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States Can’t Be Sued Over Low Medicaid Rates, Supreme Court Rules

May 25, 2015

In a victory for states trying to hold down Medicaid costs, the U.S. Supreme Court (SCOTUS) ruled providers cannot sue over low reimbursement rates. The case, Armstrong v.

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In a victory for states trying to hold down Medicaid costs, the U.S. Supreme Court (SCOTUS) ruled providers cannot sue over low reimbursement rates.

The case, Armstrong v. Exceptional Child Center, was brought by a group of Idaho providers of certain Medicaid services who sued Idaho state officials, arguing that their payments from the state were too low under the governing statute.

Federal law requires states to set Medicaid reimbursement rates at levels ensuring payments are consistent with efficiency, economy, and quality of care, but it generally leaves states free to determine the specific rates.

SCOTUS’s ruling prevented state budgets from undergoing even greater stress from Medicaid funding, says Josh Archambault, a senior fellow at the Foundation for Government Accountability.

“If providers had prevailed in this case, a Pandora’s box of litigation would have been opened, with providers in all 49 other states suing for higher reimbursement rates,” Archambault said. “As a result, the cost of paying for the current Medicaid population would have exploded for taxpayers.”

The win for taxpayers and state budgets will likely lead to continued problems for the poor in accessing health care, Archambault says.

“The flip side of the decision is that many Medicaid patients will come to realize that having access to a Medicaid card is not the same as having access to health care,” Archambault said. “Many providers decide to not participate in the program due to poor reimbursement rates.”

No ‘Cause of Action’

SCOTUS’s ruling focused on whether the federal law requiring states to set Medicaid reimbursement rates created a “cause of action” for providers allowing them to sue in court if the state failed to adhere to the law’s requirements.

The Ninth Circuit Court of Appeals ruled there was such a cause of action, but the Supreme Court reversed the decision and ruled Congress had not included a private cause of action, so the courts could not step in to determine whether the state was compliant with the law.

Writing for the majority, Justice Antonin Scalia said, “[T]he sole remedy Congress provided for a State’s failure to comply with Medicaid’s requirements—for the State’s ‘breach’ of the Spending Clause contract—is the withholding of Medicaid funds by the Secretary of Health and Human Services.”

In previous cases SCOTUS had ruled the “express provision of one method of enforcing a substantive rule suggests that Congress intended to preclude others,” Scalia wrote.

‘An Unsustainable, Deteriorating Program’

Archambault says the case shows it’s time to consider fundamental reforms to restructure Medicaid.

“Instead of focusing on the debate over reimbursement levels, the case should push policymakers to ask tough questions about the value we are getting for the tax dollars being currently spent, and if we should have so many individuals on an unsustainable, deteriorating program,” Archambault said.

“In other words, is there a better way to lower health care prices and costs for all individuals, or a better way to administer Medicaid coverage than the current, broken, safety net program?” said Archambault. “Those policy discussions are much more important in the long run [than it is for] providers … to get their hands on more taxpayer money or patients falling through the cracks of a poorly designed, government-administered [health care] program.”

Sean Parnell (sean@impactpolicymanagment.com) is a policy advisor to The Heartland Institute and president of Impact Policy Management, LLC.

Article Tags
Health Care Law
Author
Sean Parnell (sparnell@heartland.org) is a research fellow for health policy at The Heartland Institute.
sparnell@heartland.org @seandparnell