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Advocate Christ Medical Center v. Kennedy
When hospitals provide inpatient services to Medicare beneficiaries, the Medicare program pays those hospitals a fixed rate for treating each Medicare patient. Congress also provides various hospital-specific rate adjustments, including the “disproportionate share hospital,” or DSH, adjustment, which offers additional funding to hospitals that treat a high percentage of low-income patients.
To calculate the DSH adjustment, the Department of Health and Human Services adds together two statutorily prescribed fractions referred to as the Medicare fraction and the Medicaid fraction. The Medicare fraction “represents the proportion of a hospital’s Medicare patients who have low incomes,” and the Medicaid fraction “represents the proportion of a hospital’s patients who are not entitled to Medicare and have low incomes.”
When the Medicare fraction is expressed as a percentage and added to the Medicaid fraction’s percentage, the sum yields the disproportionate patient percentage.
That percentage, in turn, determines whether a hospital will receive a DSH adjustment — and if so, how much.
The numerator of the Medicare is defined by the statute as “the number of [a] hospital’s patient days” attributable to patients “who (for such days) were entitled to benefits under [Medicare] part A” and “entitled to supplementary security income [SSI] benefits … under subchapter XVI.”
The U.S. Supreme Court in Becerra v. Empire Health Foundation, for Valley Hospital Medical Center has held that the phrase “‘entitled to [Medicare Part A] benefits’” in the Medicare fraction includes “all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay.”
But the court noted it hasn’t addressed the issue presented in this case — i.e., which patients count as being “entitled to [SSI] benefits … under subchapter XVI.” HHS interprets the language to mean patients who are entitled to receive an SSI payment during the month in which they were hospitalized.
Petitioners — a group of more than 200 hospitals — insist that the phrase includes all patients enrolled in the SSI system at the time of their hospitalization, even if they were not entitled to an SSI payment during their month of hospitalization. The hospitals claim that, as a result of HHS’s misinterpretation of the phrase, HHS miscalculated the hospitals’ DSH adjustment and underfunded the hospitals from 2006 to 2009.
The hospitals have lost at every stage of this litigation, including most recently before the D.C. Circuit Court of Appeals. The D.C. Circuit concluded that SSI benefits in “subchapter XVI [are] about cash payments for needy individuals,” and that “it makes little sense to say that individuals are ‘entitled’ to the benefit in months when they are not even eligible for [a payment].”
The Court granted certiorari.
The Supreme Court held that, in calculating the Medicare fraction, an individual is “entitled to [SSI] benefits” for purposes of the Medicare fraction when they are eligible to receive an SSI cash payment during the month of hospitalization.
The high court first found that SSI benefits are cash benefits. Just as subchapter XVI makes clear that SSI benefits are cash benefits, the Supreme Court reasoned it also establishes that eligibility for such benefits is determined on a monthly basis. Section 1382(c)(1) provides that “[a]n individual’s eligibility for a benefit under this subchapter for a month shall be determined” based on the individual’s “income, resources, and other relevant characteristics in such month.” The statute’s reference to termination of benefits also refers back to months of ineligibility, stating that an individual must reapply for the program after she has been “ineligible for benefits … for a period of 12 consecutive months.”
Finally, although subchapter XVI speaks primarily in terms of eligibility for SSI benefits, the high court found that the Medicare fraction focuses on whether an individual is entitled to such benefits. In Empire Health, the court noted it treated the word “entitled” in the Medicare statute as synonymous with “qualifying” for or “being eligible … for benefits.” This case also involves the Medicare fraction, so the court explained it followed the same course.
The Supreme Court found the hospitals’ broader reading of “entitled to [SSI] benefits” failed for various reasons.
While the hospitals characterize SSI benefits as including noncash benefits — e.g., vocational rehabilitation services and continued Medicaid coverage — the high court found that these noncash benefits do not fit the description of a supplemental security income benefit.
