Supreme Court justices appear split on case over $9 billion hospital payment program

STAT News – Tuesday, November 5, 2024
By Tara Bannow

Tuesday’s oral arguments before the Supreme Court in a case involving billions in Medicare payments to hospitals revealed a split among the justices willing to show their cards.

The case, Advocate Christ Medical Center v. Becerra, concerns Medicare payments to safety net hospitals, known as disproportionate share hospital, or DSH, payments, which are designed to compensate them for treating low-income patients. The more than 200 hospitals who brought the case argue the federal Department of Health and Human Services isn’t paying them enough because it takes too narrow a view of which patients should be counted toward their payments.

Two lower courts have already sided with HHS. A federal appeals court noted in its own ruling that “at every turn,” the Medicare law in question equates SSI eligibility with “cash payments,” so only patients who received payments should be counted toward the DSH calculations.

At least two justices, Ketanji Brown Jackson and Brett Kavanaugh, signaled support for the hospitals, while another two, Samuel Alito and Neil Gorsuch, seemed more critical of the hospitals’ arguments. The other five justices didn’t offer clear insight into their thinking on the issue.

The case’s central legal question hinges on whether people are considered eligible for benefits under supplemental security income (SSI) even if they didn’t receive cash payments in a given month. SSI is for people with low incomes who are blind, disabled or 65 and older. Once people qualify, they receive monthly cash payments if their income remains below a certain threshold. They remain enrolled in the program even if they didn’t qualify for cash payments in a given month.

The hospitals argue their DSH payment calculation should be based on patients who were eligible for SSI when they were hospitalized, whether or not they qualified for cash payments during that month. HHS, however, limits the tally to only those who received cash payments.

The hospitals’ lawsuit, originally filed in 2017, concerns payment years 2006 to 2009. In their petition to the Supreme Court, hospitals argued that the agency’s interpretation reduced their DSH payments during those years by about $1.5 billion annually. In 2024, the government paid hospitals $9.2 billion under the program.

No one was more vocal in their support of the hospitals’ argument than Jackson. Addressing the attorney representing HHS, she said she was “so confused by your argument, I have to say.”

Jackson emphasized that the point of the DSH program is to make hospitals whole for treating low-income patients, who tend to have more costly health conditions. Even if the amount of cash a person has fluctuates month to month, that doesn’t mean their health status will change drastically, Jackson said. She gave the hypothetical example of a man who qualified for SSI in February and then unexpectedly came into extra cash in June, disqualifying him from SSI’s cash payment that month.

“It’s about how costly it would be to treat this person,” Jackson said. “I don’t understand why it is less or more costly in June when he has the heart attack, than in May, when he doesn’t get the cash payment.”

That’s precisely the argument that Melissa Sherry, the attorney representing the hospitals, made during her opening statement. She said the purpose of DSH is to reimburse hospitals for treating a class of patients who are less healthy and thus costlier to treat. She emphasized that if someone’s income is too high to get a cash payment in a given month, they remain in the program and eligible for its other benefits, like Medicaid continuation and vocational rehabilitation.

“Health does not change overnight,” Sherry said. “The government’s interpretation simply does not count that low-income population. It does not count the low-income Medicaid patient coming out of a nursing home. It does not count the low-income patient waiting for her first check. The list of those it does not count goes on and on. A DSH proxy that does not measure the low income population is no proxy at all.”
Alito seemed to reject that argument, noting that while it’s “catchy,” it also sounds “terribly superficial” because it’s the nature of the entitlement that matters.

Gorsuch also sounded critical of the hospitals’ argument. He gave the hypothetical example of a 70-year-old man who is deemed eligible for SSI because of his income, but then earns $1 million in a given month of the year. He asked Sherry whether that person would be entitled to benefits for the full year. She responded that he wouldn’t be entitled to the cash payment, but he would be eligible for the other benefits under SSI.

The example of the millionaire on SSI seems “unlikely to happen in the real world,” Kavanaugh said of Gorsuch’s example. Kavanaugh also raised the point that most people who aren’t eligible for cash payments in a given month qualify again the following month. He also asked Sherry whether some safety net hospitals would really need to close should the court rule against them, as hospital groups asserted in a brief they shared with the court. She said she thinks that’s realistic.

The other justices’ positions were harder to discern based on their statements. In a question to Sherry, Justice Elena Kagan seemed to downplay the other benefits of SSI beyond the cash payments.

Kagan did note that even if someone doesn’t qualify for the payment, they still retain the benefit of not having to reapply for SSI every month, because they remain in the program.

Ephraim McDowell, the attorney representing HHS, said that he understands DSH payments are critical to hospitals. However, the point of the program is not to provide hospitals with the most money possible, it’s to compensate them for serving a disproportionate share of low income patients.

“We don’t think the statute authorizes us to provide more DSH payments,” McDowell said.

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