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Jan 13, 2020

Courts and Healthcare Policy in 2020

2019 saw court hearings of a number of cases related to the Affordable Care Act (ACA). Several other Trump administration policies were also challenged, including Medicare payment policies, price transparency, how the Medicaid program can change and whether Medicaid beneficiaries can sue over curtailed benefits, and immigration changes affecting access to programs like Medicaid.

In 2020, the courts will continue to play an important role as some cases continue in the process, and potential new lawsuits challenge the administration’s continued effort to change health policy.

Cases Related to the Affordable Care Act

Texas v. United States. The most consequential case related to the ACA is the constitutional challenge to the law. A group of Republican-controlled states and two Texas residents argue that the entire ACA became unconstitutional when Congress eliminated the penalty for individuals who fail to obtain health insurance. Last month, a divided three-judge panel of the 5th U.S. Circuit Court of Appeals issued a ruling stating the individual mandate was unconstitutional because it can no longer be justified as a tax since Congress set the penalty at 0. However, the panel also remanded the case to the lower court to determine what portions of the ACA are or are not severable from the individual mandate.

Now, a coalition of Democratic attorneys general has asked the U.S. Supreme Court to take up the case and not wait for the Texas court to rule on whether some or all of the ACA provisions are so intertwined with the individual mandate that they, too, must be deemed unconstitutional.

[UPDATE - July 22, 2020] Briefing will continue through the summer. California and the House of Representatives will file a second round of briefs on July 29, and Texas will file a limited reply brief on August 18. In the meantime, there have been a series of filings regarding who can participate in yet-to-be-scheduled oral argument and how long oral argument will be. The Court has currently approved a total of one hour for argument.

Oral argument will not be held until the fall of 2020. It seems unlikely that a hearing will occur before the election on November 3. This is because the Court pushed some cases from its 2019 term to the 2020 term due to the COVID-19 pandemic. The Court scheduled those arguments first and has already filled the Court’s oral argument schedule for October 2020. A decision will not be issued until 2021.

Risk corridors. On April 27, the Supreme Court ruled in favor, 8-1, of commercial health insurers arguing that they are owed $12 billion under the ACA’s risk corridor program. The risk corridor program was designed to compensate insurers who lost money in the early years of the exchanges, but congressional Republicans blocked CMS from making most of the promised payments.

Association health plans. One lawsuit challenges the administration’s expansion of association health plans (AHP) through a Department of Labor rule that seeks to make it easier for small employers to band together and offer plans that do not have to comply with ACA consumer protections. A panel of the U.S. Court of Appeals for the D.C. Circuit heard oral arguments in November. A ruling is expected in the coming months.

[UPDATE - July 22, 2020] With a ruling to come any day, two employers brought parallel litigation in Texas, asking for a declaratory judgment that their health coverage arrangement is a single-employer self-insured group health plan (and thus exempt from most ACA rules). If approved, this could be a backdoor way of implementing the objectives of the Trump Administration’s AHP rule. The employers had requested an advisory opinion from the Department of Labor, which concluded that the arrangement did not qualify as a single-employer group health plan. Briefing was completed in late April, and a hearing has yet to be scheduled.

Short-term plans. Similar to the association health plan case, this case involves the administration’s expansion of short-term, limited-duration plans, which also need not comply with ACA protections. Briefing in the case is ongoing, and the court has not yet scheduled a date for oral arguments.

[UPDATE - July 22, 2020] A divided panel of the DC Circuit upheld the short-term plan rule in July 2020, concluding that the government’s interpretation was entitled to deference and was neither inconsistent with nor impermissible under the ACA or HIPAA. The lead plaintiff, the Association for Community Affiliated Plans, suggested that it will ask for en banc review by a full panel of judges on the DC Circuit.

