The Medicaid statute begins with seven words: "A state plan
for medical assistance must," and the statute then proceeds to
list 83 requirements that a state Medicaid plan is required to
meet.1 Absent from the statute, however, is any remedy
for Medicaid beneficiaries or providers who are harmed by a
state's failure to satisfy any one of those requirements. An
aggrieved party can always petition the Centers for Medicare &
Medicaid Services (CMS), the federal agency that oversees the
program, for relief when a state fails to comply with its
obligations. But since CMS views itself as a partner with the
states in overseeing the Medicaid program, aggrieved parties may
want to secure independent judicial enforcement of Medicaid's
entitlements. The lack of an enforcement mechanism in the statute
has stymied these efforts.
In 1990, the Supreme Court seemed to have resolved the issue in
favor of providers and beneficiaries in Wilder v. Virginia
Hospital Association.2 In Wilder, a
divided Supreme Court ruled that providers could use the federal
civil rights statute as a means to enforce a then-existing Medicaid
requirement that a state Medicaid plan provide "reasonable and
adequate" reimbursement rates.3 According to
Justice Brennan, writing for the majority, one could infer that the
Medicaid statute created "enforceable rights" to
reasonable and adequate Medicaid reimbursement because of the lack
of an effective administrative enforcement mechanism through
CMS.4 Moreover, the federal Medicaid statute itself did
not foreclose a challenge to the then-existing Medicaid
requirement.5 Therefore, because a state official -
Governor Wilder, acting through his Medicaid commissioner - had
deprived Virginia hospitals of a right guaranteed under federal law
- access to "reasonable and adequate" reimbursement rates
- the federal civil rights statute was an appropriate vehicle to
vindicate that right.
In the intervening years, three things changed that called into
question the continuing vitality of the Wilder decision.
First, in 1997, Congress repealed the statute upon which the
Wilder decision relied.6 In its place, Congress
imposed a much weaker requirement on the states: namely, that a
state plan merely provide for a public process before setting rates
for providers.7 The second was a change in the make-up
of the Supreme Court itself; Justice Marshall, who had been in the
majority in Wilder, was replaced on the Court by Justice
Thomas, who seemed less inclined to support a broad, sweeping
interpretation of a right to judicial enforcement of the Medicaid
entitlement. Finally, the Supreme Court's decision in
Gonzaga University v. Doe seemed to drastically curtail
the sweeping holding in Wilder.8 In
Gonzaga, the Supreme Court addressed the requirements
necessary to maintain an action under the federal civil rights
statute. Whereas Wilder had inferred a private right of
enforcement of the federal Medicaid statute, Gonzaga seemed to
suggest the need for a specific, individually enforceable right in
order to maintain an action against a state official for a
violation of the federal civil rights act.9
In the wake of these developments, all circuit courts that
addressed the issue of a private right of enforcement of the
Medicaid statute concluded that most Medicaid requirements failed
to contain the specific, rights-creating language that the Supreme
Court had envisioned in Gonzaga and supporting Supreme
Court precedent, including Suter and
Blessing.10 In most of these cases, the circuit
courts had addressed another requirement of federal law: that a
state Medicaid plan "provide ... that payments are ...
sufficient to enlist enough providers so that care and services are
available under the plan."11 For example, in a
Massachusetts Medicaid case, the United States Court of Appeals for
the First Circuit ruled that "If Gonzaga had existed
prior to [our earlier decision], the panel could not have come to
the same result."12
This history laid the groundwork for the Supreme Court's
Douglas v. Independent Living Center of Southern
California recently issued decision. In Douglas, providers had
objected to a California amendment to its state Medicaid plan to
reduce reimbursement rates for some providers by as much as 10%.
These providers believed that, with the proposed rate reductions,
California would not be able to "provide ... that payments are
... sufficient to enlist enough providers so that care and services
are available under the plan," in contravention of the federal
Medicaid requirement. However, attempting to bring this argument in
federal court in the Ninth Circuit using the federal civil rights
statute as a means of enforcement would have meant that the
providers were squarely confronted with the Gonzaga, Suter
and Blessing trilogy, as well as adverse precedent in the
Ninth Circuit itself.13 Thus, the providers proceeded on
a different track.
Because using the federal civil rights statute was now foreclosed
as an option, the providers tried a new approach: the U.S.
