Affordable Care Act, a law that has withstood countless assaults from Republicans in Congress and two Supreme Court challenges?

On the morning after Judge Reed O’Connor’s startling ruling that struck down the landmark health law, legal scholars were doubtful.

Lawyers on both sides of previous A.C.A. battles said the reasoning behind this one was badly flawed, notably in its insistence that the entire 2010 law must fall because one of its provisions may have been rendered invalid by the 2017 tax overhaul legislation. Had Congress meant to take such radical action, they said, it would have said so at the time.

Legal experts also noted that the Supreme Court, where most people believe the case is headed, historically has been reluctant to strike down federal laws, particularly those that have become ingrained in the lives of millions of citizens.

For now, the ruling is unlikely to affect the more than 23 million people who get health coverage through the insurance marketplaces set up by the law and the expansion of Medicaid in 36 states. The Trump administration immediately said — despite the president’s gleeful tweets hailing the decision — that it would continue to enforce the law until the appeals process plays out, which could take more than a year. That will ensure that the American health care system, which has been operating under the law for more than five years, will not be thrown into immediate chaos.

Judge O’Connor, who was appointed by George W. Bush to the Federal District Court in Fort Worth, has ruled against laws supporting immigration, transgender and Native American rights. Conservative lawyers are known to choose his district to file cases, hoping he will fire opening salvos that propel their issues through the court system.

The crux of Judge O’Connor’s decision centered on the health law’s requirement that most people have health coverage or pay a tax penalty.

That tax penalty was effectively eliminated when Congress reduced its amount to zero in the tax legislation enacted last year. And once the tax penalty no longer stood, the so-called “individual mandate” was unconstitutional and the entire law had to fall, the judge reasoned in accepting the argument of the 20 states that brought the lawsuit challenging the legislation.

But an array of legal experts said that argument was unsound. Jonathan H. Adler, a conservative law professor at Case Western Reserve University in Cleveland, called that position “simply nonsensical” and said the judge’s conclusion was “hard to justify” and “surprisingly weak.”

He and others pointed to the fact that even though Congress erased the tax penalty, it did not touch the rest of the sprawling health act. A longstanding legal doctrine called “severability” holds that when a court excises one provision of a statute, it should leave the rest of the law in place unless Congress explicitly stated that the statute could not survive without that provision.

In this case Congress’s intention was particularly clear, legal experts said.

“Congress amended one provision of a 2,000 page law and did not touch the rest of the law so it is implausible to believe that Congress intended the rest of the law not to exist,” said Abbe R. Gluck, a health law expert at Yale Law School.

Judge O’ Connor also cited congressional intent, focusing on language from the 2010 law, which underscored the significance of the individual mandate to the entire act. But he largely ignored the 2017 congressional action. In essence, legal scholars said, he looked to one congressional view and not the more recent one.

And in so doing, he opened the door for House Democrats to intervene in successive appeals. On Saturday aides to Representative Nancy Pelosi, who is expected to become the next speaker of the House, said she would move quickly to notify the Trump administration that House Democrats intended to step in to defend the law in the case.

As the legal showdown plays out, efforts to protect the A.C.A. are also underway in the courts. Earlier this year the state attorney general of Maryland sued the Trump administration for attempting to gut the act. The case is pending.

Nicholas Bagley, a health law expert at the University of Michigan, suggested that Judge O’Connor may not yet be done with the case. In a series of tweets on Saturday, Mr. Bagley noted that the judge had not yet addressed a handful of central issues in the suit, nor had he issued a final ruling indicating whether the act should fall immediately. Judge O’Connor could indeed hold onto the case before an appellate court takes it up.

But if he lets the case move forward, a likely timeline, according to many legal experts, is that the case will be taken up by the United States Court of Appeals for the Fifth Circuit in New Orleans this spring. If the Fifth Circuit upholds Judge O’Connor’s decision, the Supreme Court is likely to agree to hear the case in its term that starts in October 2019, with a decision in 2020. If the Fifth Circuit overturns the judge’s ruling and upholds the law, there is a good chance the Supreme Court would decline to even take the case, legal scholars said.

One law professor, Ilya Somin of George Mason University, criticized parts of the opinion, but said he was “a bit less confident about the outcome” because “the history of A.C.A.-related litigation is filled with surprises and failed predictions by experts.”