Further, the Supreme Court found that none of the noncash benefits identified by the hospitals is housed “under subchapter XVI.” The hospitals’ reliance on the Ticket to Work and Self-Sufficiency Program falls short for this reason, the court noted. Nor do any of subchapter XVI’s other references to vocational rehabilitation services confer an SSI benefit. Rather, Section 1382d’s references to certain services point to benefits housed elsewhere, but not within subchapter XVI.
The hospitals’ reliance on continued Medicaid coverage pursuant to §1382h(b) also fell flat, according to the Supreme Court. In most states, eligibility for SSI benefits qualifies an individual for Medicaid coverage, the court found. While losing SSI benefits generally means losing Medicaid coverage, Section 1382h(b) allows certain people ineligible for SSI benefits in a given month to be treated as if they remain eligible for SSI benefits so that they can continue receiving Medicaid. But Section 1382h(b), which by its terms applies only to Medicaid (i.e., “subchapter XIX”), simply aids in the administration of the Medicaid program. The high court explained it does not create an SSI benefit.
The hospitals advanced a second argument that eligibility for SSI benefits — even for purely cash benefits — begins when a person enters the SSI system and continues until the individual is ineligible for an SSI payment for 12 consecutive months. The court acknowledged that while it is true that a person first applying for benefits must disclose their income “rate” “for the calendar year,” that “calendar year” income does not render them eligible for SSI benefits, nor does it establish that SSI benefits operate in intervals with a duration longer than one month.
Instead, the court noted, the statute clearly directs eligibility decisions to be made monthly based on “the individual’s … income, resources, and other relevant characteristics in such month.”
The hospitals also asserted that Empire Health supported their theory that being “entitled to [SSI] benefits” means that a patient is entitled to SSI benefits even if they don’t qualify for a payment during the month of hospitalization.
But the Supreme Court found that, just as Empire Health turned on the specific features of Medicare Part A, this case turned on the specific features of SSI benefits under subchapter XVI. Unlike Medicare Part A, which provides automatic, ongoing health insurance that “never goes away” absent diminished disability, SSI benefits require recipients to apply for and be deemed eligible for benefits, and recipients can (and do) fluctuate in and out of eligibility based on monthly income and resources.
Finally, invoking statutory purpose, the hospitals argued that their broad reading of “entitled to [SSI] benefits” better advances Congress’s goal of providing additional funds to hospitals that serve a disproportionately high percentage of needy Medicare patients. But “[n]o statute pursues a single policy at all costs,” and the Supreme Court asserted it must respect the specific formula that Congress prescribed.
The U.S. Supreme Court affirmed the judgment of the lower court.
Justice Amy Coney Barrett delivered the opinion of the court, in which Chief Justice John Roberts Jr. and Justices Clarence Thomas, Samuel Alito Jr., Elena Kagan, Neil Gorsuch and Brett Kavanaugh joined. Justice Ketanji Brown Jackson filed a dissenting opinion, in which Justice Sonia Sotomayor joined.
“When Congress established Medicare’s hospital-reimbursement system, it recognized that people with low incomes tend to have comparatively worse health conditions and health outcomes than wealthier people, and was clear eyed about the fact that, as a result, ‘[h]ospitals that serve a disproportionate share of low-income patients have higher medicare costs,’” Jackson wrote in the dissent.
Jackson asserted that, to account for the variable costs attributable to the health care needs of different socioeconomic populations, Congress opted to reimburse hospitals that have a disproportionate share of low-income patients at a greater rate than other hospitals.
The dissenting justices noted that while they are in considerable agreement with the majority about portions of its interpretation and ruling, they disagreed with the majority’s interpretation of Medicare’s disproportionate-share formula. They asserted the interpretation is based upon a fundamental misunderstanding of how SSI’s cash-benefit program works.
“And that misunderstanding has led the majority to evaluate the Medicare statute without regard to the function of the formula’s reference to the SSI program, causing it to reach the wrong conclusion,” Jackson wrote.