California Healthline Daily Edition

Summaries of health policy coverage from major news organizations

Justices Hear Oral Arguments in Calif. Case Over Medicaid Cuts

On Monday, the U.S. Supreme Court heard arguments in a California lawsuit that will determine whether Medicaid beneficiaries can sue states that make provider cuts, NPR's "All Things Considered" reports (Totenberg, "All Things Considered," NPR, 10/3).


The case stems from reimbursement cuts the California Legislature approved in 2008 and 2009 to Medi-Cal, the state's Medicaid program.

Health care providers and Medi-Cal beneficiaries challenged the changes in court, arguing that the payment cuts violated federal law that says Medicaid rates must be "sufficient to enlist enough providers" so beneficiaries can access care to the same extent as the general population in a particular area.

The 9th U.S. Circuit Court of Appeals in San Francisco ruled that beneficiaries could sue under the U.S. Constitution's supremacy clause, which lets federal law take precedence over state law. California appealed to the U.S. Supreme Court.

The case before the high court is a consolidated set of three separate lawsuits on the issue that had been filed by providers and beneficiaries. In May, the Obama administration argued in support of California, saying that no law allows individuals to sue states to enforce the federal standard.

The case is particularly significant because the outcome could affect the federal health reform law's expansion of Medicaid (California Healthline, 10/3).

Details of Oral Arguments

Carter Phillips, a lawyer representing one of the hospitals that sued California, said health care providers and individuals must have some access to the courts in such situations, especially individuals who are missing "vital access to care." Phillips said the case represents a "life and death problem" (Barnes, Washington Post, 10/3).

He added, "I don't think Congress has the authority to essentially say there are some conflicts between federal and state law that we will simply ignore."

Deputy Solicitor General Edwin Kneedler countered that the justices should not allow third parties such as patients, physicians and other health providers to enforce federal Medicaid rules (Baker, "Healthwatch," The Hill, 10/3).

Kneedler said that the federal government does not seek to ban all private suits under the supremacy clause, only those involving "cooperative federal-state" programs that form a "contractual relationship" (Liptak, New York Times, 10/3).

California Deputy Attorney General Karin Schwartz said that federal Medicaid law does not allow for private plaintiffs to go to court to challenge reimbursement decisions. Schwartz said, "If Congress wants to provide for private-party litigation, it must do so clearly and unambiguously, and it has not done so in this case" (Washington Post, 10/3).

She added, "I don't think it is more efficient to have 700 district court judges interpreting a statute that does not have any objective standard" (New York Times, 10/3).

Justices' Reactions

It was not immediately clear upon the conclusion of oral arguments that a majority view had emerged from the justices, the Post reports.

Justice Ruth Bader Ginsburg said that private plaintiffs are able to go to court over rate reductions, regardless of the Medicaid law. She said, "The government can't stop that from happening, even if the government thinks they are in violation of the Medicaid Act" (Washington Post, 10/3).

Justice Sonia Sotomayor also noted that private lawsuits have been filed under the supremacy clause for almost 200 years (New York Times, 10/3)

Justice Elena Kagan said that California tried an "end run" around the reimbursement-cutting process by submitting new rate schedules before seeking approval from the federal government (Washington Post, 10/3).

Justice Stephen Breyer said he was worried that too broad of a ruling in the case would allow individuals claiming a conflict between federal and state law to "run right into court" (New York Times, 10/3).

Some justices opposed an argument by Phillips that even if CMS formally approved a proposed rate cut, patients and providers still should be able to sue over rates they consider too low. Chief Justice John Roberts asked Phillips, "Why does the agency get to determine federal law when Congress doesn't?"

Breyer also said the plaintiffs' argument allows people to sue to enforce a contract that does not affect them, so long as they perceive a conflict between state and federal law. He said, "A principle that says you can do that any time you want seems to me to create the real fear of far-reaching … in the extent that it just stops the agency of doing their business at the behest of anyone who would like to assert a state law." He said, "It's a mess, in other words" ("Healthwatch," The Hill, 10/3).

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