Among the observations flying about was the notion that the Supreme Court only rarely strikes down federal laws, and it is particularly reluctant to do so when the laws have been in place for years and affect millions of people. In fact, Chief Justice John G. Roberts Jr. wrote in his 2012 opinion upholding the health care law, that the court should err on the side of sustaining federal laws.

“As between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid,” he wrote, quoting Justice Oliver Wendell Holmes Jr., “our plain duty is to adopt that which will save the act.”

The five justices who voted to uphold the law in a landmark 2012 case, including Justice Roberts, are all still on the court.

 

 

 

 

On Health Care, Dems Go From Running to Baby Steps

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Incremental measures will dominate action on the health law in a largely gridlocked Congress.

The midterm elections all but ended the Republican push to repeal the 2010 law known as Obamacare, but as a defining issue for Democrats in their takeover of the House, health care will likely remain near the top of lawmakers’ policy and political agenda.

Newly emboldened Democrats are expected to not only push legislation through the House, but use their majority control of key committees to press Trump administration officials on the implementation of the health law, Medicaid work requirements, and insurance that does not have to comply with Obamacare rules.

Both parties are looking to address issues that voters prioritized, such as lowering prescription drug prices, though different approaches by Republicans and Democrats could mean incremental changes stand a better chance of enactment than any major bill.

Early on, lawmakers may find themselves dealing with the fallout of a court ruling that could overturn the law’s mandate that health insurance cover pre-existing conditions, putting Congress on the spot in the face of widespread voter support for those protections.

All of these issues, which dominated this year’s elections, will play out against the backdrop of the next congressional and presidential contests.

“In a lot of ways, the purpose of legislation in this Congress for the Democrats is going to be to set the agenda for the 2020 election,” said Dan Mendelson, the founder of the consulting firm Avalere.

Drug prices

Lowering drug prices is a top priority for House Democrats and President Donald Trump. Leaders of both parties identified this issue last week as a possible area for bipartisanship.

But Democrats’ more ambitious plans, like allowing Medicare to negotiate drug prices, aren’t expected to advance in the Republican Senate. Instead, issues like increasing transparency or speeding up approvals for new treatments could be ones where both parties can find agreement.

Texas Democratic Rep. Lloyd Doggett, a contender to lead the Ways and Means Health Subcommittee, is pushing a measure that would require HHS to negotiate prices for drugs covered by the Medicare Part D program. While most Democrats say they back price negotiations, there will likely be debate within the party about the details, particularly if they seem to be close to the government setting prices.

“When you start getting into anything that looks like price controls, you might get some bipartisan support for, but you also might get bipartisan support against,” said Ben Isgur, the leader of PwC’s Health Research Institute.

Democrats’ other focal points center on price-gouging for pharmaceuticals, which gained significant attention in recent years. The House Democrats’ “Better Deal” legislative agenda envisions a “price-gouging” enforcer, which would be a Senate-confirmed position to lead a new agency focused on stopping significant price increases for prescription drugs. Democrats also hope to require drug manufacturers to provide data to justify significant price increases.

Their plan would require drugmakers to justify price increases of certain amounts at least 30 days before they take effect.

Leaders in both parties have said since the election that drug pricing will be on the agenda, but have appeared skeptical of whether their efforts would yield a successful outcome.

“The jury’s out in my mind,” Democratic Rep. Pramila Jayapal said in a call with reporters last week. “If he is serious about taking on those pharmaceutical drug companies and ensuring that we can really get prescriptions filled for our seniors and negotiate prices for our pharmaceutical drugs the way we do for our VA, then we might have something we can work on.”

Mendelson predicted that even if a major bipartisan agreement to lower prices doesn’t advance in the next Congress, the Trump administration will keep taking steps that could eventually lower prices. Food and Drug Commissioner Scott Gottlieb has earned bipartisan praise for speeding new drug approvals, for instance.

The Trump administration could try to stay in command of drug pricing politics ahead of the 2020 election, he added, although Democrats will also seek to control the issue.

“There could well be significant progress over the next year or two because the administration has a lot of authority and they will use it to neutralize the issue before the 2020 election,” said Mendelson, a former Clinton administration official.

Health care law

The electrifying election-year issue of pre-existing condition protections is likely to win a House vote as Democrats seek to prove their commitment to that popular part of the law.

Both parties are bracing for a ruling from U.S. District Court Judge Reed O’Connor of Texas in a lawsuit filed by 20 state officials seeking to overturn the 2010 law. O’Connor heard oral arguments in September, although the Trump administration asked to delay a ruling until after the open enrollment period ends on Dec. 15.

