Category Archives: Supreme Court
5th Circuit Finds Subject Matter Jurisdiction For Medicare and Medicaid Providers – Why Collards Matter
“I’d like some spaghetti, please, and a side of meatballs.” – This sentence is illogical because meatballs are integral to spaghetti and meatballs. If you order spaghetti – and -meatballs, you are ordering “spaghetti and meatballs.” Meatballs on the side is not a thing.
Juxtapose, a healthcare provider defending itself from an alleged overpayment, But during the appeal process undergoes a different penalty – the state or federal government begins to recoup future funds prior to a decision that the alleged recoupment is authorized, legal, or warranted. When a completely new issue unrelated to the allegation of overpayment inserts itself into the mix, then you have spaghetti and meatballs with a side of collard greens. Collard greens need to be appealed in a completely different manner than spaghetti and meatballs, especially when the collard greens could put the company out of business because of the premature and unwarranted recoupments without due process.
I have been arguing this for years based off of, not only, a 1976 Supreme Court case, but multiple state case law, as well as, success I have had in the federal and administrative courts, and BTW – logic.
On March 27, 2018, I was confirmed again. The Fifth Circuit Court of Appeals decided a landmark case for Medicare and Medicaid providers across the country. The case, Family Rehab., Inc. v Azar, 2018 U.S. App. LEXIS 7668, involved a Medicare home health service provider, which was assessed for approximately $7.8 million in Medicare overpayments. Family Rehab, the plaintiff in the case, relied on 88% to 94% of its revenue from Medicare. The company had timely appealed the alleged overpayment, and it was at the third level of the Medicare five step process for appeals. See blog. But there is a 3 – 5 year backlog on the third level, and the government began to recoup the $7.8 million despite the ongoing appeal. If no action were taken, the company would be out of business well-before any ALJ could rule on the merits of the case, i.e. whether the recoupment was warranted. How is that fair? The provider may not owe $7.8 million, but before an objective tribunal decides what is actually owed, if anything, we are going to go ahead and take the money and reap the benefit of any interest accrued during the time it takes the provider to get a hearing.
The backlog for Medicare appeals at the ALJ level is unacceptably long. See blog and blog. However, the federal regulations only prevent recoupment during the appeal process during the first and second levels. This is absolutely asinine and should be changed considering we do have a clause in the Constitution called “due process.” Purported criminals receive due process, but healthcare providers who accept Medicare or Medicaid, at times, do not.
At the third level of appeal, Family Rehab underwent recoupments, even though it was still appealing the decision, which immediately stifled Family Rehab’s income. Family Rehab, because of the premature recoupments, was at risk of losing everything, going bankrupt, firing its staff, and no longer providing medically necessary home health services for the elderly. This situation mimics a situation in which I represented a client in northern Indiana who was losing its Medicaid contract. I also successfully obtained a preliminary injunction preventing the provider from losing its Medicaid contract. See blog.
It is important to note that in this case the ZPIC had audited only 43 claims. Then it used a statistical method to extrapolate the alleged over-billings and concluded that the alleged overpayment was $7,885,803.23. I cannot tell you how many times I have disputed an extrapolation and won. See blog.
42 USC 1395(f)(f)(d)(1)(A) states that the ALJ shall conduct and conclude the hearing and render a decision no later than 90 days after a timely request. Yet the Fifth Circuit Court of Appeals found that an ALJ hearing would not be forthcoming not within 90 days or even 900 days. The judge noted in his decision that the Medicare appeal backlog for an ALJ hearing was 3 – 5 years. The District Court held that it lacked subject matter jurisdiction because Family Rehab had not exhausted its administrative remedies. Family Rehab appealed.
On appeal, Family Rehab argued the same arguments that I have made in the past: (1) its procedural due process and ultra vires claims are collateral to the agency’s appellate process; and (2) going through the appellate process would mean no review at all because the provider would be out of business by the time it would be heard by an ALJ.
What does collateral mean? Collard greens are collateral. When you think collateral; think collards. Collard greens do not normally come with spaghetti and meatballs. A collateral issue is an issue that is entirely collateral to a substantive agency decision and would not be decided through the administrative appeal process. In other words, even if Family Rehab were to only pursue the $7.8 million overpayment issue through the administrative process, the issue of having money recouped and the damage to the company that the recoupment was causing would never be heard by the ALJ because those “collateral” issues are outside the ALJ’s purview. The premature recoupment issue could not be remedied by an ALJ. The Fifth Circuit Court of Appeals agreed.
The collateral argument also applies to terminations of Medicare and Medicaid contracts without due process. In an analogous case (Affiliated Professional), the provider argued that the termination of its Medicare contract without due process violated its right to due process and the Equal Protection Clause and was successful.
The upshot is obvious, if the Court must examine the merits of the underlying dispute, delve into the statute and regulations, or make independent judgments as to plaintiff’s eligibility under a statute, the claim is not collateral.
The importance of this case is that it verifies my contention that if a provider is undergoing a recoupment or termination without due process, there is relief for that provider – an injunction stopping the premature recoupments or termination until due process has been completed.
In a January 11, 2018, opinion, a district court in Florida held that once the government learns of possible regulatory noncompliance or mistakes in billings Medicare or Medicaid, but continues to reimburse the provider for later claims – the fact that the government continues to reimburse the provider – can be evidence in court that the alleged documentation errors are minor and that, if the services are actually rendered, despite the minor mistakes, the provider should not be liable under the False Claims Act.
Here is an example: Provider Smith undergoes a post-payment review of claims from dates of service January 1, 2016 – January 1, 2017. It is February 1, 2018. Today, Smith is told by the RAC auditor that he owes $1 million. Smith appeals the adverse decision. However, despite the accusation of $1 million overpayment, Smith continues providing medically necessary services the exact same way, he did in 2016. Despite the supposed outcome of the post-payment review, Smith continues to bill Medicare and Medicaid for services rendered in the exact same way that he did in 2016.
