In March, a divided U.S. Supreme Court ruled in a 5-4 vote, stating that individual health care providers cannot sue states under the Medicaid Act to challenge how states set reimbursement rates in their Medicaid programs. 

The California Medical Association (CMA) had filed an amicus brief in Armstrong v. Exceptional Child Center, which went to the Supreme Court last month to determine whether Medicaid providers have a cause of action under the Supremacy Clause of the U.S. Constitution to challenge a state’s compliance with Medicaid laws in setting reimbursement rates. CMA had established good precedent in the Ninth Circuit appellate district on this specific question in our Medi-Cal rate cut litigation, but the Court’s ruling yesterday overturned that precedent.

In the late 2000s, Idaho state officials recommended increases in Medicaid reimbursement rates, but they were never implemented because the Idaho legislature declined to appropriate funds. A group of Idaho providers sued the state in 2009, accusing it of maintaining reimbursement rates that were too low and that did not keep up with their rising costs for delivering medical care.

The Medicaid Act's equal access provision requires that states must reimburse providers at a level high enough to attract enough providers to participate so that enrollees have the same access to care that private pay enrollees have in the same geographic area.

Justice Antonin Scalia, writing on behalf of the majority, said that providers have no right to sue the state under what is known as the Supremacy Clause of the U.S. Constitution, which holds that federal law generally trumps state law.

The ability of providers to sue under the Supremacy Clause has been tested in many states that have tried to reduce Medicaid reimbursements in response to budget constraints. However, until yesterday, there was no federal guidance on how to challenge reimbursement rates.

While CMA sees the court ruling as unfortunate, a preliminary evaluation of the court's decision shows that a number of viable options remain available, including various legal avenues and working with state and federal regulators.

California ranks 47th in the nation's Medicaid rate of reimbursement. Current efforts are focused legislatively through SB 243 (Hernandez) and AB 366 (Bonta), which would restore a 10 percent reimbursement rate cut made to Medi-Cal in 2011 and raise those rates to be on par with Medicare.

Click here to read the Supreme Court ruling.

Contact: CMA legal information line, (800) 786-4262 or legalinfo@cmadocs.org.