Center for Medicare Advocacy

Advancing Access to Medicare and Healthcare

Issue Brief 86 | November 2024 – Final Medicare Rules on Dental, Observation and Other Issues

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I. FINAL PHYSICIAN FEE SCHEDULE RULE

CMS Final Rule Includes Important Oral Health Clarification

This month Centers for Medicare & Medicaid Services (CMS) issued a final rule that announced finalized policy changes for Medicare payments under the Physician Fee Schedule (PFS), and other Medicare Part B issues. The rule includes clarification to reimbursement for dental services necessary to the clinical success of certain covered medical treatments. This builds on the clarification in the 2023 and 2024 PFS final rules that recognized Medicare payment for dental services that are essential to certain covered medical services.

The final rule includes:

Adding to the list of clinical scenarios under which Medicare payment may be made for dental services inextricably linked to covered services, to include: (1) Dental or oral examination in the inpatient or outpatient setting prior to, or contemporaneously with, Medicare-covered dialysis services for the treatment of end-stage renal disease and (2) Medically necessary diagnostic and treatment services to eliminate an oral or dental infection prior to, or contemporaneously with, Medicare-covered dialysis services for the treatment of end-stage renal disease.

CMS is also finalizing two policies related to billing of dental services inextricably linked to covered services. Effective July 1, 2025, CMS will require the submission of the KX modifier on claims for dental services that clinicians believe to be inextricably linked to covered medical services CMS is also finalizing a proposal to require the submission of a diagnosis code on the 837D dental claims format beginning July 1, 2025.

II. OPEN ENROLLMENT AND MEDICARE ADVANTAGE UPDATES

Open Enrollment

As Medicare Open Enrollment proceeds, more MA issues are coming to light, and Congress is starting to pay attention. As the Medicare annual enrollment period continues through December 7, and beneficiaries are tasked with comparing their coverage options for the following year, ongoing overpayments to Medicare Advantage (MA) plans and barriers to care faced by MA enrollees continue to get attention. Key leaders of the committees of jurisdiction in the House and Senate have taken notice of many of these problems and are calling on the Centers for Medicare & Medicaid Services (CMS) to conduct more oversight and enforcement in order to adequately protect MA enrollees. This is a welcome step, but a much greater overhaul of the MA program is needed, which will require further Congressional action. However, given the results of the election, we expect these consumer protections to face resistance. We also expect to shift our focus to include more defensive work as we plan for proposals to cut benefits to health programs.

Medicare Advantage Flex Cards

At the Center for Medicare Advocacy we have been working on this issue for the last few months after we learned of Connecticut residents whose subsidized rents will increase due to money that is pre-loaded onto these “flex cards” they receive from their MA plan. These were duals who also receive federal assistance for housing through HUD. Apparently, this is because the cards can be used to pay for certain utilities, such as electric, internet, and cable bills, and are not limited to food and over-the-counter medical expenses and it also doesn’t matter whether the beneficiary has used the card or not. We have been working with other groups as well to advocate for federal guidance to be published that states that these cards shall not be deemed as countable income or assets for the purposes of calculating eligibility for federal assistance and benefits allowance. Below are some resources on the issue.

III. LITIGATION UPDATE  

Johnson v. Becerra, No. 1:22-cv-03024 (D.D.C.) (Challenge to Deprivation of Home Health Aide Services by Disabled Medicare Beneficiaries). The Center filed this proposed class action on October 6, 2022, on behalf of two individuals and two organizations. The named plaintiffs sought to represent a nationwide class of Medicare beneficiaries who rely on home health aide services to live safely in their homes and communities. They challenged the Secretary’s policies and practices that impede and restrict the availability, accessibility, and coverage of home health aide services for individuals with chronic, disabling conditions who qualify for such services under Medicare law. These practices include the failure to properly oversee and enforce Conditions of Participation for Medicare-certified home health agencies. They also include auditing and reviewing systems and quality rating systems that discourage the provision of aide services for plaintiffs and proposed class members. The case cited violations of the Medicare statute and regulations, as well as Section 504 of the Rehabilitation Act, which prohibits discrimination on the basis of disability. Section 504 imposes a duty on federal agencies to administer programs in the most integrated setting appropriate to the needs of people with disabilities and to avoid unjustified institutionalization of disabled people. The named plaintiffs and class members they sought to represent are at risk of institutionalization for necessary care without the Medicare-covered home health aide services they require. The plaintiffs sought declaratory and injunctive relief that would remove barriers to Medicare-covered home health aide services.

