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U.S. Supreme Court Holds Providers May Not Challenge Medicaid Reimbursement Rates



The U.S. Supreme Court held March 31 that providers could not bring a private enforcement action under the Supremacy Clause or in equity to challenge Medicaid reimbursement rates set by a state.

The closely watched 5-4 decision puts to rest an issue that had been before the Court several years earlier in a case that was resolved without reaching the merits of the Supremacy Clause issue. See Douglas v. Independent Living Ctr. of Southern Cal., No. 09-958 (U.S. Feb. 22, 2012).

The majority opinion, written by Justice Scalia and joined in the judgment by Justices Roberts, Alito, Thomas, and Breyer, reversed a Ninth Circuit decision finding providers could enforce Medicaid’s equal access provision, which requires payments be “consistent with efficiency, economy, and quality of care” and “sufficient to enlist enough providers so that care and services are available . . . at least to the extent that such care and services are available to the general population . . .” 42 U.S.C. § 1396a(a)(30)(A), under the Supremacy Clause.

The Court in October 2014 agreed to review the case and heard oral arguments on January 20.

Providers of habilitation services in Idaho sued to enjoin Medicaid reimbursement rates they said were too low to satisfy Section 30(A). The district court held the state failed to set the rates consistent with the equal access provision, and the Ninth Circuit agreed, holding the providers had “an implied right of action under the Supremacy Clause to seek injunctive relief against the enforcement or implementation of state legislation.”

Supremacy Clause

The Court said a broad reading of the Supremacy Clause to allow private enforcement actions where none otherwise existed would be at odds with Congress’ equally broad discretion not only to enact laws, but also to determine how those laws are implemented.

“It would be strange indeed to give a clause that makes federal law supreme a reading that limits Con­gress’s power to enforce that law, by imposing mandatory private enforcement—a limitation unheard-of with regard to state legislatures,” Justice Scalia wrote.

Private Enforcement Foreclosed

The majority went on to find that the Medicaid providers could not invoke the courts’ equitable powers to enjoin the enforcement of the rates, which allegedly violated federal law, because Section 30(A) itself foreclosed such relief.

In the case of Section 30(A), Congress implicitly excluded private enforcement by enacting requirements that were too open-ended and vague for the courts to adequately fashion a remedy, the majority said.

Instead, Congress “explicitly confer[ed] enforcement of this judgment-laden standard upon the Secretary”—through the ability to withhold Medicaid funds for noncompliance with federal requirements.

“The sheer complexity associated with enforcing §30(A), coupled with the express provision of an administrative remedy, §1396c, shows that the Medicaid Act precludes private enforcement of §30(A) in the courts,” the majority opinion said.

Justice Breyer, who joined in the judgment, focused on this issue in his concurrence. Breyer said not only was Section 30(A) “broad and nonspecific,” but also it applied to the setting of rates for which “administrative agencies are far better suited” than judges, Breyer wrote.

Breyer seemed to be concerned about setting a precedent for courts to take an active role in rate-setting “outside of the ordinary channel of federal judicial review of agency decision making.”

“The consequence, I fear, would be increased litigation, inconsistent results, and disorderly administration of highly complex federal programs that demand public consultation, administrative guidance and coherence for their success,” he added.

Other Remedies Available

Like the majority opinion, Breyer also pointed out that providers were not without other options—including asking the Secretary to step in, and depending on the outcome, potentially seek review of that decision in court under the Administrative Procedure Act (APA).

Breyer seemed to acknowledge that the success of an APA challenge were slim, but added that “if that is so, it is because Congress decided to vest broad discretion in the agency to interpret and enforce §30(A).”


The dissent, authored by Justice Sotomayor and joined by Justices Kennedy, Ginsburg, and Kagan, said the majority department from the Court’s “long history” of preemption jurisprudence that recognizes a private party may seek “prospective equitable protec­tion from an injurious and preempted state law without regard to whether the federal statute at issue itself pro­vided a right to bring an action.”

In the dissent’s view, Congress did not establish the sort of “detailed remedial scheme” necessary to preclude the courts’ equitable powers.

Justice Sotomayor rejected the majority’s suggestion that providers had a viable alternative for seeking relief. “If the State has violated § 30(A) by refusing to reimburse medical providers at a level ‘sufficient to enlist enough providers so that care and services are available’ to Medicaid beneficiaries to the same extent as they are available to ‘the general population,’ agency action resulting in a reduced flow of federal funds to that State will often be self-defeating,” Sotomayor observed.

Rather than viewing the breadth of the statutory language as precluding judicial review, the dissent said Congress more likely anticipated private enforcement as a “possibly necessary supplement to this limited agency-enforcement mechanism.”

“The Court’s error today has very real consequences,” Sotomayor 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.”

Armstrong v. Exceptional Child Ctr., Inc., No. 14-15 (U.S. Mar. 31, 2015).


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