In Federalist No. 62, at 381, James Madison stated:
It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; . . . or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be tomorrow.
But what if the problem is even worse than that? What happens if we reach the point where even these legislating agencies don’t know what their own “law” is? That’s the problem we confront in this case.
* * *
This case has taken us to a strange world where the government itself — the very “expert” agency responsible for promulgating the “law” no less — seems unable to keep pace with its own frenetic lawmaking. A world Madison worried about long ago, a world in which the laws are “so voluminous they cannot be read” and constitutional norms of due process, fair notice, and even the separation of powers seem very much at stake. But whatever else one might say about our visit to this place, one thing seems to us certain: an agency decision that loses track of its own controlling regulations and applies the wrong rules in order to penalize private citizens can never stand.
The case involved Caring Hearts Home Services, Inc. (Caring Hearts), which provided physical therapy and skilled nursing services to “homebound” Medicare patients. Caring Hearts, as a Medicare provider, could charge the government only for services that were “reasonable and necessary.” But Congress hasn’t been clear about who qualifies as “homebound” or what services qualify as “reasonable and necessary.” Therefore, the Centers for Medicare & Medicaid Services (CMS) developed its own rules on both subjects, and has repeatedly revised and expanded the rules over time.
In an audit, CMS purported to find that Caring Hearts provided services to some patients who weren’t “homebound” or for whom services weren’t “reasonable and necessary.” As a result, CMS ordered Caring Hearts to repay the government over $800,000. So Caring Hearts sued.
The court found, however, that CMS applied the wrong law in reaching its conclusions. CMS didn’t apply the regulations in force in 2008 when Caring Hearts provided the services in dispute. Instead, CMS wrongly applied the more onerous regulations that the agency adopted years later. The court noted:
Caring Hearts can make out a pretty good case that its services were entirely consistent with the law as it was at the time they were rendered. So this isn’t (and never was) a case about willful Medicare fraud. Instead, it’s a case about an agency struggling to keep up with the furious pace of its own rulemaking.
On a personal note, Brian Gottesman and I were fortunate to work with Judge Gorsuch when he was a partner at Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, in Washington, DC. At the time, Brian and I were affiliated with Connolly Bove Lodge & Hutz LLP.