Rachel Alexander (ralexander@wiley.law) and Brandon Moss (bmoss@wiley.law) are both Partners, and Ashley E. Bouchez (abouchez@wiley.law) is an Associate in the Washington, DC, office of Wiley Rein LLP.
In recent months, Medicare Advantage plans have seen significant shifts in the high-stakes landscape of the risk adjustment system. For one, in July, Attorney General Merrick Garland rescinded a former Department of Justice (DOJ) policy that limited the role of agency guidance in enforcement actions.[1] Now, DOJ attorneys are encouraged to liberally cite to and rely on such guidance—a particularly troubling result for Medicare Advantage plans embroiled in False Claims Act (FCA) litigation that turns on whether the plans knowingly failed to comply with a regulation or contract provision. And in August, the D.C. Circuit’s decision in UnitedHealthcare Insurance Company et al. v. Becerra[2] unwound UnitedHealth Group’s (UnitedHealth) successful challenge to the Medicare Advantage overpayment rule as the Court of Appeals determined that the rule does not violate the Medicare statute’s actuarial equivalence requirement. This decision represented a major win for the DOJ and qui tam whistleblowers looking to sue providers or Medicare Advantage plans for failure to report and return overpayments based on unsupported diagnoses. Together, DOJ’s course reversal on agency guidance and the D.C. Circuit’s holding in Becerra indicate that Medicare Advantage plans may find themselves in the crosshairs of the DOJ and qui tam whistleblowers who have brought or are looking to bring FCA suits based on alleged Medicare Advantage fraud, with the added burden of defending against claims that are based on both binding law and nonbinding subregulatory guidance.
DOJ’s rescission of agency guidance policy
After a wave of defense-friendly policies under the Trump administration, DOJ reversed its course on agency guidance, enabling DOJ attorneys to try once again to bolster weak FCA cases by citing to nonbinding agency guidance. In a July 1, 2021, memorandum regarding issuance and use of guidance documents by DOJ (Garland Memo),[3] Attorney General Merrick Garland rescinded DOJ’s purportedly “overly restrictive” policy that prohibited using noncompliance with agency guidance as a basis for enforcement actions, explaining that the prior policy “hampered Department attorneys when litigating cases where there is relevant agency guidance.” Though the Garland Memo acknowledges long-standing U.S. Supreme Court precedent that “guidance documents ‘do not have the force and effect of law,’” it paradoxically encourages DOJ attorneys to liberally cite to or rely upon agency guidance in litigation.
The Garland Memo represents DOJ’s buyer’s remorse following previous memoranda issued by former Attorney General Jeff Sessions and former Associate Attorney General Rachel Brand (Sessions Memo and Brand Memo, respectively). The November 16, 2017, Sessions Memo regarding prohibition of improper guidance documents barred DOJ from using its own guidance documents to create de facto obligations, standards, or rights, emphasizing that “guidance may not be used as a substitute for rulemaking and may not be used to impose new requirements on entities outside the Executive Branch.”[4] The January 25, 2018, Brand Memo, issued to U.S. Attorneys and “Heads of Civil Litigating Components,” expanded the Session Memo’s prohibition to guidance from other agencies in affirmative civil enforcement actions, specifying that DOJ “should not treat a party’s noncompliance with an agency guidance document as presumptively or conclusively establishing that the party violated the applicable statute or regulation.”[5] Though the Brand Memo did not render agency guidance completely moot—indeed, it specifically provided that DOJ “may use evidence that a party read such a guidance document to help prove that the party had the requisite knowledge of [a] mandate” explained or paraphrased in the guidance document—it certainly minimized its role in FCA litigation and other enforcement actions.
In February 2018, the Justice Manual was revised to incorporate the Brand Memo policy and expand it to criminal enforcement.[6] And in October 2019, Executive Order 13891, titled “Promoting the Rule of Law through Improved Agency Guidance Documents,” further incorporated this policy, explaining that “agencies have sometimes used [their authority to issue nonbinding guidance] inappropriately in attempts to regulate the public without following the rulemaking procedures of the APA [Administrative Procedure Act].”[7]
Despite DOJ’s prior extensive efforts to ensure that only binding regulations and statutes form the basis for proving violations of applicable law, President Biden rescinded Executive Order 13891 on his first day in office by way of Executive Order 13992.[8] The Garland Memo later explicitly rescinded the Sessions and Brand memos, and, on the same day the Garland Memo was issued, Attorney General Garland entered an interim final rule that implemented Executive Order 13992; revoked Executive Order 13891; rescinded any amendments to DOJ regulations pursuant to Executive Order 13891; and directed all agency heads to rescind any orders, rules, regulations, guidelines, or policies that implemented or enforced Executive Order 13891.[9] Today, the Garland Memo empowers DOJ attorneys to freely “cite [to] or rely on [guidance] documents” that “are relevant to claims or defenses in litigation” and encourages reliance “when a guidance document may be entitled to deference or otherwise carry persuasive weight with respect to the meaning of the applicable legal requirements.”[10] Under this directive, DOJ attorneys will undoubtedly increase their reliance on agency guidance in enforcement actions, and guidance that is deemed “entitled to deference” may ultimately carry the weight of binding law.