American Health Lawyers Association. Table of Contents
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1 American Health Lawyers Association Institute on Medicare & Medicaid Payment Issues Thursday, March 29, 2012, 4:15 to 5:45 PM Friday, March 30, 2012, 8:00 to 9:30 AM SS. Medicaid Supreme Court Cases and CMS Proposed (a)(30)(a)rules Lloyd A. Bookman Donna D. Fraiche Mark H. Gallant Stephen S. Schwartz Table of Contents Panel Presenters and Topics Background and Introduction Brief Overview and History of Litigation under Medicaid Act History of (a)(30)(a) suits under 1983 from Wilder to Gonzaga Supreme Court from 1990 to present Supremacy Clause as a Cause/Right of Action Politics and Merits of the Supreme Court Review of Medicaid Enforcement Chronology of the Douglas opinion February 22, 2012 slip opinion Role of the State to Provide Plan Amendments to CMS Role of CMS to Review States Plan Amendments Role of the Administrative Procedure Act (APA) Role of Reviewing Courts Agency Deference Application Amendments to (a)(30)(a) Rules Role of APA in Future Litigation Role of the States Given Medicaid Expansion Potential 1
2 Panel Presenters and Topics (in order of presentation) Donna D. Fraiche represents providers/consumers in challenges against State Medicaid cuts affecting rates and access. She served as co-counsel to the American Hospital Association in connection with Amici Briefs before the Supreme Court. She will serve as Moderator and briefly discuss the background and history of the Medicaid law, expansion impact and the role of the Courts. Mark A. Gallant represents providers in connection with Federal enforcement of Medicaid requirement. He will discuss the history of (a)(30)(a) suits under 1983 from Wilder to Gonzaga.. Panel Presenters and Topics (in order of presentation) Lloyd A. Bookman represents the California Hospital Association and will discuss the politics and merits of Supreme Court review of Medicaid Act enforcement under the Supremacy Clause, the future of the Douglas Supreme Court opinion and new cases under the APA. Stephen S. Schwartz represented the National Governors Association, National Conference of State Legislatures, Council of State Governments, National Association of Counties, International City/County Management Association, and US Conference of Mayors as Amici Curiae in support of Petitioner, Douglas and will address Supremacy Clause application. 2
3 Background and Introduction OVERVIEW AND HISTORY The Essence of This Session Can parties who provide, or are entitled to receive, covered services seek judicial recourse when budgetdriven rate cuts threaten the availability or quality of those services? If so, how and under what standard of review? 3
4 MACPAC, Report to the Congress on Medicaid and Chip, March,
5 Medicaid Expansion Covers 60 million lives (29 million children, 15 million adults, 15 million elderly and disabled) ACA expands coverage. Everyone at or below 133% of FPL by January 1, 2014 (16 million additional lives) Enhanced federal funding requires Maintenance of Eligibility (MOE) under State Plans and existing waivers Medicaid Cost Pressures Plus Coverage Expansion: The Perfect Storm 5
6 MACPAC, Report to the Congress on Medicaid and Chip, March, 2011 History of (a)(30)(a) suits 6
7 State plans must: The Access Clause: (30)(A) provide such methods and procedures relating to utilization of, and payment for care and services (including but not limited to utilization review plans ) as may be necessary to safeguard against unnecessary utilization and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such services are available to the general population in the geographic area. Circuits have split on Standing of providers and beneficiaries to enforce Sec. (30)(A) under 1983 What Sec. (30)(A) requires states to do, substantively to assure equal access 7
8 Supreme Court Cases Can budget based cuts to Medicaid reimbursement alleged to violate the access requirements of 1902(a)(30)(A) of the Medicaid Act be challenged in federal court under the Supremacy Clause? Douglas v. Independent Living Ctr. and related cases (argued Oct. 3, 2011). Supremacy Clause as a Cause of Action Three key areas of legal authority and evidence: Law of suits for injunctive relief, particularly for pre-emption. History and pre-history of the Supremacy Clause. Other existing mechanisms for enforcement of federal statutory rights. 8
9 Politics and Merits of the Supreme Court Review of Medicaid Enforcement Administration Argues Medicaid Recipients Cannot Sue States The New York Times (5/29, A23, Pear, Subscription Publication) reported on the case of Douglas v. Independent Living Center of Southern California, No : California is being sued by Medicaid recipients and providers for having set reimbursement rates too low in violation of US Law... The 9 th US Circuit Court of Appeals ruled for the plaintiffs, but California appealed the decision and Acting SG Neal K. Katyal filed an Amicus Brief with the US Supreme Court arguing that no federal law allowed private individuals to sue states to enforce this standard 9