Cost-sharing reductions (CSR). Litigation continues over the ACA’s cost-sharing reduction program, which was intended to compensate insurers for setting low deductibles and copayments on the exchanges. In 2017, the administration decided to stop making the CSR payments, prompting numerous lawsuits from insurers. The insurers have won various lower-court rulings, and a consolidated group of the lawsuits is on appeal at the U.S. Court of Appeals for the Federal Circuit. Oral arguments were held Jan. 9.

The CSR litigation raises legal issues similar to those posed by the risk corridor case at the Supreme Court because both involve government payments to insurance companies that were intended by the drafters of the ACA but subsequently revoked. The Supreme Court’s decision in the risk corridor case may therefore presage the eventual outcome on CSRs.

[UPDATE - July 22, 2020] The Court of Appeals for the Federal Circuit will soon issue a decision on whether insurers are entitled to unpaid cost-sharing reductions (CSRs). Other CSR lawsuits have been stayed pending a decision by the Federal Circuit. In the meantime, insurers have begun filing new or additional CSR complaints or adding CSR claims to complaints over unpaid risk corridors payments. Many of these complaints were filed soon after the Supreme Court’s risk corridors decision.

Contraceptive mandate. The Supreme Court is considering whether to take up another controversial ACA-related issue: the ACA’s requirement that employers provide coverage for birth control in employee health plans. Last year, two federal appeals courts blocked Trump administration rules that created exemptions for employers with religious or moral objections to the contraceptive mandate.

The justices will discuss whether to take the case at their private conference Jan. 10, with an announcement likely following within weeks.

[UPDATE - July 22, 2020] The Supreme Court issued a 7-2 decision upholding the Trump Administration’s rules that allow religious and moral exemptions to the ACA’s contraceptive mandate. The Court vacated the prior nationwide injunction by a federal judge in Pennsylvania and remanded the case to the lower courts. Directly after that, the Court separately remanded an appeal of a similar injunction by a California federal judge from the Ninth Circuit Court of Appeals. Although the Trump administration, Little Sisters, and the March for Life Education and Defense Fund had separately appealed the Ninth Circuit decision before, the Court had not taken action on those appeals while Little Sisters was pending and quickly remanded those challenges.

Nondiscrimination provisions. A new lawsuit is likely this year over the administration’s efforts to weaken some of the ACA’s nondiscrimination provisions, codified in Section 1557 of the law. HHS is currently finalizing regulatory changes expected to roll back Obama-era protections for groups such as transgender people, gay and lesbian people, and people who have terminated a pregnancy. Once the administration issues its final rule, a legal challenge is expected.

[UPDATE - July 22, 2020] The Trump administration issued its new final rule in June to implement Section 1557. There is a new round of litigation over the final rule on Section 1557, which will go into effect on August 18 if not blocked. There are currently at least five lawsuits challenging the rule, which include coalitions of plaintiffs arguing that the rule should be invalidated. Each lawsuit asks the court to vacate the Trump administration’s rule in its entirety and prevent HHS from implementing or enforcing its provisions. They argue that the 2020 rule violates the Administrative Procedure Act (APA) as arbitrary and capricious and contrary to law. They also argue that the rule exceeds HHS’s statutory authority and violates the Fifth Amendment.

The Trump administration must respond to a request for a preliminary injunction in the challenge brought by Whitman-Walker Health by July 24. A reply brief is due on July 29, and a hearing will be held on August 3 in front of Judge James E. Boasberg. A similar response from the government is due on July 31 in the challenge brought by Walker and Gentili, with a reply brief due on August 7 and a hearing scheduled for August 12 before Judge Frederic Block.

“Take care” clause. This broad-based lawsuit brought by a group of cities argues that the administration violated the Constitution by sabotaging the ACA. The lawsuit says President Trump’s various administration actions weakening the ACA conflict with the Constitution’s requirement that the president “take care that the laws be faithfully executed.” The case was filed in 2018 but remains in the early stages at a federal district court in Maryland.

