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Supreme Court Rules Medicaid Providers Cannot Sue To Enforce Their Rights

US Supreme CourtOn March 31, 2015, in a 5-4 decision, the United States Supreme Court issued its opinion in Armstrong v. Exceptional Child Center, Inc.[1] This decision essentially precludes all Medicaid providers from bringing a private cause of action to enforce their rights under the Medicaid Act.

Through Medicaid, the federal government subsidizes the States’ providing of medical services to qualified people. To get the federal monies, a state must adopt, and the federal government must approve, its Medicaid plan. Section 30(A) of the Medicaid Act requires that a state Medicaid plan must contain procedures to ensure that reimbursement rates for healthcare providers “are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers” to meet the need for care and services in the geographic area.

In Armstrong, a group of providers filed suit under the Supremacy Clause to enforce the provisions of Section 30(A) and to enjoin the Idaho Health and Welfare Department officials from continuing to reimburse the providers at rates lower than rates set forth in a provider cost study that had recommended increasing reimbursement rates. The 9th Circuit ruled that the Supremacy Clause gave the providers an implied right of action to bring suit. The Supreme Court disagreed.

The majority of the Supreme Court reasoned that while the Supremacy Clause instructs the courts to give federal law priority when there is a clash between a federal law and a state law, it does not create a cause of action.

The Majority went on to hold that the providers could not proceed in equity because the power of the federal courts to enjoin unlawful state action must be set out expressly or implicitly in statute. Here, the court reasoned that the Medicaid Act set out an express provision of a single remedy for the State’s failure to comply with the Medicaid act. That remedy is found in 42 U.S.C. Section 1396(c) and stated that the Secretary of Health and Human Services may withhold Medicaid funds if the State is failing to comply with the Medicaid Act.

What are the real life implications of this suggested remedy? As pointed out in Justice Sotomayor’s dissent, the Majority’s suggested remedy-withholding state funds will lead to the very result the law was enacted to prevent: depriving the poor of essential medical assistance.

What is the potential impact of this decision? If low rates cannot be challenged, Medicaid recipients will have fewer choices of health care providers because lower reimbursement rates make it harder for healthcare providers to choose to provide care to Medicaid recipients.[2]

What remedies are left for a provider? In Georgia, a Medicaid provider’s relationship with the State is based in contract, so remedies under the contract may still exist. If you are a provider and have a question about your rights under the Medicaid Act, please contact Kimberly Sheridan at Jeyaram & Associates at 678-709-4703.

[1] For the full opinion, please go to http://www.supremecourt.gov/opinions/14pdf/14-15_d1oe.pdf

[2] http://harvardcrcl.org/supreme-court-threatens-medicaid-reimbursement-accountability/