If O’Connor strikes down all or part of the health care law, Democrats expect a group of state attorneys general defending the law to seek an immediate injunction and appeal the decision. Legal scholars on both sides of the aisle question the arguments of those attempting to kill the law, but the case could reach the Supreme Court.

House Democrats plan to consider a bill by Rep. Jacky Rosen of Nevada who won a Senate bid last week, that would allow the House to intervene in the case and defend the health law, aides say.

Across the Capitol, 10 Senate Republicans introduced a bill this summer to guarantee coverage of pre-existing conditions, which GOP aides say could be part of a response to the lawsuit.

Democrats have criticized the Senate GOP bill because it doesn’t require insurers to cover certain services for patients with pre-existing conditions. Republicans like North Carolina Sen. Thom Tillis, who sponsored the measure, defend it.

“If they do strike down large parts of the legislation, Sen. Tillis’ bill could be one important part of a larger health care legislative effort,” said Adam Webb, a spokesman for Tillis.

Senate Majority Leader Mitch McConnell of Kentucky declined to reveal after the election how the chamber would respond to a ruling striking down parts of the law, but called for bipartisan fixes to the health law.

A draft bipartisan stabilization bill, which has been at an impasse for nearly a year, could re-emerge in the next Congress, but it’s not clear if lawmakers can resolve a fight over abortion restrictions that blocked an agreement or how that measure could change a year later.

“The first thing we need to do is stop Republican attacks on coverage of pre-existing conditions, stop any movement toward extending these short-term plans,” Iowa Rep.-elect Cindy Axne, who defeated Rep. David Young, said in a call with reporters last week.

Top Democrats — Frank Pallone Jr.Richard E. Neal of Massachusetts, and Robert C. Scott of Virginia, who are expected to chair the Energy and Commerce, Ways and Means, and Education and Workforce committees, respectively — introduced legislation this year to shore up the health law. It would increase the size of the tax credits that help people pay their premiums and expand eligibility. It would also block Trump administration rules to expand health plans that don’t meet the 2010 law’s requirements.

Aides caution the bill could see minor changes next year based on developments since it was introduced in March and say it could be tied into a stabilization debate.

Since falling short in their efforts to overhaul the law last year, Senate Republicans pivoted to rising health care costs, a focus that will likely extend into next year. Several senators showed interest in legislation to prevent surprise medical bills, but it’s not clear what other topics could lead to bipartisan agreement, which will still be needed in the Senate even with a larger Republican majority.

Oversight

Oversight of the health care law will dominate House action on the health law in a largely gridlocked Congress. House Democrats plan to bring administration officials to Capitol Hill to explain what critics call “sabotage” of the law’s insurance exchanges.

“We’ll be looking at what they’re doing administratively to undermine the operations of the Affordable Care Act and what consequences they may have caused to literally millions of people,” Minority Whip Steny H. Hoyer told reporters in September.

Oversight could touch on issues such as Trump’s funding cuts to outreach and advertising for the exchanges, reductions in enrollment help and the effects of repealing the law’s mandate to get coverage.

Maryland Rep. Elijah E. Cummings, who is expected to lead the House Oversight Committee, will likely rev up an investigation into drug companies high prices that he has been conducting as ranking member and could bring executives in to testify before the panel.

In a post-election press conference, the presumed incoming House speaker, Nancy Pelosi of California, highlighted the Energy and Commerce Committee as another “big oversight committee” that will be active.

“We do not intend to abandon or relinquish our responsibility … for accountability, for oversight and the rest,” said Pelosi. “This doesn’t mean we go looking for a fight, but it means that if we see a need to go forward, we will.”

 

Supreme Court to hear DSH payments case

https://www.healthcaredive.com/news/supreme-court-to-hear-dsh-payments-case/533427/

Dive Brief:

  • The U.S. Supreme Court agreed Thursday to review an appellate court ruling that HHS improperly changed the reimbursement formula for Medicare disproportionate share hospital payments.
  • The crux of the case is whether HHS violated federal law by making the change in the DSH reimbursement calculation without public notice and comment.
  • At stake for HHS is up to $4 billion in DSH reimbursements made between FY 2005 and 2013. 

