Part 1: The Law is Complicated, Medicare is Complicated: Navigating Legal Battles and Uncertainty in Medicare Advantage

Disclaimer: I’m not going to go through all of the details in all the lawsuits. There are some folks a lot more qualified?and litigiously inclined than I am that have given thoughts and comments around this. However, I do want to call out a couple of key points.?

To orient readers, I will refer to Elevance’s first lawsuit as Elevance One and then the second most recent one Elevance Two.

Each case had a lot of jargon so to simplify - I’m going to list out specifically what the courts ruling was and what part of the suit they ruled on in favor of the health plan.

Elevance One: This case was argued on two points. The first was all around TukeyGate (but more on that later) and the second was around a secret shopper call never connecting and being graded erroneously against them.?

Elevance Two & SCAN:? These cases are all about TukeyGate and that CMS violated the Administrative Procedure Act of 1946, which is designed to ensure federal agencies abide by rulemaking standards, including providing the public opportunities to comment on proposals.?

The implications of the wins based on violation of the 1946 Administrative Procedure Act are critical as they set a precedent for the rest of the industry with regards to their star ratings in 2024 being subjected to Tukey which has now been deemed - erroneously implemented.

So it’s not so much that they implemented Tukey, it’s how they went about implementing it, this part is important.

Now moving on to the FMO lawsuits…

There are three lawsuits currently awaiting judgment. All the lawsuits have a foundational assertion that CMS exceeded its statutory authority by attempting to regulate field marketing organizations and that the final rule is unclear about how insurers may compensate marketers - the center of all these cases is the terms “arbitrary” and “capricious” This is super important. Why? Because of the same basis that has CMS in a bind regarding Tukey… YUP, you guessed it! The 1946 Administrative Procedures Act.

The APA allows courts to review federal agency actions made reviewable by law or final actions with no other adequate court remedy. Courts must overturn agency actions, findings, and conclusions that are arbitrary, capricious, an abuse of discretion, or unlawful. Additionally, courts can review "ultra vires" actions, meaning actions that exceed the agency's authority, even if a statute typically prevents judicial review. This applies if the agency's action violates a clear statutory mandate.

Rulemakers are being jammed up by their own rules… that stings.?

AmeriLife seeks a declaratory judgment that the rule does not apply to carrier-to-FMO payments not passed on to agents and brokers. Alternatively, they seek to vacate the rule if it does apply, arguing it is arbitrary, capricious, exceeds statutory authority, and was implemented without proper procedure.

TLDR; CMS is overreaching and doesn’t have the authority, or, they have the authority but because it’s arbitrary (random without reason) and capricious (unpredictable) it shouldn’t apply to FMOs.?

In times of uncertainty, I always hit the books, in this case, the history books.

At the center of all the lawsuits is the Administrative Procedures Act of 1946.

The 1946 Administrative Procedure Act (APA) is a cornerstone of American administrative law, designed to ensure transparency, fairness, and accountability within the federal bureaucracy. Enacted in the wake of World War II, the APA responded to concerns about the unchecked power of federal agencies, which had expanded significantly during the New Deal era. The Act established standardized procedures for rulemaking, adjudication, and judicial review, providing a framework for public participation and safeguarding citizens' rights against arbitrary government action. By delineating the processes agencies must follow, the APA aimed to create a more predictable and democratic administrative system, balancing the need for efficient government with the principles of due process and public accountability. Over the decades, the APA has played a critical role in shaping the relationship between the federal government and the public, ensuring that administrative decisions are made in an open, fair, and reasoned manner.?

(If you read my President’s day article you’ll see the connection between President Truman and President Franklin Roosevelt….)

In my attempt to read the tea leaves and make sense of all the litigation I did some research as to what could potentially happen next but what’s more, the implications these rulings have not only for the individual plans and entities involved but also our industry and members we serve at large. What I found I believe gives us guidance on the days ahead.

When CMS previously estimated billions in savings (similarly to Tukey which in Final Rule CY 2021, which accounted for $1.4 BN in savings) when changing how the Medicare Disproportionate Share Hospital (DSH) payments were calculated, the case went all the way to the Supreme Court.?

The case of Azar v. Allina Health Services (June 3, 2019) presented the following question for the highest court in our nation to answer, “Does the Administrative Procedure Act and Medicare Act require the US Department of Health and Human Services to provide notice and an opportunity to comment before implementing a rule changing its Medicare reimbursement formula?”?

In a 7-1 decision for Allina Health Services, the majority opinion penned by Justice Neil Gorsuch found that The Department of Health and Human Services (CMS) neglected its statutory notice-and-comment obligations, so its new policy that would have reduced Medicare payments to hospitals serving low-income patients is vacated (canceled).?

If history and precedent tell us anything, to the question frequenting my inbox as of late, “Will CMS yield on Tukey?” My answer is, well, they probably don’t want to waste the time or strife should it make its way to the Supreme Court.

When providing the majority opinion Gorsuch quoted Milner v. Department of Navy (2011)

“even those of us who believe that clear legislative history can ‘illuminate ambiguous text’ won’t allow ‘ambiguous legislative history to muddy clear statutory language.’” Despite any fundamental distrust that CMS or others may have that rulemaking can be effective or that Congress can be trusted to legislate and resolve issues that will arise as the Medicare program, Justice Gorsuch wrote, “if the government doesn’t like Congress’s notice-and-comment policy choices, it must take its complaints [to Congress].”

More importantly, my favorite part of the majority opinion, the Allina Health decision affirms that “Notice and comment gives affected parties fair warning of potential changes in the law and an opportunity to be heard on those changes—and it affords the agency a chance to avoid errors and make a more informed decision . . . when it comes to a program where even minor changes to the agency’s approach can impact millions of people and billions of dollars in ways that are not always easy for regulators to anticipate.”

The jury is out (pun intended) on whether the same logic and jurisprudence applies to the outstanding lawsuits regarding FMO compensation... It is interesting to see that the common thread that runs between the two types of cases at its core is the APA of 1946...

Later this week I will outline possible solutions and implications to plans for 2025 and the direct and indirect impacts to members. So stay tuned!