At least, according to UNITED STATES OF AMERICA AND STATE OF FLORIDA v. SALUS REHABILITATION, LLC, if Smith continues to be reimbursed for services rendered, this continued reimbursement can be evidence in court that Smith is doing nothing wrong.
Many of my clients who are undergoing post-payment or prepayment reviews decrease or cease all together billing for future services rendered. First, and obviously, stopping or decreasing billings will adversely affect them. Many of those clients will be financially prohibited from defending the post or prepayment review audit because they won’t have enough funds to pay for an attorney. Secondly, and less obvious, at least according to the recent decision in Florida district court mentioned above, continuing to bill for and get reimbursed fo services rendered and billed to Medicare and/or Medicaid can be evidence in court that you are doing nothing wrong.
The facts of the Salus Rehabilitation case, are as follows:
A former employee of a health care system comprising of 53 specialized nursing facilities (“Salus”) filed a qui tam claim in federal court asserting that Salus billed the government for unnecessary, inadequate, or incompetent service.
Break from the facts of the case to explain qui tam actions: A former employee who brings a qui tam action is called the “relator.” In general, the reason that former employees bring qui tam cases is money. Relators get anywhere between 15 -30 % of the award of damages. Many qui tam actions result in multi million dollar awards in damages – meaning that a relator can get rich quickly by tattling on (or accusing) a former employer. Qui tam actions are jury trials (why this is important will be explained below).
Come and listen to a story ’bout a man named Jed
Poor mountaineer barely kept his family fed
Then one day he was shooting for some food,
And up through the ground come a bubbling crude
(Oil that is, black gold, Texas tea)
In the Salus case, the relator (Jed) asserted that Salus failured to maintain a “comprehensive care plan,” ostensibly required by a Medicaid regulation and that this failure rendered Salus’ Medicaid claims fraudulent. Also, Jed asserted that a handful of paperwork defects (for example, unsigned or undated documents) demonstrated that Salus never provided the therapy purported by the paperwork and billed to Medicare. Jed won almost $350 million based on the theory “that upcoding of RUG levels and failure to maintain care plans made [the defendants’] claims to Medicare and Medicaid false or fraudulent.” Oil, that is, black gold, Texas tea. You know Jed was celebrating like it was 1999.
Salus did not take it lying down.
The jury had awarded Jed $350 million. But in the legal world there is a legal tool if a losing party believes that the jury rendered an incorrect decision. It is called a Judgment as a Matter of Law. When a party files a Motion for Judgment as a Matter of Law, it is decided by the standard of whether a reasonable jury could find in favor of the party opposing the Motion, but it is decided by a judge.
In Salus, the Judge found that the verdict awarding Jed of $350 million could not be upheld. The Judge found that Jed’s burden was to show that the federal government and the state government did not know about the alleged record-keeping deficiencies but, had the governments known, the governments would have refused to pay Salus for services rendered, products delivered, and costs incurred. The Judge said that the record was deplete of any evidence that the governments would have refused to pay Salus. The Judge went so far to say that, theoretically, the governments could have implemented a less severe punishment, such as a warning or a plan or correction. Regardless, what the government MAY have done was not in the record. Specifically, the Judge held that “The resulting verdict (the $350 million to Jed), which perpetrates one of the forbidden “traps, zaps, and zingers” mentioned earlier, cannot stand. The judgment effects an unwarranted, unjustified, unconscionable, and probably unconstitutional forfeiture — times three — sufficient in proportion and irrationality to deter any prudent business from providing services and products to a government armed with the untethered and hair-trigger artillery of a False Claims Act invoked by a heavily invested relator.”
Wow. In other words, the Judge is saying that the verdict, which awarded Jed $350 million, will cause health care providers to NOT accept Medicare and Medicaid if the government is allowed to call every mistake in documentation “fraud,” or a violation of the False Claims Act. The Judge was not ok with this “slippery slope” result. Maybe he/she depends on Medicare…maybe he/she has a family member dependent on Medicaid…who knows? Regardless, this a WIN for providers!!
Legally, the Judge in Salus hung his hat on Universal Health Services, Inc. v. Escobar, 136 S. Ct. 1989 (2016), a Supreme Court case. In Escobar, the Supreme Court held that nit-picky documentation errors are not material and that materiality is required to condemn a provider under the False Claims Act. Escobar “necessarily means that if a service is non-compliant with a statute, a rule, or a contract; if the non-compliance is disclosed to, or discovered by, the United States; and if the United States pays notwithstanding the disclosed or discovered non-compliance, the False Claims Act provides a relator no claim for “implied false certification.”” (emphasis added). In other words, keep billing. If you are paid, then you can use that as evidence in court.
Escobar specifies that a “rigorous” and “demanding” standard for materiality and scienter precludes a False Claims Act claim based on a “minor or unsubstantial” or a “garden-variety” breach of contract or regulatory violation. Instead, Escobar assumes and enforces a course of dealing between the government and a supplier of goods or services that rests comfortably on proven and successful principles of exchange — fair value given for fair value received. Get it?? This is the first time that I have seen a judge be smart and intuitive enough to say – hey – providers are not perfect…and that’s ok. Providers may have insignificant documentation errors. But it is fundamentally unfair to prosecute a provider under the False Claims Act, which the Act is extraordinarily harsh and punitive, for minor, “garden variety” mistakes.
Granted, Salus was decided with a provider being prosecuted under the False Claims Act and not being accused of a pre or post-payment review finding of alleged overpayment.
But, isn’t it analogous?
A provider being accused that it owes $1 million because of minor documentation errors – but did actually provide the medically necessary services – should be afforded the same understanding that Salus was afforded. The mistakes need to be material. Minor mistakes should not be reasons for a 100% recoupment. Because there must be a course of dealing between the government and a supplier of goods or services that rests comfortably on proven and successful principles of exchange — fair value given for fair value received.
Oil has dried up, Jeb.