[UPDATE - July 22, 2020] Litigation will continue before the district court in Maryland over a range of Trump administration policy changes. In April, the district held that the lawsuit could proceed under the APA but not the Take Care Clause of the Constitution. The plaintiffs did not appeal that ruling to the Fourth Circuit and will instead turn to their claims that major provisions of the 2019 payment rule violate the APA.

The district court did not want to dismiss those claims because it did not have the full administrative record. From here, the parties will produce the administrative record, and the plaintiffs will file a motion for summary judgment by August 13. That will begin the briefing process, which will continue through mid-November.

Medicaid in the Courts

As the administration injects conservative policies into the Medicaid program, objectors are filing lawsuits.

Work requirements. The most prominent legal issue in Medicaid is the ongoing fight over work requirements, and a key ruling from the D.C. Circuit could come any day.

CMS has aggressively advocated for work requirements to be included in Section 1115 waivers. As waivers including work requirements are approved, opponents are responding with lawsuits challenging those waivers. Democrat-appointed District Judge James Boasberg repeatedly sided with the opponents last year, ordering Arkansas to suspend its work requirement program and blocking the policy from taking effect in Kentucky and New Hampshire. Other lawsuits challenging the policy in Indiana and Michigan are in the early stages before Boasberg, and more lawsuits could be coming.

Boasberg’s rulings against work requirements are now on appeal at the D.C. Circuit, which heard oral arguments in October. The D.C. Circuit has considered the case on an expedited schedule.

[UPDATE - July 22, 2020] The Supreme Court has been asked to hear Gresham v. Azar. The district court set aside state Medicaid waivers with work requirements. That decision was affirmed by a unanimous panel of the Court of Appeals for the District of Columbia in a decision written by Judge David Sentelle. The attorney general of Arkansas and the Trump administration filed cert petitions on July 13. If four Justices vote in favor of hearing the appeals, Gresham will be added to the list of cases to be decided in the Court’s 2020 term.

Beneficiaries’ right to sue. Another policy being tested in the courts is the extent to which beneficiaries have a right to sue state officials to challenge state actions that curtail Medicaid benefits. The ability to bring such lawsuits in federal court has long been viewed as an important safeguard for beneficiaries, but in recent years, some courts have expressed doubt about the legal theories underlying such lawsuits.

The Supreme Court declined to weigh in on the issue in 2018. However, currently pending at the 5th Circuit is a lawsuit brought by beneficiaries challenging Texas’ attempt to remove abortion providers from its Medicaid program. The ruling could extend far beyond the abortion context and help clarify the authority of beneficiaries to sue over a wide range of allegedly unlawful coverage policies by states.

Block grants. While no lawsuit has yet been filed, CMS’ push to permit states to convert their federal Medicaid funding into a form of a block grant has opponents on the ready. Tennessee was the first state to submit a waiver request to convert its program to a block grant. Once a waiver is approved, lawsuits are sure to follow.

Payment Policy Challenges

In Medicare, CMS remains engaged in litigation over two controversial payment policies that the agency says will bring down costs but hospitals describe as illegal. Continuing to fight both policies is a priority for the hospital industry in 2020.

340B cuts. One lawsuit challenges the agency’s 2018 and 2019 reimbursement cuts for drugs in the 340B drug discount program. Hospitals argue that the agency does not have the authority to make those cuts, and a federal district judge agreed. The case is now at the D.C. Circuit. Oral arguments were heard in November and a decision is expected by summer of this year. Meanwhile, CMS retained the 340B cuts in its 2020 hospital outpatient pay rule.

Site neutrality. Another case challenges CMS’ site-neutral policy, which cut payments for outpatient clinic visits at certain off-campus hospital facilities in 2019. Under the policy, the agency reimbursed hospitals for those visits at a rate equivalent to the cost of such services provided in doctors’ offices under the physician fee schedule. In September, a district judge said CMS lacked authority to make the cuts and vacated them. CMS’ appeal of that ruling could be heard by the D.C. Circuit sometime in 2020.

