Patients and providers can continue to sue states over Medicaid spending, for now, after the U.S. Supreme Court returned a California lawsuit to a lower court.
Medicaid suits can continue ...
... but court ruling doesn't address essential factor
The court, in a 5-4 decision, declined to settle the specific question before it because circumstances in the case had changed. Legal experts said that question was a potentially far-reaching one over whether patients and providers can sue states over Medicaid spending under the Constitution's supremacy clause, which says states must follow federal law.
The decision comes after years of state fiscal distress has led to widespread cuts to Medicaid budgets and ahead of a major expansion of Medicaid scheduled for 2014. States have challenged the expansion in a lawsuit the Supreme Court is scheduled to hear in March.
The case decided last week consolidated several lawsuits in which California providers and Medicaid enrollees had sued the state over Medicaid rate cuts. California's lawmakers approved the lower reimbursement but failed to ensure rates were high enough to guarantee providers would accept Medicaid patients, as required by federal law, the lawsuits alleged.
Mark Gallant, a member of the law firm Cozen O'Connor and former deputy general counsel for the CMS, called the Supreme Court decision good news for providers because it allowed for further legal action by those directly affected by Medicaid spending.
Justice Stephen Breyer, writing for the majority, suggested another legal avenue might be more appropriate for the providers because the CMS approved California's lower rates after the court heard oral arguments.
Federal health officials have expertise to evaluate whether state law adheres to federal law, Breyer said. Nonetheless, that federal approval could be challenged, but it could be more appropriately argued under the Administrative Procedure Act, Breyer wrote. The court remanded the case to the 9th U.S. Circuit Court of Appeals to consider that question.
The majority opinion “didn't slam the door” on legal challenges under the supremacy clause brought by hospitals, doctors or patients against state Medicaid policy, said Steve Vladeck, a law professor at the American University Washington College of Law. Vladeck was council for former HHS officials who filed an amicus brief in the case.
Stressed state budgets could bring the question before the court again soon. “The tighter state budgets become … the more they're going to look at Medicaid as one of the appealing places to cut corners,” Vladeck said.
State Medicaid budgets have shown signs of improvement after recent years, with some exceptions, said Joan Alker, co-executive director of the Georgetown Center for Children and Families. Among those exceptions are California and Illinois, where the governor last week called for $2.7 billion in Medicaid cuts.
“In order to reduce cost pressures, we need to reconsider the groups who are eligible for Medicaid, the services we cover under the program, the utilization of these services and the way and amount we pay for them,” Illinois Gov. Pat Quinn said in his budget address Feb. 22.
Maryjane Wurth, president of the Illinois Hospital Association, said she has kept an eye on the proceedings in California. Asked whether her organization could take similar action, she responded: “Every option needs to be considered.”
Quinn did not provide any details about how the state would achieve its savings number, which the hospital association said represents 18% of the state's Medicaid budget.
—with Ashok Selvam
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