SCOTUS Appears Divided on Medicaid Reimbursement Case

The Supreme Court on Tuesday appeared to be split over whether health care providers can sue state Medicaid agencies over low payment rates, Modern Healthcare reports (Schencker, Modern Healthcare, 1/20).

Background

In the case, Armstrong v. Exceptional Child Center, the Supreme Court will decide whether private health care providers can sue a state over Medicaid reimbursement. Providers in Idaho originally sued the state in 2009, alleging that it was illegally keeping Medicaid reimbursement rates at levels set in 2006 despite data showing that the cost of providing medical services had increased (California Healthline, 10/3/14). A federal judge sided with the providers, and the decision was affirmed by the 9th U.S. Circuit Court of Appeals (Galewitz, Kaiser Health News, 1/21). Idaho's Medicaid officials appealed the ruling to the Supreme Court.

The providers in the case argue that the courts are an important venue for challenging low reimbursement rates, which they claim can lead to less access to care for Medicaid beneficiaries because many providers are not willing to participate in the program. However, some states argue that Congress has not authorized such legal challenges (Modern Healthcare, 1/20).

The high court is expected to rule on the case by the end of June. Specifically, the high court will rule on whether such legal challenges are permitted under the U.S. Constitution's supremacy clause, which states that federal laws supersede conflicting state statutes.

Justices Appear Split on the Case

According to Modern Healthcare, some of the questions the justices asked on Tuesday indicated that they might be divided on the case. Some justices seemed skeptical of whether the court was the appropriate place for the challenge payment rates, while others asked where providers could challenge such reimbursement rates if not in the courts.

For example, Justice Sonia Sotomayor said, "Let's assume, as inflation is going up constantly, what happens two years into the plan when providers can't work for what the state is giving or the state is imposing a tremendous hardship on them, which is happening to a lot of providers who are being underpaid. Where do they go?" (Modern Healthcare, 1/20). In addition, Sotomayor noted that Idaho Medicaid officials did not follow the federal government's Medicaid payment formula when setting the rates (Kaiser Health News, 1/21).

However, Chief Justice John Roberts said that if providers are allowed to challenge the rates in court, "[t]he effect ... will be putting the setting of budget priorities in the hands of dozens of different federal judges," adding, "I just don't know what the practical significance of that's going to be."

Meanwhile, Justice Antonin Scalia asserted that if Congress intended to allow such lawsuits, it would have explicitly allowed for them. He and Justice Samuel Alito wondered if providers would be better suited taking such claims to CMS (Modern Healthcare, 1/20). However, a lawyer representing providers in the case noted that CMS has few ways to punish states outside of the so-called "nuclear option," which cuts off states' Medicaid funding entirely. According to the attorney, CMS has never used the sanction (Kaiser Health News, 1/21).

Reaction

Joel Hamme -- a principal at Powers Pyles Sutter & Verville, who filed an amicus brief on behalf of groups supporting providers in the case -- said it appears Justices Sotomayor and Elena Kagan are skeptical of Idaho's claims. However, he noted that providers might have difficulty swaying the justices to allow them to file such lawsuits, citing a similar case in 2012 in which the justices at the time voted 5-4 to not issue a ruling.

Meanwhile, Federation of American Hospitals general counsel Jeff Micklos said, "I do think both sides of the court really recognized the conundrum that there is no meaningful avenue for patients and providers to challenge inadequate state Medicaid rates," but it is difficult to predict how the Court will rule (Modern Healthcare, 1/20).