Dive Insight:

Policy changes since 2010 have cut payments to hospitals by billions of dollars, a report earlier this year from consulting firm Dobson DaVanzo & Associates forecast, with a prediction the cuts would reach $218.2 billion by 2028.​

The cuts include $25.9 billion for Medicaid Disproportionate Share Hospital (DSH) payments, a key source of financing for hospitals that serve low-income populations.

HHS petitioned the high court to hear the case after the D.C. Circuit Court of Appeals ruled in favor of Minneapolis-based Allina Health Services and a group of hospitals. The decision, written by embattled Supreme Court nominee Brett Kavanaugh, overturned a lower court ruling that sided with HHS.

In his 2017 opinion, Kavanaugh concluded that HHS violated the Medicare Act when it revised its reimbursement adjustment formula with going through the usual rulemaking process. In particular, he rejected the government’s argument that the notice-and-comment requirement for regulations setting or modifying a “substantive legal standard” does not apply to “interpretive rules.

Kavanaugh also held that HHS erred in including Medicare Part C enrollees with Part A enrollees in its new DSH payment calculations.

“That difference in interpretation makes a huge difference in the real world,” Kavanaugh wrote. “Part C enrollees tend to be wealthier than Part A enrollees. Including Part C days in Medicare fractions therefore tends to lead to lower reimbursement rates. Ultimately, millions of dollars are at stake for the Government and the hospitals.”

In its petition, HHS maintains that the appellate court’s decision would “significantly impair” its ability to administer annual Medicare reimbursements through the third-party contractors it employs to pay hospitals.

“The court of appeals’ decision threatens to undermine HHS’s ability to administer the Medicare Program in a workable manner,” the petition states. Given the time and cost involved in formal rulemaking, “converting the agency’s non-binding manuals and other interpretive materials into regulations requiring notice and comment would jeopardize the flexibility needed in light of Medicare’s complex and frequently changing statutory context and administrative developments.”

 

 

Is Obamacare Constitutional? The Battle Begins Again

http://www.thefiscaltimes.com/2018/09/05/Obamacare-Constitutional-Battle-Begins-Again

 

The debate over the Affordable Care Act entered a new phase Wednesday as a federal court in Texas began hearing oral arguments in a lawsuit brought by 20 Republican-led states challenging the constitutionality of the 2010 law.

Eighteen Republican state attorneys general and two GOP governors bringing the suit argue that the law’s individual mandate was rendered unconstitutional when Congress lowered the penalty for individuals who don’t buy coverage to zero.

The Supreme Court, in upholding the law in 2012, deemed that penalty a tax and thus a valid and legal exercise of Congress’ power of the purse. The lawsuit claims that the law is no longer constitutional because the zeroed-out penalty can no longer raise revenue. “It’s nothing but a hollow shell because its core has been invalidated,” said Misha Tseytlin, Wisconsin’s solicitor general.

The plaintiffs also claim that this means the entire ACA — and, in particular, its protections for patients with pre-existing conditions looking to buy insurance — must be struck down because the mandate can’t be severed from the rest of the law. The Trump Justice Department decided not to defend the ACA in the case.

What a Kavanaugh Confirmation Might Mean

The case, which legal experts see as a long shot, may still wind up before the Supreme Court — which is why Democrats have brought up Obamacare and its protections for patients with pre-existing conditions in this week’s confirmation hearing for Brett Kavanaugh, President Trump’s nominee to replace Justice Anthony Kennedy.

“Kavanaugh has signaled in private meetings with Senate Democrats that he is skeptical of some of the legal claims being asserted in the latest GOP-led effort to overturn the Affordable Care Act,” the Los Angeles Times’ Jennifer Haberkorn reported last week. Three Democrats in the meetings told the Times that Kavanaugh suggested that if one piece of the law is struck down, the rest of the law doesn’t necessarily have to fall with it.

But that may not be enough to assuage Democratic fears that Kavanaugh could be the deciding Supreme Court vote against Obamacare. “Democrats are more concerned about Kavanaugh’s past writings on expansive presidential powers, which they say could lead to his supporting efforts by the Trump administration to dismantle the health-care law without Congress,” The Washington Post’s Colby Itkowitz notes.

Where Public Opinion Stands

The political debate over Obamacare has shifted as public perception of the law has improved. The latest Kaiser Family Foundation tracking poll, released Wednesday, finds that 50 percent now view the law favorably while 40 percent see it unfavorably, with the divide still falling along partisan lines. Just under 80 percent of Democrats support the law, while a similar percentage of Republicans oppose it.

