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Blog: Medicaid 'gun to the head' test depends on which Supreme Court case you consider

The U.S. Supreme Court has severely limited the ability of healthcare providers to sue state Medicaid agencies over the adequacy of rates. But in handing down that decision Tuesday, the high court seemed to flatly contradict itself on the power of the feds to tell states how to run their Medicaid programs.

Idaho healthcare providers, backed by the American Hospital Association, had argued in the case, Armstrong v. Exceptional Child Center Inc., that suing over low rates is sometimes the only way to enforce federal payment requirements. Otherwise, low rates could lead to fewer providers agreeing to participate in Medicaid and thus less access to care for Medicaid patients.

As Modern Healthcare's Lisa Schencker reported, Justice Sonia Sotomayor wrote in dissent that the court's 5-4 decision “has very real consequences.” The outcome, Sotomayor said, means that only HHS, not providers, may go after state Medicaid agencies that underpay providers, and then only “through the drastic and often counterproductive measure of withholding the funds that pay for such services.”

Writing for the majority, Justice Antonin Scalia responded to Sotomayor by saying: “The dissent speaks as though we leave these plaintiffs with no resort. That is not the case," he said. "The dissent's complaint that the sanction available to the Secretary (the cut-off of funding) is too massive to be a realistic source of relief seems to us mistaken. We doubt that the Secretary's notice to a State that its compensation scheme is inadequate will be ignored.”

So Scalia is now writing approvingly of the federal government threatening to cut off all federal Medicaid funding to a state if it determines that the state's payments to providers are too low.

But remember what the Supreme Court's majority, led by Chief Justice John Roberts and joined by Scalia, said in 2012 in finding it unconstitutional for the federal government under the Affordable Care Act to require states to expand their Medicaid programs to low-income adults or else risk losing their federal Medicaid funding.

“In this case, the financial 'inducement' Congress has chosen is much more than 'relatively mild encouragement'—it is a gun to the head,” Roberts wrote in National Federation of Independent Business v. Sebelius.

Let's make sure we have this straight: It's a “gun to the head” to require states to accept nearly full federal funding for an expanded Medicaid program benefiting low-income Americans, but it's perfectly OK for the feds to threaten to eliminate all Medicaid funding to a state if HHS finds the state's payments to providers are too low.

Experts told Modern Healthcare's Schencker that they were not aware of HHS ever withholding money from a state on such a large scale for paying too-low rates. “That is the nuclear option, double down,” said Jane Perkins, legal director of the National Health Law Program, who supported the providers in Armstrong case. “It's nonsensical (HHS) would ever do that.”

There's a similar issue in the pending King v. Burwell case in which the Supreme Court is considering whether to strike down premium subsidies in the nearly three dozen states using the federal insurance exchange. During oral arguments March 4, Justice Anthony Kennedy questioned the implications for states' rights and federalism posed by the plaintiffs' argument because their reading would coerce states to establish exchanges by imposing onerous consequences for states that declined.

"There's a serious constitutional problem if we adopt your argument," Kennedy said to the lawyer representing those challenging the ACA subsidies.

"If Justice Kennedy believes that the challengers' interpretation of the statute would lead to an unconstitutional federal coercion of states, then the law's challengers will lose," Jesse Witten, healthcare partner with Drinker Biddle & Reath, told Modern Healthcare's Paul Demko.

I'm getting whiplash trying to follow the justices' positions on when a gun to the head is OK and when it's not.


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