Supreme Court weighs whether hospital drug cuts are valid
The U.S. Supreme Court heard oral arguments Tuesday about whether the federal government had the authority to cut hospitals' payments for outpatient drugs.
Why it matters: The controversial case involves billions of dollars for hospitals, pits not-for-profit hospitals against rural and for-profit facilities, and tests the broader legal theory of whether federal agencies can take matters into their own hands when laws are vague.
Details: Justices questioned Donald Verrilli, the former U.S. Solicitor General representing the American Hospital Association and other hospitals, and Christopher Michel of the Department of Justice.
- Hospitals pocket large savings when acquiring certain drugs through a federal program called 340B.
- Medicare, under the Trump administration, instituted a 28.5% cut to those drug payments starting in 2018. Research indicated some hospitals were profiting excessively from the program.
- Justices peppered both sides about whether Medicare's rate adjustment abided with the law.
Zoom in: The crux of the case falls on the so-called Chevron doctrine, which says federal agencies like Medicare have some leeway to interpret ambiguous laws, and courts should defer to them.
- However, after decades of using this legal doctrine, "How much ambiguity is enough?" Justice Neil Gorsuch asked.
- "I'm not sure anybody's answered that question," Michel said. And in this case, "I don't think there's much ambiguity at all," he said.
The bottom line: A ruling against hospitals would redistribute large sums of money from a drug discount program that many experts believe the hospital industry has abused, and it would solidify Medicare's ability to make these types of adjustments based on current law.