In what promises to be another opportunity to further clarify the scope of federal agency influence after the fall of Chevron deference, on June 10, 2024, the Supreme Court agreed to hear Advocate Christ Medical Center, et al. v. Xavier Becerra, Secretary of Health and Human Services. The case involves the calculation of Medicare reimbursements to hospitals under the “disproportionate share hospital” (DSH) adjustment, which provides additional compensation to hospitals serving an unusually high percentage of low-income patients. 

As a background, the Medicare program, codified at 42 U.S.C. § 1395, et seq., provides health insurance to elderly or disabled individuals and pays hospitals a fixed-rate payment for services provided to Medicare patients. However, Congress established “adjustments” to these fixed rates, including the “DHS” adjustment, which increases Medicare payments to qualifying hospitals. The adjustment rate is calculated using the “Medicare Fraction,” which represents the proportion of a hospital’s Medicare patients who have low incomes, as identified by their entitlement to supplementary security income (“SSI”) benefits. See 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I). Specifically, Medicare patients are considered to have a low income on each day of their hospitalization that they “were entitled to benefits under [Medicare part A] and were entitled to [SSI] benefits… under [Title] XVI…” Id. When calculating the Medicare Fraction, HHS interprets the phrase “entitled to SSI benefits” to mean patients who received a monthly SSI cash payment during their hospitalization.

Petitioners, a group of more than 200 hospitals, complain that the federal government is not paying them enough to care for low-income patients. They argue that HHS misinterpreted the Medicare Fraction when it calculated their DHS adjustments for fiscal years 2006-2009 because, in their view, the phrase “entitled to [SSI] benefits” includes all patients enrolled in the SSI program at the time of hospitalization, including those who did not receive the monthly SSI payment covering that period. After Petitioners unsuccessfully sought relief at the administrative level, they sought judicial review in the district court, which granted summary judgment to HHS, a decision that the D.C. Circuit affirmed.

The question before the Court is whether the phrase “entitled to [SSI] benefits” used in 42 U.S.C. § 1395ww(d)(5)(F)(vi)(I) includes all who meet basic SSI program eligibility criteria, whether or not they received an SSI payment covering their hospitalization period. Relying on the Court’s fairly recent decision in Becerra v. Empire Health Foundation, 597 U.S. 424 (2022), that the phrase “entitled to [Medicare Part A] benefits” in that same provision included “all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay[,].” Petitioners primarily argue that the phrase “entitled to [SSI] benefits” includes patients who qualify for SSI program eligibility, regardless of whether they received an SSI payment covering their hospitalization period. HHS primarily argues that because the phrase “entitled to [SSI] benefits” is followed by the phrase “under [Title] XVI,” and the only benefits Title XVI provides are monthly supplemental income payments for financially qualified individuals, patients who did not receive an SSI payment covering their hospitalization period are not included in the Medicare Fraction calculation.

The Justices heard oral argument on November 5, 2024. While Justice Kagan questioned whether the phrase “entitled to benefits” could mean two different things if a micro-analysis of the Medicare and SSI programs led to different results, Justice Alito went further, calling the Petitioner’s main textual argument “superficial” and commenting that SSI and Medicare differ in ways relied upon by the Court in Empire because SSI payments are not automatic and not enduring like Medicare payments. On the other hand, Justice Jackson seemed open to the Petitioners’ position, recognizing that the Medicare Fraction is intended to capture and remedy higher medical costs incurred by hospitals disproportionally treating low-income individuals and stating that the statutory purpose likely was not well-served through eliminating individuals from the calculation when they temporarily rise above the SSI payment threshold.

This is one of several cases on the docket this term that invites the Court to provide much-needed guidance on the role that regulatory agencies play in interpreting the statutes they administer following the Court’s Chevron-gutting decision last term in Loper, which eliminated required judicial deference formerly paid to administrative interpretations. Whether or not the Court accepts that invitation, its decision will directly impact the financial bottom line of hospitals that disproportionately serve low-income communities and may ultimately impact the availability of healthcare options available to low-income patients living in those communities.

A decision is expected later in the term. Stay tuned for Dykema’s forthcoming post discussing the Court’s opinion. For more information, please contact Chantel Febus, James Azadian, Kyle Asher, or Ryan VanOver.