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How much should we pay for the medicine?This is the central question American Hospital Association v. Becerra, A sleeper in a case involving billions of dollars in federal expenditures, and the opportunity to reshape two core principles of administrative law.

Drugs, money and the law: Sounds sexy, right? Nevertheless, you may never have heard of this case, which will be debated on Tuesday, which is forgivable. It stems from a technical controversy over how Medicare, a federal program that provides insurance to 63 million senior citizens and disabled people, pays for some of the drugs distributed by hospitals to outpatients—especially chemotherapy drugs and other expensive anti-cancer drugs.

The case is focused on part A 2003 law provided medical insurance with two options for paying for these drugs. Under the first option, Medicare will investigate the cost of obtaining these drugs in the hospital. Medicare will then use the survey data and reimburse the hospital’s “average cost of purchase”, depending on the type of hospital. This is a rough way to make the hospital complete without requiring them to submit a receipt for each drug purchase.

But medical insurance immediately ran into a problem: it was impractical to investigate the cost of purchasing a hospital. Fortunately, the law foresees this possibility and provides a second option for medical insurance.In the absence of survey data, Medicare can pay the “average price” of the drug, “calculated and adjusted by the minister [of Health and Human Services] Necessary for this purpose [option]. “

Facts have proved that this method is costly. The “average price” of medicines is fixed elsewhere in the medical insurance regulations, and is usually 106% of the selling price of medicines. As a policy issue, this “average selling price plus 6%” method is difficult to defend. Since 6% of a large number of patients is greater than 6% of a small number of patients, even if there are cheaper and equally effective treatments, hospitals have the incentive to dispense more expensive drugs.

Other developments quickly made payment policies seem more suspicious. As early as 1992, Congress formulated a plan called 340B to support health care providers serving poor and disadvantaged communities. Drugs purchased by eligible suppliers can enjoy substantial discounts-between 20% and 50% of the normal price.

Initially, few hospitals met the requirements of the 340B plan. Nowadays, More than two thirds of Non-profit hospital join. (For-profit institutions are not included in the plan.) For many years, Medicare has paid 106% of the average selling price of these 340B hospital outpatient drugs. The result was that the hospital bought very favorable drugs and then charged the federal government the full price.This strengthens the motivation to prescribe very expensive drugs-which is why medical insurance expenditures on outpatient drugs have soared, on average 8.1% per year From 2006 to 2017.

Federal regulators are troubled by the gap between hospital expenses and medical insurance payments. In their view, the focus of the 2003 decree is to pay for the hospital’s expenses, not to subsidize the 340B hospital.This is more generally consistent with health insurance regulations: its “overriding purpose” is supply “Reasonable (not excessive or unfounded) cost-based reimbursement.”

So medical insurance is adopted rule Beginning in 2018, the reimbursement rate for outpatient drugs (or more precisely, part of them) in 340B hospitals will be reduced to 22.5% below the average selling price. This is still generous, as the average 340B discount is about one-third of the drug price. But it is not as generous as it used to be, and Medicare estimates that this change will save taxpayers $1.6 billion each year.

The American Hospital Association filed a lawsuit with two hospital trade groups and three hospitals. The plaintiff argued that if the medical insurance chose option one, it could have focused on the acquisition cost and could even differentiate between hospital groups when setting the payment rate. Instead, it chose option two, that is, medical insurance must pay the “average price” of the drug—not its purchase price—and it does not provide discrimination between hospitals. Although the plaintiffs admitted that medical insurance could “adjust” the average price, they argued that reducing 106% of the average sales price to 77.5% was not a real adjustment. This is a comprehensive revision of the statutory plan.

The plaintiff ran into obstacles as soon as he left the gate.In order to prevent the court from making second guesses about the medical insurance’s choice of outpatient care costs, the medical insurance regulations Say That”[t]There should be no administrative or judicial review of these choices. According to the government, Congress ruled out review because Medicare has a fixed annual budget for outpatient care. Therefore, increasing payments for one type of care requires reducing payments for other types of care.

This connection means that if the plaintiff wins, they should not only pay more for certain drugs. This is all hospitals should pay less for other services. (This helps explain why the alliance representatives countryside with Profitability The hospital has submitted an amicus curiae briefing in support of medical insurance. ) To revoke the decision would be an administrative nightmare-this is why Congress excluded censorship in the first place.

However, as the plaintiff saw, the government only misread the scope of the exclusion language.Although it usually precludes review of reimbursement decisions related to outpatients care, It does not cross-reference sections related to outpatient clinics poison. Both District court with U.S. Court of Appeals for the District of Columbia Circuit Yes, invoking a strong presumption that facilitates judicial review of agency behavior.

As far as the merits of the case are concerned, the plaintiff’s performance was not good. Despite their victory in the District Court, the DC Circuit Court held that Medicare reasonably read the 2003 law and allowed it to align the hospital reimbursement with the hospital’s purchase cost.Therefore, the interpretation of medical insurance—and the scope of its power to “adjust” the payment rate—in Chevron USA Inc. v. Natural Resources Defense Council, A 1984 ruling held that the court should generally follow the agency’s reasonable interpretation of ambiguous regulations. Judge Cornelia Pillard disagreed, arguing that the statute clearly excludes the interpretation of medical insurance.

plaintiff Ask The Supreme Court examines a question: whether medical insurance should be accepted Chevron Respect the 2003 law interpreted in this way. Fascinatingly, the plaintiff pointed out that “[i]As we all know, the members of this court are Chevron Respect, especially when applied indiscriminately as in this case, violates the separation of powers. “

The Supreme Court is kind of.However, in the order granting a rollover order, the court instruct The two parties raised another question: whether Medicare regulations exclude litigation.This means that—in addition to resolving whether hospitals have the right to receive billions of taxpayers’ money—the courts will have the opportunity to resolve two basic principles of administrative law: the presumption of reviewability and Chevron respect.

It can be said, Aha v. Becerra Provides an exceptionally vivid example of the cost of strong presumption of reviewability. If the plaintiff wins, what remedy is there? Given that paying more for the 340B drug means it should pay less for other services, should Medicare reopen all outpatient payment decisions made since 2018? The plaintiff said no, believing that Medicare does not require any retrospective adjustments. But the government is not worried about this, and the answer is not clear at all. Isn’t this the kind of chaos that the exclusion method should avoid?

I have Call In my academic work, I abandon the presumption of reviewability precisely because it does not respect Congress’s reasonable desire to protect certain administrative decisions from judicial review.However, in recent years, the Supreme Court has proven not interested Do this-the presumption of reviewability is still “strong”. We may soon discover how powerful it is.

But a big question about this case is whether the court will use it as a tool for reconsideration Chevron respect. From the plaintiff’s point of view, this is painful—”An insult to the separation of powers“—When Medicare uses so-called ambiguity to evade Congress’s clear instructions on how much to pay the hospital, the court will postpone the trial. Some conservative justices, especially Justices Clarence Thomas and Neil Gossa Odd, may accept this argument. If so, the right wing of the court can use the case to narrow or even overturn Chevron, Has a potentially huge impact on the scope of the power of the executive branch.

Whether the court will do this is anyone’s guess. The judge can easily resolve the case on narrow grounds. Perhaps as the plaintiff argued, the law clearly excludes the interpretation of the law by medical insurance. Or, as the government claims, medical insurance appropriately exercises its explicit power to “adjust” the price of outpatient drugs.

Neither of these assets is the sexiest decision the Supreme Court has ever made. This will be technical, mysterious-even boring. However, considering the financial risks, this will be important.