Respondents Brief — Texas, et al., Petitioners v. Commissioner of Internal Revenue, et al.
Supreme Court briefNov 8, 2021
Ask Donna
What actually matters in this document.
Text
No. 21-379
In the Supreme Court of the United States
STATE OF TEXAS, ET AL., PETITIONERS
v.
COMMISSIONER OF INTERNAL REVENUE, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
BRIEF FOR THE RESPONDENT IN OPPOSITION
ELIZABETH B. PRELOGAR
Solicitor General
Counsel of Record
BRIAN M. BOYNTON
Acting Assistant Attorney
General
ALISA B. KLEIN
CATHERINE M. PADHI
Attorneys
Department of Justice
Washington, D.C. 20530-0001
SupremeCtBriefs@usdoj.gov
(202) 514-2217
QUESTIONS PRESENTED
Since 1981, as a condition of a State’s receiving payments from the federal government under the Medicaid
program, 42 U.S.C. 1396 et seq., Congress has required
States that contract with third-party managed-care organizations to provide care for beneficiaries covered by
the States’ Medicaid plans to make “actuarially sound”
per-patient payments to those managed-care organizations. 42 U.S.C. 1396b(m)(2)(A)(iii). In 2002, following
notice and comment, the Centers for Medicare & Medicaid Services (CMS) promulgated a regulation identifying three criteria that “[a]ctuarially sound” payments
must satisfy: the payment amounts must “[h]ave been
developed in accordance with generally accepted actuarial principles and practices”; those amounts must be “appropriate for the populations to be covered, and the services to be furnished under the contract”; and, directly
at issue here, the payment amounts must “[h]ave been
certified, as meeting th[ose] requirements * * * , by actuaries who meet the qualification standards established
by the American Academy of Actuaries and follow the
practice standards established by the Actuarial Standards Board [Board].” 42 C.F.R. 438.6(c)(1)(i) (2015) (emphasis omitted). The questions presented are as follows.
1. Whether the court of appeals correctly determined
that the 2002 regulation requiring certification by an actuary who follows the Board’s practice standards does
not constitute an unlawful delegation of CMS’s authority.
2. Whether petitioners’ 2015 claims challenging the
requirement in CMS’s 2002 regulation of certification
by an actuary who follows the Board’s practice standards are barred by the six-year statute of limitations for
civil claims against the United States, 28 U.S.C. 2401(a).
(I)
TABLE OF CONTENTS
Page
Opinions below .............................................................................. 1
Jurisdiction .................................................................................... 1
Statement ...................................................................................... 2
Argument..................................................................................... 14
Conclusion ................................................................................... 33
TABLE OF AUTHORITIES
Cases:
A. L. A. Schechter Poultry Corp. v. United States,
295 U.S. 495 (1935).............................................................. 17
Amerada Hess Pipeline Corp. v. FERC,
117 F.3d 596 (D.C. Cir. 1997) ............................................. 13
American Soc’y for Testing & Materials v.
Public.Resource.Org, Inc.,
896 F.3d 437 (D.C. Cir. 2018) ....................................... 13, 17
Arlington Cent. Sch. Dist. Bd. of Educ. v. Murphy,
548 U.S. 291 (2006).............................................................. 17
Association of Am. R.Rs. v. United States Dep’t
of Transp., 821 F.3d 19 (D.C. Cir. 2016) ........................... 18
Bowen v. Massachusetts, 487 U.S. 879 (1988) ...................... 2
California Sea Urchin Comm’n v. Bean,
828 F.3d 1046 (9th Cir. 2016) .......................................... 26
Carter v. Carter Coal Co., 298 U.S. 238 (1936) ................... 18
Chafin v. Chafin, 568 U.S. 165 (2013).................................. 30
Currin v. Wallace, 306 U.S. 1 (1939) ............................. 18, 19
Dahda v. United States, 138 S. Ct. 1491 (2018) .................. 33
DaimlerChrysler Corp. v. Cuno,
547 U.S. 332 (2006).............................................................. 29
Department of the Army v. Blue Fox, Inc.,
525 U.S. 255 (1999) .......................................................... 30
(III)
IV
Cases—Continued:
Page
Dunn-McCampbell Royalty Interest, Inc.
v. National Park Serv.,
112 F.3d 1283 (5th Cir. 1997) ............................... 23, 24, 25
Eubank v. City of Richmond, 226 U.S. 137 (1912) ............. 18
Frank v. Gaos, 139 S. Ct. 1041 (2019).................................. 29
The Fund for Animals v. Kempthorne,
538 F.3d 124 (2d Cir. 2008) ............................................... 22
National Envtl. Dev. Ass’n’s Clean Air Project
v. EPA, 752 F.3d 999 (D.C. Cir. 2014) ........................... 26
Sierra Club v. Lynn,
502 F.2d 43 (5th Cir. 1974),
cert. denied, 421 U.S. 994, and 422 U.S. 1049 (1075) ....... 15
United States v. Johnston, 268 U.S. 220 (1925).................. 25
United States v. Picciotto,
875 F.2d 345 (D.C. Cir. 1989) ......................................... 26
United States v. Rock Royal Co-Operative,
307 U.S. 533 (1939)........................................................ 18, 19
United States Telecom Ass’n v. FCC,
359 F.3d 554 (D.C. Cir.),
cert. denied, 543 U.S. 925 (2004) ........................... 12, 21, 22
Wisniewski v. United States, 353 U.S. 901 (1957) ............. 27
Constitution, statutes, and regulations:
U.S. Const.:
Art. I, § 8, Cl. 1 (Spending Clause) .................................. 8
Amend. X............................................................................ 8
Administrative Procedure Act,
5 U.S.C. 551 et seq., 701 et seq. ............................................ 8
5 U.S.C. 702 ...................................................................... 30
5 U.S.C. 706(2)(A) .............................................................. 8
5 U.S.C. 706(2)(B) ............................................................ 32
5 U.S.C. 706(2)(C) ............................................................ 32
V
Statutes and regulations—Continued:
Page
Anti-Injunction Act, 26 U.S.C. 7421 ...................................... 9
Further Consolidated Appropriations Act, 2020,
Pub. L. No. 116-94, Div. N, Tit. I, Subtit. E,
133 Stat. 3118:
§ 502, 133 Stat. 3119 ........................................................ 29
§ 502(b), 133 Stat. 3119 ................................................... 10
Health Care and Education Reconciliation Act
of 2010, Pub. L. No. 111-152, Tit. I, Subtit. E,
124 Stat. 1059:
§ 1406(a)(3), 124 Stat. 1065-1066 ...................................... 7
§ 1406(a)(4), 124 Stat. 1066 ............................................... 7
Medicare and Medicaid Amendment of 1981,
Pub. L. No. 97-35, Tit. XXI, Subtit. C, Ch. 2,
95 Stat. 807:
sec. 2178, § 1903(m), 95 Stat. 813-815 ........................... 3
sec. 2178(a)(2)(d), § 1903(m)(1)(A), 95 Stat. 814 ............. 3
Patient Protection and Affordable Care Act,
Pub. L. No. 111-148, 124 Stat. 119................................. 7
§ 9010, 124 Stat. 865-868 ................................................... 7
§ 9010(b), 124 Stat. 865-866 .............................................. 7
§ 9010(c)(2)(B), 124 Stat. 866 .......................................... 7
Social Security Act, 42 U.S.C. 301 et seq.:
Tit. XIX, 42 U.S.C. 1396 et seq. ........................................ 2
42 U.S.C. 1396a(a) ....................................................... 2
42 U.S.C. 1396a(a)(10) ................................................. 2
42 U.S.C. 1396a(a)(17) ................................................. 2
42 U.S.C. 1396a(b) ....................................................... 2
42 U.S.C. 1396b(m)(2)(A)(ii) ..................................... 11
42 U.S.C. 1396b(m)(2)(A)(iii) ...............3, 10, 15, 27, 28
28 U.S.C. 2401(a) ..............................................9, 11, 22, 23, 31
28 U.S.C. 2401(b) ................................................................... 23
VI
Statutes and regulations—Continued:
Page
42 U.S.C. 1302(a) ..................................................................... 4
28 Tex. Admin. Code § 21.2211(b) (2018) ............................ 20
Tex. Health & Safety Code Ann. § 247.0273(a)
(West Supp. 2017) ............................................................... 19
Tex. Ins. Code Ann. (West Supp. 2016):
§ 425.0545(a)..................................................................... 20
§ 425.0545(c)(4) ................................................................ 20
Tex. Tax Code Ann. § 11.1826(b)(1)(A) (West 2015) .......... 19
26 C.F.R. 57.2(b)(2)(ii-iii)..................................................... 7
42 C.F.R. (2015):
Section 438.2 ...................................................................... 4
Section 438.4 ...................................................................... 4
Section 438.6(c)(1)(i) .......................................................... 4
Section 438.6(c)(1)(i)(A) .............................................. 5, 16
Section 438.6(c)(1)(i)(B) .............................................. 5, 16
Section 438.6(c)(1)(i)(C) .................................. 5, 12, 15, 16
Section 438.6(c)(2) ........................................................... 15
Section 438.6(c)(2)-(4) ..................................................... 5
Section 447.361 (2001), repealed ...................................... 4
Miscellaneous:
Centers for Medicare & Medicaid Servs., U.S. Dep’t
of Health & Human Servs.:
Medicaid and CHIP FAQs: Health Insurance
Providers Fee for Medicaid Managed Care
Plans (Oct. 2014), https://go.usa.gov/xVMgu ........... 6
Medicaid Program; Medicaid Managed Care:
New Provisions, 67 Fed. Reg. 40,989
(June 14, 2002) ........................................... 2, 3, 4, 6, 16
Aaron Mendelson et al., New rules for Medicaid
managed care—Do they undermine payment
reform?, 4 Healthcare 274 (2016) ........................................ 4
In the Supreme Court of the United States
No. 21-379
STATE OF TEXAS, ET AL., PETITIONERS
v.
