Nature of the Case
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Facts
Under the Medicare program, health care providers are reimbursed by the Government for expenses incurred in providing medical services to Medicare beneficiaries. Congress has authorized D to promulgate regulations setting limits on the levels of Medicare costs that will be reimbursed. The Secretary's authority to adopt cost-limit rules is established by §223(b) of the Social Security Amendments of 1972. On June 30, 1981, D issued a cost-limit schedule that included technical changes in the methods for calculating cost limits. One of these changes affected the method for calculating the 'wage index.' The 1981 rule provided that wages paid by Federal Government hospitals would be excluded from that computation. Ps brought suit seeking to have the 1981 schedule invalidated. The District Court struck down the 1981 wage-index rule because D had violated the APA by failing to provide notice and an opportunity for public comment before issuing the rule. In February 1984, D published a notice seeking public comment on a proposal to reissue the 1981 wage-index rule, retroactive to July 1, 1981. After considering the comments received, D reissued the 1981 schedule in final form on November 26, 1984, and proceeded to recoup sums previously paid. Ps were required to return over $2 million in reimbursement payments. After exhausting administrative remedies, they sought judicial review under the applicable provisions of the APA, claiming that the retroactive schedule was invalid under both the APA and the Medicare Act. The District Court held that retroactive application was not justified under the circumstances of the case. The court of appeals affirmed. The court based its holding on the alternative grounds that the APA, as a general matter, forbids retroactive rulemaking, and that the Medicare Act, by specific terms, bars retroactive cost-limit rules. The Supreme Court granted certiorari.
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