Q & A: Supreme Court Grants Review of Medicaid Cases

Q. I have heard that the Supreme Court has just granted review of several Medicaid cases. Could this have an effect on the litigation that health advocates do? 
A. The Supreme Court has granted writs of certiorari in three Ninth Circuit cases in which Medicaid enrollees or providers are enforcing a provision of the Medicaid statute through a preemption theory. The cases will likely be argued in the fall of 2011. These cases could potentially have a dramatic effect on the ability of Medicaid beneficiaries to enforce the Medicaid Act.
On January 18, 2011, the Supreme Court granted partial writs of certiorari in three closely-watched Ninth Circuit cases that present the same issue: Independent Living Center of So. Cal. v. Maxwell-Jolly, Cal. Pharmacists? Ass?n v. Maxwell-Jolly, and Santa Rosa Memorial Hospital v. Maxwell-Jolly. 2 The issue that the Court will review is ?whether Medicaid recipients and providers may maintain a cause of action under the Supremacy Clause to enforce § 1396a(a)(30) [of the Medicaid Act] by asserting that the provision preempts a state law that may reduce reimbursement rates.?3
Reimbursement rates are a crucial part of the Medicaid program. Medicaid depends upon the participation of private health care providers. The state Medicaid agency pays participating providers a set reimbursement amount for services they provide to Medicaid enrollees. Federal law requires that participating providers accept this amount as payment in full for their services ? balance billing is prohibited.4  States set their own reimbursement rates but must comply with § 1396a(a)(30) of the Medicaid Act, which requires states to provide procedures to safeguard against unnecessary utilization of Medicaid services and to assure that payments are? consistent with efficiency, economy, and quality of care? and are sufficient to attract enough providers so that care and services are available to Medicaid beneficiaries to the extent they are available to the general population in the geographic area.5
In each of the cases that will be reviewed by the Supreme Court, the plaintiffs challenged California?s reductions in Medicaid provider reimbursement rates, arguing that the reductions violated § 1396a(a)(30)(A). The merits of their claims are not at issue. Rather, the Court will consider whether plaintiffs may enforce the provision. 
Over the years, Medicaid providers and enrollees have frequently claimed that rate reductions violated § 1396a(a)(30)(A). Plaintiffs generally brought their claims pursuant to 42 U.S.C. § 1983, which provides a cause of action for violations of federal laws by state actors.6  Courts have traditionally applied a three-part test to determine a federal law creates a federal right enforceable through § 1983: (1) Was the provision intended to benefit the plaintiff; (2) Does it contain sufficiently specific language so that a court knows what to enforce; and (3) Does it create a binding obligation on the state?7 Applying this test, a few courts had held that § 1396a(a)(30)(A) could not be enforced through § 1983, particularly by providers.8
 The 2002 Supreme Court decision in Gonzaga Univ. v. Doe made it more difficult for many statutes, including Medicaid, to be enforced through Section 1983.9  According to the Gonzaga Court, a federal law is not privately enforceable unless Congress has unambiguously manifested its intent to confer individual rights on the beneficiary of a statute.10 And, the provision must contain ?rights- or duty-creating language? and have an individual rather than an aggregate focus.11 Gonzaga provoked a surge in states? attempts to challenge the ability to enforce the Medicaid Act. Enforcement of § 1396a(a)(30)(A) fared particularly poorly. Even before Gonzaga, some courts had refused to enforce it.12 After the decision, the First, Third, Fifth, Sixth, Ninth, and Tenth Circuits all found it unenforceable.13 The Ninth Circuit finding the provision unenforceable is Sanchez v. Johnson.14

 Accordingly, advocates and providers have sought to enforce Medicaid requirements through alternative means using a preemption theory. Pursuant to the Supremacy Clause of the U.S. Constitution, state laws that conflict with federal laws are preempted and, therefore, invalid.15 In contrast to § 1983 actions, where plaintiffs must show that a statutory provision evidences Congressional intent that individuals should be able to enforce it, invoking preemption required only that plaintiffs show that state laws ?interfere with, or are contrary to? federal law.16 Moreover, plaintiffs may rely upon federal regulations or written guidance to show a conflict between federal and state law, whereas regulations standing alone cannot be enforced under Section 1983.17 This theory has allowed a resuscitation of several Medicaid provisions that had been considered unenforceable. 

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