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Supreme Court to Weigh in on Providers’ Rights to Sue for Medicaid Reimbursements

The Medicaid program, a public insurance program serving approximately 66 million low-income Americans, is at risk for losing participating providers who claim they are not being compensated fairly for their services. On January 19, 2015, the Supreme Court heard arguments in Armstrong v. Exceptional Child Center, a case that could impact the rights of healthcare providers to sue states for higher Medicaid payments. Five private companies brought suit against the director of Idaho’s health department, arguing that the state unfairly reimbursed them at rates set in 2006, despite the fact that higher rates have since been approved by the Centers for Medicare and Medicaid Services (“CMS”).

Federal law provides that state Medicaid programs must ensure payments are “sufficient to enlist enough providers,” but states have discretion to decide what that means. 42 U.S.C. § 1396a(a)(30)(A) (the “Medicaid Statute”).  Central to this case is whether providers have a cause of action that allows them to seek enforcement of a federal statute.

The healthcare providers argued that changes to Idaho’s Medicaid reimbursement rates conflict with the Medicaid Statute, and therefore violate the Supremacy Clause of the U.S. Constitution. The Supremacy Clause provides that federal law preempts contrary state law.

The state argued that the power to challenge rates is limited to the federal government when it approves states’ Medicaid plans. Congress, therefore, did not create a cause of action in the Medicaid Statute, and the Supremacy Clause should not be a tool to circumvent that decision.

The U.S. Court of Appeals for the Ninth Circuit upheld a ruling in favor of the providers last year, affirming their right to sue.

Former Medicaid officials argued in an amicus brief that providers have not only a right but an obligation to challenge inadequate Medicaid reimbursements, because CMS “lacks the logistical and financial resources necessary to be the exclusive enforcer of the equal access mandate, and it is highly unlikely to receive the necessary resources in the future.”

The United States weighed in with an amicus brief as well, arguing that while preemption causes of action are generally permissible, such an action is not appropriate in this case due to the structure and history of the Medicaid Statute.

On average, reimbursements for state Medicaid programs are one-third lower than those for Medicare. Both programs pay less than commercial health plans, which is why many doctors will not treat Medicaid patients.

The Court previously considered a provider’s power to challenge Medicaid reimbursement rates in 2012 in Douglas v. Independent Living. In that case, a narrow majority sent the case back to a lower court without affirming or negating the right to sue. A dissent written by Chief Justice John Roberts – joined by three other Justices – would have ruled against allowing such a cause of action.

This case could have major implications on Medicaid payments and could potentially open the floodgates to more suits of this nature.  We will continue to track any developments. For more information on how your practice may be affected, please contact a Foster Swift health care attorney.   

Categories: Insurance, Medicare/Medicaid, Providers

Photo of Gilbert M. Frimet
Senior Attorney

Gil has over 48 years of health care and administrative law experience.  A prolific writer, many articles authored and co­authored by Gil have appeared in Health Care Weekly Review and numerous health and legal publications.

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