By Jane Perkins, Legal Director of National Health Law Program

In 2009, the Exceptional Child Center and other providers of in-home supportive services for people with disabilities sued the Idaho Medicaid Director, Richard Armstrong, on the grounds that they were not being paid enough. According to the record in the case, the state set the providers’ rates based on how much it wanted to spend on the Medicaid program rather than on how much the in-home service actually cost. The providers wanted the court to order the Medicaid agency to set the rates according to a Medicaid Act requirement that states set Medicaid payments at a level “sufficient to enlist enough providers so that care and service are available under the [Medicaid] plan at least to the extent that such care and services are available to the general population in the geographic area.”

To bring a lawsuit in federal court, the health care providers needed what’s called a “cause of action,” and for this, they relied on the Supremacy Clause of the Constitution. The Supremacy Clause says that federal law is the “supreme Law of the Land,” regardless of any contradictory state law. Nothing unusual here. Plaintiffs have filed Supremacy Clause actions for more than 200 years, and federal courts have enforced the Supremacy Clause to enjoin state laws that conflict with, and are thus preempted by, the U.S. Constitution or a federal law.
But, on March 31, 2015, the Supreme Court ruled that health care providers cannot enforce the Supremacy Clause to make a state comply with the Medicaid Act’s payment provision. It comes as no surprise that the case was a close call—a 5-4 decision. The line-up of the justices did not reflect the usual ideological split, however. Justice Breyer voted with the majority; Justice Kennedy, with the dissent.

Justice Antonin Scalia wrote the majority opinion, and it is an unsettling read. As noted above, these types of cases have been filed for hundreds of years, including in the Medicaid context since the 1970s. Forced by the dissent to acknowledge this “long-established practice,” Justice Scalia said that it does not justify a rule that denies the “fairest reading” of a statute. This is, of course, his reading.
Under Justice Scalia’s reading, the health care providers could not enforce the Medicaid payment provision because Congress did not intend for such enforcement to occur. The Court found two indications of congressional intent. First, the “sole remedy” Congress provided in the Medicaid Act allows the Secretary of Health and Human Services (HHS) to terminate federal funding to all or parts of the state Medicaid program until the state stops violating the federal law. The Armstrong majority found that this “[e]xpression of one method of enforcement suggests Congress intended to preclude others.” There are a couple of problems with this reading. This analysis is supposed to consider congressional intent. But, when Congress enacted Medicaid in 1965, prevailing Supreme Court precedent recognized the right of individuals to claim protection of the law and the duty of courts to order an appropriate remedy even when there was not an express statutory authorization of a federal cause of action. The presumption was that a law could be enforced unless Congress specifically provided otherwise. So, the 1965 Congress would not have thought it necessary to insert provisions authorizing individual, private enforcement. Second, Justice Scalia’s reading of the statute is inconsistent with the Court’s previous holdings. The Supreme Court had already held that the Medicaid Act does not contain a provision that replaces private enforcement (Wilder v. Va. Hosp. Ass’n). In fact, in a 2005 case, Justice Scalia had listed Medicaid as a statute whose private enforcement in court is not foreclosed based on a statutory enforcement scheme (City of Rancho Palo Verdes v. Abrams).

The Armstrong majority’s second major point is that, while the termination of funding provision might not, by itself, preclude a lawsuit, the Medicaid payment provision can’t be enforced as it is so broad and non-specific as to be “judicially unadministrable.” But this isn’t really true, either. Indeed, prior to this opinion, courts had enforced the Medicaid payment provision dozens of times. They apparently had no trouble weighing evidence regarding Medicaid and private pay provider participation and Medicaid insured and privately insured access to care. In fact, when my organization, the National Health Law Program, litigated one of these cases in California, the federal agency filed a brief with the court setting forth the various standards that courts could use to measure whether the state’s Medicaid payments ensured that the services in question were available to Medicaid beneficiaries at least to the extent they were available to the general population.

According to the Supreme Court majority, the Medicaid providers’ remedy is to get the Secretary of Health and Human Services to take action against the state for paying illegally low rates. As noted, the action that the Medicaid Act authorizes the Secretary to take is the termination of all or part of the state’s federal Medicaid funding. In other words, health care providers, who aren’t being paid enough by the state Medicaid agency, can ask the federal government to stop sending federal funding to the state to operate its Medicaid program. Why would they ever do that? That does not seem “fair;” in fact, it seems nonsensical that Congress would have ever expected a health care provider to seek such a “remedy.” Indeed, former HHS officials submitted a brief to the Supreme Court in this case telling them that:

“[e]very aspect of [HHS’s] administration of the Medicaid program—from its regulations to its annual budget—is premised on the understanding that private parties will shoulder much of the enforcement burden. CMS [the part of HHS in charge of Medicaid] lacks the logistical and financial resources necessary to be the exclusive enforcer of the equal access mandate, and it is highly unlikely to receive the necessary resources in the future.”

So, where does the newly minted “fairest reading” of the Medicaid payment provision leave us? Medicaid-participating health care providers cannot enforce the Medicaid payment provision against states in federal court. On its face, this is a narrow ruling about health care providers and about a rate setting provision of one federal statute. It remains to be seen whether and, if so, how this case will affect the ability of other plaintiffs to obtain relief in federal court (e.g., health care providers participating in other federal programs, Medicaid beneficiaries, beneficiaries of other federal programs), other defendants (e.g., the Secretary of Health and Human Services) and other provisions of federal law (e.g. other Medicaid provisions, other federal laws). While much remains unanswered, we know that advocates who oppose access to the courts will be seeking to extend Armstrong as far as future courts will allow. Our litigation team at the National Health Law Program is already seeing state attorneys working to extend the ruling, so it may be that the boundaries of the Court’s new, “fairest” reading will be understood sooner rather than later.