Whether the Overpayment Rule violates the statutes' actuarial-equivalence and same-methodology mandates

QUESTIONS PRESENTED Medicare provides health insurance for millions of seniors and individuals with disabilities. Congress originally authorized the Centers for Medicare & Medicaid Services (CMS) to provide health insurance directly to eligible individuals in a program known as “traditional Medicare.” Congress later expanded Medicare to enable eligible individuals to elect coverage through private insurance plans instead. This latter program, which has been wildly successful and popular, is known as “Medicare Advantage” (MA). In enacting MA, Congress created a comparative payment model that requires CMS to pay MA plans an “actuarial[ly] equivalen|t]” amount to what CMS would have paid to insure the same beneficiary in traditional Medicare, after comparing the health and costliness of the traditional Medicare and MA populations. 42 U.S.C. § Congress likewise required CMS to use the “same methodology” to compute the costliness of insuring a beneficiary in the MA program and in traditional Medicare. Id. § 1395w-23(b)(4)(D). CMS thus for years recognized that it must use the same actuarial assumptions when calculating the cost of care for both the traditional Medicare and MA populations. But in 2014, CMS departed from that position— without acknowledging or explaining this flip flop—in adopting a new rule implementing a_ separate statutory requirement that MA plans return identified “overpayments” to the agency. Id. § 1320a7k(d)(1); see 79 Fed. Reg. 29,844, 29,918-25 (May 23, 2014) (“Overpayment Rule”). This Overpayment Rule implemented a different set of assumptions for assessing the health and costliness of the traditional ii Medicare and MA populations: It imposed a stringent definition of “overpayment” on private MA insurers using one set of assumptions about their beneficiaries’ health data, but failed to make any corresponding adjustment to the traditional Medicare data CMS uses to calculate MA payment rates. The Rule thus creates an apples-to-oranges payment scheme, which imposes potentially billions of dollars in additional payment obligations on MA plans and threatens the scope and affordability of care MA plans are able to provide to over 26 million seniors. Petitioners—the nation’s leading providers of MA plans—challenged the Overpayment Rule as contrary to the Medicare statute’s and same-methodology mandates, and as an arbitrary and capricious departure from the agency’s prior position. The district court agreed with petitioners that the rule is invalid on those independent grounds. But the D.C. Circuit reversed. Adopting a position never advocated by CMS, the D.C. Circuit held that the Medicare statute’s and samemethodology requirements do not even implicate the issue of what constitutes an “overpayment.” The court then held that this lack of a statutory connection negated any need for CMS to justify the agency’s change in position in adopting the Overpayment Rule, and that the Rule is otherwise lawful. The questions presented are: 1. Whether the Overpayment Rule violates the statutes “actuarial equivalence” and “same methodology” mandates. 2. Whether the Overpayment Rule is otherwise arbitrary, capricious, or not in accordance with law.