Supreme Court Holds Providers Cannot Sue States to Challenge Low Medicaid Rates

03 April 2015 Health Care Law Today Blog

The Supreme Court ruled, on March 31, in a 5-4 decision, that hospitals and all other providers cannot sue to force a state to pay higher Medicaid rates. The name of the case is Armstrong v. Exception Child Center. In Armstrong, the plaintiffs were a group of Idaho providers that furnish “habilitation services.” These are in-home care services, and the providers contended that but for the provision of such services, the Medicaid recipients would require care provided in a hospital or a nursing facility or intermediate care facility for the mentally retarded.

The providers asked the Federal district court to issue an injunction to require the Idaho Medicaid agency to increase the rates for habilitation services. The district court issued the injunction, and on appeal the Ninth Circuit Court of Appeals affirmed. The Supreme Court reversed, however. Although the Medicaid statute says  that each State’s Medicaid plan must set rates that are “sufficient to enlist enough providers so that care and services are available,” the Supreme Court held that providers cannot sue to enforce this provision, but rather only the Secretary of HHS can enforce this provision by withholding Federal funds from the State.

The Supreme Court majority (Scalia, Roberts, Breyer, Thomas, Alito) found that the Supremacy Clause in the Constitution while giving Federal courts the power to declare State action invalid in light of contrary Federal law, does not provide private citizens a right to bring suit to enforce Federal laws. Nor could the providers invoke the court’s power to do equity because in providing the Secretary with the authority to cut off federal funding to States that do not pay sufficient Medicaid rates, Congress impliedly foreclosed all other relief. Also, the fact that Congress used broad and subjective language in the Medicaid statute provision at issue (“consistent with efficiency, economy, and quality of care”) indicates that Congress meant to leave it to the Secretary to come up with standards and enforce them rather than give the courts the power to decide when Medicaid rates are too low.

The four dissenters (Kennedy, Kagan, Ginsburg, Sotomayor) agreed with part of the majority’s reasoning. However, the dissent believed that it should be presumed that Congress intended to give the federal courts the equitable power to set aside rate determinations by agencies, including State Medicaid agencies, unless Congress affirmatively manifests a contrary intent.

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