Some U.S. Supreme Court justices are skeptical, based on questions they posed Tuesday, that healthcare providers should be allowed to sue state Medicaid agencies over low reimbursement rates. Other justices, though, asked where providers can challenge rates if not in court.
The split made the outcome hard to gauge from the oral arguments in Armstrong v. Exceptional Child Center Inc. Providers argue that the courts are an important avenue for challenging low rates—which they say lead to less access to care for Medicaid patients because too few providers are willing to participate. A number of states, however, counter that Congress has not authorized such lawsuits.
The 9th U.S. Circuit Court of Appeals ruled in favor of Idaho providers who sued state Medicaid officials over low rates there. The Idaho Medicaid officials then appealed that ruling to the Supreme Court, which agreed to consider the question of whether such lawsuits are barred by 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 Idaho's rates actually violate the federal law.
Carl Withroe, an attorney for the Idaho officials, argued Tuesday that providers have no right under the law to sue state Medicaid officials—an argument that led to questions from the justices about a number of technical legal issues. Justice Sonia Sotomayor also questioned how providers might challenge low Medicaid rates if not in court.
“Let's assume, as inflation is going up constantly, what happens two years into the plan when providers can't work for what the state is giving or the state is imposing a tremendous hardship on them, which is happening to a lot of providers who are being underpaid. Where do they go?”
But several of the justices suggested allowing providers to litigate rates could undermine states' ability to control their budgets.
“The effect, it seems to me, will be putting the setting of budget priorities in the hands of dozens of different federal judges, and I just don't know what the practical significance of that's going to be,” Chief Justice John Roberts said during arguments by James Piotrowski, the attorney representing the providers.
Piotrowski responded that lawsuits challenging rates have been allowed since at least 1969, “and in that 45-year period, we haven't seen a flood of litigation.”
Justice Antonin Scalia, though, said that if Congress wanted to allow providers to challenge rates in court, it would have made that explicit. Congress “has not created a private cause of action here and, therefore, it impliedly does not want the scheme that you desire,” Scalia said.
Scalia and Justice Samuel Alito asked if providers would be better off taking their complaints to the CMS. At least Sotomayor and Justice Elena Kagan, meanwhile, seemed skeptical of Idaho's arguments, said Joel Hamme, a principal with Powers Pyles Sutter & Verville, who filed an amicus brief in the case on behalf of several organizations supporting the providers.
Hamme said providers might have a bit of an uphill battle persuading the justices to allow them to sue, especially because the Supreme Court reviewed a similar case in 2012 and voted 5-4 at the time not to issue a ruling. That case arose after California providers sued the state over amendments to the state's Medicaid program, including a 10% rate cut.
Jeff Micklos, general counsel for the Federation of American Hospitals, which also filed an amicus brief in the case, said he felt the questioning was fairly balanced.
“I do think both sides of the court really recognized the conundrum that there is no meaningful avenue for patients and providers to challenge inadequate state Medicaid rates,” Micklos said. Still, he said, it's difficult to predict which way the justices will rule.
Matt Salo, executive director of the National Association of Medicaid Directors, also said it was difficult to glean which way the court will lean based on the arguments.
Salo, who believes rate disputes should not be resolved in court, said the justices asked a number of good questions, including what kind of a precedent could be set by the case.
“I think that's the right question to ask because that's the question our members are raising,” Salo said. “If we're allowing [providers] to have standing in order to sue, whether or not that opens up the floodgates, it certainly changes the way government works, and I think not in a good way.”
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