Becerra v. Empire Health Foundation, For Valley Hospital Medical Center
The Court upheld a federal rule that requires all Medicare-eligible patients — even those whose care Medicare is not currently paying for — to be counted in the formula used to calculate bonus payments for hospitals serving large numbers of low-income patients.
The ruling settles a conflict among federal appeals courts and affirms the government's reading of a dense Medicare payment formula, which for most hospitals produces somewhat lower bonus payments than the alternative approach the hospital in this case advocated.
How it got here: The Ninth Circuit struck down HHS's 2004 Medicare payment regulation; two other circuits had upheld it; the Supreme Court took the case to resolve the split.
The Case in Depth
What happened
The federal government pays "disproportionate share hospital" bonuses to hospitals that treat unusually high shares of low-income patients. The bonus formula involves two fractions — one measuring low-income Medicare patients, one measuring low-income non-Medicare patients. A hospital challenged a 2004 federal rule that counts all Medicare-eligible patients (anyone over 65 or disabled) in the Medicare fraction, even on days when Medicare isn't actually paying their bill — for example, because they've used up their covered days or have private insurance.
The question before the Court
When calculating extra Medicare payments to hospitals that treat many low-income patients, should patients who qualify for Medicare but whose care Medicare isn't paying for on a given day still count as Medicare patients in the formula?
The Court's answer
Yes — the government's regulation correctly reads "entitled to [Medicare Part A] benefits" to mean all patients who qualify for Medicare (essentially everyone over 65 or disabled), regardless of whether Medicare is actually paying for their care on any given day. The Court found that this phrase functions as a term of art throughout the Medicare statute, consistently meaning "qualifying for the program." Nothing in the small parenthetical phrase "(for such days)" was powerful enough to change that settled meaning for just this one formula — parentheticals typically convey an aside, not a fundamental redefinition of statutory terms Congress used uniformly everywhere else.
Reading "entitled" to mean "currently receiving payment" would also create serious problems across the Medicare statute: patients could temporarily lose access to Parts B, C, and D on days Part A wasn't paying; annual notice requirements would flicker on and off based on daily payment status; and anti-deceptive-marketing rules could vanish whenever a private insurer was footing the bill. The two-fraction formula's structure further supports the government: it is designed to sort all low-income patients cleanly into Medicare and non-Medicare populations, and the hospital's approach would cause patients to fall between the two fractions or count in neither.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Hospitals that serve disproportionately high numbers of low-income patients — so-called "safety-net" hospitals — will continue to have their federal bonus payments calculated under the government's formula. For most of those hospitals, that means modestly lower payments than the competing approach would have generated, though the Court ruled the government's method better captures what the law is designed to measure: two distinct low-income patient populations.
What changes now
The case returns to the Ninth Circuit to be reconsidered under the Supreme Court's ruling. Hospitals covered by the government's 2004 regulation will continue to have their disproportionate-share bonus payments calculated under the rule, which for most hospitals produces modestly lower payments than the hospital's proposed approach. The ruling does not resolve every open question about the Medicare fraction formula — in particular, how to interpret the separate phrase "entitled to SSI benefits" in the same formula remains undecided.
What this does not decide
The Court expressly left open how to interpret "entitled to SSI benefits" — the other key entitlement phrase in the same Medicare fraction formula. This ruling addresses only the "entitled to Medicare Part A benefits" language and does not settle every disputed aspect of how safety-net hospital bonus payments are calculated.
Concurrences and dissents
Dissent — Justice Kavanaugh
Justice Kavanaugh argued that from the time Congress enacted the statute in 1986 until 2003, the government itself read the provision the same way the dissent does — counting only days Medicare was actually obligated to pay. His core objection: a patient cannot be simultaneously entitled and disentitled to have payment made by Medicare for the same day. He rejected the majority's concern that this reading would disrupt other Medicare provisions, noting that HHS operated under his preferred reading for nearly two decades without any such problems. He also argued the '(for such days)' parenthetical carries real meaning that the majority unfairly minimized.
How the Court got there
The legal reasoning, step by step
- The Court began with the phrase 'entitled to [Medicare Part A] benefits' as it appears throughout the Medicare statute. Congress explicitly states that every person over 65 or disabled 'shall be entitled to' Part A benefits automatically — no application required. That status of being 'entitled' is a legal status arising from age or disability, and it is separate from whether Medicare is actually paying for any particular service on any particular day.
- The statute itself confirms that entitlement can coexist with payment limits: it explicitly refers to patients 'entitled to benefits under Part A but having exhausted benefits for inpatient hospital services.' Under the hospital's reading, that phrase would be internally incoherent — someone who can't get payments cannot simultaneously be 'entitled to benefits.' The statute's own text demonstrates that hitting a coverage limit doesn't extinguish the underlying entitlement.
- The Court then rejected the hospital's argument that the parenthetical phrase '(for such days)' transforms 'entitled to benefits' into 'currently receiving payment' for this formula alone. Courts don't read Congress as redefining core statutory terms through parentheticals — which typically signal an aside or afterthought. The phrase instead serves the narrower purpose of directing the government to ask about a patient's qualification status on each day, for instance to exclude pre-65th-birthday hospital days when a patient turns 65 mid-stay.
- Reading 'entitled' to mean 'actually receiving payment' would cause cascading instability across the Medicare statute. Patients could lose their gateway to Parts B, C, and D coverage on days Part A wasn't paying. Annual required notices about program benefits would phase in and out based on daily payment status. Anti-deceptive-marketing rules protecting Medicare patients from misleading advertising could disappear whenever a private insurer was covering care. Congress would not have designed a statute whose patient protections fluctuate based on who happened to pay on a given day.
- Finally, the overall two-fraction structure reinforces the Court's reading. The statute is designed to measure and compensate hospitals for serving two distinct low-income populations: Medicare patients (largely seniors) and non-Medicare patients (largely non-seniors). The government's approach neatly places every low-income patient in one category or the other. The hospital's actual-payment test would cause patients to ping-pong between fractions — or fall out of both entirely — based on who was paying that day, distorting the statute's goal of measuring each population distinctly.