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Washington Highlights

Supreme Court Rules Against Providers in Medicaid Reimbursement Rates Dispute

April 3, 2015— The Supreme Court March 31 ruled, 5-4, that providers do not have a right to sue the state for setting Medicaid reimbursement rates too low. The majority decision, drafted by Justice Antonin Scalia, held that there is no private right of action for providers to challenge states’ reimbursement rates under Medicaid.

Providers of in-home care services covered by Idaho’s Medicaid plan under its “habilitation services” pricing challenged the rates set by the state for these care services, stating that the state violated the Medicaid Act by reimbursing providers of habilitation services at rates lower than federal law permits. The providers were successful in federal district court, and the Ninth Circuit affirmed.

Section (30)(A) of the Medicaid Act states that plans “must assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers.” Justice Scalia noted that this is a “judicially unadministrable” requirement, and that “the sheer complexity associated [with this requirement], coupled with the express provision of an administrative remedy [through the Secretary of Health and Human Services] shows that the Medicaid Act precludes private enforcement in the Courts.”

Justice Stephen Breyer, in his concurring opinion, noted that the providers in this case were asking for the court to engage with direct rate-setting, which is “outside the ordinary channel of federal judicial review of agency decision making.” Justice Breyer feared that allowing courts to do so would result in “increased litigation, inconsistent results, and disorderly administration of highly complex federal programs that demand public consultation, administrative guidance and coherence for their success.” In his opinion, he added that Congress never intended “to allow a statute-based injunctive action that poses such risks.”

The opinion did note that providers have an administrative remedy, working with the federal government to intervene on their behalf. Providers must work with the Department of Health Human Services (HHS) to determine whether the state is not providing fair reimbursement rates. If so, HHS could withhold all Medicaid funds from the state, an aggressive step that HHS has never taken with a state.

Justice Sonia Sotomayor’s dissent, joined by Justices Anthony Kennedy, Ruth Bader Ginsburg, and Elena Kagan, noted that this form of recourse is “through the drastic and often counterproductive measure of withholding the funds that pay for such services.”

Chief Justice John Roberts and Justices Clarence Thomas, Stephen Breyer, and Samuel Alito joined Justice Scalia in the decision to reverse.

Contact:

Ivy Baer, J.D., M.P.H.
Senior Director and Regulatory Counsel
Telephone: 202-828-0499
Email: ibaer@aamc.org

Allison M. Cohen, J.D., LL.M.
Senior Policy and Regulatory Specialist
Telephone: 202-862-6085
Email: acohen@aamc.org

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org