American Nursing Home Association v. Cost of Liv

ing Council-Conflict Between the Economic Stabilization Act and the Social Security Act

The American Nursing Home case, like McGuire Shaft and Tunnel, raised the issue of conflict between the Economic Stabilization Act and other Federal law. Of the several attacks the ANHA raised against the legality of the Council's controls on nursing homes, one was that the CLC's regulations illegally interfered with Titles XVIII and XIX of the Social Security Act by limiting the amount of Medicare and Medicaid funds that nursing homes could receive.

More specifically, the Medicare and Medicaid programs, established under the Social Security Act, generally provide for federal and, in the case of Medicaid, state reimbursement of the "reasonable" costs of institutions participating in the programs. In furtherance of its goal of moderating inflation in the health care industry, however, the CLC regulations in some instances mandated a lower reimbursement amount than that which was allowable under the Medicare or Medicaid formulas. The ANHA contended that application of the CLC's regulations would improperly conflict with the SSA and that where there was a conflict, the Social Security Act provisions should prevail.

The District Court found in favor of the plaintiff, holding: (1) that Congress had not intended that the Economic Stabilization Act regulations interfere with the strictly controlled system of reimbursement set up under Medicare and Medicaid; and (2) that § 203 (j) of the Economic Stabilization Act, which prohibited using the Act as authority to withhold appropriated funds, was applicable by analogy to the instant case.2

On appeal, the TECA reversed the District Court on the conflict issue, noting two errors made by the lower court. First, TECA held it was error to fail to distinguish between temporary legislation designed to meet short-run economic problems and more permanent legislation which focused on long-term problems pertaining to a particular sector. The former kind of temporary measure does not necessarily "conflict" merely because it may overlap areas of the economy regulated by the latter. Second, it is necessary to presume, in the absence of other evidence, that Congress was aware of the conflict. Further, in pointing out the already stringent accounting to which Medicare/Medicaid costs were subject, TECA found that the trial court had failed to recognize the divergent purposes of the SSA and the ESA. The "reasonable" reimbursement provisions of the former were designed only to protect federal funds; on the other hand, the Phase IV controls had a specifically anti-inflationary purpose, and went

beyond the limited purpose of the Medicare and Medicaid programs.3 On the side issue of the impoundment argument, TECA found that Congress, in enacting § 203 (j), was seeking to prohibit "action (s) of greater direct impact than the regulations at issue here, which still provide for substantial federal reimbursements and seek to curtail them only to the extent that they are inflationary".

In conclusion, TECA noted that legislative history of the 1972 amendments to the Social Security Act, showed that Congress was aware and approved of the overlap between the CLC's regulations and the Medicare and Medicaid programs. TECA thus concluded that any conflict between the Economic Stabilization Act and the Social Security Act should be resolved in favor of the Economic Stabilization Act.

American Nursing Home-Notes

1. 368 F. Supp. 490 (D.D.C. 1973), 372 F. Supp. 517 (D.D.C. 1974), rev'd 497 F.2d 909 (T.E.C.A. 1974).

2. 372 F. Supp. at 520, 21.

3. 497 F.2d. at 911.

4. Id.

APPENDIX

The Price Commission's General Counsel's Office; Some

Observations

by

Carlton S. Jones*

I. Introduction

II. The Press of Business and Legal Basic Training

a) Operating Conditions

b) Development of Regulations

c) Rent Regulations

d) Legal Education of Agency Heads

III. The Public's Right to Know

a) Press Releases; Regulations

IV. The Place of the General Counsel's Office in the General Scheme of Things

a) Agency Lawyers Outside the General Counsel's Office

b) Other Responsibilities of the General Counsel

V. Personnel

VI. The Program's Needs at the Moment a) Creative Legal Thinking

*Office of the General Counsel, Price Commission.

Appendix-Price Commission General Counsel's

Office; Some Observations

INTRODUCTION

The following paragraphs are intended as helpful background to any future General Counsel or Deputy General Counsel of a Federal agency responsible for the stabilization of prices and rents as part of a mandatory wage/price_control program. This paper does not address certain matters considered unique to the Price Commission and therefore not necessarily relevant to any future controls program. Nor does this article discuss resolution of the substantive issues which confronted the Commission during Phase II; such issues are destined to be evaluated and analyzed for years to come in books and articles addressing the economics and politics of the Phase I-IV period. Rather, this essay is a personal account of certain of the items which, many months later, come to mind with respect to my experience as Deputy General Counsel of the Price Commission during Phase II of the Economic Stabilization Program.

