Provider and Beneficiary Challenges to Medicaid Payment Reductions Still in Question
February 23, 2012
On January 22, 2012, the United States Supreme Court released its opinion in Douglas v. Independent Living Center of Southern California, et al. and two other consolidated cases (the "Douglas cases") all involving lawsuits by Medicaid providers and beneficiaries seeking to stop Medicaid payment reductions that originally passed the California legislature in 2008. The question before the Court was whether Medicaid providers and recipients could bring an action under the Supremacy Clause of the US Constitution. In the end, the 5-4 majority of the Court did not decide this question, noting that the relevant circumstances had changed. Thus, the Court vacated the Ninth Circuit Court of Appeals' decision and sent the case back to the lower courts for further consideration.
Following Supreme Court precedent regarding 42 U.S.C. § 1983 ("Section 1983"), the federal courts increasingly have declined to find that the Medicaid statute includes a right of action that would allow providers or beneficiaries to claim, under Section 1983, that state actions or laws violate the federal Medicaid requirement that payment rates must be "consistent with economy, efficiency and quality of care and ... sufficient to enlist enough providers ..." as set forth in 42 U.S.C. § 1396a(a)(30)(A). In order to avoid dismissal based on Section 1983 precedent, the plaintiffs in the Douglas cases had successfully brought their cases instead directly under the Supremacy Clause. California appealed, stating that a plaintiff could not bring a Supremacy Clause action when no right of action was present.
The Supreme Court granted review in January 2011 and the case was the first heard in the 2011-12 Term. A number of national organizations submitted amicus briefs supporting the California providers and beneficiaries. The Solicitor General submitted a brief supporting California. If the Court had found in favor of the providers and beneficiaries, it would be clear that providers and beneficiaries could bring challenges to state payment rate decisions using the Supremacy Clause. If the Court had found in favor of California, this route would have been foreclosed.
Because of further actions by the Centers for Medicare & Medicaid Services ("CMS") during the pendency of the case before the Court, the Supreme Court did not decide either way. During the time that the case was before the Court, CMS approved state plan amendments that, in effect, indicated CMS' belief that the California rate reductions complied with federal law. Because of this CMS approval, the Court majority determined that further consideration by the appeals court was appropriate. In addition, the majority noted that an appropriate avenue for judicial review might be review of CMS' decision under the Administrative Procedure Act. The four justice minority would have found that no Supremacy Clause action was available.
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