4:23-cv-00909
N.D. Tex.Sep 25, 2025Background
- CMS Final Rule (Feb 2023) eliminates FFS Adjuster and uses RADV extrapolation to recover overpayments across all contract enrollees.
- Historical RADV practice allowed extrapolation but previously paired with the FFS Adjuster from 2012–2018 to maintain actuarial equivalence.
- Plaintiffs Humana challenge the Final Rule under the APA as arbitrary, retroactive, and procedurally improper.
- Defendants argue the Final Rule rests on statutory interpretation and public-comment sufficiency.
- Court finds procedural defect: Final Rule is not a logical outgrowth of the Proposed Rule, vacates and remands the Final Rule, and deems the error not harmless.
- Plaintiffs’ reliance interests and retroactivity concerns cited as reasons to vacate and remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| APA procedural grounds—logical outgrowth | Humana argues Final Rule abandons proposed justifications | HHS says comments and public input preserved the justification | Vacate and remand; not a valid logical outgrowth |
| Harmless-error retroactivity | Error prejudices reliance on old rule from 2018–2023 | No prejudice; interpretation is best reading | Not harmless; remand required |
| Notice-and-comment sufficiency | CMS failed to notify about core pivot on actuarial equivalence | Comment process adequate | Procedural defect; remand warranted |
Key Cases Cited
- Mock v. Garland, 75 F.4th 563 (5th Cir. 2023) (logical-outgrowth requires fair notice of final rule)
- Texas Ass’n of Manufacturers v. U.S. Consumer Prod. Safety Comm’n, 989 F.3d 368 (5th Cir. 2021) (notice-and-comment must align with final rule and proposed rule)
- Huawei Techs. USA, Inc. v. FCC, 2 F.4th 421 (5th Cir. 2021) (context for logical-outgrowth analysis)
- Shinseki v. Sanders, 556 U.S. 396 (U.S. 2009) (harmless-error principle in APA context not satisfied here)
- Mexican Gulf Fishing Co. v. U.S. Dep’t of Commerce, 60 F.4th 956 (5th Cir. 2023) (costs and dialogue in notice-and-comment; improper reliance on broad/surface quotes)
- Azar v. Allina Health Servs., 587 U.S. 566 (2019) (statutory-interpretation argument cannot bypass notice-and-comment)
- R.J. Reynolds Vapor Co. v. FDA, 65 F.4th 182 (5th Cir. 2023) (surprise-switcheroo doctrine referenced in analysis)
- Chamber of Commerce v. SEC, 85 F.4th 760 (5th Cir. 2023) (cost-benefit considerations require meaningful notice and discussion)