Managed Care Outlook 2023

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Several significant decisions that could impact managed care are slated to come out of courts in the coming year, including opinions that could influence (1) the ability to sue for Medicaid benefits; (2) the viability of federal False Claims Act (FCA) cases; (3) Employee Retirement Income Security Act (ERISA) requirements for communicating adverse benefit determinations; and (4) the constitutionality of portions of the Patient Protection and Affordable Care Act (ACA). Here are a few of the cases we are watching on behalf of our managed care clients.

Right to sue for Medicaid benefits

In Health & Hospital Corporation of Marion County, Indiana v. Talevski, the U.S. Supreme Court is considering whether to reexamine its precedent that individuals can bring a federal Section 1983 suit (alleging a state or local official has violated their civil rights) to enforce rights under legislation such as Medicare. The Court is also considering whether the Nursing Home Reform Act provides a private right of action or leaves the enforcement of rights under that Act exclusively to the Centers for Medicare and Medicaid Services (CMS).

This case, while focused on the enforcement of rights under Medicaid, may have implications for rights under other federal programs and the administration of health care overall. Specifically, the case could potentially overturn long-standing precedent allowing individuals to enforce rights under all statutes created by Congress under the Spending Clause that touch on health care, not just Medicaid. Additionally, the enforcement of rights under Medicaid, Medicare, and other health care programs could be left exclusively under the purview of CMS and the Department of Health and Human Services (or other applicable agencies) to administer via administrative and agency remedies. Accordingly, a ruling in this case is one to watch. The U.S. Supreme Court heard oral argument in November 2022, and its ruling is expected by the end of the term in June 2023.

Government control over FCA cases

In December 2022, the Supreme Court heard another case with potentially large ramifications for the health care industry. In U.S., ex rel. Polansky v. Executive Health Resources, Inc., the Court is considering whether the government has the authority to dismiss a qui tam FCA suit after initially declining to intervene and, if so, the applicable standard to apply to dismissal. In this case, which concerns alleged fraudulent billing of Medicare claims, the Justice Department originally declined to proceed with a qui tam suit but later moved to dismiss the action. The government’s motion was granted by the district court and affirmed by the Third Circuit. In doing so, the Third Circuit concluded that the government must intervene before moving to dismiss, which it can seek leave to do at any point upon showing good cause and that FRCP 41(a)’s standards for voluntary dismissals govern the motion to dismiss.

A circuit split has emerged over when the government can move for dismissal of qui tam cases, and the applicable standard for those motions, with some circuits (like the D.C. Circuit) holding that the government has “unfettered discretion” to move for dismissal at any point of the litigation, regardless of whether it has chosen to intervene, and other circuits (like the Seventh and Third Circuits) limiting the government’s authority to seek dismissal to only when it intervenes in an action and has applied FRCP 41(a)’s standards for a motion to dismiss. Finally, the Ninth Circuit has adopted a rationality standard under which the government must identify a valid government purpose, and a rational relationship between dismissal and accomplishment of that purpose, to obtain dismissal of a qui tam action. The Supreme Court is likely to resolve this split.

With health care being a frequently targeted area for qui tam lawsuits, Polansky may have significant implications for managed care companies. If the Supreme Court’s ruling imposes a requirement to intervene in order to move to dismiss a qui tam action and a time by which that intervention must occur, the government may be encouraged to intervene earlier and dismiss actions that do not further the FCA’s goal of redressing fraud before managed care companies are required to expend significant litigation resources. Further, the adoption of a more heightened standard like the Ninth Circuit’s for government motions could also impact the government’s ability to dismiss qui tam cases. Ultimately, Polansky presents an opportunity for the Justices to weigh in on the rules by which future qui tam actions may proceed. As with Talevski, a decision in this case is expected by the end of the Court’s term.

Key takeaways
  • The Supreme Court is likely to decide whether individuals can bring suit to enforce rights under Medicaid, and potentially under other federal statutes.
  • The Supreme Court is also likely to decide the government’s authority to dismiss FCA cases.
  • The Tenth Circuit will likely address the level of detail that must be in a denial letter, as well as whether inconsistent denial letters are evidence that a denial is arbitrary and capricious.
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