Meta description: Learn what the Supreme Court decided in Becerra v. Empire Health Foundation, how Medicare’s hospital reimbursement formula works, and why the ruling matters.
The Supreme Court’s 2022 decision in Becerra v. Empire Health Foundation clarified how Medicare counts certain hospital patient days when calculating extra payments to hospitals that serve a disproportionate share of low-income patients. The dispute centered on people who remained eligible for Medicare Part A but had used up the benefits available for a particular hospital stay. The Court ruled that those days belong in the Medicare fraction used in the payment formula. The decision resolved a long-running disagreement between federal health officials and hospitals over how to read the governing statute.
What the Supreme Court Decided
On June 24, 2022, the Supreme Court ruled 5–4 for the federal government in Becerra v. Empire Health Foundation, 597 U.S. 424 (2022). Justice Elena Kagan wrote the majority opinion. The Court held that patients who are eligible for Medicare Part A remain “entitled to benefits under part A” for purposes of the Medicare disproportionate-share-hospital, or DSH, payment formula—even when Medicare will not pay for a particular day because the patient’s coverage limit has been reached.
In practical terms, the ruling allows the U.S. Department of Health and Human Services (HHS) to count those patient days in the denominator of the Medicare fraction. The fraction is part of the formula used to determine a hospital’s Medicare DSH adjustment. The Court did not decide that Medicare must pay for an otherwise uncovered day of care; it addressed how that day is classified in a separate hospital-payment calculation.
The case arose from a challenge by Empire Health Foundation, a nonprofit organization connected to a Spokane, Washington, hospital. Empire argued that days after a patient exhausted Medicare Part A coverage should not count as Medicare days in the formula. HHS took the opposite view. The Supreme Court upheld the agency’s interpretation.
How Medicare DSH Payments Work
Medicare pays qualifying hospitals an additional amount, commonly called the DSH adjustment, to account for the costs and financial pressures associated with serving a substantial number of low-income patients. The adjustment is calculated under federal law and is based in part on two fractions. Together, they measure a hospital’s share of patients associated with Medicare and low-income status, and its share of patients eligible for Medicaid but not counted in the Medicare fraction.
The formula appears in section 1886(d)(5)(F) of the Social Security Act, codified at 42 U.S.C. § 1395ww(d)(5)(F). The statute uses patient days as a measure. In broad terms, a hospital’s Medicare fraction compares certain days attributable to people entitled to Medicare Part A and eligible for Supplemental Security Income (SSI) with a larger group of days attributable to people entitled to Part A or eligible for SSI.
The Medicaid fraction generally accounts for days involving patients eligible for Medicaid who are not entitled to Medicare Part A. The two fractions are combined in determining the hospital’s DSH percentage. The details matter because a patient day placed in one fraction, both fractions, or neither can affect the calculation and, in turn, a hospital’s payment.
| Formula component | General role |
|---|---|
| Medicare fraction | Measures specified patient days involving people entitled to Part A and people eligible for SSI. |
| Medicaid fraction | Measures specified days involving Medicaid-eligible patients who are not entitled to Part A. |
| DSH adjustment | Uses the statutory fractions to determine an additional Medicare payment for qualifying hospitals. |
This is a simplified description. The statute and federal regulations control the exact calculation, and other rules may apply to particular hospitals or payment periods.
Why “Entitled to Benefits” Was Disputed
The case turned on the meaning of the statutory phrase “entitled to benefits under part A.” The federal government treated entitlement as a person’s status under the Medicare program: whether the person qualified for Part A. Empire argued that the phrase should be understood in relation to the care received on a particular day. Under its reading, a day would count as a Medicare day only if Part A benefits were actually available to pay for the hospital care that day.
That difference became important when a patient’s hospital stay continued after the patient had used all available covered days. Medicare Part A generally covers inpatient hospital care subject to eligibility rules, coverage limits, and other conditions. When the applicable benefits are exhausted, Medicare may no longer pay for additional days in that stay. But a patient who has used those days may still be a person eligible for Part A.
Empire’s interpretation focused on payment for the specific day. HHS’s interpretation focused on the patient’s broader eligibility status. The Supreme Court concluded that the statutory language supported the government’s approach. The law refers to people “entitled to benefits,” the majority reasoned, rather than limiting the formula to days for which Medicare actually makes payment.
