United States Court of Appeals, District of Columbia Circuit
October 21, 2019
from the United States District Court for the District of
Columbia (No. 1:17-cv-02774)
L. Feldesman argued the cause for appellant. With him on the
briefs were Matthew S. Freedus and David A. Bender.
Schoen, Attorney, U.S. Department of Justice, argued the
cause for appellees. With her on the brief were Joseph H.
Hunt, Assistant Attorney General, and Alisa B. Klein,
Before: Tatel, Pillard, and Wilkins, Circuit Judges.
PILLARD, CIRCUIT JUDGE:
provision of the Medicare statute we call the Not Less Than
Provision, 42 U.S.C. § 1395w-27(e)(3)(A), requires that
private Medicare insurance plans' reimbursements to a
Federally Qualified Health Center (FQHC) for
government-subsidized medical services be "not less
than" what the insurers pay other healthcare providers
not receiving such subsidies. Cares Community Health, an
FQHC, claims that the Not Less Than Provision also prevents
private Medicare prescription drug plans from reimbursing an
FQHC less for dispensing pharmaceuticals than they would
reimburse a non-FQHC for dispensing the same drugs. Cares
sued the U.S. Department of Health and Human Services (HHS),
the HHS Secretary, and the Administrator of the Centers for
Medicare and Medicaid Services (CMS), claiming that they
unlawfully allowed an insurer offering Medicare prescription
drug coverage, Humana Health Plan, Inc., to pay Cares less
for drugs that Cares obtains at a discount under a separate
federal program known as Section 340B, id. §
256b, than Humana would reimburse a non-FQHC for the same
drugs. The district court dismissed Cares' claim, holding
that the Medicare statute does not mandate that HHS require
Humana to reimburse FQHCs for discounted pharmaceuticals at a
rate "not less than" Humana pays other providers
for the same drugs. Cares Cmty. Health v. HHS, 346
F.Supp.3d 121, 129 (D.D.C. 2018) (quoting 42 U.S.C. §
1395w-27(e)(3)(A)). We affirm.
become an FQHC like Cares under the Medicare program, 42
U.S.C. § 1395x(aa)(4), a health center must provide
"primary health services" to "medically
underserved" communities, id. § 254b(a),
regardless of patients' ability to pay, see id.
§ 254b(k)(3)(G). FQHCs are a key part of the medical
safety net for low-income individuals without health
insurance. Recognizing that FQHCs' central role in
treating low-income, uninsured patients means that they
provide lots of uncompensated care, Congress has provided
FQHCs various forms of financial support. See generally
Cmty. Health Care Ass'n of N.Y. v. Shah, 770 F.3d
129, 136 (2d Cir. 2014).
Medicare statute provides one such support through
governmental "wraparound" payments. Those payments
make up the difference between what private insurers
reimburse FQHCs for providing non-pharmacy outpatient medical
services to Medicare beneficiaries and what traditional
Medicare would reimburse a provider for the same services,
which might be higher. See 42 U.S.C. §
1395l(a)(3)(B). Because insurers might otherwise be
tempted to save money at the government's expense by
lowering their reimbursements to FQHCs receiving wraparound
payments, Medicare's Not Less Than Provision prevents
insurers from exploiting the wraparound support by
selectively reducing reimbursement rates to FQHCs. See
id. § 1395w-27(e)(3)(A).
Public Health Service Act provides a second support through
Section 340B, which requires drug manufacturers participating
in Medicaid to offer pharmaceutical discounts to FQHCs and
certain other safety-net healthcare providers. See
id. § 256b. These drug discounts can produce income
for eligible providers insofar as insurers reimburse them at
market prices that exceed the 340B-discounted price.
Notwithstanding some difference in how these two supports
operate, Cares argues that the Medicare statute's
protection against insurers' freeloading off the
wraparound program also necessarily forbids insurers from
lowering their reimbursements to capture for themselves the
benefit of Section 340B discounts.
The "Not Less Than" Payment Mandate
federal Medicare program reimburses medical providers"
such as FQHCs "for services they supply to eligible
patients" age 65 and older or with disabilities. Ne.
Hosp. Corp. v. Sebelius, 657 F.3d 1, 2 (D.C. Cir. 2011).
The Medicare statute is divided into five "Parts,"
lettered A through E, with Parts A through D each
corresponding to a separate benefit category under Medicare.
Id. Traditional Medicare comprises Part A, which
"covers medical services furnished by hospitals and
other institutional care providers," and Part B, which
covers outpatient care like physician and laboratory
services. Id. Congress authorized wraparound
payments to FQHCs in the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (Medicare
Modernization Act or MMA), Pub. L. No. 108-173, 117 Stat.
2066, which "established the Medicare Advantage
program" in Part C, id. § 201(a), 117
Stat. at 2176 (codified as amended at 42 U.S.C. §
1395w-21 et seq.), and added prescription drug
coverage to Medicare in Part D, id. § 101, 117
Stat. at 2071 (codified as amended at 42 U.S.C. §
1395w-101 et seq.).
Medicare Part C Services and Wraparound Payments
Medicare Advantage (Part C), private insurance
companies-known as Medicare Advantage organizations- contract
with CMS to offer Medicare beneficiaries a similar range of
medical coverage to what traditional Medicare funds directly
under Parts A and B. See Ne. Hosp. Corp., 657 F.3d
at 2; see also MSPA Claims 1, LLC v. Tenet Fla.,
Inc., 918 F.3d 1312, 1316 (11th Cir. 2019). CMS pays
those insurers (the Medicare Advantage organizations) a fixed
amount for each eligible Medicare beneficiary they enroll,
and the insurers in turn negotiate agreements with healthcare
providers to reimburse them for services they provide to the
insurers' enrolled beneficiaries. See Ne. Hosp.
Corp., 657 F.3d at 3. Part C imposes certain
requirements on CMS' contracts with insurers,
e.g., 42 U.S.C. § 1395w-27, some of which CMS
must require insurers to implement in their agreements with
providers, e.g., id. §
here, the Medicare Modernization Act includes three
interlocking requirements regarding Medicare Advantage
organizations' relationship with FQHCs, each of which we
give a shorthand name for ease ...