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From Health Law Daily, March 31, 2015

High court reverses 9th Cir.; won’t allow providers to bring private action to challenge Medicaid reimbursement

By Melissa Skinner, J.D.

In an opinion reversing the Ninth Circuit’s decision, the Supreme Court will not allow providers of “habilitation services” under Idaho’s Medicaid program to bring a private right of action seeking an injunction requiring Idaho to comply with Section 30(A) of the Medicaid Act and effectively challenging the current reimbursement rates under that program. Justice Scalia, writing for the majority, wrote that the Supremacy Clause, which the Ninth Circuit found formed the providers’ right to sue in this action, was not a source of any federal rights and “certainly does not create a cause of action.” The majority also determined that the notion of a private right of action was not consistent with the “Court’s preemptive jurisprudence,” while the dissent grounded its opinion in the idea that the Court’s history allowed for private actions to bar federal actions that violated federal or state law (Armstrong v. Exceptional Child Center, Inc., March 31, 2015, Scalia, A.).

Background. Idaho’s Medicaid program, which is administered by the Idaho Department of Health and Welfare (IDHW), includes “habilitation services,” which are defined by the Medicaid Act as in-home care for individuals who, “but for the provision of such services…would require the level of care provided in a hospital or a nursing facility or intermediate care facility for the mentally retarded the cost of which could be reimbursed under the State plan” (42 U.S.C. § 1396n(c) and (c)(1)).

Section 1396a(a)(30)(A) ( hereinafter “Section 30(A)”) of the Medicaid Act requires that the state plan provide methods and services under the plan “as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy and quality of care…” The section also requires payments that are sufficient to ensure enlistment of enough providers are available to beneficiaries in the covered geographic areas.

Claims. Several providers of habilitation services in Idaho—including Exceptional Child Center, Inc., Inclusion, Inc., Tomorrow's Hope Satellite Services, Inc., WDB, Inc., and Living Independently For Everyone, Inc., (collectively “the providers”)—brought suit against two government officials, Richard Armstrong, the Director of IDHW and Leslie Clement an IDHW Deputy Director and former IDHW Division of Medicaid Administrator (collectively “the directors”) challenging their actions with respect to Medicaid reimbursement rates. Specifically, the providers alleged that the directors failed to institute recommended changes to the reimbursement rates and violated Section 30(A) insofar as they provided reimbursement at rates that were inconsistent with the directives of Section 30(A).

District Court, Ninth Circuit. After the district court granted the providers summary judgment holding that the rates were not consistent with Section 30A, the Ninth Circuit heard the matter on appeal and affirmed that judgment. The Ninth Circuit specifically found that providers had an implied right of action under the Supremacy Clause to seek an injunction regarding the enforcement or implementation of the state’s law (see Providers’ successful in challenge to living services rates that do not substantially reimburse costs affirmedApril 7, 2014) The Supreme Court’s review of this matter was limited to one question: whether the Supremacy Clause gave Medicaid providers a private right of action to enforce section 30(A) against a state? (see Idaho’s ‘hot potato’ Medicaid challenge set for 2015October 3, 2014).

Majority. The Supreme Court reversed the finding of the Ninth Circuit and ruled that the Supremacy Clause does not create a private action and that “Medicaid providers cannot sue for an injunction requiring compliance with [section 30(A)].” This ruling was supported by three points outlined by the majority: (1) the Supremacy Clause in not a source of any federal rights; (2) the reading of the Supremacy Clause in that light is not inconsistent with the Court’s history of decisions; and (3) the suit cannot proceed in equity, as the authority of the court to bar unlawful executive action is subject to several statutory limitations.

With respect to the notion that the Supremacy Clause does not form federal rights to bring an action, the court determined it was necessary to read the Clause in the context of the Constitution as a whole. Therefore, while the Court pointed out that Congress was given the broad power to make laws, “it is unlikely that the Constitution gave Congress such broad discretion with regard to the enactment of laws, while simultaneously limiting Congress’s power over the manner of their implementation, making it impossible to leave the enforcement of federal laws to federal actors.” In other words, the court reasoned that if the Supremacy Clause were to be interpreted to create a private right of action, it could be said that Constitution requires Congress to allow for enforcement of its laws by private actors. Instead, the majority found that the ability to sue to enjoin laws is the “creation of courts of equity.”

Turning to the notion of equity, the Court found that the suit could not proceed under this guise because an “express provision of a single remedy for a State’s failure to comply with Medicaid’s requirements” already exists. In particular, 42 U.S.C.§ 1396(c) provides for the withholding of federal funds by the Secretary of HHS for a state’s failure to comply with Medicaid requirements. The court reasoned that the existence of this express remedy suggests that Congress meant to exclude other remedies under the law. That remedy, along with the fact that the Court determined that “it was difficult to imagine a requirement less broad and less specific” than Section 30A, combined to form the basis of the Court’s decision to preclude the availability of equitable relief in this matter.

Concurrence, dissent. While the dissent, written by Justice Sotomayor, who was joined by Justices Kennedy, Ginsburg, and Kagan, agreed that the Supremacy Clause did not exactly form a basis for an implied right of action, it argued that “we have long held that federal courts may in some circumstances grant injunctive relief against state officers who are violating, or planning to violate, federal law.” Justice Breyer, who wrote a separate opinion concurring in part and concurring with the judgment of the majority also framed the question this way but determined that the federal courts did not have the authority to grant such injunctive relief.

The case is No. 14-15.

Attorneys: Carl J. Withroe, Idaho Deputy Attorney General, for Richard Armstrong. James M. Piotrowski (Herzfeld & Piotrowski, LLP), and Stephen P. Berzon (Altshuler Berzon LLP) for Exceptional Child Center, Inc.

Companies: Exceptional Child Center, Inc.; Inclusion, Inc.; Tomorrow's Hope Satellite Services, Inc.; WDB, Inc., and Living Independently For Everyone, Inc.

MainStory: TopStory SupremeCourtNews ReimbursementNews MedicaidPaymentNews

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