On April 5, 2023, the court granted the government’s motion to dismiss and denied plaintiffs’ class certification motion as moot. Johnson v. Becerra, 668 F. Supp. 3d 14 (D.D.C. 2023). The court found that all plaintiffs had adequately presented their claims to the Secretary, and it waived the requirement of exhaustion of administrative remedies. However, the court held that the plaintiffs lacked standing to challenge the Secretary’s policies because they failed to plausibly allege redressability. Assuming that plaintiffs’ injuries were caused by the Secretary, the court found that it is “purely speculative” that their injuries would be redressed by a favorable court decision. It emphasized that Medicare-certified home health agencies are “third parties,” and doubted that the requested policy changes would alter the home health agencies’ behavior with regard to provision of aide services. The plaintiffs appealed the district court’s dismissal of the case to the U.S. Court of Appeals for the D.C. Circuit in June 2023.

Update: On August 9, 2024, the D.C. Circuit affirmed the district court’s decision, finding that plaintiffs lacked standing to pursue their claims. The case was therefore dismissed.

Barton Reeves v. Becerra, No. 3:24-cv-01097 (D. Conn.) (SNF coverage). On June 25, 2024, the Center for Medicare Advocacy requested federal court review of a fundamentally erroneous decision regarding coverage of skilled nursing facility (SNF) care. The case involves services for a Connecticut resident who was dully-eligible for both Medicare and Medicaid benefits. After a hearing with an Administrative Law Judge (ALJ), the Center won Medicare coverage of the beneficiary’s SNF services because he received “daily, skilled rehabilitation services” in the form of occupational therapy. Medicare law is definitive about covering SNF care when qualified beneficiaries receive “daily skilled” care, which can be either nursing services or rehabilitation services (such as physical or occupational therapy). However, after the ALJ issued a favorable decision, a Medicare contractor stepped in and referred the decision to the next level of appeal—the Medicare Appeals Council—for additional review. Misreading the controlling law and regulations, the contractor claimed that coverage of inpatient SNF services can only be based on daily skilled nursing services, and not on daily skilled rehabilitation services. Alarmingly, the Appeals Council agreed with this blatant misstatement of the law and found that Medicare could not cover the SNF care in question.

It is particularly troubling that CMS’s contractor went out of its way to overturn a duly-considered and legally correct ALJ decision, and that the Appeals Council – the highest level of review in Medicare’s administrative appeal system – affirmed the incorrect argument. Unfortunately, it is difficult to correct even obvious errors in Medicare’s appeal system. The Center appealed the Council’s decision to federal district court on behalf of Connecticut’s Department of Social Services, which bore the costs of the services that Medicare should have paid for.

Update: In September 2016, the government filed a motion to remand the case to the Medicare agency pursuant to “sentence six” of the appeal statute, meaning that the federal court would make no finding on the agency’s final administrative decision and the case would essentially be “reset.” The plaintiff opposed the motion, explaining that the agency should not have a “second bite at the apple” via a remand with no substantive ruling or guidance from the court. This is especially true given the Plaintiff’s allegations regarding the Appeals Council’s fundamentally erroneous decision and threat it poses to coverage of critical medical services. Plaintiff proposed that the court rule on the merits of the case. Briefing on the motion was complete in mid-October.

Beitzel v. Becerra, No. 2:23-cv-01932 (E.D. Cal.) (Self-Administered Drugs). The Center for Medicare Advocacy and Community Legal Services at the McGeorge School of Law filed this class action on September 8, 2023, on behalf of beneficiaries who have lost coverage for medically necessary, expensive drugs with no warning. The lead named plaintiff requires an injectable drug that – for years – was administered to him in a clinic by health care professionals to treat symptoms of Crohn’s disease. He also has Parkinson’s disease and cannot administer the drug himself due to his disability. The drug was covered under a provision that allows Medicare Part B to pay for drugs that are furnished “incident to the services of a physician.” Then, unbeknownst to the plaintiff, Medicare deemed the drug to be “usually self-administered by the patient,” meaning it would no longer be covered for him as it had been, under Part B.

