Hospitals Suing HHS Over Alleged ACA Loophole

The Secretary of the Department of Health and Human Services, Xavier Becerra, is under suit in the District of Columbia from a host of disproportionate share hospitals. The suit, which was filed last Friday, accuses Becerra of excluding Medicaid and Medicare eligible individuals through new legislation that allows for states to refrain from submitting state plan amendments for the expansion portion of the Affordable Care Act.

The complaint explained that the Affordable Care Act (ACA) was expanded to include individuals under 65 whose incomes did not exceed 133% of the Federal Poverty Level. When the expansion went into effect in 2014, those individuals became eligible for Medicare and Medicaid. After challenges to this expansion reached the Supreme Court, they upheld the ACA but detailed in their decision that the federal government cannot “force states to expand their existing medical assistance plans as prescribed by the ACA through the withholding of federal funds.” This resulted in state noncompliance with the expansion, as the refusal to submit a state plan amendment could no longer be punished via financial penalties.

Alabama, Florida, Nebraska, Tennessee, Kansas, and Missouri “refrained from submitting state plan amendments expanding their medical assistance programs to cover additional persons who became eligible for Medicaid coverage under the ACA,” effectively negating the effects of the expansion and reverting to previous levels of coverage for those individuals.

The plaintiffs are citing injury from Becerra due to his refusal to “recognize patients made ‘eligible for Medicaid’ as a matter of law under the ACA as ‘low-income patients’ for purposes of determining their entitlement to Medicare DSH supplements.” By tying the newly eligible population to the submission of state plan amendments, HHS allegedly established a system in which the population would not gain Medicare or Medicaid eligibility in those states since they did not submit a state plan amendment.

The plaintiffs are seeking for the secretary to “instruct his Medicare administrative contractors to re-determine the plaintiffs’ Medicare DPP and DSH entitlements for the cost years in question,” for him to adjust the plaintiff’s Medicare DSH supplements, and lastly for him to verify the eligibility of some patients in a cooperative manner.

The plaintiffs are represented by Cozen O’Connor.