SCOTUS watch: Clearing the backlog, slapping Medicare, and the most Thomas Thomas dissent ever

AP Photo/Gemunu Amarasinghe

“Seventeen opinions have suddenly become much more manageable,” quipped one live-blogging commenter at SCOTUSblog, although the total left is now 18. In two days this week, the Supreme Court has cleared out eleven of the twenty-nine cases remaining from this year’s term. Observers had wondered whether the justices planned to extend the session, as the pace of releases had left a daunting backlog.

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After releasing five decisions on Monday, mostly of a technical nature, the court published six more today — again, none of which were either Dobbs or Bruen. However, one case did offer a slap at Medicare over cuts to drug reimbursements, but even that was relatively narrow:

The U.S. Supreme Court on Wednesday ruled in favor of a group of nonprofit hospitals in their bid to restore billions of dollars cut by the government from their annual Medicare reimbursements since 2018.

The unanimous ruling overturned a lower court’s 2020 decision that the U.S. Department of Health and Human Services (HHS) had the authority to reduce by $1.6 billion the yearly Medicare payments for outpatient drugs that had helped subsidize the operations of hospitals catering to the poor and uninsured.

The high court, in a ruling authored by Justice Brett Kavanaugh, found that the U.S. Court of Appeals for the District of Columbia Circuit wrongly allowed HHS to close a gap between the reimbursement rates paid to these hospitals and the discounts they receive on medications through a federal program called “340B.”

The rate adjustment, the court found, was an impermissible interpretation of the federal law governing Medicare, the vast government program that provides health insurance for the elderly and disabled.

The case name on this appeal, American Hospital Association v Becerra, is a bit misleading. For technical reasons, current HHS secretary Xavier Becerra’s name is on the case, but this started during the Trump administration. The reason that this opinion was both unanimous and relatively brief was that HHS violated the clear text of the statute in question. In order to reset reimbursement rates, HHS has to either conduct a survey of hospitals’ acquisition costs, or HHS has to produce a new calculation based on manufacturers’ prices. Either way, it has to use the same formulation for all reimbursement recipients.

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HHS in this case failed on all of the above points. They tried to use 340B as a shield to salvage the cuts, but no one on the court was buying it. In the summary, Kavanaugh argues for a unanimous court that the hospitals have to get their money back:

Absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates only for 340B hospitals; HHS’s 2018 and 2019 reimbursement rates for 340B hospitals were therefore unlawful. The text and structure of the statute make this a straightforward case. Because HHS did not conduct a survey of hospitals’ acquisition costs, HHS acted unlawfully by reducing the reimbursement rates for 340B hospitals. HHS maintains that even when it does not conduct a survey, the agency still may “adjus[t]” the average price “as necessary.” §1395l(t)(14)(A)(iii)(II). But HHS’s power to increase or decrease the price is distinct from its power to set different rates for different groups of hospitals. Moreover, HHS’s interpretation would make little sense given the statute’s overall structure. Under HHS’s interpretation, the agency would never need to conduct a survey of acquisition costs if it could proceed under option 2 and then do everything under option 2 that it could do under option 1. That not only would render irrelevant the survey prerequisite for varying reimbursement rates by hospital group, but also would render largely irrelevant the provision of the statute that precisely details the requirements for surveys of hospitals’ acquisition costs. See §1395l(t)(14)(D). Finally, HHS’s argument that Congress could not have intended for the agency to “overpay” 340B hospitals for prescription drugs ignores the fact that Congress, when enacting the statute, was well aware that 340B hospitals paid less for covered prescription drugs. It may be that the reimbursement payments were intended to offset the considerable costs of providing healthcare to the uninsured and underinsured in low-income and rural communities. Regardless, this Court is not the forum to resolve that policy debate.

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That’s of interest in itself, as is the unanimity of this court on that point. The most interesting point about this opinion, though, is a complete lack of discussion about Chevron doctrine. It’s unnecessary in this case, or so the unanimous court believes, thanks to the bald violations of HHS. Still, it might have been a vehicle for the court to reduce its Chevron reliance on agencies in their regulatory decisions.

Otherwise, the most notable outcome came in Viking River Cruises v Moriana, not so much for the 8-1 decision but for Justice Clarence Thomas’ dissent. Thomas wanted to remind everyone that he thinks the federal arbitration statute in play shouldn’t be used for state-court proceedings, and he cites a respected jurist in making that argument … himself, in previous dissents:

I continue to adhere to the view that the Federal Arbitration Act (FAA), 9 U. S. C. §1 et seq., does not apply to proceedings in state courts. See Allied-Bruce Terminix Cos. v. Dobson, 513 U. S. 265, 285–297 (1995) (THOMAS, J., dissenting); see also Kindred Nursing Centers L. P. v. Clark, 581 U. S. 246, 257 (2017) (THOMAS, J., dissenting) (collecting cases). Accordingly, the FAA does not require California’s courts to enforce an arbitration agreement that forbids an employee to invoke the State’s Private Attorneys General Act. On that basis, I would affirm the judgment of the California Court of Appeal.

As fun as all this is, today’s decisions are important to the parties in the cases and interesting in terms of precedential weight. Otherwise, the most notable aspect of today’s work at the Supreme Court is that the effort that’s being put into getting the less controversial and less polarizing decisions cleared out of the way, and the rapidity in which that’s being done. Needless to say, the attempted assassination of Brett Kavanaugh has their full attention, as does the leak that precipitated the attack in the first place. The justices have good reason to want to get this session over with as soon as possible, and it looks like that’s exactly what they’re doing.

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Update: My friend Liz Mair sent me a few of her thoughts on the American Hospital Association v Becerra decision, which are worth reading:

1) From a raw political perspective, I think it’s interesting that the opinion was authored by the Supreme Court Justice that Trump fought hardest to confirm: Kavanaugh.

2) I also think it’s interesting— and telling— that the decision was unanimous— it makes very clear that the Trump administration way overreached with its policy. On my read, with this decision, the court was clearly, unanimously saying the government cannot dispense with the rules when making regulatory decisions. When you get agreement on a matter from both Clarence Thomas and Sonia Sotomayor, that is a noteworthy kick in the teeth to whoever was ruled against.

3) Obviously, this is a big victory for not-for-profit hospitals that are part of the 340B program, but that also means it’s a big victory for Trump’s most dedicated base— white, working class, rural voters who disproportionately rely on 340B providers. That is why the decision is politically noteworthy (beyond my point about Trump having fought hardest for Kavanaugh).

Set aside the legalities here, the reality is that anything that messes with 340B providers is directly hurting what are now the most reliable GOP voters. I’m always glad when the Supreme Court shuts down dodgy regulatory endeavors just as a recovering lawyer, but thinking as a GOP strategist, there are additional political reasons why Republicans shouldn’t have wanted this to stand and for the last Republican President to get tagged with it. At the end of the day, 340B is a program that costs taxpayers exactly zero dollars; the only people who have a problem with it are Big Pharma companies, and their allies like Scott Peters who has little in common either in terms of politics or kitchen table finances with blue collar workers earning $30k a year in West Virginia.

4) It’s worth remembering that Trump DID take significant steps to protect the 340B program— the most notable one, in my opinion, was setting ceiling price regulations for drugs in the program to keep drugmakers from ripping program participants off.

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David Strom 5:20 PM | May 01, 2024
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