In my judgment, the primary task of any government agency's general counsel's office is to ensure the legal sufficiency of all agency actions. Perhaps the organization manual does not read precisely that way in established agencies, but, in any recently formed governmental unit, the first priority must be considered the development of policies, procedures and activities that will contribute to the agency's ability to exercise its authority legally.

Given my assessment of the major duty of a legal office, I have organized this paper into sections dealing with certain of the factors that have an impact upon the office's ability to achieve the goal of legal sufficiency.

THE PRESS OF BUSINESS AND LEGAL BASIC TRAINING Operating Conditions

The Chairman and Commissioners of the Price Commission were sworn in by the President on October 22, 1971, just 3 days before the announced expiration of the 90-day Freeze (Phase I of the Economic Stabilization Program). It belabors the obvious to state that 23 days is a very short period within which to settle upon the basic principles that were to guide the price stabilization effort. Fortunately for the nation, the individuals selected as members of the Commission were able to devote considerable time during that 23-day period to a broad and sophisticated consideration of the basic economic policy issues involved in any controls program. The Chairman of the Commission was a full-time government employee. The six other Commissioners, however, each had positions of major responsibility in business or education in cities other than Washington, but their schedules permitted their attendance at the continuous round of Commission meetings held during this critical period.

It was only toward the end of the period, during the second week of November, that the Commission's thinking became crystallized sufficiently for those on the legal staff to begin outlining and drafting what would become the Commission's regulations governing the price side of the economy.

Developing Regulations

During this period, I served as Acting General Counsel of the Commission with a legal staff consisting of myself, with about six months' experience as a govern

ment lawyer and one attorney with about four years' experience in the government. Because no one at the Commission had had experience in the drafting of regulations sufficient for publication in the Federal Register, the decision was made to ask the Internal Revenue Service to supply, on a temporary basis, two attorneys to assist in the drafting process. The two "volunteers" turned out to have had considerable experience in legislative and regulatory drafting, but, their efforts seemed, to me at least, directed to making the Commission's regulatory framework as complicated as possible with many sub-sections, sub-paragraphs and parenthetical phrases-perhaps because their experience had been at the IRS. Additionally, their interest in participating in the Commission's first steps was minimal. Simply stated: they were hard to work with.

As the calendar steadily approached the November 13th deadline for publication of the Commission's initial regulations, we were fortunate to secure the assistance of a senior attorney from the Department of Commerce who had the requisite skill in drafting and regulation development to take the lead in preparing the regulations. As the Commission met night and day, the lawyers remained huddled in a small suite of offices on the seventh floor of the new Commission building trying, piece by piece, to articulate the Commission's policies in a legally sufficient and readily understandable form. Inevitably, however, it was only during the day and evening of November 11 that the Commission members finally were able to agree on the specific points they wanted as part of the initial Phase II policy.

The very hurried pace of the Commission's decision-making process resulted in very general policy decisions; the Commission intended to "flesh out" its policies in the weeks following the end of Phase I. This strategy, though, had to be modified: in order to provide sufficient guidance to the public, the Commission's initial regulations had to contain more than general policy pronouncements. Firms needed guidance in shifting from Phase I base prices to Phase II base prices, appropriate definitions of "price" and "base period" had to be formulated, and numerous other regulatory details had to be resolved. Many of these details were substantive in nature and could not be regarded as merely procedural hence within the authority of the General Counsel to determine. To the extent that these issues bore directly on basic Commission policy decisions, they were presented to the Commission as a whole or to its Chairman for decision. Many matters were, however, resolved by myself or by others involved in the regulation drafting process; there simply was not sufficient time for the Commission or its Chairman to resolve every issue, regardless of importance. Fortunately, Robert Kagan, an attorney who served as the Chairman's assistant during the first several months of the agency's existence, was deeply involved in the regulation development process and was able to focus the Chairman's attention on key issues requiring resolution in an expeditious, informal manner wholly appropriate to the demands of time.

So many key decisions were made by the Commission in so short a period that it must be considered fortunate that the ultimate regulatory product reflected Commission policy as well as it did. In one notable instance, however, the regulations did not reflect what two Commission members thought the Commission had decided. These individuals believe to this day that the Commission determined to limit price increases to a dollar-for-dollar pass-through of increased allowable costs; the regulations, however, reflected the understanding of the General Counsel that the Commission's decision was to permit prices to be increased by the percentage that allowable costs had increased. Four Commissioners believed the regulations correctly reflected a Commission decision on the matter, the remaining