The U.S. Supreme Court will hear a case Tuesday centering on the question of whether private healthcare providers may sue state Medicaid agencies over low reimbursement rates.
Providers say a victory for them in the case, Armstrong v. Exceptional Child Center Inc., would ensure they can continue to challenge low rates in court. Low rates otherwise might lead to fewer providers agreeing to participate in Medicaid and thus less access to care for Medicaid patients. Some experts say it's important for providers to be able to sue to ensure rate adequacy under the federal Medicaid statute because that's the only way to enforce federal payment requirements. HHS has only one remedy—withholding federal matching funds from states.
Idaho Medicaid officials appealed the case to the Supreme Court, challenging a 9th U.S. Circuit Court of Appeals ruling in favor of the providers. They, along with a number of states and Medicaid agencies, argue that private parties are not allowed to sue to enforce the Medicaid law because Congress has not authorized such suits.
In 2012, the Supreme Court, by a 5-4 vote, declined to rule on a similar case, sending it back to the 9th Circuit.
Jeff Micklos, general counsel for the Federation of American Hospitals, which filed an amicus brief in the case, said it's important for providers to have access to the courts to challenge low payments. “It's a big case for hospitals and all providers,” he said. “This is all about access to care for patients, and access really equates to adequate rates for providers.”
But Matt Salo, executive director of the National Association of Medicaid Directors, said lawsuits are the wrong way to resolve rate issues. “If you think the state is being stingy, then you lobby the state to say, 'Look, you've got to do something differently,'” he said. “Bringing things into court just drags everything to a grinding halt.”
The case arrived at the Supreme Court after Idaho residential providers for disabled patients sued state officials over the state's failure to implement new, higher rates, for which the Legislature didn't provide sufficient funding. A federal district court ruled that Idaho's rates were out of line with the federal law's requirements that states “assure that payments are consistent with efficiency, economy and quality of care and are sufficient to enlist enough providers” to ensure adequate access to care. That was upheld by the 9th Circuit.
Idaho appealed to the Supreme Court, and the justices agreed to consider the question of whether providers have a right to sue state Medicaid agencies under the Supremacy Clause of the Constitution, which says federal laws take precedence over state laws that conflict with them. The case does not involve whether the state's rates actually violate the federal law.
Twenty-seven states joined to file a brief supporting Idaho, as did the National Governors Association. The NGA argued that giving courts the ability to decide such conflicts between state and federal law “is a recipe for increased federal-state conflict and for frustration of state attempts to achieve joint state-federal goals in new and creative ways.”
But Jane Perkins, legal director of the National Health Law Program, which also filed an amicus brief in the case, said that if the Supreme Court decides providers can't sue state Medicaid agencies, providers will lose a key tool for ensuring adequate rates. “We get calls from all over, and Idaho isn't the only place where the rates paid for various home- and community-based services are being questioned,” she said.
The cost of providing care to Medicaid beneficiaries exceeded payments by $13.7 billion in 2012, up from $11.3 billion in 2009, according to a brief filed in the case by the American Hospital Association and Federation of American Hospitals. “This persistent gap threatens the availability of quality medical care for tens of millions of people,” they wrote. “Without recourse to the courts to enforce the conditions Congress set in place, hospitals and other providers will continue to bear losses that, for some, are unsustainable.”
In 2012, the Supreme Court declined to rule in a California case where providers sued the state over amendments to the state's Medicaid program including a 10% rate cut. The issue in that case also was whether providers could sue to enforce federal Medicaid law. At the time, the California Medical Association regarded the high court's refusal to take the case as a victory because it seemed to allow providers to sue over Medicaid rates.
But if the Supreme Court now rules against providers, that would shut the door on future Medicaid rate suits, legal experts say.
Follow Lisa Schencker on Twitter: @lschencker