Supreme Court Issues Medicaid Ruling
In its decision in the case of Armstrong et al. v. Exceptional Child Care Center, Inc., et al., the U.S. Supreme Court has barred providers from seeking injunctive relief in Federal Court compelling states to increase Medicaid reimbursement.
In this case a group of Medicaid providers of habilitation services in Idaho had claimed that their Medicaid rates were less than the actual cost of providing care, and the State’s Medicaid program had violated the federally mandated standard of paying rates that “assure that payments [1] “are consistent with efficiency, economy, and quality of care” while “safeguarding against the unnecessary utilization of … care and services” and [2] “are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.” (42 U. S. C. §1396a(a)(30)(A)). This standard is mandated in all state Medicaid plans and is referred to by the Court as “section 30(A).”
The providers sought an injunction requiring Idaho to comply with section 30(A) under both the Social Security Act and the Supremacy Clause of the Constitution (which provides that federal law is the supreme law of the land). They claimed that the State’s Medicaid rates were preempted by federal law and violated the Constitution. The lower courts ruled on behalf of the providers, holding that the Supremacy Clause gives providers an implied right of action to seek an injunction mandating compliance with section 30(A).
In reversing the lower court decision and writing for the majority Supreme Court Justice Antonin Scalia states that:
It is difficult to imagine a requirement broader and less specific than §30(A)’s mandate that state plans provide for payments that are “consistent with efficiency, economy, and quality of care,” all the while “safeguard[ing] against unnecessary utilization of . . . care and services.”
Justice Scalia goes on to say:
We think, that Congress “wanted to make the agency remedy that it provided exclusive,” thereby achieving “the expertise, uniformity, widespread consultation, and resulting administrative guidance that can accompany agency decision making,” and avoiding “the comparative risk of inconsistent interpretations and misincentives that can arise out of an occasional inappropriate application of the statute in a private action … the sheer complexity associated with enforcing §30(A), coupled with the express provision of an administrative remedy, §1396c, shows that the Medicaid Act precludes private enforcement of §30(A) in the courts.
In other words, the provider’s only real option to remedy inadequate Medicaid rates at the federal level is to pursue administrative action through the Centers for Medicare and Medicaid Services (CMS). The provider would have to persuade CMS that the State is in violation of the Medicaid plan and that some corrective or punitive action should be directed against the State, up to and including a partial or total removal of federal Medicaid funding from the State.
In writing for the dissent, Justice Sotomayor cited a long line of contrary precedent that supports the availability of injunctive relief in preemption and rate-making cases. She also noted that the wording of 30(A) cannot be understood to include a congressional intent to preclude judicial involvement and that the remedy of cutting federal Medicaid funds would be counterproductive in terms of even further hurting access to services for Medicaid recipients. The dissent also noted that there currently exists no clear avenue for providers to pursue an administrative remedy through CMS.
Providers should keep in mind that this does not eliminate the ability to pursue Medicare litigation at the federal level, nor does it impact Medicaid litigation at the State level to the extent it is based on State law grounds. In any event, Medicaid reimbursement lawsuits are also likely to become less relevant as Medicaid programs across the nation now shift from fee-for-service rates set by State Medicaid agencies towards managed care and alternative payment arrangements.
Nonetheless, this ruling eliminates an important legal theory upon which to seek relief at the federal level from inadequate Medicaid reimbursement. One question this now raises is whether this would prompt CMS or Congress to develop some meaningful administrative process or remedy to address inadequate Medicaid payment rates.
Contact: Patrick Cucinelli, pcucinelli@leadingageny.org, 518-867-8827