DHHS is under criminal investigation by the federal government for allegedly overpaying employees without a bid process, and, simply, mismanaging and overspending our Medicaid tax dollars. See blog.
When I first started writing this blog, I opined that the federal investigation should be broadened. While I still believe so, the results of broadening the scope of a federal investigation could be catastrophic for our Medicaid providers and recipients. So I am metaphorically torn between wanting to shine light on tax payer waste and wanting to shield NC Medicaid providers and recipients from the consequences of penalties and sanctions on NC DHHS. Because, think about it, who would be harmed if NC lost federal funding for Medicaid?
[BTW, of note: These subpoenas were received July 28, 2015. Aldona Wos announced her resignation on August 5, 2015, after receipt of subpoenas. The Subpoenas demand an appearance on August 18, 2015, which, obviously, has already passed, yet we have no intel as to the occurrences on August 18, 2015. If anyone has information, let me know.]
Does this criminal investigation go far enough? Should the feds investigate more Medicaid mismanagement over and above the salaries of DHHS employees? What are the potential consequences if NC is sanctioned for violating Medicaid regulations? How could a sanction affect providers and recipients?
DHHS’ employees are not the only highly compensated parties when it comes to our Medicaid dollars! It is without question that the contracts with vendors with whom DHHS contracts contain astronomically high figures. For example, DHHS hired Computer Sciences Corporation (CSC) to implement the NCTracks software for $265 million. Furthermore, there is no mention of the lack of supervision of the managed care organizations (MCOs) and the compensation for executives of MCOs being equal to that of the President of the United States in the Subpoenas.
The subpoenas are limited in scope as to documents related to hiring and the employment terms surrounding DHHS employees. As I just said, there is no mention of violations of bid processes for vendors or contractors, except as to Alvarez & Marsal, and nothing as to the MCOs.
Specifically, the subpoena is requesting documents germane to the following:
- Les Merritt, a former state auditor who stepped down from the North Carolina State Ethics Commission after WRAL News raised questions about potential conflicts of interest created by his service contract with DHHS;
- Thomas Adams, a former chief of staff who received more than $37,000 as “severance” after he served just one month on the job;
- Angie Sligh, the former director of the state’s upgraded Medicaid payment system who faced allegations of nepotism and the waste of $1.6 million in payments to under-qualified workers for wages, unjustified overtime and holiday pay in a 2015 state audit;
- Joe Hauck, an employee of Wos’ husband who landed a lucrative contract that put him among the highest-paid workers at DHHS;
- Alvarez & Marsal, a consulting firm overseeing agency budget forecasting under a no-bid contract that has nearly tripled in value, to at least $8 million;
Most likely, the penalties imposed would be more civil in nature and encompass suspensions, recoupments, and/or reductions to the federal matching. Possibly a complete termination of all federal matching funds, at the worst.
42 CFR Part 430, Subpart C – of the Code of Federal Regulations (CFR) covers “Grants; Reviews and Audits; Withholding for Failure To Comply; Deferral and Disallowance of Claims; Reduction of Federal Medicaid Payments”
The Center for Medicare and Medicaid Services (CMS) is charged with the oversight of all 50 states’ management of Medicaid, which makes CMS very busy and with solid job security.
CMS may withhold federal funding, although reasonable notice and opportunity for a hearing is required (unlike the reimbursement suspensions from providers upon “credible” (or not) allegations of fraud).
If the Administrator of a hearing finds North Carolina non compliant with federal regulations, CMS may withhold, in whole or in part, our reimbursements until we remedy such deficiency. Similar to health care providers’ appeals, if the State of North Carolina is dissatisfied with the result of the hearing, NC may file for Judicial Review. Theoretically, NC could go all the way to the U.S. Supreme Court.
Other penalties could include reductions of (1) the Federal Medical Assistance Percentage; (2) the amount of State expenditures subject to FFP; (3) the rates of FFP; and/or (4) the amount otherwise payable to the state.
As a reminder, the penalties listed above are civil penalties, and NC is under criminal investigation; however, I could not fathom that the criminal penalties would differ far from the civil allowable penalties. What are the feds going to do? Throw Wos in jail? Highly unlikely.
The subpoena was addressed to:
NC DHHS, attention the Custodian of Records. In NC, public records requests go to Kevin V. Howell, Legal Communications Coordinator, DHHS.
But is the federal government’s criminal investigation of DHHS too narrow in scope?
If we are investigating DHHS employees’ salaries and bid processes, should we not also look into the salaries of DHHS’ agents, such as the salaries for employees of MCOs? And the contracts’ price tags for DHHS vendors?
Turning to the MCOs, who are the managers of a fire hose of Medicaid funds with little to no supervision, I liken the MCOs’ current stance on the tax dollars provided to the MCOs as the Lion, who hunted with the Fox and the Jackal from Aesop’s Fables.
The Lion went once a-hunting along with the Fox, the Jackal, and the Wolf. They hunted and they hunted till at last they surprised a Stag, and soon took its life. Then came the question how the spoil should be divided. “Quarter me this Stag,” roared the Lion; so the other animals skinned it and cut it into four parts. Then the Lion took his stand in front of the carcass and pronounced judgment: The first quarter is for me in my capacity as King of Beasts; the second is mine as arbiter; another share comes to me for my part in the chase; and as for the fourth quarter, well, as for that, I should like to see which of you will dare to lay a paw upon it.”
“Humph,” grumbled the Fox as he walked away with his tail between his legs; but he spoke in a low growl:
Moral of Aesop’s Fable: “You may share the labours of the great, but you will not share the spoil.”
At least as to DHHS employees’ salaries, the federal government is investigating any potential mismanagement of Medicaid funds due to exorbitant salaries, which were compensated with tax dollars.
Maybe this investigation is only the beginning of more forced accountability as to mismanaging tax dollars with Medicaid administrative costs.
One can hope…(but you do not always want what you wish for…because the consequences to our state could be dire if the investigation were broadened and non compliance found).
