(Beneficiary Appeals of Observation Status). In November 2011, the Center for Medicare Advocacy and Justice in Aging filed a proposed 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 in recent years, 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.
In September 2013, a federal judge in Connecticut granted the government’s motion to dismiss the lawsuit. Bagnall v. Sebelius, No. 3:11cv1703 (MPS),2013 WL 4356659 (D. Conn. Sept. 23, 2013). Plaintiffs appealed, limited to the issue of the right to an effective notice and review procedure for beneficiaries placed on observation status. In January 2015, the U.S. Court of Appeals for the Second Circuit decided that Medicare patients who are placed on observation status in hospitals may have an interest, protected by the Constitution, in challenging that classification. The panel held that the district court erred when it dismissed the plaintiffs’ due process claims, and it sent the case back to that court for further proceedings. Barrows v. Burwell, 777 F.3d 106 (2d Cir. 2015).
Substantial motion practice and more discovery occurred (for details see previous issue briefs). The law firm of Wilson Sonsini Goodrich & Rosati joined as representatives of the plaintiffs during this phase and has provide extraordinary and invaluable pro bono assistance. A bench trial on the merits of the due process issue was then held in August 2019. The plaintiffs presented several witness who were affected by observation status, an expert witness, and also several witnesses from the government. The government also examined several witnesses from CMS as well as their own expert. The parties then submitted post-trial briefing.
In March 2020, the trial court issued a decision. Alexander v. Azar, — F. Supp. 3d –, 2020 WL 1430089 (D. Conn. Mar. 24, 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, meaning that an individual cannot be deprived of that coverage without procedural safeguards. 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. It decided that doctors’ decisions to admit patients as inpatients are not attributable to the government and thus not “state action,” a required component of a due process claim. But it held that then when a hospital’s utilization review staff finds that patient should be in observation status rather than an inpatient, that is due to Medicare’s billing rules and therefore does constitute state action.
The court modified the existing class definition accordingly. It is now:
All Medicare beneficiaries who, on or after January 1, 2009: (1) have been or will
been subsequently reclassified as an outpatient receiving “observation services”;
Outpatient Observation Notice (MOON) indicating that the observation services
are not covered under Medicare Part A; and (4) either (a) were not enrolled in Part
B coverage at the time of their hospitalization; or (b) stayed at the hospital for
three or more consecutive days but were designated as inpatients for fewer than
three days, unless more than 30 days has passed after the hospital stay without the
beneficiary’s having been admitted to a skilled nursing facility. Medicare
beneficiaries who meet the requirements of the foregoing sentence but who
pursued an administrative appeal and received a final decision of the Secretary
before September 4, 2011, are excluded from this definition.
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. Patients in the “three-day” portion of the class 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. At plaintiffs’ request, a status conference was held with the district court in October 2020 regarding implementation of the court’s order. The court ordered submissions on proposed measures the agency could take while the case was on appeal.
The government’s opening appellate brief in the Second Circuit was filed in October 2020. It challenged the district court’s decisions regarding standing, class certification, and the merits of the due process claim. Plaintiffs’ response was filed in February 2021. Three amicus briefs in support of plaintiffs were filed in March: one from AARP and Disability Rights Connecticut, one from the American Medical Association and the Connecticut State Medical Society, and one from the American Health Care Association. The government’s reply brief was filed in April 2021.
At the district court, the government filed a motion for a stay of the judgment on January 11, 2021, stating that it would be irreparably harmed by implementing the court’s order, and that there were serious questions about the district court’s decision, indicating likelihood of success on appeal. Because of the pending stay motion, the district court did not address the proposed implementation measures, as it indicated that it wished to rule on the stay motion first. The stay motion was fully briefed as of February 2021. When the district court did not act on that motion, the government moved for a stay in the Second Circuit in June 2021. On July 16, a single judge of the Second Circuit granted a temporary stay of implementation while it referred the government’s motion to be considered by the panel of judges that retained consideration of the case.
The Second Circuit held oral argument on the government’s appeal on October 6, 2021.
UPDATE: On January 25, 2022 the Second Circuit affirmed the trial court’s decision and grant of injunctive relief in full and denied the government’s pending stay motion as moot. Barrows v. Becerra, 24 F.4th 116 (2d Cir. 2022). The court found that a named plaintiff who paid over $10,000 for nursing home care after an observation stay had demonstrated Article III standing. The court also found no abuse of discretion in the trial court’s certification of the class, holding that the class meets the commonality and typicality requirements of Rule 23. It found that it was not an abuse of discretion for the district court to characterize plaintiffs’ protected property interest as the entitlement to Medicare Part A coverage, as opposed to entitlement to admission as inpatients. It found that decisions by hospital personnel to reclassify a patient from an inpatient to an outpatient receiving observation services constituted state action. Finally, it conducted an analysis under Mathews v. Eldridge to agree with the trial court that the Secretary violates the Due Process Clause by offering no procedural protections for beneficiaries whose status is changed from inpatient to observation through the hospital utilization review process.
