Medicaid Reimbursement Problems: Who Can Challenge Low Rates?

Jun 08, 2015 | Labs Blog

By Leslie Francis for

Leslie_Francis_kmphsaThe Supreme Court decided Armstrong v. Exceptional Child Center on March 31, 2015,  The decision has not garnered significant publicity (at least, I missed it), but portends a great deal.

Armstrong involved a suit by Idaho providers of community-based services challenging the adequacy of reimbursement rates under § 30(A) of the Medicaid Act.  That section requires that rates be set at a level that is “sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area…”  Idaho had ignored its study of reasonable reimbursement levels and instead had set rates to be consistent with state budgetary constraints.  Ninth Circuit precedent permitted suits under the Supremacy Clause alleging that state actions violated federal law.  In Armstrong, SCOTUS rejecting this reasoning.

Justice Scalia, writing for the Court (5-4, with Justice Breyer joining the majority and Justice Kennedy the dissent), first concluded that the Supremacy Clause is a “rule of decision” that tells courts which law to apply but does not create additional rights.  Core to Justice Scalia’s reasoning was that if the Clause required private rights of action for violations of federal law, it would preclude Congress from determining enforcement mechanisms—a strange result for a constitutional provision on Congressional supremacy.  The opinion distinguished cases such as ex parte Young as permitting equitable remedies to enjoin state officials from violations of federal law.

But in Armstrong, no such equitable remedy was available either.  Justice Scalia’s opinion’s second major conclusion was that § 30(A) of the Medicaid Act implicitly precludes such enforcement in equity.  Instead, Justice Scalia reasoned for the Court, the sole enforcement method provided by the Medicaid Act is a decision by the Secretary of HHS to withhold Medicaid funding from the non-compliant state.  To reach this conclusion, Justice Scalia first observed that the Medicaid Act provides an enforcement mechanism, the Secretary’s decision to withhold funds.  As a general rule, when Congress provides an enforcement mechanism, that “suggests” preclusion of other means of enforcement.  For § 30(A), the suggestion is determinative because of the difficulties enforcement would present to courts.  Balancing the availability of services with other statutory goals of efficiency, economy, quality of care, and avoidance of overutilization is not a manageable task for courts, in the judgment of Justice Scalia’s opinion.  Against the dissent’s argument that given statutory and judicial history Congress should not be assumed to have implicitly precluded enforcement in equity, Justice Scalia opined that the majority’s was the “fairest” reading of the Medicaid Act.

Medicaid providers are understandably perturbed by the conclusion that the only method available to them for enforcing §30(A)’s reimbursement requirements is petitioning the Secretary of HHS to cut off funding for a state’s Medicaid program.  But advocates for Medicaid recipients are concerned, too, that the broad language of the majority’s discussion of equitable remedies will cut off for them what has been a standard way of enforcing the adequacy of services under the Social Security Act. Jane Perkins’ excellent critical discussion of Armstrong for the National Health Law Program develops this critique,