Let us quickly contemplate the possible consequences of any of the above-mentioned penalties, whether civil or criminal in nature, on Medicaid recipients.
To the extent that you believe that the reimbursement rates are already too low, that medically necessary services are not being authorized, that limitations to the amount services are being unduly enforced…Imagine that NC lost our federal funding completely. We would lose approximately 60% of our Medicaid budget.
All our “voluntary” Medicaid-covered services would, most likely, be terminated. Personal care services (PCS) is an optional Medicaid-covered service.
With only 40% of our Medicaid budget, I could not imagine that we would have much money left to pay providers for services rendered to Medicaid recipients after paying our hefty administrative costs, including overhead,payroll, vendor contracts, MCO disbursements, etc. We may even be forced to breach our contracts with our vendors for lack of funds, which would cause us to incur additional expenses.
All Medicaid providers could not be paid. Without payments to providers, Medicaid recipients would not receive medically necessary services.
Basically, it would be the next episode of “Fear the Walking Dead.”
Hopefully, because the ramifications of such penalties would be so drastic, the federal government will not impose such sanctions lightly. Sanctions of such magnitude would be a last resort if we simply refused to remedy whatever deficiencies are found.
Otherwise, it could be the zombie apocalypse, but the Lion’s would be forced to share.
Mark this day, June 25,2015 (also my daughter’s 10th birthday) as also the birth of a new state. Our country, according to the Supreme Court’s decision in King v. Burwell, now consists of 51 states. The Health and Human Services (HHS) is now our 51st state.
Today the Supreme Court decided the King v. Burwell case.
If you recall, this case was to determine whether the plain language of the Affordable Care Act (ACA) should be upheld. According to the ACA, people were to receive tax subsidies or “premium tax credits” to subsidize certain purchases of health insurance made on Exchanges, but only those enrolled in through an Exchange established by the State under [§18031]. §36B(c)(2)(A).
“Specifically, the question presented is whether the Act’s tax credits are available in States that have a Federal Exchange.”
“At this point, 16 States and the District of Columbia have established their own Exchanges; the other 34 States have elected to have HHS do so.”
In Justice Scalia’s words, “This case requires us to decide whether someone who buys insurance on an Exchange established by the Secretary gets tax credits. You would think the answer would be obvious—so obvious there would hardly be a need for the Supreme Court to hear a case about it. In order to receive any money under §36B, an individual must enroll in an insurance plan through an “Exchange established by the State.” The Secretary of Health and Human Services is not a State. So an Exchange established by the Secretary is not an Exchange established by the State—which means people who buy health insurance through such an Exchange get no money under §36B.”
However, the majority disagrees.
Apparently, HHS is now our 51st state.
The upshot of the Decision is that the majority found that, despite our country’s deep-rooted, case law precedent that when a statute is unambiguous that the plain meaning of the statute prevails. Despite hundreds of years of the Supreme Court upholding statutes’ clear meanings, the Supreme Court, in this case, decided that “[i]n extraordinary cases, however, there may be reason to hesitate before concluding that Congress has intended such an implicit delegation.”
Therefore, when the ACA became law, and the word “state” was used, surely, Congress meant “state and/or federal government.” Or, on the other hand, let’s just call HHS a state for the purpose of the ACA.
In Justices Scalia, Thomas, and Alito’s opinions, the decision is absurd. In the dissent they write, “The Court holds that when the Patient Protection and Affordable Care Act says “Exchange established by the State” it means “Exchange established by the State or the Federal Government.” That is of course quite absurd, and the Court’s 21 pages of explanation make it no less so.”
This is a copy of an article written by William Baude on SCOTUSblog.
In the article, William analyzes the oral arguments for Armstrong v. Exceptional Child Center, a very important Supreme Court case heard by the Justices January 20, 2015. If you don’t recall the lawsuit, see my blog: “Low Medicaid Reimbursement Rates Violate the Supremacy Clause?!… The Supreme Court to Weigh In!”
Here is the analysis:
The Supreme Court has heard a lot of preemption suits, but Tuesday’s arguments in Armstrong v. Exceptional Child Center suggest that the Court has not yet agreed on what exactly the formal underpinnings of those suits are.
The case features a debate about the intersection of two lines of precedent. One line restricts the availability of a federal statutory cause of action unless Congress has deliberately included one. The other line makes a cause of action broadly available when the plaintiff seeks an injunction to enforce a constitutional provision. At issue in this case is whether suits to enforce the preemptive effect of a federal statute are more like constitutional injunctions or statutory suits.
Both lines of precedent were on full display at yesterday’s argument. Shortly after his argument started the state’s counsel, Carl Withroe, was pressed with questions about the many prior preemption cases the Court had heard. Justice Ruth Bader Ginsburg adverted to a list of fifty-seven cases attached to the Medicaid recipients’ brief that are alleged to fail under the state’s theory. Withroe made several different attempts to distinguish those cases, although he did not seem to fully satisfy the Court. Towards the end of Withroe’s argument, Justice Anthony Kennedy asked “Did I miss something? … I thought you were going to give us a principled way to say why this case is different from our other preemption cases.”
Deputy Solicitor General Ed Kneedler took the podium next, attempting to supply that principled basis. He argued that Spending Clause legislation, and Medicaid specifically, was different from the usual preemption case for reasons rooted in the history of equity practice. Traditional equitable remedies, he said, could vindicate a person’s “liberty,” “property,” or “business,” but Medicaid was none of those things because it was a spending program created by a cooperative agreement with the state. Once again, Justice Kennedy chimed in at the end of Kneedler’s time to question whether his theory really distinguished one of the Court’s prior cases, American Trucking Associations v. City of Los Angeles.
Representing the Medicaid recipients, attorney James Piotrowski also faced skepticism about the implications of his position, and seemed to embrace them more than to distinguish them. He openly conceded that his clients would not have a right to sue under the Court’s statutory cause of action cases or under Section 1983. But the Supremacy Clause suit, he stressed, would seek only the narrow remedy of an injunction.
