Health-Related Litigation And The Supreme Court: The 2021 Term (Part 2)

Federal courts have long played a significant role in shaping health policy, and the Supreme Court’s current term was no exception. This is especially true given a shift in the Court’s makeup, with an emboldened six-to-three conservative majority. The stakes could not have been greater—from bodily autonomy to billions in Medicare funding to the scope of federal agencies’ authority—and the consequences of the Court’s decisions will be felt for decades to come.

This article summarizes several of the recently completed term’s major health care decisions. These decisions focus on the constitutional right to an abortion, the methodology for Medicare disproportionate share hospital payments, and climate change. An earlier article summarized prior decisions on Medicare payment cuts to 340B hospitals, employers’ coverage of dialysis, disability discrimination by health care providers, state recoupment of settlement funds for Medicaid programs, and the public charge rule.

Though not discussed here, the Court also struck down a New York licensing law that restricted when someone can carry a handgun in public. New York State Rifle and Pistol Association v. Bruen was the most significant gun rights decision in more than a decade. The Court issued Bruen in the wake of several mass shootings, most notably at a supermarket in Buffalo, New York and an elementary school in Uvalde, Texas.

Undoing A Constitutional Right To A Pre-Viability Abortion

In Dobbs v. Jackson Women’s Health Organization, the Court rejected nearly 50 years of precedent to hold that women (and other people who can become pregnant) no longer have a constitutionally protected right to a pre-viability abortion. The Court fully overturned Roe v. Wade and Planned Parenthood v. Casey, leaving abortion to be dictated by each state. This has led to a severe patchwork of rights and protections for the more than 64 million women of childbearing age.

In Dobbs, a women’s health clinic and physician challenged the constitutionality of a Mississippi law that banned abortion after 15 weeks of pregnancy. The lower courts held that the law was unconstitutional under Roe and Casey. Mississippi appealed, initially taking the position that the Court need not disturb these long-standing precedents. But, after Justice Amy Coney Barrett was appointed to the Court in fall 2020, state officials changed their position and asked the Court to overrule Roe and Casey.

The Decision

Writing for a five-to-four majority, Justice Samuel Alito concluded that the Constitution does not expressly include the right to an abortion and that abortion is not guaranteed under the Due Process Clause of the Fourteenth Amendment. Abortion is not “deeply rooted” in our nation’s history and tradition, nor is it an integral part of a right to privacy, personal dignity, and autonomy, or the freedom to make intimate and personal choices. While Roe and Casey balanced the latter interests against potential life, states can now balance these “competing interests” differently.

Justice Alito explained why stare decisis—the doctrine that courts should uphold precedent—does not prevent this Court from overturning Roe and Casey. Among other considerations, he criticized Roe as a legislative act and found women to have no reliance interest in the continuation of a long-standing constitutional right over their bodies.

Going forward, state-level abortion restrictions will be reviewed under the lowest level of judicial scrutiny, known as rational basis review. As a result, state laws that regulate abortion will be entitled to a strong presumption of validity by courts. Said another way, state restrictions should be upheld if there is a rational basis on which the legislature could have thought that it would serve legitimate state interests. What might these interests be? Per Justice Alito, state interests might include “respect for and preservation of prenatal life,” elimination of certain “medical procedures,” and “mitigation of fetal pain.” This paves the way for states to adopt a whole range of restrictions.

Chief Justice Roberts concurred in the judgment—meaning the Court upheld Mississippi’s law by a vote of six to three—but he would not have fully overturned Roe. Calling for judicial restraint, he would have separated the right to choose to terminate a pregnancy under Roe from its viability framework.

Justice Kavanaugh concurred separately to assert his view that Dobbs is limited to abortion and should not affect other landmark decisions that rely in whole or in part on the right to privacy and liberty. But Justice Thomas, in another concurrence, gave no such reassurances and called on the Court to reconsider all cases that rely on the same type of substantive due process rights found in Roe. He specifically pointed to prior decisions on access to contraceptives, intimacy, and marriage equality.