COMMISSIONER OF INTERNAL REVENUE, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
BRIEF FOR THE RESPONDENT IN OPPOSITION
OPINIONS BELOW
The revised opinion of the court of appeals (Pet. App.
1a-29a) is reported at 987 F.3d 518. The opinion of the
district court granting in part and denying in part the
parties’ cross-motions for summary judgment (Pet.
App. 30a-107a) is reported at 300 F. Supp. 3d 810. An
earlier opinion of the district court (Pet. App.
108a-165a) is not published in the Federal Supplement
but is available at 2016 WL 4138632.
JURISDICTION
The revised judgment of the court of appeals was entered on February 12, 2021. A petition for rehearing en
banc was denied on April 9, 2021 (Pet. App. 166a-188a).
On March 19, 2020, this Court extended the time within
which to file a petition for a writ of certiorari to 150 days
from the date of the lower-court judgment, order deny(1)
2
ing discretionary review, or order denying a timely petition for rehearing. The effect of that order was to extend the deadline for filing a petition for a writ of certiorari in this case to September 6, 2021. The petition for
a writ of certiorari was filed on September 3, 2021. The
jurisdiction of this Court is invoked under 28 U.S.C.
1254(1).
STATEMENT
1. a. The Medicaid program, enacted in 1965 as Title
XIX of the Social Security Act (Medicaid Act), 42 U.S.C.
1396 et seq., “is a cooperative endeavor in which the
Federal Government provides financial assistance to
participating States to aid them in furnishing health
care to needy persons,” Bowen v. Massachusetts,
487 U.S. 879, 883 (1988) (citation and internal quotation
marks omitted). To participate in Medicaid and receive
federal funding, a State must submit a plan for medical
assistance that meets various statutory requirements,
which must be approved by the Secretary of Health and
Human Services. 42 U.S.C. 1396a(a) and (b). The State’s
plan, once approved, defines the categories of persons
who are eligible for benefits under the plan and the nature and extent of medical assistance to be provided under the plan. 42 U.S.C. 1396a(a)(10) and (17). The Centers for Medicare & Medicaid Services (CMS) within
the Department of Health & Human Services (HHS),
which administers the Medicaid program, then “provid[es] matching funds to State agencies to pay for a portion of the costs of providing health care to Medicaid beneficiaries.” CMS, HHS, Medicaid Program; Medicaid
Managed Care: New Provisions, 67 Fed. Reg. 40,989,
40,989 (June 14, 2002) (2002 Regulation).
3
For many years, States typically paid healthcare
providers directly for the specific services that the providers had rendered to patients who were enrolled in
the States’ Medicaid plans—known as the “fee-forservice” model. 2002 Regulation, 67 Fed. Reg. at 40,989.
Although States continue to provide coverage for certain healthcare beneficiaries or services through the
fee-for-service model, since 1982 States have increasingly
utilized a different approach, known as the managed-care
model. Ibid. Under that model, States enter “contracts
with managed care organizations (MCOs), such as
health maintenance organizations (HMOs),” through
which a managed-care organization is “paid a fixed, prospective, monthly payment for each beneficiary enrolled with the entity for health coverage,” an amount
known as the “capitation payment.” Ibid.
In a 1981 amendment to the Medicaid Act, Congress
made it easier for States to offer services through the
managed-care model by permitting States to require their
beneficiaries to enroll in a managed-care organization to
receive benefits. 2002 Regulation, 67 Fed. Reg. at 40,989;
see Medicare and Medicaid Amendment of 1981 (1981
Act), Pub. L. No. 97-35, Tit. XXI, Subtit. C, Ch. 2, sec.
2178, § 1903(m), 95 Stat. 813-815 (42 U.S.C. 1396b). The
1981 Act also established certain requirements for contracts between States and managed-care organizations.
See ibid. Among other things, the 1981 Act specified that
the capitation payments that a State agreed to pay the
managed-care organization under the contract—i.e., the
fixed per-beneficiary amounts—must be “actuarially
sound.” Sec. 2178(a)(2)(d), § 1903(m)(1)(A), 95 Stat. 814
(42 U.S.C. 1396b(m)(2)(A)(iii)). That actuarial-soundness
requirement helps to ensure that States do not under-
4
finance managed-care organizations and thereby compromise enrollee access to care. See Aaron Mendelson et al.,
New rules for Medicaid managed care—Do they undermine payment reform?, 4 Healthcare 274, 274 (2016). The
requirement also helps to ensure that States do not overpay their managed-care organizations, thereby needlessly
expending federal funds.
b. Prior to 2002, CMS—which Congress has authorized and entrusted to implement the Medicaid program,
including through an express grant of rulemaking authority, see 42 U.S.C. 1302(a)—and its predecessor had
taken the view that a State’s payments to a managedcare organization could not “exceed the cost * * * of
providing the same services on a fee-for-service basis.”
E.g., 42 C.F.R. 447.361 (2001), repealed, 67 Fed. Reg.
41,116. States and other stakeholders, however, objected that the agency’s approach unduly limited the
States’ flexibility. See 2002 Regulation, 67 Fed. Reg. at
40,996-40,997.
In 2002, HHS promulgated the 2002 Regulation at
issue here, in which it revised its approach to actuarial
soundness in order to “give[ ] States and actuaries maximum flexibility while still ensuring that rates be certified as actuarially sound.” 67 Fed. Reg. at 40,998; see
id. at 41,097 (42 C.F.R. 438.6(c)(1)(i) (2015)).* Under
the 2002 Regulation, to qualify as actuarially sound, the
* Effective in 2016, HHS modified and recodified the regulatory
provisions relating to the actuarial-soundness requirement, which
now appear in 42 C.F.R. 438.2 and 438.4. Because petitioners challenge the 2002 version of the actuarial-soundness rule, which was in
effect in 2015, and because the definitions relevant to their claims
are unchanged, this brief follows the court of appeals in referring to
the pre-2016 codified version. See Pet. App. 4a n.3. Unless otherwise indicated, all subsequent citations of the codified regulations in
this brief refer to the pre-2016 codified version.