Justice Samuel Alito asked Piotrowksi whether his argument implied that someone could challenge a state’s decision to legalize marijuana as preempted by federal drug laws. Yes, Piotrowksi agreed, so long as Article III standing was satisfied, there would indeed be a cause of action. (Though Justice Alito did not specifically mention a suit by a state, the question might have been inspired by the recent marijuana preemption lawsuit filed in the Supreme Court’s original jurisdiction by two states — Oklahoma and Nebraska.)
And when Chief Justice John Roberts suggested to Piotrowski that his position would open “the courthouse door to everybody who says that federal law was not followed,” Piotrowski agreed: “Yes, your honor, that’s right. We open the courthouse doors.”
At the same time, Piotrowski also conceded that Congress could expressly preclude a preemption suit if it spoke clearly. The key, he argued, is that Congress’s decision not to create a statutory cause of action was not the same as a congressional decision to prohibit a cause of action that came from other background legal principles. Justice Kennedy did not ask Piotrowski any questions.
Lest this abbreviated summary make it seem like argument followed a clear path, I should say that there were also plenty of side points raised throughout. There were questions about how the state’s reimbursement rates related to its formula, a question from Justice Elena Kagan about why nobody from the federal Department of Health and Human Services had signed the federal government’s amicus brief, a response from Chief Justice Roberts about whether DHS was just trying to help the health-care sector “get a bigger chunk of the federal budget,” and a series of questions from Justice Stephen Breyer about the doctrine of “primary jurisdiction,” including a nostalgic reminiscence about the Civil Aeronautics Board “of blessed memory.” But the Justices also constantly reminded one another that the question was whether the suit could be brought, not whether it should prevail.
Four Justices have already answered that question in their dissent three years ago in Douglas v. Independent Living Center. Over the next few months, we will see if they have persuaded any of their colleagues to join them.
AZ Supreme Court Holds AZ Legislators Have Standing to Challenge AZ Law, But Media Mischaracterizing the Lawsuit
You know the old adage, “Believe none of what you hear, and only half of what you see?” –Benjamin Franklin.
Well the old adage still holds true, especially when it comes to journalists and the media interpreting and reporting on lawsuits that deal with Medicaid laws, and which, perhaps, only an infinitesimal, ancillary aspect may touch the issue of Medicaid expansion.
Even if the lawsuit will not impact Medicaid expansion, journalists and the media hype the lawsuits as “conservatives challenging Obamacare yet again,” which mischaracterizes the actual lawsuit.
It seems that the media have become so accustomed to polarizing the topic of Medicaid expansion that reporters seem incapable of truly assessing the issues objectively and reporting accordingly. This has happened recently when the AZ Supreme Court rendered a decision December 31, 2014, regarding legal standing, not the constitutionality of Medicaid expansion as many journalists report. Biggs, et al. v. Hon. Cooper, et al.
The Arizona Supreme Court only decided that 36 legislators have the legal standing to challenge the passage of House Bill 2010, which was signed into law as A.R.S. § 36-2901.08.
What is A.R.S. § 36-2901.08?
For starters, A.R.S. stands for Arizona Revised Statutes (ARS). For those of you who missed “Schoolhouse Rock” as a child, a statute is a law that is enacted by the legislative body and which governs the state. Statutes are considered “black letter law” and should be interpreted on their face value and plain meaning.
The content of 36-2901.08 allows the State of Arizona to expand Medicaid. In addition to expanding Medicaid, 35-2901.08 assesses a levy on hospitals to aid in funding the expansion of Medicaid.
36 Arizona legislators voted against 36-2901.08. It passed by a simple majority and was signed into law. The 36 legislators, who voted against the bill, brought a lawsuit to enjoin the statute from being applied or enacted. The State of Arizona’s position is that the 36 legislators lack the legal standing to bring the lawsuit.
Here are the issues in the legislators’ case, BIGGS ET AL. v. HON. COOPER ET AL.:
1. Do the 36 legislators have the standing to bring an injunctive action enjoining Arizona from carrying out 36-2901.08?
2. If the answer to #1 is yes, then have the 36 legislators proven that 36-2901.08 was passed in violation of the AZ Constitution?
I’ve read a number of articles from journalists covering this matter who mischaracterize the Biggs lawsuit as a lawsuit brought by the Arizona legislators, predominantly Republicans, asking the Arizona Supreme Court to strike statute 36-2901.08 because the expansion of Medicaid is unconstitutional, or “challenging Governor Jan Brewer’s Medicaid expansion plan,” or “challenging the legality of the state’s Medicaid expansion…”
These journalists are mischaracterizing the Arizona Supreme Court’s opinion. And I am not talking about journalists for small, local papers are making these mistakes…the above quotations are from “The New York Times” and “The Associated Press.”
So, let’s discuss the true, correct ramifications of the Arizona Supreme Court opinion in Biggs…
First, the Biggs opinion does not hold that Medicaid expansion in Arizona or elsewhere is unconstitutional…nor does it decide whether Medicaid expansion in Arizona is invalid on its face.
The opinion, rendered December 31, 2014, only holds that the 36 legislators have the legal standing to bring the lawsuit…there is no holding as to constitutionality of Medicaid expansion, despite so many journalists across America stating it so.
What is standing?
Standing, or locus standi, is the capacity of a party to bring suit in court. This is not a question of whether a person is physically capable of bringing a lawsuit, but whether the person prove that he or she has sustained or will sustain a direct injury or harm and that the harm is redressable (or can be fixed or set right by the lawsuit).
The issue on the Supreme Court level in Arizona is only the narrow issue of whether the 36 legislators have standing. Period.
The Arizona Supreme Court held that the 36 legislators do possess the requisite legal standing in order to bring the lawsuit.
