The specific controversy at issue involves a 3-year-old, 10% rate cut to hospitals in California's Medi-Cal program. Medi-Cal has more than 10 million enrollees in the state who, under federal Medicaid rules, are supposed to have equal access to medical care. The lawsuit was brought on behalf of healthcare providers who say the rate cuts would not allow them to care for Medicaid patients (PDF).
The Supreme Court case comes at a critical time for Medicaid, as the Patient Protection and Affordable Care Act is mandating states to expand the eligibility of Medicaid programs in order to add an estimated 14 million people to the state-run insurance programs.
Lloyd Bookman—a founding partner with law firm Hooper Lundy and Bookman, which is representing several healthcare-provider interest groups in the case—said in an interview that a victory for California in Douglas could hurt the reform law's efforts nationally to expand access.
“If this case comes out adversely and states are allowed to cut rates without fear of provider lawsuits, that could have an impact on the mechanisms in the ACA, because ... the ACA depends on many millions of people enrolled in state Medicaid programs,” Bookman said.
The Obama administration has sided with the state in the lawsuit, filing briefs saying that the federal Medicaid statute does not create a “private right of action” for individuals or healthcare providers sue to overturn Medicaid rate decisions.
The Ninth Circuit Court of Appeals ruled that although the Medicaid law doesn't contain a private right of action, it interpreted the Constitution's Supremacy Clause as giving healthcare providers a right to sue to enforce Medicaid's equal-access guarantee. In a friend-of-the-court brief, the National Governors Association (PDF) rejected that legal reasoning.
“The Supremacy Clause is not a roving commission to allow plaintiffs to seek judicial correction of perceived conflicts between state and federal law, where they personally have neither a right nor a defense under federal law,” the governors' brief said.