5
amounts of a State’s capitation payments (known as its
capitation rates) must satisfy three conditions. First,
those rates must have been “developed in accordance
with generally accepted actuarial principles and practices.” 42 C.F.R. 438.6(c)(1)(i)(A). Second, they must be
“appropriate for the populations to be covered, and the
services to be furnished.” 42 C.F.R. 438.6(c)(1)(i)(B). The
2002 Regulation set forth in detail various parameters for
how those determinations are to be made—such as data
sources and adjustments to data—and what documentation a State must furnish. 42 C.F.R. 438.6(c)(2)-(4).
Third, an actuary must “certif [y]” that the rates satisfy
the regulation’s substantive requirements. 42 C.F.R.
438.6(c)(1)(i)(C). It is that third requirement—the
actuarial-certification rule—that is the subject of this
litigation.
The 2002 Regulation specified that, to be able to certify capitation rates, actuaries must “meet the qualification standards established by the American Academy of
Actuaries [Academy] and follow the practice standards
established by the Actuarial Standards Board [Board].”
42 C.F.R. 438.6(c)(1)(i)(C). The Academy is a private,
membership-based professional organization that sets
qualification, practice, and professionalism standards
for actuaries. Am. Compl. ¶¶ 27-29 (C.A. ROA 159-160).
The Board is an independent organization that sets
standards for actuarial practice in the United States, including by adopting guidance in the form of Actuarial
Standards of Practice. Id. ¶¶ 29-31 (C.A. ROA 160); see
Pet. App. 3a. The actuarial-certification rule thus requires States to have their capitation rates verified as
compliant with the substantive actuarial-soundness
standards set forth in the 2002 Regulation by actuaries
who possess the qualifications and follow the practice
6
standards established by the relevant professional organizations in the actuarial field. In adopting that
approach—as opposed to prescribing its own, contextspecific set of actuarial-practice standards, as some
commenters had proposed—CMS explained that it preferred to “bas[e] the definition” of actuarial soundness
on “a methodology that uses accepted actuarial principles and practices” so as to “give[ ] States and actuaries
maximum flexibility while still ensuring that rates be
certified as actuarially sound.” 67 Fed. Reg. at 40,998.
c. In 2015, the Board issued Actuarial Standard of
Practice 49 (Standard 49), which “provides guidance to
actuaries when performing professional services related
to Medicaid * * * managed care capitation rates, including a certification on behalf of a state.” Pet. App. 207a;
see id. at 201a-289a. As relevant here, Standard 49 explained that a managed-care capitation rate is “ ‘actuarially sound’ ” only if it “provide[s] for all reasonable, appropriate, and attainable costs.” Id. at 208a (emphasis
omitted). Those costs “include, but are not limited to,
expected health benefits, health benefit settlement expenses, administrative expenses, the cost of capital, and
government-mandated assessments, fees, and taxes.”
Id. at 208a-209a.
With respect to government fees in particular, the
Board’s Standard 49 aligned with existing CMS guidance documents, which explained that government fees
should “be considered a business cost to health plans”
and thus should be considered in capitation rates. CMS,
HHS, Medicaid and CHIP FAQs: Health Insurance
Providers Fee for Medicaid Managed Care Plans 1
(Oct. 2014), https://go.usa.gov/xVMgu; see id. at 2
(“[T]he amount of the fee should be incorporated as an
adjustment to the capitation rates and the resulting
7
payments should be consistent with the actual or estimated amount of the fee.”). That guidance reflected the
uncontroversial proposition that actuarial soundness
requires taking into account all of an insurer’s costs, including taxes and fees.
2. a. In 2010, in the Patient Protection and Affordable Care Act (ACA), Pub. L. No. 111-148, 124 Stat. 119,
Congress imposed an annual tax on health-insurance
providers, § 9010, 124 Stat. 865-868, which is known as
the Health Insurance Providers Fee (Providers Fee) or
the Section 9010 tax. Congress set the aggregate annual
amount of the Providers Fee for the entire healthinsurance industry and then apportioned it across insurers according to a statutory formula. § 9010(b), 124 Stat.
865-866; Health Care and Education Reconciliation Act
of 2010 (2010 Reconciliation Act), Pub. L. No. 111-152,
Tit. I, Subtit. E, § 1406(a)(4), 124 Stat. 1066. Congress
exempted from the Providers Fee government entities
that provide health insurance and certain nonprofit insurers. ACA § 9010(c)(2)(B), 124 Stat. 866; 2010 Reconciliation Act § 1406(a)(3), 124 Stat. 1065-1066; see
26 C.F.R. 57.2(b)(2)(ii-iii). In accordance with the actuarial-soundness requirement, States incorporated the
cost of the Providers Fee into their contracts with
managed-care organizations.
b. In October 2015, petitioners—Texas and several
other States—commenced this action against the
United States and various federal officials (respondents
in this Court) challenging the Providers Fee and respondents’ “actions implementing” it. Compl. 1-2 (C.A.
ROA 21-22); see Compl. ¶¶ 6-70 (C.A. ROA 23-37); Am.
Compl. 1-2, ¶¶ 6-80 (C.A. ROA 147-172). Petitioners
sought declaratory and injunctive relief, and “monetary
relief against the United States in the form of a return
8
of the * * * Providers Fees previously made,” i.e., “a
refund of the amounts [petitioners] have paid (or may
pay during the course of this litigation) under the * * *
Providers Fee.” Am. Compl. 2, 29 (C.A. ROA 148, 175);
see id. ¶¶ 38-39 (C.A. ROA 163); see also id. ¶¶ 69-71
(C.A. ROA 170-171).
Petitioners contended that the Providers Fee itself, as
applied to the managed-care organizations with which petitioners contracted, violated the Constitution’s Spending
Clause, Art. I, § 8, Cl. 1, the Tenth Amendment, and principles of federalism. Am. Compl. ¶¶ 46-49, 58-59, 66-68,
72-77 (C.A. ROA 165-166, 168-170, 172-173). Petitioners,
however, do not challenge the Providers Fee itself in this
Court, and they acknowledge (Pet. 9 n.6) that their claims
challenging it are “likely moot” in light of Congress’s repeal of the Providers Fee in 2019, see p. 10, infra.
Petitioners additionally asserted claims under the
Administrative Procedure Act (APA), 5 U.S.C. 551
et seq., 701 et seq., challenging the actuarial-certification rule adopted by CMS in the 2002 Regulation. Pet.
App. 7a. Petitioners alleged that the actuarial-certification rule “constitutes an unconstitutional delegation
of Congress’s legislative power to a private entity,” that
it exceeded CMS’s statutory authority, that it was arbitrary and capricious in violation of the APA, 5 U.S.C.
706(2)(A), and that CMS had “failed to properly engage
in notice-and-comment rulemaking” in accordance with
the APA. Am. Compl. ¶¶ 57, 62 (C.A. ROA 167-168); see
id. ¶¶ 50-57, 60-65 (C.A. ROA 166-169).
The district court granted partial summary judgment to petitioners in relevant part and vacated the
actuarial-certification rule. Pet. App. 30a-107a. The
court concluded (as relevant) that petitioners had standing to challenge the actuarial-certification rule and that
9
their claim was not barred by the six-year limitations
period generally applicable to claims against the United
States, 28 U.S.C. 2401(a), or the Anti-Injunction Act, 26
U.S.C. 7421. Pet. App. 43a-72a. On the merits, the
court rejected petitioners’ contentions that the actuarialcertification rule was arbitrary and capricious and
adopted in contravention of notice-and-comment requirements. See id. at 94a-95a. But the court concluded
that the actuarial-certification rule is an impermissible
delegation of legislative power and exceeds CMS’s statutory authority. See id. at 72a-94a.