In an extensive and impassioned dissent, Justice Breyer, joined by Justices Sotomayor and Kagan, criticized the majority for allowing states to force their own moral choice and coerce women into carry a pregnancy to term “even at the steepest personal and familial costs.” Draconian state laws will “transform what, when freely undertaken, is a wonder into what, when forced, may be a nightmare.”

Implications In Brief

Dobbs has had an immediate impact. Several states have “trigger” laws where abortion bans went into effect immediately or will soon. Clinics were forced to turn away patients, and millions will have to travel hundreds of miles for care.

The dissent, like Justice Thomas, emphasizes that additional constitutional rights will be under threat as a result of Dobbs since these other decisions are cut from “the same constitutional fabric” as Roe and Casey. The dissent predicts that states will adopt all kinds of restrictions, including laws without any exceptions for the life of the mother, and criminalize not only providers but women themselves alongside anyone who assists them in obtaining an abortion (a scheme already allowed by the Court in Texas and now adopted by other states).

States are also expected to attempt to block travel and criminalize information sharing. Justice Kavanaugh suggests that states cannot bar travel to another state for an abortion. The dissent agrees that the Constitution should protect travel, speech, and interstate commerce but explains that Dobbs “will give rise to a host of new constitutional questions.” Indeed, Dobbs is expected to unleash a tidal wave of federal and state litigation over bodily autonomy and reproductive health care, focusing on issues from abortion to miscarriage management to contraception to fertility services.

Court Upholds HHS Methodology For Disproportionate Share Hospital Payments

In Becerra v. Empire Health Foundation, the Court upheld a rule adopted by the Department of Health and Human Services (HHS) in 2004 to set payments for disproportionate share hospital adjustments (DSH payments) under the Medicare program. DSH payments are designed to offset the cost of uncompensated care for hospitals that serve a high proportion of low-income patients.

As discussed more here, the Medicare statute includes a formula for how to calculate hospital DSH payments using the so-called “Medicare fraction” and “Medicaid fraction.” The former reflects the hospital’s low-income senior population while the latter reflects the hospital’s low-income non-senior population. Empire Health Foundation focuses on the Medicare fraction, which is calculated by dividing the number of patient days for those “entitled to” both Medicare Part A benefits and Supplemental Security Income benefits by the number of patient days for those entitled to Medicare Part A benefits.

In its 2004 rule, HHS interpreted the phrase “entitled to benefits” to include all days for patients who are eligible for Medicare Part A benefits—regardless of whether Medicare actually pays for those days. (Part A might not pay if, for instance, the patient is in the hospital for longer than 90 days per illness or the patient has private health insurance.) Said another way, HHS included in the Medicare fraction patients whom Medicare insures but does not pay for. The statute, HHS asserted, requires the inclusion of all Part A patient days in the Medicare fraction; even if not, HHS argued that its approach is reasonable and entitled to deference.

Empire Health Foundation disagreed, arguing that “entitled to benefits under Part A” refers to a patient’s entitlement to payment of benefits by Medicare for specific hospital days, not general entitlement to Part A benefits. HHS, the hospital argued, rewrote the statute to replace “entitled to” with “eligible for” in the Medicare fraction. Hospitals do not like HHS’s interpretation because it increases the denominator of the fraction, thereby reducing their potential DSH payments.

The Ninth Circuit agreed with Empire Health Foundation in 2020, holding that HHS’s interpretation was incompatible with the “unambiguous” statutory language. If a person is “entitled to” rather than “eligible for” Part A, it means that Part A pays for the relevant care. In contrast, two other federal appeals courts reached a different conclusion, holding that the statute is ambiguous and deferring to HHS’s interpretation as reasonable.

The Decision

In a five-to-four decision written by Justice Kagan, the Court reversed the Ninth Circuit’s decision and upheld HHS’s interpretation of the Medicare fraction. Justice Kagan was joined by Justices Thomas, Breyer, Sotomayor, and Barrett. Justice Kavanaugh—joined by Chief Justice Roberts and Justices Alito and Gorsuch—dissented.