Medicare provided no notice of this change in coverage and does not require medical practitioners to provide notice. Only after the plaintiff received several additional scheduled injections from the clinic did he learn that the drug was no longer covered by Part B and that Medicare held him responsible for its full cost, which was over $40,000 per injection. The plaintiffs challenge Medicare’s policy of providing no notice when a drug that was excluded by Part B is added to the “self-administered drug list” (SAD List) and thus excluded from such coverage. They raise due process and statutory claims to ensure that beneficiaries can make informed decisions about how to receive these medications when there has been a change in Medicare’s coverage terms. Plaintiffs filed an amended complaint with an additional plaintiff on December 26, 2023, and a motion to certify a nationwide class on January 30, 2024. The government filed a motion to dismiss the amended complaint on January 31, 2024.

A hearing on the government’s motion to dismiss was held on April 15, 2024. The judge granted the motion, signing the opinion on April 19, 2024. The judge held that he lacked jurisdiction under 42 U.S.C. 405(g) over the claims of two Plaintiffs because they had not exhausted administrative remedies and waiver of exhaustion did not apply. He held that Beitzel, the remaining Plaintiff, lacked Article III standing to seek prospective relief, and had failed to state a claim for which relief could be granted for all of his claims. Plaintiffs appealed to the Ninth Circuit on June 3, 2024, on their constitutional and Medicare statutory claims. Briefing is ongoing.

Barrows v. Becerra, 24 F.4th 116 (2d Cir. 2022) (Beneficiary Appeals of Observation Status). In November 2011, the Center for Medicare Advocacy and Justice in Aging filed a class action lawsuit on behalf of individuals who have been denied Medicare Part A coverage of hospital and nursing home stays because their care in the hospital was considered “outpatient observation” rather than an inpatient admission. When hospital patients are placed on observation status, they are labeled “outpatients,” even though they are often on a regular hospital floor for many days, receiving the same care as inpatients. Because patients must be hospitalized as inpatients for three consecutive days to receive Medicare Part A coverage of post-hospital nursing home care, people on observation status do not have access to nursing home coverage. They must either privately pay the high cost of nursing care or forgo that skilled care. The number of people placed on observation status has greatly increased as CMS has strictly enforced its definition of which services hospitals should bill as inpatient/Part A and which services they should bill as observation/Part B. However, CMS has not allowed beneficiaries to appeal the issue of whether their hospitalizations should be classified as observation or as inpatient for Medicare coverage purposes.

After a dismissal by the district court, a remand by the Second Circuit, substantial motion practice and discovery, a bench trial on the merits of the due process claim was held in August 2019. In March 2020, the trial court issued a decision. Alexander v. Azar, 613 F. Supp. 3d 559 (D. Conn. 2020). It held that the Secretary of Health and Human Services violates the Fifth Amendment Due Process Clause by not allowing certain patients to appeal their placement on observation status. Thus, as matter of constitutional due process, patients who are admitted as inpatients by a physician, but whose status is changed to observation by their hospital, have the right to appeal to Medicare and argue for coverage as hospital inpatients. In this ruling, the court held that there is a protected property interest in Medicare Part A coverage. The court did not, however, find a due process violation for patients whose doctors never order inpatient status, or whose status is switched only from observation to inpatient. It drew a distinction between the actions of doctors and the actions of hospital utilization review staff. The court modified the existing class definition accordingly.

The court ordered that the agency establish an appeals process for class members, under which they can argue that their inpatient admission satisfied the relevant criteria for Part A coverage—for example, that the medical record supported a reasonable expectation of a medically necessary two-midnight stay at the time of the physician’s inpatient order. Certain patients will be able to pursue these appeals in an expedited manner while still hospitalized. The court also ordered the agency to provide notice of these procedural rights. In May 2020, the government appealed the district court’s trial decision to the Second Circuit. The Second Circuit affirmed the trial court’s decision in full on January 25, 2022. Barrows v. Becerra, 24 F.4th 116 (2d Cir. 2022).

The government is implementing the court’s injunction via notice-and-comment rulemaking. After substantial delays, the government published a Notice of Proposed Rulemaking (NPRM) in the Federal Register on December 27, 2023. Class counsel Center for Medicare Advocacy, Justice in Aging, and Wilson Sonsini Goodrich & Rosati submitted detailed comments on the NPRM, as did a broad coalition of 75 national as well as state and local beneficiary advocacy organizations. Along with the Center and co-counsel Justice in Aging, organizations that signed on to the coalition’s letter include AARP, the ALS Association, the Medicare Rights Center, the National Committee to Preserve Social Security and Medicare, the National Disability Rights Network, and the National Health Law Program. The comments supported CMS’s general approach to the court-ordered appeal procedures and strongly urged the agency to finalize and implement the rule as quickly as possible. The coalition of advocates support that the proposed observation status appeals will be largely similar to existing Medicare appeals and provisions that aim to minimize burden on beneficiaries. However, they made several recommendations to improve the procedures.