The district court vacated the actuarial-certification
rule, Pet. App. 89a, and it additionally ordered the United
States to pay $479 million in what the court described
as “equitable disgorgement” to compensate the States
for what they had paid to their managed-care organizations to account for the Providers Fee. C.A. ROA 44114412; see Pet. App. 8a. The court acknowledged that
the APA does not waive federal sovereign immunity for
monetary awards—whether legal or equitable—that
substitute for a loss suffered by the plaintiffs. C.A.
ROA 4406-4407, 4409. But the court stated that it had
“inherent and broad equitable jurisdiction to order [the
United States] to disgorge” the money. Id. at 4411. The
court subsequently entered final judgment, but it has
stayed that judgment pending the exhaustion of appellate review. See D. Ct. Doc. 171 (Apr. 16, 2021).
c. In September 2018, following the district court’s
summary-judgment ruling in this case, petitioners commenced a separate action in the same court “contest[ing] the calculation, assessment, and distribution of
liability for the 2018 [Providers Fee].” Compl. 1, Texas
v. United States (Texas II), No. 18-cv-779 (N.D. Tex.
10
Sept. 20, 2018). The complaint in that case acknowledged that the district court’s ruling in this case did not
prevent States from being required to account for the
Providers Fee, stating that “Congress’s admonition of
‘actuarial soundness,’ and the general principles of actuarial soundness, nonetheless require[d] that the 2018
[Providers Fee] still be added to the negotiated capitation rates of Plaintiffs’ Medicaid * * * contracts.” Id.
¶ 26 (citing 42 U.S.C. 1396b(m)(2)(A)(iii)) (brackets
omitted); see id. ¶ 45. Proceedings in that case have
been stayed. 18-cv-779 D. Ct. Doc. 42 (Apr. 16, 2021).
3. The government appealed. In December 2019,
while this litigation was pending in the court of appeals,
Congress repealed Section 9010 of the ACA and thus
eliminated the Providers Fee prospectively for “calendar years beginning after December 31, 2020.” Further
Consolidated Appropriations Act, 2020 (2020 Appropriations Act), Pub. L. No. 116-94, Div. N, Tit. I, Subtit. E,
§ 502(b), 133 Stat. 3119.
The court of appeals affirmed in part and reversed in
part. Pet. App. 1a-29a (amended panel opinion issued
in conjunction with denial of petition for rehearing). As
relevant here, the court first held that petitioners had
standing to challenge CMS’s actuarial-certification
rule. Id. at 10a-14a. The court stated that petitioners
“alleged a particular injury in fact”—namely, “having to
pay millions of dollars in Provider[s] Fees despite the
ACA’s explicit exemption for governmental entities”—
that the court deemed “arguably traceable” to the
actuarial-certification rule. Id. at 11a.
The court of appeals rejected the government’s contention that petitioners’ asserted injury would not be
redressed by relief regarding the actuarial-certification
rule itself. The court noted that, as petitioners had
11
acknowledged in Texas II, see p. 10, supra, they “may
still have to pay the Provider[s] Fee under” the provision of the 1981 Act that independently required capitation rates to be “actuarially sound.” Pet. App. 12a-13a
& n.8; see 42 U.S.C. 1396b(m)(2)(A)(ii). But the court
reasoned that Standard 49’s “explicit requirement to
pay the Provider[s] Fee would be removed” if the actuarial-certification rule were set aside, such that a ruling for petitioners in this case would “remove one of two
legal barriers to defeating this obligation.” Pet. App.
12a-13a.
The court of appeals next concluded that what it described as petitioners’ “APA claims” were “timebarred.” Pet. App. 14a; see id. at 14a-16a. The court
observed that challenges to agency action under the
APA “are governed by 28 U.S.C. § 2401(a),” which permits such an action to be brought (and waives sovereign
immunity) only “ ‘within six years after the right of action first accrues.’ ” Id. at 14a (quoting 28 U.S.C.
2401(a)). The court explained that CMS had “published
the [actuarial-certification rule] in 2002, thirteen years
before [petitioners] filed their complaint.” Ibid.
The court of appeals acknowledged that, under
Fifth Circuit precedent, “a plaintiff may ‘challenge . . .
a regulation after the limitations period has expired’ if
the claim is that the ‘agency exceeded its constitutional
or statutory authority,’ ” but only if the plaintiff
“ ‘show[s] some direct, final agency action involving the
particular plaintiff within six years of filing suit.’ ” Pet.
App. 14a (citation omitted). Here, the court found that
petitioners had not identified any such “direct and final” actions by CMS in the six years preceding their
commencement of this suit in 2015. Id. at 15a. The
court rejected petitioners’ contentions that CMS had
12
taken such actions in 2015 when it sent a letter to
Texas’s Medicaid Director approving that State’s
amended contract with its managed-care organization;
when the government collected the Providers Fee from
the managed-care organizations with which petitioners
contracted; or when CMS issued a guidance document
that “restated” the requirement under the 2002 Regulation that, to be actuarially sound, a State’s capitation
rates must be certified by an actuary who follows the
Board’s practice standards. Id. at 16a; see id. at 15a-16a.
The court of appeals, however, viewed petitioners’
nondelegation challenge to the actuarial-certification
rule to be distinct from what the court had termed their
“APA claims,” Pet. App. 17a, and it proceeded to address that constitutional claim on the merits, id. at
17a-23a. The court rejected petitioners’ nondelegation
challenge on two grounds. See ibid.
First, the court of appeals held that the actuarialcertification rule, and with it the incorporation of the
Board’s practice standards, did not constitute an improper delegation of authority. Pet. App. 17a-20a. The
court explained that “an agency does not improperly
subdelegate its authority when it ‘reasonably conditions’ federal approval on an outside party’s determination of some issue.” Id. at 17a (quoting United States
Telecom Ass’n v. FCC, 359 F.3d 554, 566-567 (D.C. Cir.),
cert. denied, 543 U.S. 925 (2004)) (brackets omitted). In
this case, the court observed, CMS had conditioned its
approval of an insurance contract on an actuary’s certification that the agency’s own standards had been met.
See 42 C.F.R. 438.6(c)(1)(i)(C) (requiring capitation
rates to “[h]ave been certified” by an actuary “as meeting the requirements of this paragraph”). The court
13
found that the actuarial-certification requirement here
was a “reasonable” condition. Pet. App. 19a.
The court of appeals observed that “Congress requires capitation rates to be actuarially sound, as defined by HHS.” Pet. App. 19a. And it found “[c]ertification by a qualified actuary who applies the Board’s
standards” to be “reasonably connected to ensuring actuarially sound rates,” given that both “the Board and a
qualified actuary have institutional expertise in actuarial
principles and practices.” Ibid. That approach, the court
explained, did not represent a “subdelegation[ ] of authority”; instead, CMS had “simply incorporated the Board’s
actuarial standards into its [actuarial-certification rule],
a common and accepted practice by federal agencies.”
Id. at 19a-20a (citing American Soc’y for Testing & Materials v. Public.Resource.Org, Inc., 896 F.3d 437, 442
(D.C. Cir. 2018), and Amerada Hess Pipeline Corp. v.
FERC, 117 F.3d 596, 601 (D.C. Cir. 1997)). The court
agreed with the government’s contention that CMS
“could achieve exactly the same result by promulgating
regulations that adopted the substance of the . . .
Board’s standards.” Id. at 20a.
Second, the court of appeals determined in the alternative that, “even assuming arguendo that [CMS] subdelegated authority” to the Board, “such subdelegations were
not unlawful” because CMS retained “final reviewing authority.” Pet. App. 20a; see id. at 20a-23a. The court
noted that CMS “ ‘reviewed and accepted’ the Board’s
standards.” Id. at 22a (citation omitted). And it observed
that CMS “closely ‘superintended’ ” the contract-approval
process “ ‘in every respect,’ ” which it exercised through an
extensive, independent review process for each contract
approval, of which actuarial certification was but one
“small part.” Ibid. (citation omitted).
