call our next case nasser of hospital st agnes medical center versus secretary of department of health and human services it may please the court name is joshua walton from the united states department of justice representing the appellant secretary of health and human services with the court's permission i'd like to reserve five minutes for rebuttal ok thank you your honor the medicare dish regulation at issue in this case excludes patients covered by a state charity care program in cooper this court held that the statute permitted as much the same medicare dish regulation excludes patients who receive medical care through a federally approved and federally conditioned demonstration project under section eleven fifteen the in the deficit reduction act congress expressly authorized the secretary to do that the distinction between section eleven fifteen patients and state charity care programs is a rational one and therefore should have been upheld by the district court unlike the pennsylvania's ga program the section all have been fifteen demonstration projects are ones in which the secretary decide exactly which medicaid requirements will apply and which will be waived secretary decides how long the project will last what costs will be considered medicaid expenditures and makes a determination that the whole project is in the terms of the statute likely to assist in promoting the objectives of many making this distinction yes germination which we have built and the secretary was acting within her discretion in a reasonable manner that's correct and cooper did not deal with whether this was a violation of equal protection that's correct but the standard for a violation of equal protection was not in any way incorporated in the original determination that the secretary made in statute reasonably presumably she's also doing it with a rational purpose and although the original promulgating of the rule didn't express the address an equal protection question i think that's normal and natural since no one no airline yeah that's right but i think your honor makes it makes an excellent point which is the issue in cooper was whether the statute permitted the secretary to make the regulation that she did and having held that it does the question now is sort of an even harder one which is ok if the statute permits it does the constitution where the a p a forbid it but then that goes to an even higher standard the one that everyone agrees applies here which is the rational basis test and it is the plaintiff's burden in attacking the regulation which comes with a presumption of constitutional validity june in the words of the supreme court to negative every conceivable  that might exist for the program and there are a lot of things that the plaintiffs an attempt to do here to show some similarities between the program but that's neither here nor there a need to negate all of the conceivable rational bases know if if we agree with you in the home i'll sit down right now if you all say that you agree with me yes well for purposes of equal protection once we find there is a rational basis for different treatment then haven't you kind of answered the equal protection argument because you've then found they are different and they're permissibly different so you can treat them differently i think that's an excellent way to put it if they're not similarly situated they don't need to be treated similarly yes that's that's exactly right so i guess the issue too is who needs to be treated similarly i was a little confused as to whether we're talking about hospitals are we talking about the patients or are we talking about the the programs you know that there is a program which is a section eleven fifteen and that is different from the state charity the g eight program if you will and so those programs are are different and for a valid reason so we've been removed from the concept of well you're treating hospitals and patients differently i couldn't kind of make that hospitals would only have standing to complain of equal protection as applied to the ho than them that's right yeah that's exactly right and i think it's sort of blends all of the three because the way the statute works is that it's an additional payment to hospitals that is calculated on the basis of patients depending on what programs the in yeah but i think you're right the hospitals could only complain about equal protection for them but no matter how you slice it whether it which which of those three or all of the three you look at there's still this rational distinction between a demonstration project that's federally controlled and approved and a ga program which is not and then in the district court expressly acknowledge it's a creature of state law it's not a federally controlled program and i think that alone is enough of a rational basis to sustain it i'd be happy section eleven fifteen program it's a civic program states have to apply for it if they apply for it and they are proof we will prove it and we will prove that time we will acknowledge that we will want to hear from them how it for traditional medicaid benefits because at that time the government construed the medicare dish statute as requiring medicaid eligibility in the house they decided to make an exception to that well the statute  patients will not be considered in the base for medicare reimbursement when you're considering to which patients are medicaid eligible right now because cooper if i may cooper involved patients who were not covered by any insurance program who were not covered by the new jersey medicaid program they were ok they were bad they're dealing with a state program pennsylvania is dealing with a state program where the state program is mentioned in the medicaid state medicaid program as existing but it's not regulated by it's not funded on a patient b at all it's free care and then in exchange for that there's a pool of money and a hospital gets a portion of the pool of money at the end of the year based on uncompensated care that's completely different from the state plan individual patients for inpatient care if they satisfy an income eligible of the standard forty seven percent of federal poverty level which was a if