US Supreme Court Issues Important Medicaid Decision
April 1, 2015 07:49 AM
The US Supreme Court held today that Medicaid providers do not have the right to sue state Medicaid programs when a state allegedly has failed to comply with federal Medicaid law regarding the setting of payment rates. In Armstrong v. Exceptional Child Center, Inc., the Supreme Court decided that there is no private right of action under the Supremacy Clause of the U.S. Constitution for a provider of services to sue a state Medicaid program to enforce the federal Medicaid law that requires rates to be set at a level sufficient to secure access to care for Medicaid beneficiaries to the same extent available to individuals with private health insurance. You can read the opinion by clicking here. The lower courts had decided that the Idaho Medicaid program standards for rate setting violated federal law because those standards did not adequately consider the cost of care.
In a 5-4 ruling, the Supreme Court settled the latest chapter in the decades-long effort of providers of Medicaid services to challenge inadequate Medicaid payment rates in federal court. In recent years, Medicaid providers held out hope that the court rulings in the U.S. Court of Appeals for the Ninth Circuit would become the law of the land. That court, which covers the states of California, Oregon, Arizona, Washington, and Idaho, had held that Medicaid providers could proceed to challenge Medicaid payment rates under the Supremacy Clause of the U.S. Constitution. That constitutional provision establishes that federal law preempts any conflicting state law—i.e. federal law is “supreme” to state law. The Court of Appeals had ruled that health care providers had a “private right of action” under the Supremacy Clause to enforce the “equal access” provision of federal Medicaid law as it relates to payment rates. In the Exceptional Child Center case,the Supreme Court reversed the Court of Appeals, holding that the Supremacy Clause does not grant any right of action itself. Instead, the Court held that the Supremacy Clause just tells a federal court how it must decide when there is a conflict between a state and federal law.
The Court’s ruling also reiterated its earlier ruling that the Medicaid payment rate law itself “implicitly precludes private enforcement of” the equal access law under Medicaid. The Court found that two aspects of the equal access law establish Congress’s intent to foreclose any equitable relief for providers of Medicaid services. First, the Court concluded that the sole remedy that Congress provided is that federal Medicaid could withhold the federal funding to the state. Second, the Court further found that the equal access provision is “judicially unadministrable.” In other words, the Court considered that Medicaid rate setting requirements to be too complex for judges to adjudicate conflicts and that decisions on rate setting were better left to federal and state administrative agencies.
The big question is where do Medicaid providers go from here to resolve conflicts regarding the adequacy of payment rates? NAHC’s Center for Health Care Law had pursued multiple lawsuits in the past on Medicaid payment rates for home care. The Exceptional Child Center case is another home care related case as it concerned payment rates for habilitation services for developmentally disabled children. Just about every other provider and practitioner sector has pursued similar litigation with most courts closing their doors to the disputes based on the absence of a provider’s right to sue.
One path open to providers is presented by Justice Stephen Breyer in his concurring opinion: ask federal Medicaid to interpret or modify existing rules or create new rules that establish federal standards that it would enforce against noncompliant state Medicaid programs. If enforcement requests are denied, an injured party (e.g., a provider of services) could seek judicial review based on refusal of the Centers for Medicare and Medicaid Services (CMS) to enforce the rules. However, as the dissenting judges point out, the only remedy that CMS can impose is to deny payment of the federal financial share of Medicaid funding, a remedy that would be self-defeating in an effort to secure access to care.
Congress can also change the law and grant providers a right to sue states when there is a problem with payment rates. While this option has appeal, Congress has shown no interest in exposing Medicaid programs to such litigation.
The other available forums for redress include the state Medicaid agency itself, the state legislature, or the state governor. However, providers have resorted to litigation because of the unresponsiveness of these Medicaid stakeholders. Still, home care has had some recent success in improving Medicaid payment rates (e.g., Colorado).
The Medicaid landscape is also shifting with many states moving towards managed care for home care and other long term care services. That means that providers should prepare to negotiate acceptable payment rates. NAHC’s Home Care and Hospice Financial Managers Association (HHFMA) is currently working on a project that will help providers accurately calculate their cost for Medicaid services as a means to prepare for evidence-based negotiation.
Medicaid home care advocates have long focused efforts outside the judicial system to address Medicaid rate issues. In light of the Supreme Court ruling, those efforts will need to continue. At the same time, it appears that directing advocacy towards the Centers for Medicaid Services at CMS should be added to the advocacy toolbox. If CMS does not properly do its job reviewing Medicaid rate-setting, the Court’s ruling may be a starting point for litigation against CMS, rather than the state Medicaid program, as the Defendant.