In its status report of May 1, 2024, the government stated that it received 51 comments and was working on the final rule. It stated that it anticipates publishing the final rule “before the end of the year.” It also summarized some of the comments by providers, government, advocates, and other communities. Plaintiffs submitted a response to this status report, pointing out that 1) the chief requests of advocates’ comments on the NPRM is finalizing and implementing the rule as quickly as possible, and 2) 51 comments is not a large number to respond to, and Plaintiffs are concerned that stretching publication of the final rule until “the end of the year” could significantly and unnecessarily delay relief. They noted instances when agencies had responded to many thousands of comments in much shorter periods of times. Plaintiffs requested a status conference to ensure sufficient progress is being made on the final rule. The court held a conference with the parties on July 19, 2024. At the conference, the court agreed with the concerns of class counsel that the realization of the plaintiff class members’ constitutional rights is occurring too slowly. Judge Shea asked the government’s counsel about specific ways that the process could be accelerated. He then issued an order requiring the government to finalize and publish the final rule by October 15, 2024.

Update: The government issued the final rule implementing the court’s judgment on October 15, 2024. 89 Fed. Reg. 83240 (Oct. 15, 2024). Appeals are expected to be operational in 2025. The regulations create processes for both retrospective and prospective appeals for eligible beneficiaries who disagree with their hospital’s decision to reclassify them from inpatients to outpatients receiving observation services. 42 C.F.R. §§ 405.931-938 (retrospective) and 42 C.F.R. §§ 405.1210-1212 (prospective). The retrospective appeals are for class members who were denied the right to appeal their patient status in the past, and will be available for a closed period of time. Prospective appeals will be available on an ongoing, expedited basis for eligible beneficiaries who are still in the hospital and need a quick determination of whether they qualify for inpatient status. This will assist patients who require a qualifying inpatient hospital stay for coverage of SNF care. Eligible beneficiaries who do not file within the expedited time frame will still be able to request review of their patient status on a standard appeal time frame. The Center for Medicare Advocacy will provide information about these appeals on its website.

  • For answers to frequently asked questions from people who think they may be class members, please see the Center’s website here.

Drug Price Negotiation Lawsuits – Inflation Reduction Act

The Center has joined a coalition of advocacy organizations, led by AARP, that is urging federal courts to uphold Medicare’s drug price negotiation program. The program, created by the Inflation Reduction Act (IRA), allows Medicare to use its bargaining power to negotiate prices and reduce the cost of expensive drugs for the first time. Drug companies and their allies have filed multiple lawsuits around the country attempting to strike down or limit the program.

The coalition has filed amicus briefs supporting the government in these lawsuits, explaining that the negotiation program is urgently needed because it will help older adults and people with disabilities afford life-saving prescription drugs. The amicus briefs also explain that the drug price negotiation program will protect the financial integrity of Medicare and save taxpayers billions of dollars.

Read an amicus brief filed in a case brought by a Connecticut drug manufacturer here. This brief features stories the Center collected from Connecticut residents about their experiences with prescription drug prices.

Update: In light of the recent election, the fate of this litigation is uncertain. The incoming administration in 2025 may take a different approach. Attempts to repeal all or parts of the statute authorizing the negotiation program, or attempts to modify it, could also affect the litigation or lead to additional litigation.

  • Ongoing updates on the Medicare drug price negotiation cases can be viewed at the O’Neill Institute Health Care Litigation Tracker here.

IV. NURSING FACILITY UPDATE

Provider litigation challenging the nurse staffing rule: three cases largely make the same legal and factual arguments, use hyperbolic language, and allege violation of the Administrative Procedure Act

American Health Care Association v. Xavier Becerra, Case 2:24-cv-00114-Z-BR (N.D. Texas May 23, 2024) AHCA, Texas Health Care Association, three Tex nursing homes are plaintiffs; Leading Age joined later.

