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Supreme Court Rules Medicaid Reimbursements Not Subject to Private Action by Providers

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.”

© 2020 Dinsmore & Shohl LLP. All rights reserved.National Law Review, Volume V, Number 94


About this Author

Matthew Arend Litigation Attorney Dinsmore Shohl, privacy, data security

Matt is a member of the Health Care Practice Group, focusing his practice on all aspects of federal and state privacy and data security issues, including HIPAA compliance, breach analyses, and governance. He also routinely advises clients on compliance with federal and state anti-kickback laws, Stark law, Sunshine Act, Medicare Secondary Payer laws, pharmaceutical marketing rules and other regulatory matters. Additionally, his thorough knowledge of the healthcare arena enables him to counsel clients through audits and investigations, as well as providing training and...

Jenna Moran, Corporate Attorney, Dinsmore Law Firm

Jenna is a member of the Corporate Department, focusing her practice on health care law. Prior to joining Dinsmore, she served as a judicial extern for Judge Raymond Mitchell in the Circuit Court of Cook County in Chicago. She also worked as a law clerk for Krieg DeVault, LLP in Chicago where she gained experience in regulatory compliance, pharmacy law, Medicare/Medicaid appeals and reimbursement, and health law litigation. Jenna also served as the Symposium Editor for the DePaul Law Review, where she organized the 24th annual DePaul Law Review Symposium bringing together the foremost professionals in mental health law to build effective solutions to improve mental health services.