14
Having rejected all of petitioners’ claims challenging
the actuarial-certification rule (and other claims involving the Providers Fee itself, not at issue here, see Pet.
App. 23a-29a), the court of appeals found it unnecessary
to address the propriety of the district court’s equitabledisgorgement monetary remedy. Id. at 29a & n.20.
4. The court of appeals denied rehearing en banc.
Pet. App. 166a-167a. Judge Ho, joined by four other
judges, dissented from the denial of rehearing en banc,
disagreeing with the panel’s rejection of petitioners’
nondelegation challenge to the actuarial-certification
rule. Id. at 168a-188a.
ARGUMENT
Petitioners contend (Pet. 18-22) that CMS’s actuarialcertification rule represents an unconstitutional delegation of legislative authority to private entities. They
further contend (Pet. 26-31) that the court of appeals
erred in rejecting their remaining claims challenging
the actuarial-certification rule on other grounds as
time-barred because they filed suit 13 years after that
rule was promulgated. The court of appeals correctly
rejected petitioners’ arguments, and its decision does
not conflict with any decision of this Court or of another
court of appeals. The questions petitioners raise also
lack any ongoing practical significance because the Providers Fee previously imposed on petitioners’ managedcare organizations, which was the genesis of petitioners’
grievance and the source of their asserted injury, was
repealed by Congress in 2019. In any event, this case
would be an unsuitable vehicle for this Court’s review
for multiple reasons. Further review is not warranted.
1. The court of appeals correctly rejected the States’
nondelegation challenge to the actuarial-certification
rule.
15
a. The Medicaid Act and CMS regulations both require that the fixed, per capita payments made by a State
to a managed-care organization that provides care to the
State’s Medicaid enrollees must be “actuarially sound.”
42 U.S.C. 1396b(m)(2)(A)(iii); 42 C.F.R. 438.6(c)(2). As
relevant here, the actuarial-certification rule adopted
by CMS in the 2002 Regulation requires a State to submit a certification that its payment rates comply with
that requirement, which must be made by an actuary
who “meet[s] the qualification standards established by
the [Academy] and follow[s] the practice standards established by the [Board],” 42 C.F.R. 438.6(c)(1)(i)(C)—
two independent professional organizations that set
standards for practice in the actuarial field, Am. Compl.
¶¶ 27-31 (C.A. ROA 159-160). Petitioners contend (Pet.
18-22) that the actuarial-certification rule amounts to an
impermissible delegation of legislative authority because the Board is a private entity. The court of appeals
correctly rejected that contention. Pet. App. 17a-23a.
i. The court of appeals recognized, consistent with
its own longstanding precedent, that “[a] federal agency
may not ‘abdicate its statutory duties’ by delegating
them to a private entity.” Pet. App. 17a (quoting Sierra
Club v. Lynn, 502 F.2d 43, 59 (5th Cir. 1974), cert. denied, 421 U.S. 994, and 422 U.S. 1049 (1975)). As the
court explained, however, the actuarial-certification
rule does not constitute such a “subdelegation[ ] of
[CMS’s] authority.” Id. at 20a; see id. at 17a-20a. The
requirement that a state Medicaid plan’s capitation
rates for paying a managed-care organization be “actuarially sound” was set forth by Congress 40 years ago
in the Medicaid Act itself. 42 U.S.C. 1396b(m)(2)(A)(iii).
The actuarial-certification rule implements that statu-
16
tory directive by requiring that a State’s rates be “developed in accordance with generally accepted actuarial
principles and practices” and “appropriate for the populations to be covered, and the services to be furnished
under the contract.” 42 C.F.R. 438.6(c)(1)(i)(A) and (B).
Petitioners do not appear to take issue with either of
those unremarkable substantive criteria.
Instead, petitioners challenge here only the actuarialcertification rule’s further requirement that a State
submit a certification by an actuary that its capitation
rates comply with those two substantive criteria and
other parameters that CMS prescribed in its regulations. See 42 C.F.R. 438.6(c)(1)(i)(C). The rule requires
that the actuary making that certification possess the
relevant professional qualifications (identified by the
Academy) and follow the applicable professional standards (promulgated by the Board) in the actuarial field.
As the court of appeals recognized, CMS “could
achieve exactly the same result” that it did through the
actuarial-certification rule “by promulgating regulations that adopted the substance of the . . . Board’s
standards.” Pet. App. 20a (emphasis omitted). Or it
could have chosen to prescribe its own distinct, parochial set of professional qualifications and standards of
practice for actuaries applicable only to the context of
managed-care-organization contracts for Medicaid
plans. Instead, CMS elected to require actuaries making certifications to the federal government to follow
the widely accepted professional standards established
by an expert body that apply to the actuarial profession,
in order to “give[ ] States and actuaries maximum flexibility while still ensuring that rates be certified as actuarially sound.” 67 Fed. Reg. at 40,998. The court of appeals correctly determined that CMS’s approach does
17
not improperly delegate its authority and instead fully
comports with the constitutional structure.
ii. That determination accords with this Court’s precedent. The Court has long recognized Congress’s “broad
power to set the terms on which it disburses federal
money to the States,” Arlington Cent. Sch. Dist. Bd. of
Educ. v. Murphy, 548 U.S. 291, 296 (2006). The Court
also has long recognized that the government may
“avail[ ] itself of ” private assistance in resolving “matters
of a more or less technical nature.” A. L. A. Schechter
Poultry Corp. v. United States, 295 U.S. 495, 537 (1935).
As the court of appeals observed, federal agencies frequently incorporate by reference standards established
by private entities. Pet. App. 19a (citing American Soc’y
for Testing & Materials v. Public.Resource.Org, Inc.,
896 F.3d 437, 442 (D.C. Cir. 2018)), for the proposition
that agencies have incorporated “over 1,200 standards
established by private organizations”). Here, petitioners do not challenge Congress’s ability to condition
Medicaid payments to a State on the State’s employment of actuarially sound rates. And they do not appear
to dispute that implementing any actuarial-soundness
requirement presupposes the existence of standards of
appropriate actuarial practice, or that those standards
are necessarily of a relatively “technical nature.”
Schechter Poultry, 295 U.S. at 537.
An agency’s reliance on outside input is especially
appropriate where, as here, that input comes from a disinterested, independent body with relevant expertise in
the industry. The chief concern that this Court’s cases
addressing impermissible delegations of authority to
private entities have recognized sounds in due process:
the possibility that regulatory power would be wielded
18
by private persons whose own “interests may be and often are adverse to the interests of others in the same
business.” Carter v. Carter Coal Co., 298 U.S. 238, 311
(1936) (holding invalid a federal statute allowing the
producers of two-thirds of the coal in a given district to
set wages and hours for all producers in that district);
see, e.g., Eubank v. City of Richmond, 226 U.S. 137,
143-144 (1912) (addressing ordinances that allowed
homeowners to set zoning requirements for their own
neighborhoods and noting the concern that private parties may act “solely for their own interest or even capriciously”). Nothing like that concern of entrusting selfinterested private entities to adopt regulations to govern others in their own industry is implicated by requiring actuaries certifying the compliance of States’ Medicaid capitation rates to follow actuarial guidance
adopted by the independent organization (the Board)
that prescribes standards for their profession. Cf. Association of Am. R.Rs. v. United States Dep’t of
Transp., 821 F.3d 19, 29 (D.C. Cir. 2016) (“Delegating
legislative authority to official bodies is inoffensive because we presume those bodies are disinterested, that
their loyalties lie with the public good, not their private
gain.”). There is no suggestion here that the Board is
a self-interested actor regulating its own competitors.
Moreover, the Court has repeatedly upheld laws that
prescribe a requirement but make its application to regulated entities contingent on the approval of some or all
of the regulated entities themselves, which “merely
placed a restriction upon [Congress’s] own regulation.”
