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Supreme Court Holds that Medicaid Providers Do Not Have Right to Challenge Medicaid Reimbursement Rates under Supremacy Clause

    Client Alerts
  • April 01, 2015

Yesterday, the United States Supreme Court issued an opinion that denies providers the right to challenge low Medicaid reimbursement rates by suing state agencies in federal court.

In Armstrong v. Exceptional Child Center (No. 14-15), several residential care providers in Idaho sued on the grounds that its Medicaid program failed to pay providers increased Medicaid rates that had been approved by the federal government.  The providers were initially successful in convincing the district court and Court of Appeals for the Ninth Circuit that the State should be forced to pay the higher rates because federal Medicaid law requires states to pay rates that are sufficient to ensure access to care.  The providers contended that they had the right to sue Idaho in federal court under the United States Constitution’s Supremacy Clause—which provides that federal law trumps State law.

Without reaching the issue of whether Idaho had violated the law, the Supreme Court in a 5-4 vote, ruled that Medicaid providers have no right to sue to enforce the federal law.  Liberal Justice Stephen Breyer joined four conservatives (Scalia, Thomas, Roberts, and Alito) in the majority.  Conservative Justice Anthony Kennedy joined the other liberals (Ginsburg, Sotomayor, and Kagan) in dissent.

Writing on behalf of the majority, Justice Scalia wrote that the Medicaid law did not give providers a clear right to sue and that the Supremacy Clause itself did not create a right for providers to bring the lawsuit.  Scalia wrote that the Supremacy Clause “instructs courts what to do when state and federal law clash, but is silent regarding who may enforce federal laws in court.”  Justice Scalia indicated that providers have a remedy—ask federal government to intervene.

In a dissenting opinion, Justice Sotomayor stated that the Court’s decision was contrary to previous rulings, which acknowledged a right to sue, and disagreed that the Medicaid law needed to specifically provide providers the right to sue in order for a challenge to be brought.  Justice Sotomayor warned that the Court’s decision will have “real consequences” and concluded that solely relying on the federal agency to enforce rates will be inadequate because the agency’s only remedy is “the drastic and often counterproductive measure of withholding the funds that pay for such services.”

The decision is a blow to Medicaid providers, including hospitals, doctors, home health agencies, hospices, and pharmacists.

The full opinion is available here.  Stay tuned for additional analysis on the Supreme Court decision and its aftermath on Parker Poe’s Health Law Blog.