The majority concluded that HHS’s rule was consistent with the text, context, and structure of the DSH statute. Individuals who are “entitled to benefits under Part A” include all those who qualify for Part A (regardless of whether Part A pays for their hospital stay). HHS correctly construed the statutory language at issue, which reflects “a surprisingly clear meaning,” at least per Justice Kagan.

Justice Kagan also rejected the arguments made by Empire Health Foundation. “Entitled to” should not be read to have the same meaning as “eligible for”—and the reference to “(for such days)” in the statute does not change this meaning. Looking to other parts of the Medicare statute, she determined that “entitled to benefits” is a term of art that means a person broadly qualifies for Medicare benefits by being, for instance, over 65. This entitlement to benefits is broad and distinct from the narrower entitlement to payment under certain conditions. You can still have insurance, she explained, even if your plan or policy imposes some limits on your care or benefits. Justice Kagan also invoked other statutory provisions—on, for instance, marketing and notices—that she found inconsistent with Empire Health Foundation’s interpretation.

In a 4-page dissent, Justice Kavanaugh asserted that the statute is “straightforward and commonsensical” in the other direction. In his view, a patient is only “entitled to” Part A benefits if Medicare paid for the care on the relevant day. Justice Kavanaugh took this view in part because HHS interpreted the statute that way from 1986 until 2003 before “abruptly” changing course in 2004. Overall, according to Kavanaugh, the 2004 rule is “not the best reading of this statutory reimbursement provision.”

Implications In Brief

With the 2004 rule upheld, hospitals will continue to receive lower DSH payments than they otherwise would have under the preferred methodology of Empire Health Foundation. In a trend worth watching, Justice Kagan did not defer to HHS’s judgment under the Chevron doctrine (as two appellate courts had). Instead, the majority interpreted the statute itself and found that HHS was correct in its interpretation.

This is the second health care decision this term—over Medicare payments to hospitals, no less—where the Court has sidestepped Chevron deference. In American Hospital Association v. Becerra, the Court sided with hospitals over payments to safety net hospitals. Like Justice Kagan here, the unanimous Court there did not address whether HHS’s interpretation of the Medicare statute was entitled to deference and instead limited its analysis to the text and structure of the law before rejecting HHS’s rule.

Climate Change Ruling Jeopardizes Health Care Rules

In West Virginia v. Environmental Protection Agency (EPA), the Court held that Congress did not clearly authorize an Obama-era rule known as the Clean Power Plan. This rule dates to 2015 and was designed to regulate greenhouse emissions under the Clean Air Act. The Clean Air Act directs the EPA to identify sources that significantly contribute to air pollution and set guidelines for achieving “the best system of emission reduction” based on various criteria.

Citing this authority, the Clean Power Plan set guidelines for states to develop emission standards that prioritized cleaner energy by existing power plants. States and plants had flexibility in how they achieved these reductions. Options included more efficient coal burning practices and “generation shifting” activities, like incentivizing plants to invest in lower emission sources (such as natural gas) and shift to renewable energy sources over fossil fuels. Plants could meet these standards through an emissions trading program, with the overall goal of cutting emissions by 32 percent below 2005 levels by 2030.

Power plants and Republican attorneys general challenged the scope of EPA’s authority to issue the Clean Power Plan. In 2016, the Court stopped the rule from going into effect, remanding it to EPA. Then, in 2019, the Trump administration repealed the Clean Power Plan and issued a more industry-friendly policy known as the Affordable Clean Energy rule. In doing so, the EPA asserted that the Clean Power Plan exceeded its legal authority and that the Clean Air Act restricts EPA from incentivizing “generation shifting” activities. EPA, they argued, is limited to regulating individual power plants and cannot adopt an emissions trading program or similar multi-power plant mechanism.

