Supreme Court Rules Medicaid Reimbursements Not Subject to Private Action by Providers
Saturday, April 4, 2015

In a 5 to 4 decision on March 31, 2015, the Supreme Court ruled in Armstrong v. Exceptional Child Center, Inc. that Medicaid Providers have no private cause of action to sue government officials for higher Medicaid reimbursement rates. The action was brought by providers of habilitation services who claimed that Idaho reimbursed them at rates lower than §30(A) permitted. Section 30(A) of the Medicaid Act requires states to “assure that payments are consistent with efficiency, economy, and quality of care” while “safeguard[ing] against unnecessary utilization of . . . care and services.” 42 U.S.C. §1396a(a)(30)(A). Both the District Court and 9th Circuit previously held that Idaho had not set rates in a manner consistent with §30(A) and providers had a right of action under the Supremacy Clause to seek injunctive relief against the state.

Justice Scalia delivered the opinion holding that providers had no private cause of action under the Supremacy Clause or in equity. In reading the Supremacy Clause in the context of the Constitution as a whole, the Court’s majority opinion held that it was “unlikely that the Constitution gave Congress such broad discretion with regard to the enactment of laws, while simultaneously limiting Congress’s power over the manner of their implementation.” The Court further stated that Congress intended to foreclose equitable relief for a violation of §30(A) because the sole remedy Congress provided for a State’s failure to comply with Medicaid’s requirements was withholding Medicaid funds by the Secretary. However, the Court did not leave providers without any recourse, stating that relief can be sought through the Secretary.

Justice Breyer, in casting the controlling vote, filed a separate opinion concurring in part and concurring in the judgment, stating, “[t]he history of ratemaking demonstrates that administrative agencies are far better suited to this task than judges.” Breyer feared a holding allowing courts to engage in direct rate-setting could set a dangerous precedent of allowing other similar actions to fall to Judges which was “outside the ordinary channel of federal judicial review” and could result in increased litigation, inconsistent results, and “disorderly administration” of complex federal programs.

Justice Sotomayor, Justice Kennedy, Justice Ginsburg, and Justice Kagan dissented in the opinion. Justice Sotomayor wrote the dissenting opinion arguing, “Congress is undoubtedly aware of the federal courts’ long-established practice of enjoining state action, it should generally be presumed to contemplate such enforcement unless it affirmatively manifests a contrary intent.” Justice Sotomayor warned the only relief the Secretary can provide to address violations after the Court’s decision would be to withhold the funds that pay for such services, calling this measure “drastic” and “counterproductive.”

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