Constitution and the laws executed under it, they argued, are
"the supreme law of the land."14 Thus, if the
federal Medicaid statute - a law enacted under the
Constitution's Spending Clause authority - requires
"sufficient" payments to providers, and a state statute
provides arguably insufficient payments to providers, the state
law, under traditional Supremacy Clause pre-emption analysis, must
yield to the federal law. The Ninth Circuit accepted this argument,
and struck down the California rate statute in 2009.15
On February 22, 2012, in a somewhat surprising, and divided,
decision, the United States Supreme Court vacated and remanded the
Ninth Circuit's holding.16
In doing so, the Supreme Court noted that "since we [accepted
this case for review], the relevant circumstances have
changed." 17In particular, after the Supreme Court
had granted review in Douglas, CMS approved a modified
version of the California rate plan. As a result of CMS'
action, the Supreme Court questioned whether the Supremacy Clause
action against the state plan could be maintained; after all,
according to Justice Breyer, review of the federal agency's
decision (i.e. CMS' decision to accept California's
modified rate plan) was now available under the Administrative
Procedure Act.18 Accordingly, aggrieved providers had
another means of challenging the rate reductions. Moreover,
deciding the question now risked "inconsistency or
confusion" in the lower courts.19 As a result, the
Supreme Court vacated the Ninth Circuit's judgment and remanded
it in light of its decision and the CMS approval of the California
rate plan.
Douglas, like Wilder, was a 5 - 4 decision. Of
interest is the composition of that 5 - 4 majority. Whereas Justice
Kennedy was in the minority in Wilder - suggesting that he
disagreed that the federal civil rights statute provided a means of
individual enforcement of the Medicaid entitlement - he was in the
majority in Douglas. One has the sense that the Supreme
Court was inclined to reject the Ninth Circuit's Supremacy
Clause reasoning in its entirety, but that Justice Breyer was able
to cobble together a 5 - 4 majority by attracting Justice Kennedy
to a relatively narrow opinion that avoided the major
Constitutional question. The tone of Chief Justice Roberts'
dissent - joined by Justices Alito, Scalia and Thomas - suggests
that this may be precisely what happened.
Thus, the availability of an individual means of enforcement of
the Medicaid entitlement remains unanswered. Of additional interest
is what Justice Kennedy's position may mean for the far larger
health care cases pending Supreme Court review this term: i.e., the
Constitutional challenges to the Patient Protection and Affordable
Care Act, which will be heard by the Court at the end of this
month.20 Justice Kennedy's apparent reluctance to
join a sweeping rejection of a means of challenging a purported
violation of the Medicaid entitlement may suggest a similar
reticence to striking down a major piece of Spending Clause
legislation this Term.
Footnotes
1 Social Security Act § 1902(a), 42 U.S.C. §
1396a(a).
2 496 U.S. 498 (1990).
3 The federal civil rights statute, enacted in the aftermath of
the Civil War, provides a cause of action for any individual who
has been deprived of their rights, guaranteed by the Constitution
or federal law, by the action of any state official acting under
color of state law. 42 U.S.C. § 1983.
4 496 U.S. at 521.
5 Id. at 521 - 22.
6 Balanced Budget Act of 1997, Pub. L. No. 105 - 33 §
4711(a), 111 Stat. 251, 507 - 508 (Aug. 5, 1997).
7 Social Security Act § 1902(a)(13)(A), 42 U.S.C §
1396a(a)(13)(A).
8 Gonzaga, 536 U.S. 273 (2002).
9 Id. at 280 - 83, citing Suter v. Artist M, 503
U.S. 347 (1992) and Blessing v. Freestone, 520 U.S. 329
(1997).
10 See Sanchez v. Johnson, 416 F.3d 1051, 1058 - 59 (9th
Cir. 2005) (compiling cases).
11 Social Security Act § 1902(a)(30)(A), 42 U.S.C. §
1396a(a)(30)(A).
12 Long-Term Care Pharmacy Alliance v. Ferguson, 362 F.3d
50, 59 (1st Cir. 2004).
13 Sanchez, supra n. 10.
14 U.S. Const. Art VI cl. 2.
15 Douglas v. Independent Living Center of Southern
California, 572 F.3d 644 (2009).
16 Douglas v. Independent Living Center of Southern
California, 565 U.S. ___ (2012) (hereafter, Douglas slip
op.).
17 Douglas slip op. at 2.
18 See id. at 6 - 7 (noting that although the question
had not changed, the answer may).
19 Id. at 7.
20 Pub. L. No. 111 - 148 as amended by Pub. L. No. 111 - 152, and
collectively referred to as the Affordable Care Act. The oral
arguments on the constitutionality of the Affordable Care Act will
be heard on March 26, 27, and 29, 2012.
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