The Trump-era rule was then challenged in court. And, in January 2021, a divided panel of the D.C. Circuit invalidated the Affordable Clean Energy rule. Why? Because the EPA’s decision to rescind the Clean Power Plan rested on faulty reasoning that its hands were tied by the Clean Air Act. This ruling invalidated the Affordable Clean Energy rule and the rescission of the Clean Power Plan rule. The EPA then asked the court to stay the vacatur of the Clean Power Plan rule pending a new rule. As a result, no rule is currently in effect, although the EPA indicated it will issue a new rule by the end of 2022.

Even without a rule in place, West Virginia and the other plaintiffs pushed ahead, urging the Court to “resolve” whether the EPA has “unilateral power” to adopt what it views as significant changes via the regulatory process. The government argued that the parties could not possibly be harmed by the absence of a rule and that the parties were asking for an advisory opinion with the sole goal of constraining the EPA’s authority in the future. It is also worth noting that the goals laid out by the Obama-era EPA have already been met—even though the Clean Power Plan never went into effect.

The Decision

In a decision that will affect future health care regulations and subsequent litigation, the Court held that Congress did not clearly authorize the EPA to adopt the Clean Power Plan. Chief Justice Roberts, writing for a now-familiar six-to-three majority, invoked the so-called “major questions” doctrine to conclude that EPA exceeded its statutory authority. The same reasoning was recently used to invalidate federal COVID-19 pandemic measures, such as the eviction moratorium and the vaccine-or-test mandate for workers. Justice Gorsuch, joined by Justice Alito, wrote a concurring opinion. And Justice Kagan, joined by Justices Breyer and Sotomayor, dissented.

Even though there is no current rule in effect (and over the government’s objections), the Court held that the states were injured by the D.C. Circuit’s opinion and thus had standing. The government failed to show that the dispute was moot based solely on the EPA’s position that it will not enforce the Clean Power Plan. Concluding that the case is justiciable, the Chief Justice turned to summarizing his view of the major questions doctrine.

What is a major question? As discussed more here, it is not entirely clear. Summarizing prior cases, the Chief Justice noted that there are “extraordinary cases”—where the breadth of an agency’s asserted authority and regulation is of “economic and political significance”—that give courts “a reason to hesitate” before concluding that Congress gave the agency that authority. Examples include the Food and Drug Administration’s attempt to regulate tobacco products as drugs or devices, the Centers for Disease Control and Prevention’s eviction moratorium, the Internal Revenue Service’s conclusion that marketplace premium tax credits are available in all states under the Affordable Care Act, and the Occupational Safety and Health Administration’s vaccine-or-test mandate for workers.

Despite a “colorable textual basis” in each case, “common sense” made it “very unlikely” that Congress granted each agency with this authority. Congress, the Chief Justice observed, is presumed to make major policy decisions on its own—not leave those decisions to agencies. Therefore, when these “extraordinary cases” arise, an agency must have “clear congressional authorization” for its policies.

The Clean Power Plan qualifies as a major question because the EPA “claimed to discover” a broad power in a long-standing statute. The Chief Justice characterized the relevant provision of the Clean Air Act as an ancillary provision with vague language that was designed to be a “gap filler” and was rarely used before. In addition, he noted, the EPA was asserting an authority that Congress had “conspicuously and repeatedly declined to enact itself,” since Congress has long rejected cap-and-trade schemes for carbon. Chief Justice Roberts then went on in his majority opinion to ruminate on what Congress meant—or did not mean—when enacting the Clean Air Act, finding it “highly unlikely” that Congress would leave the decision of coal-based generation to the EPA’s discretion.

After deciding that the major questions doctrine applies, the Chief Justice found no clear congressional authorization for the EPA to regulate as it did under the Clean Power Plan. He acknowledged that “almost anything could constitute” a “system” under the relevant Clean Air Act provisions. But he then stated that the word “system” is “an empty vessel” and rejected the other statutory language cited by the government as insufficient to satisfy the “clear authorization” requirement. The Chief Justice concluded that the EPA’s decision to adopt the Clean Power Plan rests only with Congress or an agency acting under a clear congressional delegation of authority.