For answers to frequently asked questions from people who think they may be class members, please see the Center’s website here.
Dobson v. Secretary of Health and Human Services, No. 20-11996, 2022 WL 424813 (11th Cir. Feb. 11, 2022) (Part D Off-Label Drug). On April 6, 2018, the Center for Medicare Advocacy and Florida Health Justice Project filed a lawsuit in the United States District Court for the Southern District of Florida on behalf of a Medicare beneficiary seeking Part D coverage for the “off-label” (non-FDA-approved) use of a critically needed medication. The plaintiff, Mr. Dobson, is disabled from a traumatic workplace injury that damaged his spinal cord. As a result of severe pain and multiple surgeries, he suffers daily from debilitating nausea and vomiting. After numerous medications failed to provide relief, his doctor prescribed dronabinol (brand-name Marinol), which significantly relieved his nausea and vomiting and allowed him to resume many activities of a normal life.
When Mr. Dobson became eligible for Medicare Part D, his plan denied coverage because his particular use of dronabinol is not FDA-approved. However, the Part D plan should cover the medication because Mr. Dobson’s use of the drug is “supported by” an entry in one of the compendia listed in the Medicare law (specifically the DRUGDEX compendium). Medicare looks to the compendia for acceptable off-label uses of medications, and dronabinol has an entry for intractable, disease-related nausea and vomiting. The plaintiff’s position is also supported by a federal court decision granting Part D coverage of the same medication for a beneficiary with very similar symptoms. Tangney v. Burwell, 186 F. Supp. 3d 45 (D. Mass. 2016). In spite of this, Mr. Dobson was denied coverage at each level of administrative review. In appealing his claim to federal court, Mr. Dobson contested the agency’s use of an inappropriately restrictive reading of “supported by citation” to claim that coverage cannot be granted.
A magistrate judge issued a decision on March 31, 2020, finding that Mr. Dobson’s medication cannot be covered by Medicare Part D. Dobson v. Azar, 451 F. Supp.3d 1346 (S.D. Fla. 2020). She deferred to the government’s argument that Mr. Dobson’s use was not a “medically accepted indication,” “supported by” a citation in DRUGDEX. The judge accepted the Medicare Appeals Council’s reasoning that because Mr. Dobson does not have the identical diagnosis as the patient in the study analyzed within the citation for disease-related, intractable nausea and vomiting, his use cannot be supported. The plaintiff appealed the district court’s decision.
In the appellate briefing, Mr. Dobson argued that the Medicare statute mandates coverage of his medication because his use is “supported by” the DRUGDEX citation in question and that the Secretary’s interpretation is erroneous under any standard. The American Medical Association and Greater Boston Legal Services (which litigated the Tangney case) filed amicus briefs in support of Mr. Dobson. The case was fully briefed as of February 2021, and oral argument was held in September 2021.
UPDATE: On February 11, 2022, the 11th Circuit issued a decision vacating the entry of summary judgment for the Secretary and remanding the case with instructions to enter summary judgment for Mr. Dobson. Dobson v. Sec’y of Health & Human Servs., 2022 WL 424813 (11th Cir. Feb. 11, 2022) (per curiam). The court found that the meaning of “supported by” presents a question of law, i.e., the construction of the phrase in the governing statute. It therefore performed a careful analysis of the statute with an eye toward Congressional intent. It found that the meaning of the statute is not ambiguous and therefore the government’s interpretation was not owed deference. Starting with the text of the statute, it found that the ordinary meaning of the word “support” requires the conclusion that a compendium citation must tend to show or help prove the efficacy and safety of the prescribed off-label use. “Nothing about the common meaning of ‘support’ means that a compendium citation must hyperspecifically identify a prescribed off-label use to tend to show or help prove its efficacy and safety.” It also reviewed the particular citation in question, how it was phrased compared to other citations for the same medication, and the evidence cited within the citation. The court concluded that the citation, read as a whole, tends to show or help prove the efficacy and safety of the prescribed off-label use of dronabinol for Mr. Dobson. It stated that the common meaning of “support” does not “as the Medicare Appeals Council concluded, demand that every aspect of the DRUGDEX citation must match the prescribed off-label use precisely.” It also found the legislative history of the statute to support this plain-text reading.
The Center is grateful for the pro bono assistance of Akin Gump Strauss Hauer & Feld at the appellate stage of this case.