you see it's in the state plan and it specifies that it is regarded as a type of medical assistance and the hospital is is to regard those patients as medical assistants patients and payments are made invisibly as though those are medicaid patients so there are patients specific payments made in the state plan secretaries under state treasury no not from the state treasury those are the they're made they're the same their medicaid patients and that's that's the record in this case the record in this case is that from a hospital standpoint one doesn't even know funds it's individual payments for individual hospital services that's what was approved in ninety four and that's why the commoner's that the secretary what you're saying makes no sense you're making a presumption that ga days in which it can vary from one state to another are the same as charity care where there's no payment made and and in this particular case it makes absolutely no sense because since one thousand nine hundred four in pennsylvania the secretary approved the state plan that describes ga patients that says that those patients are eligible for medical systems and it says that the hospitals will receive for those patients payments that are no different than any other medicaid payments that wasn't  not hearing why the secretary cannot do what was done here that is say that we have section eleven fifteen which has been established for specific purposes and we're going to say that we're going to treat hospitals and patients that are part of that differently from regular state because it's a demonstration project because it's approved in a different if i can just address briefly what what waivers what a waiver is as judge randolph explained in cookeville case it's a traditional medicaid program where some of the regular poor requirements can be waived this is not a wholesale difference among programs the secretary has always treated now the counties are to get the waiver the state has to file to request this and it has to be something that is going to promote medicare or medicaid and we have a list of which states are applied and how long they exist separate center and when they expire and these are these are different and the purpose of that is so different that it's housing groove and it's experimental well be counted under the medicare statute a patient must be medicaid eligible but we're not but we'll make an exception because we have a specific program we want to promote there's no basis in the medicare statute for an exception and if you going to make an exception then you're saying i no longer really reading that statute which is what the secretary of knowledge in in two thousand we no longer reading that statute as requiring that patients be medicaid eligible we're going to allow gays to be counted in whatever pennsylvania to pay hospitals for non medicaid patients who are poorer than the patients in the typical whatever should have said we're going to put together something that we think is going to you know help that here we're going to if they could have filed for section eleven fifteen waiver under certain program they jumped through certain hoops and and got the approvals and that wasn't done right way that they thought they were going to approve medicare medicaid and seek the secretary to sign on the dotted line and that would have resolve your problem would it not you would have then qualified and would have been treated the way they're treated correct that's correct if pennsylvania had applied for a waiver then these patients would have been deemed to be accountable but i but the point is in relevant respects there's there's no difference approving medicaid and if pennsylvania feels that its program will will offer such a program well approve it but but if they don't then by statute and by regulation we don't have to consider that's the government's argument yeah and that's but but that affords a dignity to a waiver that it doesn't deserve because as this court explained in the door of the statutory waiver so it's a waiver certain regulations of now the waiver provision simply allows the secretary to say in your state we will allow you not to comply with certain portions of in medicaid statute that has no impact on whether or not under the medicare statute a patient who's a poor patient should be counted if they're funded versus medicaid eligible until two thousand the sector is always one of these categories together they have never been treated as as separate categories if that our job to say that because the secretary changed the treatment of something that he's not allowed to do it and it's our job to to to second guess the stink it's that have been drawn  start to scrutinize when the secretary draws a distinction whether it's it's a rational distinction and it serves a stated purpose and when the secretary in two thousand said i have longer going to require i no longer read the medicare dish statute as mandating eligibility and i instead believe that if somebody at the hospital is treating lowing compassions whether or not they're medicaid eligible as long as those patients are funded under or regarded as funded under title nineteen plan they can be counted by hospitals and that doesn't that critical set of facts doesn't draw any distinctions between what was going on in pennsylvania nineteen and pennsylvania ga patients have always been funded under title like it because there is individual eligibility and it's it's set forth in the record in the state plan which as judge lu exempt but but the exception under the waiver is to treat their costs yes covered by title nineteen that doesn't draw any distinction from ga patients because ga patients whose whose inclusion in the plan was scrutinized by and approved by the secretary have been approved for payment their inpatient services are individually paid for as services under title nineteen so by saying we're going to allow waiver patients to be counted if their services  patients are also not make a doubtable but poorer than the typical way repayment and their pay their care is funded under title nineteen and in pennsylvania particular through ninety four zero eight and so as a result of that there was no difference