In the case of Louis W. Sullivan, Secretary of Health and Human Services v. Marilyn Finkelstein (1989), the Supreme Court ruled in favor of Sullivan, reversing a decision by the Second Circuit Court that had favored Finkelstein. The dispute centered on whether or not Medicare should cover certain medical services provided to Mrs. Finkelstein during her hospital stay after she was admitted for chest pains but before her doctor officially declared her an "inpatient". The court held that under federal law, Medicare could only pay for post-hospital extended care services if they were preceded by a three-day minimum medically necessary inpatient hospital stay; this did not include time spent as an outpatient under observation status even though physically present within the hospital.

In the dissenting opinion for Sullivan v. Finkelstein, Justice Blackmun argued that the majority's interpretation of the Social Security Act was incorrect and unfair to claimants. He contended that under their interpretation, a claimant who had been denied benefits could only challenge this decision by proving it was not supported by substantial evidence - an extremely difficult standard to meet. This would effectively prevent many deserving individuals from receiving benefits they were entitled to. Furthermore, he criticized the majority for failing to consider legislative history which indicated Congress intended for courts reviewing these decisions to have more power in determining whether or not a denial of benefits was justified. In his view, this case represented another example of judicial activism where judges impose their own policy preferences rather than interpreting law as written.