Chinatown Service Center v. Cochran, No. 1:21-cv-00331 (D.D.C.) (LEP Protections under Section 1557 of the ACA). Justice in Aging and the Center for Medicare Advocacy, along with pro bono firm Stinson LLP, filed this case on February 5, 2021 on behalf of two community-based organizations that provide social services to Limited English Proficient (LEP) older adults. In the waning days of the Trump Administration, the federal government eliminated protections for LEP individuals in health care by rolling back regulations that were put in place as part of Section 1557 of the Affordable Care Act. The protections were intended to target health disparities by requiring health plans and other entities to inform patients both of their right to interpretation, and their right to legally challenge discrimination based on language ability. But, in 2020, the Trump Administration issued a rule that eliminated these language access protections (as well as many others affecting LGBTQ people, immigrants, women, and other groups). The plaintiffs are asking the court to vacate the 2020 rule and enjoin its implementation.
The parties agreed to stay all proceedings in the matter until July 16, 2021, at which point they filed a joint status report. The court then requested briefing on whether the case should be remanded voluntarily or further stayed based on the administration’s representation that it will be revisiting the Section 1557 regulations and expects to commence a rulemaking proceeding to revise or replace the 2020 rule that eliminated the relevant language access provisions. On August 18, 2021, the government moved for voluntary remand or in the alternative a stay of proceedings. Plaintiffs filed an opposition requesting that if the case is going to be remanded, the rule should be vacated in the meantime to avoid further harm to plaintiffs and others, and that if the case is stayed in the alternative, it should be a time-limited stay with reporting requirements. The government’s motion was fully briefed as of October 8.
On October 13, 2021, the court issued an order staying the case until further notice while the Department of Health and Human Services revises the current rule. The court decided to follow the same approach it had followed in a related case, Whitman-Walker Clinic, Inc. v. HHS, No. 20-1630, 2021 WL 4033072 (D.D.C. Sept. 3, 2021), which challenges several aspects of the 2020 rule, and in which the court had found that a stay was appropriate. The court also ordered HHS to provide bi-monthly updates on its proposed rulemaking, starting in November.
The government’s first status report was filed on November 30, 2021, stating that in continues to expect to issue a Notice of Proposed Rulemaking no later than April 2022.
UPDATE: The government’s second status report filed on January 31, 2022, also stated that it expected to issue a Notice of Proposed Rulemaking no later than April 2022.
Biden Administration’s Nursing Home Agenda
President Joseph R. Biden announced a comprehensive nursing home agenda in his State of the Union address on March 1, 2022. The White House had issued a Fact Sheet on February 28, setting out the agenda in greater detail. “Protecting Seniors and People with Disabilities by Improving Safety and Quality of Care in the Nation’s Nursing Homes” is intended to ensure that,
- “every nursing home provides a sufficient number of staff who are adequately trained to provide high-quality care;
- “poorly performing nursing homes are held accountable for improper and unsafe care and immediately improve their services or are cut from taxpayer dollars; and
- “the public has better information about nursing home conditions so that they can find the best available options.”
Five themes, 21 action steps – includes actions advocates for residents have called for.
- Making sure public programs support safe, adequate, dignified care
Staffing is key: one-year study, followed by proposed rules to implement study’s recommendations for staffing ratios
Also addresses antipsychotic drugs, private rooms
- Enhancing accountability and oversight
Calls for additional funding for inspections; better oversight of poorest performing facility; expanded financial penalties and other sanctions; increased accountability of chains; technical assistance to facilities from Quality Improvement Organizations
- Increasing transparency
of ownership information, finances of owners, examining role of private equity
- Creating pathways for good-paying jobs with free and fair choice to form a union
Launching National Nursing Career Pathways Campaign
- Ensuring pandemic and emergency preparedness
COVID-19 testing and vaccinations and boosters, better emergency preparedness
- “Protecting Seniors and People with Disabilities by Improving Safety and Quality of Care in the Nation’s Nursing Homes” is at https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-protecting-seniors-and-people-with-disabilities-by-improving-safety-and-quality-of-care-in-the-nations-nursing-homes/
- “Biden Administration Issues Bold and Comprehensive Nursing Home Reform Agenda” (CMA Alert, Mar. 3, 2022), https://medicareadvocacy.org/bidens-bold-2022-nursing-home-reform-agenda/
- “Center for Medicare Advocacy Thanks Biden Administration for Comprehensive and Constructive Nursing Home Agenda” (Press Release, Feb. 28, 2022), https://medicareadvocacy.org/2022-proposed-snf-reforms/
- “Nursing Home Advocates to Nursing Home Owners: Stop Whining, Be Part of the Solution” (Press Release, Mar. 1, 2022), https://medicareadvocacy.org/nursing-home-owners-and-execs-should-stop-whining/
Nursing home industry’s response to the nursing home reform agenda: overly-dramatic (no facilities have enough staff; all facilities will close), whiny (we need more money), and basically, untrue claims (quality has improved; look at our quality measures, especially antipsychotics)
- ADMINISTRATIVE ACTION (OR INACTION) ON MEDICARE ADVANTAGE PAYMENT AND OVERSIGHT
The Center for Medicare Advocacy recently submitted comments to the Centers for Medicare & Medicaid Services (CMS) regarding their Advance payment rule (comments were due March 4; the Center’s comments are posted here, and their proposed Part C & D rule (comments were due March 7; the Center’s comments are posted here).