and in fact the pennsylvania hospitals under the plan approved by the secretary were paid for ga patients whose income levels were at or below f t c levels as as the evidence what and what doesn't pennsylvania do that because you have a choice of ways to run program and the secretary has never distinguished in the dish world until two thousand between whether you have an eleven fifteen waiver wrote a traditional distinguished and we have to respect that distinction not when the to not when the very reasons given for the distinction are flatly contrary to the record and ignored state plan the secretary granted the first grant of this decision on the assumption my time is up so is a vanish the answer the secretary grant of the distinction initially on i don't have to look at this because the regulation that created th discrepancy didn't apply during the coster judge ludwig correctly determined that they were wrong about that that the regulation did apply he looked at this and said i see no basis for this distinction you have two states that are operating pa and the patients are even poorer than the typical waiver patients the judge is there for mandated to say show me why this is rational and at the end of the day the agency came back and said the patients in the pennsylvania waiver program are not pay for  plan and they reach that conclusion by saying that s p a ninety four zero eight does not provide for ga patients which in fact it squarely does it sets forth payments for ga patients and the result was that there was a lot of smoke and mirrors  nearly as i can take some part of the program and allow you to modify the room rule of the government the secretary's always said for medicaid waivers and ga programs or charity care all that matters is is the patient eligible for medicaid until two thousand when the secretary said it no longer matters if you're eligible for medicaid if you're in a waiver state because from now on we're going to regard those services as paid for and that didn't change that put them in alignment with pennsylvania not the other way around thank you matters but i think the only question that you need to ask under either analysis is whether there's a rational distinction between the two programs and for all the reasons we've gone over today there is a rational decision that the administrator expressly point to do the difference between a federally controlled approved program and the state's program which is not once that rational basis is accepted as it should be the analysis is done and all of these  questions about how exactly the stagy program works in all its questions about finding our centrally irrelevant once a rational basis is established the secretary offered budget neutrality as a distinction that the  section eleven fifteen waiver programs have to have to be neutral from budgetary standpoint is that a real distinction how does that set it apart from the state programs well i think what it does is it requires certain budgetary requirements for someone who applies for the waiver program as part of the overall package and because the ga program is not a waiver program it is not subject to federal control it doesn't have to do that it may choose to do that on its own but it's not a requirement that the federal government imposes on the state and that's just another of one of the many other distinctions it adds on it's not determinative in this case but it's another point that the administrator pointed to why would pennsylvania not have sought eleven fifteen waiver is that an onerous process or just i mean i have no context in which to put this whole eleven fifteen waiver program you know i'm really not in a position to answer that without just speculating that maybe they don't want to go through the paperwork maybe they want to be free to pick and choose the medicaid requirements they want rather than have them be imposed by the secretary but that would just be all speculation on my part i really here represent there is there are many more bells and whistles in that program that are controlled by the federal government as state picking its own plan the core of it of who is treated and what care they get is determined by the secretary he ga program that's the side of by the state and that's one of the most fundamental differences hospital say the pennsylvania e patients their fear is funded by medicare i think that if you know this in medicaid yeah i would say two things that one of the that's wrong as a matter of law but second even if they were correct that they were funded in the same way they are burdened in an equal protection case like this under a rational basis is to negate every conceivable rational basis for assisting law they might be right on that they're wrong but even if they were it doesn't negate all of the that we've gone over over and over again in this case about how it's federally controlled federally conditioned the secretary makes a terminations decide how long a class none of those go away whether the funding were the same or different but i will say just  know and the point which is there it's conceded in this case in the complaint in this relation that ga patients are in eligible for medicaid because they're in eligible for medicaid medicaid doesn't pay for their care now there's a circuitous route which is a little bit sort of hard to follow about how the medicaid dish payments which are different from regular medicaid matching funds travel eventually to these hospitals that treat ga patients but that doesn't mean medicaid in the traditional matching funds and pays for their care it does it so they're wrong about the funding and it really wouldn't matter as a legal matter if they get the last point i'd like to make on is if i may as  judgement deluge asked at one point why can't the secretary make this distinction between demonstration projects and the only answer that i heard with that and that he cares and he doesn't pro the dish actually doesn't provide for that kind of an exception i just want to point you to the that out that the dispatch itself says in the calculation consider two groups of patients one those who are in eligible for medicaid and to those who are who are in eligible for medicaid