The Majority’s Reasoning
The majority read the statute as distinguishing between a person’s entitlement to Part A and whether Part A pays for a particular service or day. A person may qualify for the program even when a coverage limit or other condition prevents payment for a particular portion of a hospital stay. The Court found that the statutory text did not make payment on each individual day the test for inclusion in the Medicare fraction.
The opinion also considered how the formula treats SSI. The Medicare fraction’s numerator identifies days associated with people who are both entitled to Part A and eligible for SSI. Its denominator includes a broader group—days associated with people entitled to Part A or eligible for SSI. Because the statute describes categories of people rather than only paid claims, the majority concluded that exhausted-benefit days could remain part of the relevant patient-day count.
In reaching its decision, the Court relied on the statutory wording and the structure of the payment formula. It rejected the view that “entitled” necessarily means that Medicare must pay for the specific day being counted. The ruling therefore endorsed HHS’s long-standing regulatory approach to the disputed days.
The Dissenting View
Justice Brett Kavanaugh wrote the dissent, joined by three other justices. The dissent viewed the phrase “entitled to benefits under part A” in the context of Medicare’s payment for hospital care. On that reading, days after a patient exhausted Part A coverage should not be treated as Medicare days in the denominator, because Part A did not cover those days.
The dissent also raised concerns about the consequences of the government’s interpretation for hospitals’ DSH calculations. It argued that the statutory formula should reflect the days for which Medicare benefits were available, rather than a patient’s general eligibility when no Part A payment could be made. The disagreement was therefore both textual and practical: the justices differed over whether the formula measures program eligibility or coverage of the particular day.
What the Ruling Means for Hospitals
The decision settled the federal government’s authority to include exhausted-benefit days in the Medicare fraction’s denominator when applying the relevant DSH rules. It therefore preserved HHS’s method for calculating the fraction rather than requiring the agency to adopt Empire’s narrower approach.
Because the Medicare fraction affects the overall DSH calculation, the classification of patient days can influence payment amounts. The precise effect varies by hospital and reporting period. It depends on the hospital’s patient mix, the number and type of disputed days, and the other figures used in the formula. The ruling did not establish a single payment change applicable to every hospital.
Hospitals reviewing DSH calculations should distinguish among three separate questions: whether a patient is eligible for Part A, whether Part A covers a particular day, and how the statute directs that day to be counted in the DSH formula. Becerra addresses the third question. It does not expand Part A coverage or authorize payment for days that Medicare otherwise does not cover.
What the Ruling Means for Medicare Patients
The Supreme Court’s ruling concerns payments between Medicare and hospitals. It does not change a patient’s Part A eligibility, create additional covered hospital days, or change the rules for when Medicare pays a claim. A patient’s coverage continues to depend on federal Medicare law, the facts of the stay, and applicable coverage requirements.
Nor does the decision mean that a patient who has exhausted coverage automatically owes a particular amount. Patient responsibility depends on the circumstances and applicable Medicare rules, including any other coverage, notices, or protections. The case concerned how hospitals’ DSH adjustments are calculated, not a ruling on an individual patient’s bill.
Why the Case Matters Beyond One Hospital
The decision is significant because Medicare DSH adjustments help support hospitals that serve high numbers of low-income patients. The case clarified a key term in the formula and provided a nationwide answer to a dispute that had produced conflicting interpretations in litigation. For hospitals, government agencies, and those examining Medicare reimbursement, the ruling establishes that Part A eligibility—not payment for each specific day—is central to the disputed classification.
The case also illustrates a recurring issue in public-benefit programs: legal eligibility and payment for a particular service are not always the same thing. A person can remain eligible for a program while a specific service falls outside coverage, or while a benefit limit has been reached. Whether that distinction matters in a formula depends on the exact language Congress used.
Key Case Details and Sources
- Case: Becerra v. Empire Health Foundation, 597 U.S. 424 (2022).
- Decision date: June 24, 2022.
- Vote: 5–4.
- Holding: Patients eligible for Medicare Part A remain “entitled to benefits under part A” for the DSH Medicare fraction, including days after they exhaust benefits for a particular stay.
- Statute: 42 U.S.C. § 1395ww(d)(5)(F).
- Primary source: The Supreme Court opinion in Becerra v. Empire Health Foundation.
For the governing legal analysis, the Supreme Court’s opinion and the statutory text are the primary sources. Agency guidance and hospital-specific payment records can help explain how the rules apply to an individual calculation, but they do not replace the statute or the Court’s holding.