10 Administration Argues Medicaid Recipients Cannot Sue States States are unhappy with the 9 th Circuit s decision, while consumer advocates are dismayed by the administration s position The DOJ brief reverses positions taken by Solicitors General not only in this administration but all previous administrations, Republican as well as Democratic 2010-the Department affirmed the important role private parties can and often do play in vindicating federal law, in recommending that the Supreme Court decline to accept this very case for review under the Bush administration, SG Olson similarly told the Supreme Court that Spending Clause enactments preempt inconsistent state law by operation of the Supremacy Clause. 10
11 The DOJ brief reverses positions taken by Solicitors General not only in this administration but all previous administrations, Republican as well as Democratic 2002-SG Olson asserted that Spending Clause statutes are binding law with the full force and preemptive authority of federal legislation under the Supremacy Clause Obama-appointed Acting SG Katyal asked the Supreme Court to accept certiorari in Douglas cases in the 9 th Circuit Acting Solicitor General to Supremes: Close Courthouse Doors to Safety Net Beneficiaries 11
12 Calif. Medicaid cuts pit HHS vs. DOJ By: J. Lester Feder June 7, :46 AM EST Much of the health policy world was stunned when acting Solicitor General Neal Katyal filed an amicus brief in a Supreme Court case on May 26 arguing against Medicaid patients and providers suing California over changes to its Medicaid program. Every health policy person and every lawyer in the administration [was] on [the opposite side] the good guy side, said a Capitol Hill source with knowledge of the deliberations. Chronology of the Douglas opinion AB 5 Rate Cuts and Lower Court Litigation Orthopaedic Hospital v. Belshe, 103 F.3d 1491 (9 th Cir. 1997) Independent Living Center v. Shewry Independent Living Center v. Maxwell-Jolly, 572 F.3d 644 (9 th Cir. 2009) California Medical Association v. Shewry, (BC ) Santa Rosa Memorial Hospital v. Maxwell-Jolly (9 th Cir. 2009) California Pharmacist Association v. Maxwell-Jolly, 630 F. Supp (C.D. Ca. 2009) Dominguez v. Schwarzenegger, 596 F.3d 1087 (9 th Cir. 2010) 12
13 Only Issue Accepted for Certiorari in the US Supreme Court Whether Medicaid providers may maintain a cause of action under the Supremacy Clause to enforce 1396a(a)(30)(A) by asserting that the provision preempts a State law that reduces reimbursement rates. emphasis added List of Parties Toby Douglas, Director California Department of Health Services, Petitioner Independent Living Center of Southern California, Inc., et al., Respondents California Pharmacists Association, et al., Respondents Santa Rosa Memorial Hospital, et al., Respondents 13
14 14
15 As Amicus Curiae in Support of Petitioner As Amici Curiae in Support of Petitioner National Governors Association, National Conference of State Legislatures, Council of State Governments, National Association of Counties, International City/County Management Association, and United States Conference of Mayors 15
16 As Amici Curiae in Support of Petitioner Michigan and 30 other States Alabama Indiana Rhode Island Alaska Louisiana South Dakota Arizona Maine Tennessee Arkansas Maryland Texas Colorado Mississippi Utah Connecticut Nevada Vermont Delaware North Carolina Washington Florida Oklahoma West Virginia Hawaii Oregon Wisconsin Idaho Pennsylvania Wyoming As Amici Curiae in Support of Respondents National Association of Chain Drug Stores, National Community Pharmacists Association, National Alliance of State Pharmacy Associations & the American Pharmacists Association Former HHS Officials Members of Congress 16
17 As Amici Curiae in Support of Respondents The American Medical Association, American Dental Association, American Academy of Pediatrics, American Congress of Obstetricians and Gynecologists, American Academy of Family Physicians & the American College of Emergency Physicians American Civil Liberties Union, NAACP Legal Defense and Education Fund, Inc., and Mexican American Legal Defense and Educational Fund As Amici Curiae in Support of Respondents AARP, Families USA, National Legal Aid and Defenders Association, National Health Law Program, National Disability Rights Network, Center for Medicare Advocacy, First Focus, Voices for America s Children, Children s Dental Health Project, National Center for Youth Law, National Housing Law Project, National REACH Coalition, Disability Rights Legal Center, American Network of Community Options and Resources, Planned Parenthood Federation of America, National Family Planning & Reproductive Health, Black Women s Health Imperative, National Asian Pacific American Women s Forum, Asia & Pacific Islander American Health Forum 17
18 As Amici Curiae in Support of Respondents The American Health Care Association, American Hospital Association, Association of American Medical Colleges, Catholic Health Association of the United States, Federation of American Hospitals, National Association of Children s Hospitals, National Association of Community Health Centers, National Association of Public Hospitals and Health Systems, National Council for Community Behavioral Healthcare, and Safety Net Hospitals for Pharmaceutical Access As Amicus Curiae in Support of Respondents 18
19 As Amicus Curiae in Support of Respondents 19
20 Justice Anthony Kennedy 20