Currin v. Wallace, 306 U.S. 1, 15 (1939); see United
States v. Rock Royal Co-Operative, 307 U.S. 533, 545
(1939). Such laws do not constitute an “unlawful delegation” because “Congress had the power to put” those
19
requirements “into effect without the approval of anyone” and merely chose to make the requirements’ operation contingent. Rock Royal, 307 U.S. at 577. Here,
similarly, Congress established the actuarial-soundness
requirement that CMS’s regulations reiterate, and
CMS “exercise[d] its [rulemaking] authority in making
the regulation and in prescribing the conditions of its
application.” Currin, 306 U.S. at 16. No improper delegation occurred because CMS “ha[s] the power to” determine actuarial soundness “without the approval of
anyone.” Rock Royal, 307 U.S. at 577. States’ actuaries
must follow the Board’s practice standards only because
CMS has imposed that requirement as one of the “conditions” of receiving federal funding. Currin, 306 U.S.
at 16. If CMS disagreed with the Board’s standards, it
could amend its regulations to override them at any
time.
Notably, the due-process principles that underlie the
private nondelegation doctrine petitioners invoke apply to
state law as well as federal law, and many state statutes
entrust private entities to impose or implement technical
conditions as part of a regulatory scheme. See, e.g., Tex.
Tax Code Ann. § 11.1826(b)(1)(A) (West 2015) (property
may not be exempted for tax purposes unless the organization “has an audit prepared by an independent auditor”
that is “conducted in accordance with generally accepted
accounting principles”); see also Gov’t C.A. Br. 39 n.6 (collecting additional examples). For example, each petitioner here, like the federal government, requires private
actors to comply with private safety standards set by disinterested organizations. See, e.g., Tex. Health & Safety
Code Ann. § 247.0273(a) (West Supp. 2017) (“The executive commissioner by rule shall specify an edition of the
20
Life Safety Code of the National Fire Protection Association to be used in establishing the life safety requirements
for an assisted living facility licensed under this chapter.”); see also Gov’t C.A. Br. 40 n.7 (collecting additional
examples). And, of particular relevance, each petitioner
has laws requiring compliance with the Board’s technical
standards for actuaries. See, e.g., Tex. Ins. Code Ann.
§ 425.0545(a) and (c)(4) (West Supp. 2016) (requiring
every company that holds life-insurance contracts to submit each year an “opinion of [an] appointed actuary” that
is “based on standards adopted from time to time by the
Actuarial Standards Board or its successor”); 28 Tex. Admin. Code § 21.2211(b) (2018) (“The illustration actuary
shall certify that the disciplined current scale used in illustrations is in conformity with the Actuarial Standard of
Practice * * * promulgated by the Actuarial Standards
Board.”); see also Gov’t C.A. Br. 40 n.8 (collecting additional examples). Petitioners do not contend that those
state laws constitute improper delegations to private entities
Finally, the court of appeals correctly recognized
that, even if the actuarial-certification rule could be
thought to have subdelegated some authority to private
entities, it would not be unlawful because CMS retained
“final reviewing authority.” Pet. App. 22a. CMS “reviewed and accepted” the Board’s standards, ibid. (citation omitted), which it is always free to supersede for
Medicaid managed-care contracts. And CMS also “ ‘superintend[s]’ ” the managed-care contract-approval
process—of which actuarial “certification is a small
part”—“ ‘in every respect.’ ” Ibid. (citation omitted). The
court correctly determined that the actuarial-certification rule did not impermissibly subdelegate CMS’s authority.
21
b. Petitioners’ contention (Pet. 22-26) that the decision below conflicts with decisions of other courts of appeals addressing analogous nondelegation issues lacks
merit.
Petitioners principally assert (Pet. 22-25) that the
decision below conflicts with the D.C. Circuit’s decision
in United States Telecom Ass’n v. FCC, 359 F.3d 554,
cert. denied, 543 U.S. 925 (2004) (U.S. Telecom), which
held that the Federal Communications Commission
could not “subdelegate” its regulatory authority over
certain telecommunications carriers to state regulatory
commissions to make certain regulatory determinations
on a localized basis, “absent affirmative evidence of authority to do so.” Id. at 566; see id. at 565-568. That
decision does not conflict with the decision below because, as the court of appeals found, CMS’s actuarialcertification rule is not a “subdelegation[ ] of authority”
to the Board. Pet. App. 20a. The rule merely places
“reasonable conditions” that make “federal approval” of
capitation rates contingent on “an outside party’s determination of [an] issue.” Id. at 17a, 20a.
The court of appeals’ conclusion that such reasonable
conditions are permissible accords with the D.C. Circuit’s decision, which expressly recognized such conditions as permissible. See U.S. Telecom, 359 F.3d at 567
(“[A] federal agency entrusted with broad discretion to
permit or forbid certain activities may condition its
grant of permission on the decision of another entity,
* * * , so long as there is a reasonable connection between the outside entity’s decision and the federal
agency’s determination.”). Indeed, the court of appeals
here relied on U.S. Telecom for the proposition that an
agency may reasonably condition its approval on “an
outside party’s determination of some issue,” as “such
22
conditions only amount to legitimate requests for input.” Pet. App. 17a. Petitioners’ assertion that U.S.
Telecom limited that principle to delegations to government entities contradicts the D.C. Circuit’s recognition
that “[t]he fact that the subdelegation in th[at] case
[wa]s to state commissions rather than private organizations d[id] not alter the analysis.” 359 F.3d at 566.
Petitioners likewise err in contending (Pet. 25) that
the court of appeals’ alternative holding that CMS’s “final reviewing authority” renders any putative delegation to the Board lawful conflicts with the Second Circuit’s decision in The Fund for Animals v. Kempthorne,
538 F.3d 124 (2008). Petitioners point to that court’s
statement that an agency “abdicates its ‘final reviewing
authority’ ” if “all it reserves for itself is ‘the extreme
remedy of totally terminating the delegation agreement.’ ” Pet. 25 (quoting Fund for Animals, 538 F.3d at
133). But the court of appeals here did not suggest that
an agency’s reserving to itself only that limited kind of
review authority is sufficient. Instead, it recognized
that CMS retains authority to review and accept or reject the Board’s standards and that “[t]he contract approval process is closely ‘superintended by HHS in
every respect.’ ” Pet. App. 22a (brackets and citation
omitted).
2. Petitioners’ contention (Pet. 26-31) that the court
of appeals erred in applying Section 2401(a)’s six-year
limitations period to their statutory challenges to the
actuarial-certification rule lacks merit and does not
warrant further review.
a. As petitioners acknowledge, their statutory
claims challenging the actuarial-certification rule “are
subject to a six-year statute of limitations.” Pet. 28 (citing 28 U.S.C. 2401(a)). Section 2401(a) provides that,
23
“[e]xcept as provided by chapter 71 of title 41” of the
United States Code—which pertains to government
contracts—“every civil action commenced against the
United States shall be barred unless the complaint is
filed within six years after the right of action first accrues.” 24 U.S.C. 2401(a). Section 2401(a) makes an exception for “[t]he action of any person under legal disability or beyond the seas at the time the claim accrues,”
whose action “may be commenced within three years after the disability ceases.” Ibid. And Section 2401(b)
prescribes a distinct framework of deadlines for seeking
administrative and judicial review of “[a] tort claim
against the United States.” 28 U.S.C. 2401(b).
As the court of appeals explained, the actuarialcertification rule that petitioners challenged was “published * * * in 2002, thirteen years before [petitioners]
filed their complaint.” Pet. App. 14a. And none of the
exceptions to Section 2401(a)’s six-year deadline applies. Petitioners thus correctly recognize (Pet. 28)
that “[a]ny challenge to the procedures by which the
[actuarial-certification] rule was adopted thus became
untimely in 2008.”
