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From the State and Local Legal Center

In Becerra v. Empire Health Foundation, the U.S. Supreme Court held 5-4 that patients whom Medicare insures but does not pay for on a given day are counted in the Medicare fraction for purposes of computing a hospital’s disproportionate-patient percentage.

US Supreme CourtStates and local governments own and operate disproportionate-share hospitals (DSH) which serve an “unusually high percentage of low-income patients” and receive greater Medicare payments. According to the court, the regulation, which it agrees “correctly construes the statutory language at issue,” will, for most hospitals, decrease DSH payments.

The Medicare fraction and the Medicaid fraction must be calculated to determine whether a hospital qualifies for DSH payments. The Medicare fraction “roughly speaking” measures the hospital’s low-income senior-citizen population and the Medicaid fraction measures the hospital’s low-income non-senior population.

Specifically, the Medicare statute describes the Medicare fraction as: “The numerator of which is the number of [a] hospital’s patient days for [the fiscal year] which were made up of patients who (for such days) were entitled to benefits under part A of [Medicare] and were entitled to [SSI] benefits, and the denominator of which is the number of such hospital’s patient days for such fiscal year which were made up of patients who (for such days) were entitled to benefits under [Medicare] part A.”

In short, the numerator is the number of patient days attributable to Medicare patients who are poor. The denominator is the number of patient days attributable to all Medicare patients.

The statute describes the Medicaid fraction as “the numerator of which is the number of [a] hospital’s patient days for [the fiscal year] which consist of patients who (for such days) were eligible for medical assistance under [Medicaid], but who were not entitled to benefits under part A of [Medicare], and the denominator of which is the total number of the hospital’s patient days for such [fiscal year].”

In other words, the numerator is the number of patient days attributable to non-Medicare patients who are poor. The denominator is the total number of patient days.

In 2004, by regulation, the Department of Health and Human Services began interpreting “entitled to [Medicare Part A] benefits,” in the Medicare fraction to include patients whom Medicare insures but does not pay for on a given day. Patients may be insured by Medicare, but it may not be paying for them because private insurance is paying or they have used up their allotted Medicare coverage.

Empire Health argued that the regulation is “inconsistent with the statutory fraction descriptions.” According to Empire, the Medicare fraction contains the word “entitled” which means something different from the word “eligible” used in the Medicaid fraction. To be “eligible” for a benefit, Empire posits, is to be “qualified” to seek it; to be “entitled” to a benefit means to have an “absolute right” to its payment.

According to the court, Empire’s argument “even if plausible in the abstract, does not work in the Medicare statute. In this statute, “‘entitled to benefits’ is essentially a term of art, used over and over to mean qualifying (or, yes, being eligible) for benefits—i.e., being over 65 or disabled.”

Likewise, Empire argued that the parenthetical phrase “for such days” in the Medicare faction indicates only days Medicare pays for should be included in the Medicare fraction. The court rejected this argument, which it noted dissenting Justices Brett Kavanaugh, John Roberts, Samuel Alito and Neal Gorsuch “focuses most of its energies on.” “[T]hose three little words do not accomplish what Empire would like, having the much less radical function of excluding days of a patient’s hospital stay before he qualifies for Medicare (e.g., turns 65).”

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This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.