Now, the case will be remanded (sent to a lower court), in this instance, to the Superior Court, for a new fact-finding trial now that the issue of standing has been resolved. In other words, at the lower superior court level, the ref (judge) made a call that the football players on the team (36 legislators) were ineligible to play NCAA football (poor grades, were red-shirted last year), and the alleged ineligible players appealed the decision all the way up. Now the NCAA (AZ Supreme Court) has determined that the players are eligible and the game will resume.
Again, despite the rhetoric put forth by numerous widespread journalists, the 36 legislators are not merely challenging Arizona Medicaid expansion on its face.
Instead, the Arizona Constitution requires that certain Acts that increase state revenues must pass the legislature by a supermajority vote. See Ariz. Const. art. 9, § 22(A).
Remember from the beginning of this blog that 36-2901.08 was passed by a simple majority.
The 36 legislators argue that the assessment of a levy on Arizona hospitals constitute an Act that requires a supermajority vote, which, obviously would require more than a straight 50% approval.
So the 36 legislators’ lawsuit in AZ is about whether 36-2901.08 needs a supermajority or simple majority to vote it into law.
Not whether Medicaid expansion is constitutional.
Believe none of what you hear, and only half of what you see…especially when it comes to journalists and media reporting on lawsuits regarding Medicaid rules and regulations.
Supreme Court Will Decide Whether Citizens in NC and 26 Other States Can Receive Tax Credits for Health Care Premiums!!
With a decision that, I can only imagine, ricocheted against the White House walls, the Supreme Court granted certiorari to hear King v. Burwell this past Friday, November 7, 2014, despite Obama’s administration’s request for the Supreme Court to postpone granting certiorari in order to wait for a D.C. circuit to re-visit an opinion, the Halbig ruling.
The Supreme Court’s decision in King could, potentially, have devastating consequences on the Affordable Care Act (ACA). However, I write that last sentence with an asterisk. Journalists across the country are entitling articles, “Obamacare Is Doomed! Everybody Panic!”, “The Supreme Court Might Gut Obamacare. Your State Could Save It,” and “Obamacare vs. Supreme Court.” These titles to articles are misleading, at best, and factually incorrect, at worst. King v. Burwell is actually not an attack on the ACA. But I will explain later…
First of all, what the heck is certiorari…or “cert”, as many attorneys call it?
A writ of certiorari is actually an order from a higher court to a lower court demanding a record in a case so that the higher court may review the lower court’s decision. A writ of certiorari is the instrument most used by the Supreme Court to review cases. The Supreme Court hears such a small, minute fraction of lawsuits that when the Supreme Court “grants cert,” it is a big deal.
I have written in the past about these same two appellate court cases, which were both published July 22, 2014, within hours of one another, regarding the Health Care Premium Subsidies Section of the Affordable Care Act. These two cases yield polar opposite holdings. In Halbig v. Burwell, the D.C. Circuit Court found that the clear language of the ACA only allows the health care premium subsidies in states that created their own state-run health care exchanges, i.e, residents in NC along with 35 other states would not be eligible for the subsidies. See my blog: Halbig: Court Holds Clear Language of the ACA Prohibits Health Care Subsidies in Federally-Run Exchanges.
Juxtapose the 4th Circuit Court’s decision in King v. Burwell, which held that “For reasons explained below, we find that the applicable statutory language is ambiguous and subject to multiple interpretations. Applying deference to the IRS’s determination, however, we uphold the rule as a permissible exercise of the agency’s discretion.”
So the two cases came to two entirely different conclusions. Halbig: ACA is clear; King: ACA is ambiguous.
Well, for everyone else, that is as clear….as mud.
When the D.C. court decided Halbig, it was not an en banc decision. In English, this means that the entire bench of judges in the D. C. Circuit did not hear the case, only a panel of three (which is the usual way for a case to be heard on appeal to a federal circuit). The Obama administration, along with other proponents of the ACA, hoped that the U.S. Supreme Court would deny cert to King until the D.C. court could re-visit its decision, this time en banc.
Yet, this past Friday, the Supreme Court opted to consider King v. Burwell.
The sole issue to be decided is: Whether the Internal Revenue Service may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through exchanges established by the federal government under Section 1321 of the Patient Protection and Affordable Care Act.
How is King v. Burwell NOT an attack on the ACA?
The plaintiffs in King are not asking the Supreme Court to strike down the ACA, even, in part. They are asking the Court to uphold the plain language of the ACA by holding that the IRS’s interpretation of the ACA is erroneous. Let me explain…
Section 1311 directs states to establish exchanges, and Section 1321 directs the federal government to establish exchanges “within” any state that opts to not set up its own state-run exchange, e.g., NC.
Section 1401 authorizes subsidies for people whose household income falls between 100 and 400% of the federal poverty level, who are not eligible for qualified employer coverage or other government programs, and who enroll in coverage “through an Exchange established by the State.” (emphasis added). These 3 criteria are crystal clear based on the plain language of the statute.
The statute makes no provision for subsidies in states that opt not to create their own exchange but, instead, allow the federal government to create an exchange within its state.
The ACA was intended to create penalties if the states do not establish their own exchanges. For example, the subsidies are not allowed to citizens of states without state-created exchanges.
In August 2011, the IRS issued a proposed rule [add link] announcing it would provide tax credits (and implement the resulting penalties) in states with federal exchanges, too. IRS officials later admitted to Congress that they knew the statute did not authorize them to issue tax credits through federal exchanges…Oops…
The proposed rule received much negative feedback based on the fact that the IRS appeared to have no statutory basis for the rule. Nonetheless, the proposed rule was finalized in May 2012, and lawsuits ensued…
Oklahoma began the litigation with Pruitt v. Burwell in September 2012. In September 2014, a federal district court held that the plain language of the ACA does not allow subsidies in states with federally-run exchanges. In May 2013, Halbig v. Burwell was filed, and in September 2013, King v. Burwell was filed.
So, much to the contrary of popular belief, these lawsuits are not “against the ACA” or “proving the unconstitutionality of the ACA.” Instead, these lawsuits are “against” the IRS interpreting the ACA to allow tax credits for all states, even if the state has a federally-run exchange.