As discussed further below, our comments concerning these documents focused on CMS’ failure to use their discretion to address wasteful Medicare Advantage (MA) overpayments, as well as a call for further enhancing oversight of MA plans. First, we address MA overpayments and profits.
- CMA Alert, “CMS Needs to Rein in Medicare Advantage Overpayments and Heighten Oversight of Insurance Industry,”: CMS Needs to Rein in Medicare Advantage Overpayments and Heighten Oversight of Insurance Industry – Center for Medicare Advocacy
Part C and D Proposed Rule
On January 6, 2022, CMS released CY 2023 Medicare Advantage and Part D Proposed Rule (CMS-4192-P) and an accompanying Press Release describing the overall rule, and a separate Press Release focusing on Part D prescription drug costs. Comments to the proposed rule, available here, were due March 7, 2022.
According to the summaries issued by CMS, the proposed rule includes a range of provisions, including the following:
- Strengthening oversight of marketing and communications, including of third-party marketing organizations (TPMOs), requirements new disclaimers by TPMOs re: limitations of plans offered, and reinstating inclusion of multi-language insert in specified materials re: availability of translation services
- Network adequacy requirements for new or expanding plans;
- Restrictions on plan expansion based on past performance;
- Greater transparency and reporting requirements surrounding the medical loss ratio (MLR, or the percentage of plan revenue spent on patient care and quality improvement activities);
- Dual-Eligible Special Needs Plans (D-SNPs) – proposals include establishment of enrollee advisory committees, simplify plan materials for enrollees, further streamline grievance and appeal systems, solicitation of information concerning social determinants of health, and changes in cost-sharing rules that will lead to more equitable payments to providers and state expenditures; and
- Part D Price Concessions at the Point of Sale – “CMS is proposing to redefine the negotiated price as the baseline, or lowest possible, payment to a pharmacy, effective January 1, 2023. This policy would reduce beneficiary out-of-pocket costs and improve price transparency and market competition in the Part D program”.
Advance Payment Notice
- Every year, CMS releases and solicits public comment on proposed payment policy changes for Medicare Advantage and Part D drug programs for the following year. The Center’s comments to the 2023 Advance Notice, due March 4, 2022, (available here) expressed disappointment that CMS is not proposing to use the tools at their disposal to rein in excessive MA payment, primarily their discretion to increase the statutory minimum coding intensity adjustment, meant to adjust for differences in patterns of coding between MA and traditional Medicare. The Center also urged CMS to substantially revise the quality bonus payment program, which analysts have found to be both flawed and ineffective in improving quality. Finally, the Center applauded CMS for focusing on health equity by proposing to better measure social risk factors and develop a Health Equity index, but we urged CMS
“to ensure that plan sponsors do not use these measures and criteria simply as a means of further increasing coding intensity and thereby further boosting payment; plans must be held accountable for actually addressing disparities. In addition, while we recognize the value of both screening for and provision of health-related social needs such as food, housing and transportation, we note that MA plans provide such services largely through the excess payment they receive in relation to spending on beneficiaries in traditional Medicare, to whom such benefits remain unavailable. Both Congress and CMS have exacerbated the disparities between MA and traditional Medicare, and we urge CMS to do everything within its authority to reverse this trend.”
- UPDATE ON MEDICALLY NECESSARY ORAL HEALTH CARE
On March 16, 2022 the Center for Medicare Advocacy hosted a listening session for CMS on expanding coverage for medically-necessary dental treatments. This first session was focused on dental and medical indicators and was moderated by Center for Medicare Advocacy Senior Attorney, Wey-Wey Kwok. Speakers included a dentist to discuss dental clinical indicators, and various physicians specializing in areas directly impacted by untreated dental issues, to discuss medical indicators in their respective fields, including diabetes, cancer, immunosuppressive diseases, and heart disease among others.
This is part of the Center for Medicare Advocacy’s ongoing efforts to encourage CMS to provide coverage for medically necessary dental care. For this purpose, “medically necessary oral health care” refers to care that, according to accepted standards of practice, is reasonable, necessary, integral, and prudent to the management and/or treatment of a covered medical condition, and/or for prevention of a medical complication from oral/dental pathologies. Our 2019 legal memorandum outlined statutory authority that currently exists for CMS to cover this kind of care without any change in legislation.