This week, the U.S. Supreme Court sided with the Department of Health and Human Services (HHS) in a case involving Medicare payments to hospitals that serve a “disproportionate share” of low-income patients. HHS generally pays hospitals fixed rates for treating each Medicare patient based on the patient’s diagnosis. But Congress authorized certain adjustments, including enhanced payments for “disproportionate share hospitals” (DSHs). The DSH adjustment recognizes that it is often costly to treat low-income individuals and encourages hospitals to treat such patients.
In Advocate Christ Medical Center v. Kennedy, a group of hospitals challenged how HHS calculates the DSH adjustment. The formula depends partly on the fraction of a hospital’s patients who both have low incomes, as evidenced by their “entitlement to [Supplemental Security Income (SSI)] benefits” (numerator), and who are “entitled to benefits under [Medicare] part A” (denominator). 42 U.S.C. § 1395ww(d)(5)(F)(vi). The higher the proportion of such patients, the more funding the hospital receives.
Previously, the Supreme Court held that for purposes of calculating the DSH adjustment, individuals “entitled to benefits under [Medicare] part A” are all those qualifying for the program, regardless of whether they actually receive Medicare payments for a hospital stay. Becerra v. Empire Health Foundation. Yet in Advocate Christ, the Court held that to count as “entitled to [SSI] benefits,” an individual must be eligible to actually receive a cash payment from SSI during the month of her hospitalization. Writing for the majority, Justice Amy Coney Barrett emphasized that SSI benefits are monthly cash payments. She also claimed that unlike Medicare entitlement, which generally persists unless a beneficiary’s disability status changes, SSI entitlement is determined monthly.
Hospitals had argued that anyone enrolled in SSI should count, regardless of whether they are eligible to receive a cash payment in their month of hospitalization. The Court rejected this view, narrowing the pool of patients counted in the DSH calculation.
Justice Ketanji Brown Jackson, joined by Justice Sonia Sotomayor, dissented. She emphasized Congress’s goal of boosting payments to hospitals that serve low-income communities, noting the well-documented link between poverty and poorer health outcomes. Justice Jackson criticized the majority for misunderstanding the SSI program, which provides income support to individuals over 65 or those who are blind or disabled. She remarked that Congress incorporated SSI into the DSH formula as a proxy for poverty, not “to assess the wholly irrelevant fact of whether any such individual actually received a cash payment under the SSI program during the month of their hospitalization.” This interpretation of the statute, she continued, “arbitrarily undercounts a hospital’s low-income patients.”
Justice Jackson further explained that SSI creates an ongoing entitlement to be enrolled in the program, separate from the right to receive a cash payment in any particular month. SSI thus helps address the “plague of uncertainty” that poverty can create, by alleviating not only the lack of income but the high volatility of income over time. SSI provides for at least a minimal amount of cash even as a poor person’s income may fluctuate throughout the year.
Justice Jackson’s interpretation is a more logical analysis of the Medicare statute and it reflects the lived experience of low-income people. She illustrated her point with a hypothetical: a woman who has long been eligible for SSI, but because she is able to pick up more shifts in her retail job during January, she is ineligible for an SSI payment for that particular month. If she is hospitalized in February she is counted under the majority’s reading of the DSH formula. “But if her heart fails in January, she’s out. Why would Congress have intended to exclude [her] from the hospital’s count of low-income patients in January but include her in February? The answer is simple. It didn’t. After all, the disproportionate-share formula is not about [her] personal cash flow….the formula is trying to count those patients who will be costlier to treat due to the health impacts of poverty.”
Justice Jackson also noted SSI’s similarity to Medicare Part A in having threshold entitlement requirements that are distinct from whether a person receives payment in any given month. People become entitled to Part A when they turn 65 and have met certain work history requirements. But to receive payment for medical services there are additional requirements, including that a service be covered by the program and medically necessary. “It was precisely this distinction—between a threshold entitlement to participate in a benefit program, on the one hand, and a subsequent right to a payment under that program, on the other—that was the linchpin of our interpretation of another part of the disproportionate-share formula in” Empire Health. The same logic should have been applied regarding entitlement to SSI, Jackson argued. “All the formula cares about is whether a patient qualifies for the program that entitles her to payment under specified conditions.”
Justice Jackson concluded by writing that the Court’s decision will “deprive hospitals serving the neediest among us of critical federal funds that Congress plainly attempted to provide.” Noting that hospitals serving a disproportionate share of low-income patients are struggling, she states that it is now “up to Congress to restate its intention that low-income people have access to quality medical care and that hospitals be compensated accordingly.”
May 1, 2025 – A. Bers