Will it negatively impact the ACA if the plaintiffs win? That would be a resounding yes.
Oral argument could be as soon as March 2015.
Have you ever said something that you immediately wished you could put back in your mouth? I know I have! In fact, just recently, I was eating lunch with my husband and one of our closest friends Josh. Josh, his wife, Tracey, my husband Scott and I ride horses together almost every weekend. Our daughters come with us, and it’s a fun family event. So, I should have known that a manger is a tool used in barns to hold the hay for the horses to eat, not just baby Jesus’ bed.
Josh tells me that he is going to pick up a manger. To which I respond, “Josh, why do you need a baby manger?” If words came out of your mouth on a string, I would have grabbed that string and shoved it back into my mouth. Of course, my husband had no end to his ribbing. “Josh, why do they sell baby mangers in Tractor Supply?” And “Baby Jesus was so lucky that someone put a manger in that barn for when he was born.”
At that point, I would have liked to claim that I had a “speak-o.” You know, like a typo, but for speech.
At least this is what Jonathan Gruber has claimed…that he made a speak-o in 2012.
Jonathan Gruber is one of the architects of the Affordable Care Act (ACA). He drafted much of the language included in the ACA. After the ACA was passed, Gruber was interviewed by a number of journalists regarding specific sections of the ACA. One of the sections on which he spoke was the section that allowed for health care premium subsidies for people enrolled in the program who reside in states which created state-run health care exchanges as opposed to states that opted to use the federal exchange. For ease of this blog, I will call this ACA section the “Health Care Premium Subsidies Section.”
As I am sure you are aware if you follow my blog, two appellate court cases came out July 22, 2014, regarding the Health Care Premium Subsidies Section, with polar opposite holdings. In Halbig v. Burwell, the D.C. Circuit Court found that the clear language of the ACA only allows the health care premium subsidies in states that created their own state-run health care exchanges, i.e, residents in NC along with 35 other states would not be eligible for the subsidies. See my blog: “Halbig: Court Holds Clear Language of the ACA Prohibits Health Care Subsidies in Federally-Run Exchanges.”
Juxtapose the 4th Circuit Court’s decision in King v. Burwell, which held that “For reasons explained below, we find that the applicable statutory language is ambiguous and subject to multiple interpretations. Applying deference to the IRS’s determination, however, we uphold the rule as a permissible exercise of the agency’s discretion.”
The two cases were released within hours of each other and came to two entirely different conclusions. Halbig: ACA is clear; King: ACA is ambiguous.
Interesting to note is that D.C. is not a state, and the 4th Circuit clearly embraces five states.
In my Halbig blog, I explain the legal analysis of statutory interpretation. I also explain that based on my reading of the Health Care Premium Subsidies Section, I tend to side with the D.C. courts and opine that the Section is not ambiguous.
If, however, a court finds that the statutory language is ambiguous, the court defers to the agency’s interpretation “so long as it is based on a permissible construction of the statute,” which is clear case law found in the 4th Circuit.
Therefore, once the 4th Circuit determined that the statute is ambiguous, the court made the correct determination to defer to the IRS’ ruling that all states could benefit from the subsidies.
Yet another approach to statutory interpretation is considering the legislative intent. The courts may attempt to evaluate legislative intent when the statute is ambiguous. In order to discern legislative intent, courts may weigh proposed bills, records of hearing on the bill, amendments to the bill, speeches and floor debate, legislative subcommittee minutes, and/or published statements from the legislative body as to the intent of the statute.
Recently, some journalists have uncovered 2012 interviews with Gruber during which he states that the Health Care Premium Subsidies Section was drafted intentionally to induce the states to create their own health care subsidies and not rely on the federal exchange. How’s that for intent?
The exact language of that part of the 2012 interview is as follows:
Interviewer: “You mentioned the health information [sic] Exchanges for the states, and it is my understanding that if states don’t provide them, then the federal government will provide them for the states.”
Gruber: “I think what’s important to remember politically about this is if you’re a state and you don’t set up an Exchange, that means your citizens don’t get the tax credits… I hope that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these Exchanges, and that they’ll do it.”
What do you think? You think Gruber is pretty explicit as to legislative intent? Well, at least in 2012….
In 2014, Gruber states, as to his 2012 comment, “I honestly don’t remember why I said that. I was speaking off-the-cuff. It was just a mistake. People make mistakes. Congress made a mistake drafting the law and I made a mistake talking about it.”
According to Gruber, Congress made a typo; Gruber made a speak-o.
“It’s unambiguous that it’s a typo,” Gruber tells reporter Chris Matthews from NBC and MSNBC.
Um…a typo when the statement is spoken? Hence, the new word “speak-o” blowing up Twitter.
If Gruber’s statement was truly a speak-o, it was a re-occurring speak-o. Gruber also made two speeches in which he listed three possible threats to the implementation of Obamacare. In both cases the third “threat” was that states would not set up exchanges and, instead, would rely on the federal government.
I anticipate that Gruber’s 2012 and contrary 2014 statements will be at issue as these cases, Halbig and King, move forward.
As for me, I would like to invoke my own speak-o’s. I can only imagine how I will be received when I appear before a court and say, “Your Honor, I apologize. That was a speak-o.”
Compelling Personal Care Workers to Pay Union Dues Violates Our Freedom of Speech: But I Still Have to Pay My HOA Dues!
I live in a community that requires homeowner association monthly dues. We have a homeowner association (HOA). More than once I have complained at the high cost of these monthly dues and the absurd endeavors on which our HOA spends my money. For example, we had a beautiful, clay tennis court. If you have ever played tennis on a clay court, you know how wonderful it is to play on clay. Clay tennis courts are also expensive to build. A few years ago, my HOA decided to turn the clay tennis courts into a gardening center. In place of the tennis nets, they built 10-12 raised beds to which the homeowners could purchase rights to use. Somehow, my HOA determined the clay tennis court would be better used as a place to hold raised beds instead of playing tennis.
