publication date: Jun. 1, 2018

COA suit claims sequester cut to Medicare Part B is unconstitutional

By Paul Goldberg

The Community Oncology Alliance filed a lawsuit against HHS and other federal agencies over continuing to apply a 2 percent cut to all Medicare Part B reimbursements.

The cuts began on April 1, 2013, and are expected to continue through 2027.

COA, which represents oncology practices across the US, filed the lawsuit in the US District Court for the District of Columbia on May 30.

The complaint names HHS as well as the Office of Management and Budget. COA seeks injunctive relief to specifically stop the Centers for Medicare and Medicaid Services from applying the sequester cut to Part B drug reimbursement.

On the same day, COA sent a letter to HHS Secretary Alex Azar. HHS is preparing change in the Part B program as part of the Trump administration plan for lowering drug prices.

“We are dismayed that the Administration did not consult with community oncologists to understand what is, and is not, working with the payment for cancer drugs and services before making grand pronouncements,” COA President Jeff Vacirca and Executive Director Ted Okon wrote in their letter to Azar.

“Patients’ lives are at stake with policy changes and practicing medical professionals on the front lines must be involved. COA is working very diligently on several important initiatives aimed at payment reform for cancer drugs and services, but feel that the proverbial rug is being pulled out from under us with some of the Administration’s proposals, starting with moving Medicare Part B cancer drugs to Part D,” Vacirca and Okon wrote.


COA’s constitutional argument, abridged from the lawsuit, follows:

OMB or HHS does not have the authority to effectively amend through sequestration the legislatively sanctioned formula by which providers or suppliers are paid or reimbursed for Part B Drugs. The application of the 2 percen sequestration cut against Part B drugs is a constitutional violation of the separation-of-powers doctrine.

Specifically, using the [Budget Control Act of 2011] sequestration tool to reduce spending for Part B drugs constitutes a de facto amendment to the [The Medicare Modernization Act of 2003] statutory formula and thereby violates the Constitution’s Presentment Clause (Article I, Section 7).

The Presentment Clause provides that before becoming a law, a bill must pass through both the House and Senate and “be presented to the President,” and “[i]f he approve he shall sign it, but if not he shall return it . . . .” U.S. Const. Art. I, § 7.

The presentment requirement was considered so important to the Founders that they took effort to make sure the requirements could not be circumvented. As a result, the President is entrusted with only the limited authority in the lawmaking process to nullify proposed legislation. Under the Presentment Clause’s mandate, the President (or other parts of the Executive Branch) has no authority to nullify, alter, or amend existing legislation.

Applied here, the Executive Branch could not alter the MMA’s statutory ASP plus 6% formula even if Congress intended it to do so. It is clear, though, Congress did not intend to do so, because the BCA does not contain any express language indicating that the sequestration applied to the MMA’s statutory formula.

Moreover, the letters from Congress to CMS immediately after the sequestration effective date further corroborate that the statutory formula was not intended to be altered. In other words, even if reimbursement for Medicare Part B drugs could somehow be considered “services,” that still does not demonstrate that the MMA’s statutory ASP plus 6 percent formula was meant to be altered. The Balanced Budget Act does not specifically amend or modify the separate statutory ASP plus 6 percent reimbursement formula contained in the MMA.

OMB’s recommendation to the President to make the 2 percent cut to Medicare (and HHS/CMS’ implementation), including the cut to Part B drug reimbursement, is analogous to an Executive Branch line-item veto, which has been ruled an unconstitutional invasion into the legislative sphere. By reducing the payment formula contained in the MMA, Defendants effectively amended the Medicare Part B payment provisions.

The MMA’s statutory formula can only be amended or repealed through a duly approved bill in Congress that the President then signs into law. It cannot be amended or repealed through OMB’s (or HHS/CMS’) purported execution of the separate BCA, especially where the BCA itself does not address the MMA’s statutory formula, and Congressional members specifically urged CMS not to apply the sequestration cut to Medicare Part B drugs.

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