Complaint

“That rule exceeds CMS’s statutory authority, effects a baffling and unexplained departure from the agency’s longstanding position, and creates impossible-to-meet standards that will harm thousands of nursing homes and the vulnerable Americans they serve.” Complaint ¶1

¶12. “To be clear, all agree that nursing homes need an adequate supply of well-trained staff. But imposing a nationwide, multi-billion-dollar, unfunded mandate at a time when nursing homes are already struggling with staffing shortages and financial constraints will only make the situation worse. If CMS’s new standards are permitted to take effect, hundreds of nursing homes will likely be forced to downsize or close their doors entirely. That threatens to displace tens of thousands of nursing home residents from their current facilities, while forcing countless other seniors and family members to wait longer, search farther, and pay more for the care they need. The Final Rule thus promises to be a nightmare not only for owners and operators of nursing homes, but also for the vulnerable residents they serve, in direct derogation of CMS’s statutory mandate.”

Complaint largely repeats arguments that AHCA has been making since President Biden first announced his nursing home reform agenda in February 2022 – no one to hire, unfunded mandate, nursing homes will close. We’ve been challenging those arguments, most recently in “Residents’ Advocates Reject Industry Complaints About Nursing Home Staffing Rule” (CMA Alert, May 9, 2024).

State of Texas v. United States Department of Health and Human Services, Civil Action No. 2:24-cv-171-Z (N.D. Tex. Aug. 14, 2024).

Complaint largely focuses on the Abt 2022 staffing study, which it describes as flawed and not supporting the final rule.

Two cases in Texas were consolidated. Briefing schedule:

  • Oct. 18, 2024: plaintiffs filed motion for summary judgment on all counts
  • Nov. 15, 2024: defendants to file a combined summary judgment response and cross-motion for summary judgment (not to exceed 50 pages)
  • Dec. 13, 2024: plaintiffs to file a combined summary judgment reply and response to cross-motion for summary judgment (not to exceed 50 pages)
  • Jan. 17, 2024: defendants to file their reply in support of cross-motion for summary judgment (not to exceed 35 pages)

State of Kansas v. Becerra, Civil Action No. 1:24-cv-00110-LTS-KEM (N.D. Iowa, filed Oct. 11, 2024) (First Amended Complaint for Declaratory and Injunctive Relief)

20 Republican Attorneys General, 17 state affiliates of Leading Age representing 21 states, two Kansas nursing homes are the plaintiffs

Plaintiffs describe the rule as “an existential threat to the nursing home industry” and “not even close to lawful” and contend, “This Final Rule represents not only another attempt from the Biden-Harris administration to impose its policy preferences on the rest of the country but is also monumentally costly and nearly impossible to comply with.” Complaint, p. 2. Many paragraphs in the 66-page Complaint describe the “Harm to plaintiffs” – A. Financial Burden, ¶¶130-149; B. Administrative Burdens (Staffing Issues, Enhanced Facility Assessment, ¶¶150-168; C. Enhanced Facility Assessments, ¶¶169-176; and D. Harm to Plaintiff States, ¶¶177-189.

APA theories:

  • Lack of statutory authority Contrary to law
  • Arbitrary and capricious (Sharp Departure from Past Practice, Failure to Consider Reliance Interests, Failure to Consider Important Aspects of the Problem)

The Attorneys General filed a motion for preliminary injunction. Kimberly Marselas, “Lawsuit seeks immediate injunction of nursing home staffing rule to prevent ‘irreparable harm’ to operators,” McKnight’s Long-Term Care News (Oct. 28, 2024), arguing that facilities are taking action now, whose costs they will be unable to recoup, in order to comply with a rule that the court is likely to find is illegal. The Government sought an expedited briefing schedule on summary judgment or revision to the briefing schedule on the motion for preliminary injunction. The court rejected the motion for expedited briefing schedule on summary judgment and, instead, ordered:

  • Nov. 21, 2024: defendants file response to motion for preliminary injunction
  • Nov. 27, 2024: plaintiffs’ reply
  • Dec. 6, 2024, 3:00 p.m. CST: oral arguments on motion for preliminary injunction

Nursing Home Reform Law (1987)

We were demoralized, Jan. 21, 1981, when the Reagan Administration pulled regulations issued by the Carter Administration to elevate residents’ rights from a Standard to a Condition of Participation. In Dec. 1987, we were elated when President Reagan signed the Nursing Home Reform Law as part of the Omnibus Budget Reconciliation Act of 1987.

In retrospect, we understand that we had a lot going for us: supportive federal agency, New York Times coverage, actor Kirk Douglas, support for reform legislation by the nursing home industry eventually supported reform legislation, far less partisan Congress (Democrats and Republicans together opposed Reagan Administration’s deregulatory efforts). But at the time, the challenges seemed formidable.

We’ll tell the story in detail in a webinar we’re planning for 2025.

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