Supreme Court weighs legal recourse for Medicaid reimbursement cuts

The Supreme Court began its new term Monday by weighing whether patients and healthcare providers in the Medicaid program for poor Americans can sue to block a state from cutting reimbursement rates.

California and the Obama administration argued that only HHS gets to determine whether the rates a state uses to pay doctors and other providers complies with the federal Medicaid law. There was no consensus apparent among the justices Monday.

The term opened with high anticipation because the justices seem likely to confront President Barack Obama's healthcare overhaul. Both the administration and opponents of the law have filed Supreme Court appeals, setting the stage for a high court hearing in the spring and a decision by late June.

Monday's case does not directly implicate the new law, although the expansion of Medicaid is a key element in the law's aim of extending coverage to more than 30 million Americans. Medicaid costs are shared by the federal and state governments.

Faced with large budget deficits, the California legislature passed a law reducing Medicaid reimbursement rates by up to 10%. The Medicaid law says states have to maintain reimbursement rates that are sufficient to get providers to take part. States must submit proposed rate reductions to HHS, but the law is silent about whether private parties can go to court to keep payments from going down.

In this case, California put the some of the lower rates in effect before submitting them to HHS. Multiple lawsuits followed and federal courts in California stepped in to block the new rates. Eventually, HHS also did not approve them, although California asked the department to reconsider the rejection.

Carter Phillips, a veteran Supreme Court lawyer who argued the case on behalf of patients and providers, said that without the federal court orders there was no guarantee that doctors and hospitals would continue treating Medicaid patients. "My people have a life or death problem," Phillips said.

Roberts appeared strongly inclined to vote against Phillips' clients, saying the court generally does not allow private parties to sue unless a law expressly says they may.

Justice Stephen Breyer said he was troubled by giving federal judges too much authority to weigh in on the large number of payments made under Medicaid.

But other justices suggested that the lawsuits were appropriate, in part because California put new rates in place before getting federal approval.

Justice Elena Kagan accused the state of an end run around the regulatory process.

Karin Schwartz, a deputy state attorney general, disagreed, saying the state is allowed to put new rates in effect while awaiting HHS review.

A decision is expected by spring.