Similar to Justice Kavanaugh’s reasoning in his Becerra v. Empire Health Foundation dissent, the majority pointed to the fact that the EPA had not used this authority or taken this position in the past. The Chief Justice also emphasized the fact that the EPA had adopted a “novel reading” of the statute and used the cited authority under the Clean Air Act “only a handful of times” since the law was enacted in 1970. This lack of action, he asserted, is evidence of the EPA’s limited authority in this arena.

Consistent with his prior writing on this legal issue, Justice Gorsuch used his concurrence to lay out an even broader view of the major questions doctrine. He first laid out what he views as three non-exhaustive “triggers” for when an agency action involves a major question: when the agency claims the power to resolve a matter of great political significance or end a national debate; when the agency seeks to regulate a significant portion of the economy or require billions in spending by private persons or entities; or when the agency wants to intrude into an area that is a domain of state law.

Justice Gorsuch then set forth his view for what qualifies as a clear congressional statement to satisfy the concern that an agency is addressing a so-called major question. Courts should 1) look at the overall statutory scheme so that agencies are not relying on gap filler provisions; 2) consider the age and focus of the statute; 3) examine the agency’s past interpretations and be skeptical when an agency asserts new authority; and 4) assess whether there is a “mismatch” between an agency’s action and its mission and expertise.

In her dissent, Justice Kagan characterized the Court’s decision as an impermissible advisory opinion on the scope of a new EPA rule and explained that Congress did clearly authorize the EPA to regulate power plants in this manner. Emphasizing the text of the statute, she asserted that Congress directed the EPA to develop a system of emission reduction and purposely selected a broad, comprehensive, and wide-ranging word while imposing other constraints on the EPA in exercising this authority. She bolstered this argument by pointing to additional relevant statutory language and statutory history.

The majority, Justice Kagan noted, simply found that generation shifting under the Clean Power Plan is “just too new and too big a deal for Congress to have authorized it in … general terms.” But broad delegations to agencies by Congress are purposely designed to enable agencies to respond to new and big problems as and when they arise. The majority’s decision, in Justice Kagan’s view, thus overrides Congress’ choice in delegating to the EPA and will “prevent agencies from doing important work, even though that is what Congress directed.”

Implications In Brief

The Court’s decision in West Virginia does not fully prevent EPA from regulating greenhouse gases, but it significantly narrows the agency’s options for doing so. For now, the EPA could regulate individual power plants—as opposed to the full power grid—but doing so is less effective at combatting climate change. The Court does not directly opine on whether that is the EPA’s only option, but the Court seems skeptical and this issue could arise in what is sure to be future litigation over the EPA’s next rule.

By fully embracing the major questions doctrine, West Virginia undermines deference to federal agencies at a time when Congress seems more dysfunctional than ever. The majority opinion could also prevent agencies from changing their mind over time or adopting new interpretations of older statutes. This is a significant change that would constrain any new administration from adopting new rules that match its policy preferences.

Lower courts, in particular, could view agency action skeptically and aggressively invalidate federal regulations. Even before West Virginia, there was a surge in the number of federal court filings that mention the major questions doctrine. Coupled with increased judicial skepticism of the administrative state, this shift could severely limit the executive branch’s ability to implement federal law.

West Virginia will have significant implications for health policy in particular. Why? Because of the specialized, complex nature of health care and the degree to which Congress tasks federal officials with health care implementation. As just some examples, Congress has entrusted federal agencies with administering trillions of dollars in annual health care spending, overseeing the Medicare and Medicaid programs, approving drugs and devices, providing health care for veterans, and regulating private insurers, among other roles. Given how much Congress defers health care implementation to the executive branch, a wide range of health laws and regulations could be vulnerable to legal challenge.