Petitioners nevertheless argue that they “may still
challenge the legality of the [actuarial-certification]
[r]ule * * * if it has been applied to them within the last
six years.” Pet. 28 (citing Dunn-McCampbell Royalty
Interest, Inc. v. National Park Serv., 112 F.3d 1283,
1287 (5th Cir. 1997)). As petitioners recognize (Pet. 29),
however, the court of appeals applied that very principle, stating that a “plaintiff may ‘challenge . . . a regulation after the limitations period has expired’ if the
claim is that the ‘agency exceeded its constitutional or
statutory authority,’ ” but only if the plaintiff “ ‘show[s]
some direct, final agency action involving the particular
24
plaintiff within six years of filing suit.’ ” Pet. App. 14a
(quoting Dunn-McCampbell, 112 F.3d at 1287). The
court of appeals found, however, that petitioners had
failed to “show some direct, final agency action involving the particular plaintiff[s] within six years of filing
suit.” Ibid. (quoting Dunn-McCampbell, 112 F.3d at
1287).
Petitioners contend (Pet. 28) that the court of appeals’ application of that principle here is “inconsistent
with the record” in this case. But the court considered
and properly rejected each of the three events that the
district court had found to constitute direct and final
agency action applying CMS’s actuarial-certification
rule to them. Pet. App. 15a-16a.
First, the district court had cited “a 2015 letter sent
by [CMS] to the Texas Medicaid Director approving
Texas’s amended [managed-care-organization] contract, which included Provider[s] Fees in the capitation
rates for additional groups of Medicaid beneficiaries.”
Pet. App. 15a. But, as the court of appeals explained,
that letter “d[id] not show that [CMS] was issuing a new
ruling requiring Texas to include Provider[s] Fees in its
capitation rates.” Ibid. Moreover, “Texas paid costs
associated with Provider[s] Fees for the 2013 calendar
year,” which was not covered by the 2015 letter. Ibid.
“Thus, even before the letter, Texas accounted for the
Provider[s] Fee in its capitation rates,” and “[t]he letter
did not mark a change to Texas’s obligation under the
[actuarial-certification] [r]ule.” Ibid.
Second, the district court had cited “the government’s collection of the Provider[s] Fee through [petitioners’] 2015 capitation rates.” Pet. App. 15a. As the
court of appeals observed, however, the federal government “does not collect the Provider[s] Fee directly from
25
states” such as petitioners, and thus its “decision to collect” the Fee “from [managed-care organizations] is not
a ‘direct . . . action involving the States.’ ” Id. at
15a-16a (quoting Dunn-McCampbell, 112 F.3d at 1287)
(brackets omitted).
Third, the district court had relied on a 2015 CMS
“guidance document ‘for use in setting capitation rates.’ ”
Pet. App. 16a (brackets and citation omitted). But as the
court of appeals noted, “the guidance document did not
create any new obligations or consequences.” Ibid. Instead, the document merely “restated that for capitation
rates to be actuarially sound, they had to be consistent
with” the Board’s Actuarial Standards of Practice, a requirement that “ha[d] existed since [CMS] promulgated
the [actuarial-certification] [r]ule” in 2002. Ibid.
The court of appeals’ determination that none of
those events constituted a further direct, final agency
action applying the actuarial-certification rule to petitioners themselves is sound. At a minimum, petitioners’
disagreement with the court of appeals’ assessment of
“the record” of this particular case (Pet. 29) does not
warrant this Court’s review. See United States v. Johnston, 268 U.S. 220, 227 (1925) (“We do not grant a certiorari to review evidence and discuss specific facts.”).
Petitioners contend (Pet. 26) that application of the
general six-year limitations period to their challenges
“allows agencies and private parties to shield * * * unconstitutional delegations from judicial” review. That
is incorrect. Under the court of appeals’ approach, a
plaintiff aggrieved by final agency action predicated on
an allegedly unconstitutional delegation may bring suit
within six years of that agency action. See Pet. App.
14a. The court of appeals simply concluded that peti-
26
tioners had not identified any final agency action applicable to them. Id. at 15a-16a. In any event, petitioners’
concern about insulating impermissible delegations
from judicial review is not implicated here because the
court of appeals nevertheless did reach the merits of
their nondelegation challenge and properly rejected it.
b. Petitioners do not contend that the decision below
squarely conflicts with any decision of this Court “that
directly addressed this question.” Pet. 28 n.11. They
cursorily assert that the decision below is inconsistent
with decisions of the Ninth and D.C. Circuits. Pet. 28, 31
(citing California Sea Urchin Comm’n v. Bean, 828 F.3d
1046, 1049-1050 (9th Cir. 2016); National Envtl. Dev.
Ass’n’s Clean Air Project v. EPA, 752 F.3d 999, 1003
(D.C. Cir. 2014); and United States v. Picciotto, 875 F.2d
345, 347-348 (D.C. Cir. 1989)). That assertion of a lowercourt conflict lacks merit. Neither D.C. Circuit decision
that petitioners cite involved the application of a statute
of limitations to claims challenging agency action. See
National Envtl. Dev. Ass’n’s Clean Air Project,
752 F.3d at 1003, 1005-1008 (rejecting arguments that
plaintiffs lacked standing and that their claims challenged non-final agency action and were not ripe); Picciotto, 875 F.2d at 347-348 (addressing distinction between substantive and interpretive rules). And the
Ninth Circuit in California Sea Urchin Commission
concluded that the plaintiffs’ claim there was timely because “the operative agency action challenged”—the
termination of a particular program, pursuant to authority set forth in an earlier agency regulation—
occurred within the limitations period. 828 F.3d at 1049.
The court of appeals here found no analogous “operative
agency action,” ibid., within the limitations period. See
Pet. App. 14a-16a. Finally, petitioners’ contention (Pet.
27
30) that the decision below “creates intra-Circuit disagreement” with other decisions of the Fifth Circuit does
not warrant this Court’s review. See Wisniewski v.
United States, 353 U.S. 901, 902 (1957) (per curiam).
3. Even if either question presented in the petition
might otherwise warrant review, this case would be an
unsuitable vehicle to address them.
a. Although the court of appeals held that petitioners had standing to challenge the actuarial-certification
rule in this case, the government respectfully disagrees
with that conclusion, and at a minimum, substantial
doubt exists whether that conclusion is correct. As the
government argued below, it is far from clear how
petitioners’ asserted injury—i.e., having to include in
their capitation rates, and thus to pay to their managedcare organizations, “millions of dollars in Provider[s]
Fees” that the ACA imposed on those organizations,
Pet. App. 11a—could be redressed by a favorable decision on their claims challenging CMS’s actuarialcertification rule. See Gov’t C.A. Br. 23-25. As petitioners recognized in a separate suit that they brought after
they prevailed in the district court here, even if CMS’s
rule incorporating the Board’s practice standards (including Standard 49) did not exist, petitioners still
would be required to account for the Providers Fee in
setting capitation rates. The Medicaid Act has required
capitation rates to be “actuarially sound” since 1981.
42 U.S.C. 1396b(m)(2)(A)(iii). And as petitioners correctly acknowledged in their complaint in Texas II,
“Congress’s admonition of ‘actuarial soundness’ ” in
Section 1396b(m)(2)(A)(iii), “and general principles of
actuarial soundness, nonetheless require that the 2018
[fee] still be added to the negotiated capitation rates
of Plaintiffs’ Medicaid * * * contracts.” Compl. ¶ 26,
28
Texas II, supra (No. 18-cv-779) (brackets omitted); accord id. ¶ 45 (“Plaintiffs’ actuaries, employing their best
judgment and discretion, [have] conclude[d] actuarial
soundness in 2018 can only result from a full, dollar-fordollar imposition upon Plaintiffs of any 2018 [Providers
Fee] liability upon their Medicaid” managed-care
organizations.). That concession was correct. See
Medicaid Health Plans of Am. C.A. Amicus Br. 15-17.
Even if petitioners succeeded in having the actuarialcertification rule set aside, it would have had no effect
on their obligation to account for the Providers Fee in
setting their capitation rates before the Providers Fee
was repealed.
The court of appeals did not question that petitioners’ statutory obligation to account for the Providers
Fee would persist irrespective of a decision on their
challenge to the actuarial-certification rule. See Pet.