21 SCOTUS punts on Calif. Medicaid suit By: Jason Millman February 22, :20 AM EST The Supreme Court is punting on a key question about when Medicaid providers and beneficiaries have the right to sue over cuts to the federal-state health care program. That was the major question at the heart of Douglas v. Independent Living Center, in which provider and consumer groups claimed that California violated federal law by cutting Medicaid provider payment rates. They went to court under the Constitution s Supremacy Clause, essentially saying that provisions of the federal Medicaid statute should block the provider cuts. (Emphasis added) Other Medicaid Issues Resolved by or Before the US Supreme Court This Term 21
22 Supreme Court Cases Claims for Section 340B discounts may not be pursued by providers against drug manufacturers under a third party beneficiary theory. Astra USA Inc. v. Santa Clara County, Cal. (March 29, 2011) The Supreme Court Will it Stop Health Reform? 22
23 Supreme Court Cases Is the ACA s mandate to expand Medicaid eligibility to 133% of the FPL an impermissibly coercive exercise of the Spending Power? U.S. Department of Health and Human Services, et al. v. State of Florida, et al., No Modern Healthcare February 7,
24 Supreme Court Review 4 Issues to Watch Source: Washington Post 24
25 25
26 Back to the Future Role of the State to Provide Plan Amendments to CMS Recent California Rulings State Court Remedies Application of 30(A) 26
27 APA Litigation Challenging Rate Reductions California providers have recently obtained injunctions against modified State Plan Amendments approved by CMS after review was granted and briefs were filed in ILC Amendments to (a)(30)(a) Rules 27
28 Proposed (30)(A) Regulations Published May 6, 2011 (76 Fed. Reg. 2634) 208 comments received 28
29 Key Elements of Proposed Rules Compilation of access-related data by state agency Public process must precede SPA submission State-level monitoring of access and development of corrective action plans Access Data Review State Agency must document and update access review using data trends and analysis of Extent enrollee needs are met Availability of care and providers Changes in utilization Approach based on MACPAC Report 29
30 Role of CMS to Review States Plan Amendments Review of Payment Data Estimate of Medicaid rates as a percentile of average customary provider charges and medicare rates or average commercial rates or medicaid allowable cost and Estimate of composite average percentile increase or decrease resulting from proposed revision 30
31 Access Review Time Frames Beginning January 1 of the year starting no sooner than 12 months after final rule effective date for all covered services Subset of services annually All services within 5 years Results (including basis for estimates and descriptions of analytic methods) available to CMS and public on request Special Rules for Rate Reductions Access review of prior year data required Public notice and stakeholder comments required prior to SPA submission Monitoring and corrective action plan within 90 days of discovering access issue 31
32 Role of the Administrative Procedure Act (APA) TITLE 5 UNITED STATES CODE CHAPTER 5, APPLIES TO APPROXIMATELY 55 GOVERNMENT FEDERAL REGULATORY AGENCIES (e.g., DHHS, FDA, EPA) Role of Reviewing Courts Arbitrary and Capricious Standard Agency decision may be upheld based on explanations by the Agency at the time of decision. Motor Vehicle Mfr. Assn. v. State Farm Ins., 463 U.S. at 29 (1983). 32
33 Role of APA in Future Litigation Supreme Court noted in Douglas, et al. that plaintiffs may have to pursue claims under APA to challenge federal approval of the SPA Standard of Review = arbitrary and capricious On the record Agency Deference Application CHEVRON DEFERENCE? 33
34 Pro-Chevron Deference Factors Broad general statutory language Agency expertise Monitoring participation is one means for assessing adequacy of payment rates Monitoring and correcting only for demonstrated access shortfalls maximizes efficiency and economy Anti-Chevron Factors Motor Vehicle Mfrs. test Section (30)(A) refers twice to adequacy of payments yet CMS sets no uniform federal standard or benchmark to define adequacy of payment Section (30)(A) does not enumerate state budget problems as a factor Does CMS effectively delegate interpretation of Section (30)(A) to the States? Is post hoc monitoring a viable basis for states to assure that payments satisfy Sec. (30)(A)? 34
35 Role of the States Given Medicaid Expansion Potential Medicaid Rolls Are Swelling! 35
36 New Eligibility Rules Will Increase Medicaid Enrollment Percent Increase in Medicaid Enrollment Under the ACA, ,000 in LA Percent Change from 2019 Baseline Medicaid Enrollment 20% 20.1% to 30% 30.1% to 40% 40.1% Source: Holahan, J., and Headen, I. (2010). Medicaid Coverage and Spending in Health Reform: National and State-by-State Results for Adults at or below 133% FPL. Kaiser Commission on Medicaid and the Uninsured. Access at Note: The estimates assume a 57% participation rate. The estimates include newly enrolled 1115 waiver eligible population. The estimates do not take into account the effects of states shifting individuals with incomes >133% FPL from Medicaid to the exchange, the effects of reform for children, or changes in Medicaid between 2010 and Who Are Those Guys? 36
37 ACA Permits Cost Cutting Measures Elimination of optional services Provider rate cuts Cost Cutting Measures (cont d) CMS has road mapped austerity options for states Cindy Mann Letter to Jan Brewer (Feb. 15, 2011) CMS SMDL with FAQs (Feb. 25, 2011) 37
38 THANK YOU. LLOYD A. BOOKMAN DONNA D. FRAICHE MARK H. GALLANT STEPHEN S. SCHWARTZ 38
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