June 24, 2022

Supreme Court Decides Becerra v. Empire Health Foundation

On June 24, 2022, the U.S. Supreme Court decided Becerra v. Empire Health Foundation, No. 20-1312, holding that, in calculating the “Medicare fraction” component in determining Medicare reimbursements to hospitals, individuals entitled to Medicare Part A benefits are all those qualifying for the program, regardless of whether they receive Medicare payments for the entirety of a hospital stay.

The Medicare program — which provides Government-funded health insurance to elderly or disabled Americans — reimburses hospitals at higher rates when they serve a higher proportion of low-income patients. Contemplating the complexity of calculating the appropriate amount of this enhanced rate, Congress created adjustments to be used for these reimbursements. As one component part of those adjustments, two statutorily described fractions are combined: the so-called Medicare and Medicaid fractions. In determining the Medicare fraction, the number of patient days attributable to low-income patients “entitled to” benefits under Part A of Medicare are divided by the number of patient days attributable to all patients “entitled to” benefits under Medicare Part A. The resultant percentage is combined with a percentage computed from the Medicaid fraction to determine the rate mark-up that the hospital will receive. 

In 2004, the Department of Health and Human Services (HHS) issued a regulation instructing that patients whom Medicare insures but does not pay for on a given day (e.g., because a hospital stay exceeds 90 days or a patient is otherwise insured) are “entitled to” Medicare Part A benefits for purposes of computing the Medicare fraction. Practically, this regulation has generally decreased hospital reimbursements from Medicare. Empire Health Foundation challenged the HHS regulation as contrary to the text of the underlying statute. The Ninth Circuit agreed.

In reversing and remanding, the Supreme Court held that the HHS regulation coheres with the statute’s text, context, and structure. First, the Medicare statute instructs throughout its various provisions that individuals remain “entitled to” benefits even if they have run into one of the statute’s conditions that limit or prevent coverage of a particular expense, such as the 90-day limit on inpatient hospital services. And second, because the statute reimburses hospitals for serving two different low-income populations — both Medicare and non-Medicare (captured in the Medicaid fraction) — the former always count in the Medicare fraction, regardless of whether the Medicare program is paying for a day of their care.

Justice Kagan delivered the opinion of the Court, in which Justices Thomas, Breyer, Sotomayor, and Barrett joined. Justice Kavanaugh filed a dissenting opinion, in which Chief Justice Roberts and Justices Alito and Gorsuch joined.

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