App. 13a. Instead, it reasoned that, “[h]owever true the
United States’s argument may be,” vacatur of the
actuarial-certification rule “would remove one explicit
requirement to pay the Provider[s] Fee.” Ibid. And it
deemed petitioners’ “statutory injury” from the Medicaid
Act’s independent actuarial-soundness requirement irrelevant because it “[wa]s not complained of here.” Ibid.
That reasoning has matters backwards. If petitioners had challenged both the actuarial-certification rule
and Section 1396b(m)(2)(A)(iii) in this case and had prevailed with respect to both, it might at least be possible
for the district court in this case to fashion relief that
would redress their injury. But precisely because that
separate, statutory obligation is unchallenged in this
case, and thus must be taken as a given as the case
29
comes to this Court, petitioners fail to identify how relief directed to CMS’s actuarial-certification rule could
redress their injury.
At the very least, significant doubt exists whether
petitioners had standing to commence this suit challenging the actuarial-certification rule. Before addressing the merits of either of petitioners’ claims, this Court
would have to confront that threshold question. See,
e.g., Frank v. Gaos, 139 S. Ct. 1041, 1046 (2019) (per curiam) (“We have an obligation to assure ourselves of litigants’ standing under Article III.” (quoting DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 340 (2006))).
That alone makes the case a poor candidate for review.
b. In any event, Congress’s repeal of the Providers
Fee in 2019 eliminates any prospective injury to petitioners, casts further doubt on the existence of any redressable injury, and renders the case devoid of ongoing practical significance. See p. 10, supra; 2020 Appropriations Act § 502, 133 Stat. 3119. That repeal removes
any possibility that invalidating the actuarial-certification rule would shield petitioners’ managed-care organizations from financial obligations going forward because those obligations no longer exist.
Petitioners themselves maintain (Pet. 27) that their
untimeliness in filing suit should be excused on the basis
that they lacked a cognizable injury, and could not have
sued to challenge the actuarial-certification rule, before
the Providers Fee was imposed and Standard 49 made
clear that capitation rates in State managed-care contracts must account for it. See ibid. (“Any lawsuit before such time would likely have been dismissed for lack
of Article III jurisdiction.”). But, as petitioners acknowledge, the Providers Fee now no longer exists and
injures no one. See Pet. 9 & n.6. Petitioners assert (Pet.
30
9) that they continue to have a viable claim against the
“structure of the [actuarial-]certification [r]ule” itself,
on the theory that the rule renders them vulnerable to
future fees that Congress may choose to enact and assess against their managed-care organizations. But
such speculation about hypothetical future legislation
does not preserve a live controversy, much less a practically important one warranting this Court’s review.
The only relief that petitioners requested that has not
been overtaken by subsequent events is their claim for
monetary relief from the federal government for sums
that it collected not from petitioners, but from their
managed-care organizations. See Pet. App. 8a. But as
the government explained in the court of appeals,
although the district court granted such relief—in the
form of an order of equitable disgorgement of more than
$479 million, see ibid.—that novel remedy was manifestly improper as a matter of law. The APA’s limited
waiver of sovereign immunity, 5 U.S.C. 702, expressly
excludes “money damages.” Ibid. That waiver must “be
strictly construed, in terms of its scope, in favor of the
sovereign.” Department of the Army v. Blue Fox, Inc.,
525 U.S. 255, 261 (1999). It does not plausibly permit the
monetary relief petitioners sought here as compensation
for increased capitation rates that they paid to thirdparty managed-care organizations. See Gov’t C.A. Br.
42-45.
Accordingly, because petitioners cannot obtain retrospective monetary relief from the federal government
to compensate for alleged damages caused by the application of the Providers Fee to their managed-care organizations, it is far from clear what “effectual relief ” a
federal court could order that would redress their asserted injuries. Chafin v. Chafin, 568 U.S. 165, 172
31
(2013) (citation omitted). The court of appeals expressly
reserved that question. Pet. App. 29a & n.20. But before this Court could address the merits, it would likely
need to confront at the threshold whether the retrospective monetary award that petitioners sought, or any
other form of relief, is available that could redress petitioners’ putative injuries.
c. Finally, this case would be an unsuitable vehicle
for addressing petitioners’ nondelegation challenge to
the actuarial-certification rule because that claim, like
petitioners’ statutory challenges to the rule, is time
barred by the same six-year limitations period applicable to their other claims. 28 U.S.C. 2401(a).
As discussed above, the court of appeals correctly
determined that petitioners’ statutory claims challenging the actuarial-certification rule—to which the court
referred as petitioners’ “APA claims”—were timebarred because petitioners filed their suit 13 years after
the rule was adopted in the 2002 Regulation. Pet. App.
14a-16a; see pp. 22-26, supra. Although the court of appeals thus correctly rejected petitioners’ other claims
as untimely, it apparently viewed Section 2401(a)’s limitations period as inapplicable to petitioners’ nondelegation challenge to that rule. But Section 2401(a) is
equally applicable by its terms to that claim as well.
Section 2401(a) encompasses “every civil action commenced against the United States” except those for
which the statute expressly provides a different deadline. 28 U.S.C. 2401(a). It is not limited to claims asserting noncompliance with the APA, and it does not exclude claims challenging an agency action on nondelegation or other constitutional grounds. Indeed, the caveat that the court of appeals articulated—which would
32
allow untimely claims that an “agency exceeded its constitutional or statutory authority” if an additional showing is made, namely, “some direct, final agency action
involving the particular plaintiff within six years of filing
suit,” Pet. App. 14a (citation omitted)—presupposes
that the general six-year limitations period applies to
constitutional claims, and that an untimely constitutional challenge to a regulation is barred unless a plaintiff identifies a new, direct, and final agency action involving that plaintiff within the six-year limitations period.
In any event, the court of appeals’ distinction between petitioners’ APA claims and their nondelegation
claim overlooks that petitioners’ nondelegation claim
was also brought expressly under the APA. In asserting that claim, their complaint observed that the APA
provides for review of agency action that a court finds
to be (inter alia) “contrary to constitutional right,
power, privilege, or immunity.” 5 U.S.C. 706(2)(B); see
Am. Compl. ¶ 61 (C.A. ROA 168) (alleging that “[t]he
[APA] requires this Court to hold unlawful and set aside
any agency action that is ‘contrary to constitutional
right’ or ‘in excess of statutory jurisdiction, authority,
or limitations’ ” (quoting 5 U.S.C. 706(2)(B) and (C))). It
then proceeded to allege that “[t]he determination that
[petitioners] must pay the * * * Providers Fee * * *
constitutes an unconstitutional delegation of Congress’s
legislative power to a private entity.” Id. ¶ 62 (C.A.
ROA 168).
Although the court of appeals assumed without analysis that the limitations period did not bar petitioners’
nondelegation challenge, and accordingly reached (and
rejected) that claim on the merits, the court’s judgment
rejecting their nondelegation claim may be affirmed on
33
the alternative basis that that claim, like petitioners’
other claims, was untimely. See, e.g., Dahda v. United
States, 138 S. Ct. 1491, 1498 (2018). Affirmance on that
ground would be especially appropriate because, as the
court of appeals recognized, the limitations period in actions against the United States conditions the APA’s
waiver of sovereign immunity and thus is properly addressed at the threshold. Pet. App. 14a. For the reasons explained above, the court of appeals’ case-specific,
fact-dependent application of the limitations period to
the circumstances of this case does not warrant this
Court’s review. See pp. 22-27, supra. At a minimum,
the fact that petitioners’ nondelegation challenge to the
actuarial-certification rule can and should be rejected
on that separate ground makes this case an unsuitable
vehicle to address their nondelegation challenge.
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
ELIZABETH B. PRELOGAR
Solicitor General
BRIAN M. BOYNTON
Acting Assistant Attorney
General
ALISA B. KLEIN
CATHERINE M. PADHI
Attorneys
NOVEMBER 2021
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.