Despite my intense disapproval of this decision, I was forced to continue to pay my HOA dues, and a part of my HOA dues was spent on the conversion from tennis court to garden center.
Not completely dissimilar, in many states, public sector workers are required to contribute to union dues, even if they disagree with the union’s actions. In-home care workers are considered public sector workers in Illinois because they care for the disabled and elderly and accept Medicaid money. Including Illinois, 19 states allow bargaining agreements for home care workers.
Last week the Supreme Court sent shockwaves to the 19 states that allow bargaining agreements with home care workers. The Supreme Court held that Illinois cannot compel personal care workers to pay union dues.
You may be asking yourself, why is Knicole blogging about an Illinois lawsuit and union dues. How in the world does this affect North Carolina health care providers who accept Medicare and Medicaid?
The narrow answer would be that the case has no effect whatsoever on NC health care providers. Unlike Illinois, North Carolina does not allow public sector bargaining. In fact, in NC, union contracts, or bargaining contracts for public sector employees are considered “illegal, unlawful, void and of no effect.” N.C. Gen. Stat. 95-98.
A broader view, on the other hand, is to understand that increases or decreases in personal care wages, better or worse benefits provided to personal care workers, and the overall profit or loss of personal care workers across the country, is relevant to NC personal care workers, and I prefer this broader view.
In the Supreme Court case, Harris, et al v. Quinn, Justice Alito wrote that compelling public sector workers to compensate a third party to “speak” for them, even if the worker disagrees with the third party’s speech violates the First Amendment.
In the Supreme Court opinion, Justice Alito writes:
“If we accepted Illinois’ argument, we would approve an unprecedented violation of the bedrock principle that, except perhaps in the rarest of circumstances, no person in this country may be compelled to subsidize speech by a third party that he or she does not wish to support.”
Individual states determine labor laws related to government employees. As previously stated, NC bans bargaining agreements. Virginia does as well.
In states that do allow bargaining agreements, if workers did not want to participate in the bargaining unit, the worker would opt out of full dues and pay only the cost of grievance administration and collective bargaining. Supposedly, this prevents the nonmembers, who benefit from the reward of collectively-bargained higher wages or better benefits, from reaping the benefits without paying for them. The whole “free-ride” idea…
In Illinois, Service Employees International Union (SEIU), a bargaining unit, argued that personal care workers should be compelled to contribute to it because personal care workers are public sector workers.
SEIU claims that it gets higher pay and better benefits for personal care workers. Approximately 1 million of the 3 million personal care workers nationwide are members of SEIU or other similar organizations.
However, the Supreme Court disagrees. According to the Harris decision, I shouldn’t have to pay for HOA dues if I disagree with the HOA’s actions (I’m kidding. Sadly, I have no case to cease paying my HOA dues).
Proponents of unions are not happy with the results, but let’s play out a hypothetical…what if the Supreme Court held that public sector workers were required to pay union dues, even against their will….
Because, think about it…the government cannot prevent us from contributing to political candidates nor can the candidate force you to contribute to a political campaign. Upholding the freedom of speech is not necessarily anti-union. The Supreme Court did not rule “against” unions per se. It ruled that a bargaining unit is “bargaining for” or “speaking for” its members. And you cannot be forced to pay for speech with which you disagree.
Free speech allows all of us to individually decide which principles to support. Allowing personal care workers to choose not to support certain ideologies is not an attack on collective bargaining. Rather, it ensures that the free choices of personal care workers are represented by any union entity, rather than union leaders benefiting from coerced fees.
While the Harris decision does not apply to me and my HOA dues for many reasons, including the fact that I chose to live in the community knowing that the HOA existed, the Harris decision does have possible broad ramifications, especially as to in-home care workers and other public sector workers. It may mean that the 1 million in-home care workers now compelled to contribute to unions may have standing to stop if they so choose.
Do you know anyone who constantly changes his or her mind? Sometimes changing your mind can have drastic consequences. Think about it in the aspects of politics. Imagine that Obama announces that he was switching parties to become a Republican? This would be a huge decision with drastic consequences.
As crazy as it sounds, politicians do switch sides. The most recent switch-hitter that I can recall is Charlie Crist of Florida. Republican Crist served as Florida’s governor from 2007 to 2011. In December 2011, Crist officially changed his party affiliation to Democrat. More famously, Ronald Reagan began his political career as a Democrat. Hillary Clinton used to be a Republican. These changes had profound impact.
Now imagine that the Supreme Court rules one way, then overturns itself. There would be drastic consequences, and it does not happen often (actually the Supreme Court has overturned itself 10 times over the course of history).
Similarly, what if the Center for Medicare and Medicaid (CMS) issued a final ruling, caused millions of providers to change the way they bill Medicare or Medicaid, then changed its mind?
Can CMS change its mind after issuing a final ruling?
This is precisely what the Supreme Court will decide.
In Perez v. Mortg. Bankers Ass’n, U.S., No. 13-1041, petition filed 2/28/14, the federal government is asking the Supreme Court to review whether an agency altered its interpretation of a regulation without adhering to the Administrative Procedure Act (APA). In Perez, the Department of Labor (DOL) issued a reinterpretation of a prior ruling without obtaining notice and comment from the public.
If the Supreme Court allows the DOL to uphold its reinterpretation, this holding could have serious ramifications in the health care arena. Medicare and Medicaid are also highly regulated, like labor laws. IF DOL’s reinterpretation stands, then CMS could also issue redeterminations of prior rulings without notice and comment.
Allowing CMS to flip-flop decisions would impact providers who rely on CMS rulings in order for their practices to remain compliant.
As of now, the Supreme Court has not decided whether it will hear arguments on this case. But both petitions filed with the Supreme Court cite a circuit court split in opinions. It is more likely for the Supreme Court to grant review of a case when there is a split of opinion.