Supreme Court Blocks Provider Lawsuits Over Medicaid Pay

The US Supreme Court on Tuesday ruled that providers don’t have the right to sue states over Medicaid payments.

The case, Armstrong v. Exceptional Child Center Inc., came out of Idaho, where in 2005 the state passed a law creating a new methodology for calculating Medicaid payments. The new methodology would have raised Medicaid payments, but the legislature was unable to find funding for the increase, and thus the change was never enacted.

In response, providers of residential habilitation services sued the state, asking the federal court to rule that the State of Idaho was in violation of federal Medicaid mandates. A lower court and the Ninth Circuit court sided with the providers, but the Supreme Court on Tuesday found that existing law does not give providers the right to sue in such cases. The ruling was a 5-4 decision, with Justice Stephen Breyer joining the court’s conservative wing.

Writing for the majority, Justice Antonin Scalia said providers could only sue if they were explicitly granted that right in federal law, which he said is not the case here.

“Our precedents establish that a private right of action under federal law is not created by mere implication, but must be ‘unambiguously conferred,’” he wrote.

Further, Scalia said the providers had other avenues to seek assistance, such as petitioning the US Department of Health and Human Services.

“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,” he wrote. “We doubt that the Secretary’s notice to a State that its compensation scheme is inadequate will be ignored.”

In an amicus brief supporting the state, the American Bar Association argued Idaho has the right to defy federal authorities and risk penalty.

“The Medicaid Act is no different from the statute that promises to reduce federal highway funding for States that fail to maintain a 21-year-old drinking age...” the association wrote. “It is perfectly lawful for a State to depart from [federal statute] and risk a reduction or cut-off of federal funds.”

In her dissent, Justice Sonia Sotomayor said the majority was wrong to assume Congress had intended to block any such actions by providers and said sufficient precedent exists to allow the case to go forward. Prohibiting provider lawsuits against states will have “very real consequences,” she concluded.

“Previously, a State that set reimbursement rates so low that providers were unwilling to furnish a covered service for those who need it could be compelled by those affected to respect the obligation…” she wrote. “Now, it must suffice that a federal agency, with many programs to oversee, has authority to address such violations through the drastic and often counterproductive measure of withholding the funds that pay for such services.”

The full decision is available here.