SCOTUS Limits Claims Brought by Healthcare Providers’ for Denied Medicaid Reimbursement

In a recent 5-4 decision by the U.S. Supreme Court, Armstrong v. Exceptional Child Center, Inc., Slip. Op., 575 U.S. ____ (March 31, 2015), Justice Scalia, writing for the majority, took aim at health care providers seeking to enforce Medicaid rate-setting provisions against a state that refused to incorporate those provisions in the state’s Medicaid plan, and instead reimbursed providers for Medicaid services at lower rates.

In Armstrong, the plaintiffs, providers of habilitation services under Idaho’s Medicaid plan sought an injunction to prevent Idaho’s State Department of Health from violating Section 30(A) of Medicaid, 42 U.S.C. § 1396(a)(30)(A), which requires a state to “assure that payments are consistent with efficiency, economy, and quality of care,” while “safeguard[ing] against unnecessary utilization of. . . care and services.”  The Court reversed the Ninth Circuit’s decision that the Supremacy Clause gave the providers an implied right of action to seek an injunction requiring Idaho to comply with Section 30(a).

While it has long been the case that a federal court could enjoin a state official from violating a federal law, see e.g. Ex parte Young, 209 U.S. 123 (1908), Justice Scalia concluded that, at least with respect to Section 30(A), federal courts lack the power to issue injunctive relief because, according to Justice Scalia, in enacting Section 30(A) Congress did not “unambiguously confer” on federal courts equitable powers, but instead established a scheme of enforcement that intended to foreclose equitable relief to private citizens against state actors, such as providers who are paid less by states than is required under Section 30(A).

Writing for the dissent, Justice Sotomayor, took issue with the majority’s departure from the long history of Supreme Court decisions that preserve the right of private citizens to access the federal courts to enjoin state actors from violating the Constitution and other federal laws, especially considering that the so-called remedial scheme under Section 30(A) was effectively limited to the federal government withholding Medicaid funding to a state for not complying with Medicaid.

In some ways, Justice Scalia’s opinion appears to be a pointed attack on healthcare providers who seek reimbursement for their services under Medicaid. Not only does Justice Scalia abandon providers’ rights under the Supremacy Clause, but, in dicta, Justice Scalia questions whether providers are even beneficiaries of the Medicaid contracts implemented by the States such that providers even have standing to bring claims for reimbursement as third party beneficiaries of the Medicaid program.

Importantly, however, the Court’s opinion appears to be limited to claims brought by providers against state actors under the Supremacy Clause, and therefore does not alter a provider’s right to bring an action against a private payer to seek reimbursement denied in violation of Medicaid.  Such an action may still be brought pursuant to the implied right of action cases under Cort v. Ash, 422 U.S. 66 (1975) and its progeny.



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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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