As with the 340B reimbursement cuts, the litigation did not stop CMS from going ahead with phasing in the cuts in its 2020 outpatient rule.

[UPDATE - July 22, 2020] On July 17, 2020, the US Court of Appeals for the District of Columbia Circuit reversed the district court to uphold the 2019 Medicare payment rule expanding outpatient “site‑neutral” payment policies to apply to all hospital outpatient clinic visits, i.e., even at longstanding off-campus provider-based hospital departments (PBDs). The district court decision vacated the payment rule at issue) on the grounds that the Centers for Medicare & Medicaid Services (CMS) had exceeded its statutory authority by adopting a targeted rate change lowering payments for certain hospital outpatient clinic visits in a non-budget-neutral manner. The decision by the Court of Appeals will allow the Expanded Site-Neutral Policy to stand, unless reversed by the Supreme Court.

Transparency Policy

CMS faces drug and hospital industry-led legal challenges to two final rules issued last year that require drug companies and hospitals to disclose more information about pricing. Both challenges are based on the First Amendment.

Drug prices. A drug-pricing rule, issued in May by the U.S. Food and Drug Administration (FDA), seeks to require pharmaceutical companies to include the list prices of their drugs in television advertising. A district judge struck the rule on the grounds that the FDA overstepped its statutory authority. However, the judge did not rule on the drug manufacturers’ argument that the rule’s requirement of disclosure of list prices infringes on the manufacturers’ right to free speech. The case is on appeal at the D.C. Circuit, and oral arguments are scheduled for Jan. 13.

Hospital prices. The hospital transparency rule, issued in November by CMS, seeks to require hospitals to publish the confidential rates they negotiate with private insurers. The hospital industry sued, arguing the rule is highly burdensome and violates hospitals’ free speech. The district judge presiding over the case has set an expedited schedule to review it — but this case, like many of the other lawsuits challenging regulatory actions, likely will end up at the D.C. Circuit.

[UPDATE - July 22, 2020] In late June 2020, the district court upheld the Trump administration’s rule to require hospitals to publicly disclose negotiated rates and prices of certain “shoppable” items and services. The rule was promulgated under Section 2718(e) of the Public Health Service Act, a provision of the ACA known as the medical loss ratio provision. Hospitals challenged the rule, arguing that the government exceeded its authority, that the rule violates the First Amendment, and that the rule is arbitrary and capricious. Judge Carl J. Nichols disagreed and upheld the rule. The American Hospital Association, the lead plaintiff, quickly appealed to the decision to the DC Circuit. The rule is set to go into effect on January 1, 2021.

Other Health Law Issues

Immigrants and health insurance. Two immigration policies finalized last year have health law consequences. The “public charge” rule, issued in August by the Department of Homeland Security, and an executive proclamation on immigration, issued in October, have led to two lawsuits.

The public charge rule makes it harder for legal immigrants who receive certain forms of public assistance, including Medicaid, to remain in the country and become permanent U.S. residents. The proclamation requires new immigrants seeking entry into the country to demonstrate that they will be able to obtain health insurance, not including subsidized ACA plans or Medicaid.

Conscience rule. The rule, issued in May by the HHS Office of Civil Rights, expands the ability of medical professionals to refuse to provide care based on religious or moral objections.

Lawsuits challenging the immigration policies and the conscience rule are pending in federal courthouses around the country, and most of them are moving quickly. Substantive rulings from federal appeals courts are expected on all three issues in 2020.

[UPDATE - July 22, 2020] The Trump administration appealed three federal district court decisions—in California, New York, and Washington—to vacate its provider conscience rule. These decisions were appealed to the Second Circuit (New York) and the Ninth Circuit (California and Washington). The rule will remain on hold while the cases are appealed, and briefing will continue through the summer.