That may be why Republicans still view repealing the law as a potent issue with their base. Vice President Mike Pence, in Wisconsin last week to campaign for Senate candidate Leah Vukmir, said the GOP push to repeal and replace the health care law was still alive: “We made an effort to fully repeal and replace Obamacare and we’ll continue, with Leah Vukmir in the Senate, we’ll continue to go back to that,” he told reporters. With Sen. Jon Kyl (R-AZ) replacing John McCain, a critical vote against the GOP’s 2017 Obamacare repeal bill, there has been chatter about another potential repeal effort — though Senate Majority Leader Mitch McConnell effectively shot that down on Wednesday.

In the meantime, open enrollment on the ACA exchanges is set to begin on November 1, with the Trump administration once again providing reduced funding for outreach groups that help people enroll. A recent report by the nonpartisan Government Accountability Office criticized the administration’s management of Obamacare signup periods.

Why Protections for Pre-Existing Conditions Are Such a Potent Political Issue

http://www.thefiscaltimes.com/2018/09/05/Why-Protections-Pre-Existing-Conditions-Are-Such-Potent-Political-Issue

 

The Affordable Care Act provisions preventing insurers from discriminating against patients with pre-existing medical conditions have become a popular — and politically potent — element of the law, and the new Kaiser Family Foundation tracking poll shows why: Six in 10 Americans say that they or someone in their household suffers from a pre-existing condition such as asthma, diabetes or high blood pressure.

It’s no surprise then that the tracking poll also finds that 75 percent of Americans now say that it is “very important” to keep the provision prohibiting insurance companies from denying a person coverage because of his or her medical history. Another 15 percent say it is “somewhat important” this provision stays in place. Similarly, 72 percent say it is “very important” that the provision to keep insurance companies from charging sick people more remains law. Another 19 percent say it is “somewhat important.”

In addition, more than 60 percent of Americans are “very worried” or “somewhat worried” that they will lose insurance coverage if the Supreme Court overturns the Affordable Care Act’s protections for people with pre-existing conditions. And 75 percent are “very worried” or somewhat worried” that they or a family member will have to pay more for coverage.

Democrats have been hammering the administration and Republicans for their willingness to have a court invalidate protections for those with pre-existing conditions.

As part of their effort to push back on that line of attack, 10 Republican senators last month introduced new legislation that they say would prevent insurance companies from denying coverage to people with pre-existing conditions, or charging those people more, no matter what happens in the Texas court case. Critics have said that the GOP bill’s protections don’t go as far as Obamacare’s. Republicans have responded by saying they’d be willing to look at changes to make the legislation more comprehensive.

 

The ACA is back in court

https://www.axios.com/affordable-care-act-court-challenge-texas-kavanaugh-2dd66378-c046-44e8-9a4a-f660687c17d9.html

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Today is all about the courts, the threats they might pose to the Affordable Care Act, and Democrats’ goal of using those threats to drive turnout in the midterm elections.

Driving the news: A federal district judge in Texas will hear oral arguments this morning on red states’ latest legal challenge to the ACA. At the same time, Brett Kavanaugh will be answering senators’ questions about his nomination to the Supreme Court.

Democrats’ strategy is to tie the two together — to frame the Texas lawsuit as an existential threat to the ACA’s most significant provisions and raise the prospect that a Justice Kavanaugh would cast the decisive vote to strike down the heart of President Obama’s signature achievement.

Reality check: The Texas lawsuit would indeed be devastating to the ACA if it succeeds — Texas wants the courts to invalidate the entire law, while the Justice Department is hoping to ax its protections for pre-existing conditions. But a lot of pieces would have to fall into place to get there.

  • Most of the legal experts I’ve talked to see this case as a long shot on the merits.
  • Even if Kavanaugh were to vote to strike down the ACA — which we can’t know for sure, based on his track recordwith the law — Chief Justice John Roberts would also have to do an about-face and vote to kill the ACA, after upholding it twice before, in order for this suit to ultimately succeed.

The big picture: If there are any tea leaves to read today about the ACA’s future, they’ll come from Judge Reed O’Connor in El Paso, not Judge Brett Kavanaugh in Washington.

  • Don’t expect Kavanaugh to say anything revealing about health care, much less to comment on this specific case.

Situational awareness: The Kavanaugh questioning starts at 9:30 a.m. ET. The district court arguments start an hour later.