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U.S. Supreme Court Considers Whether Providers May Sue State Medicaid Officials for Failing to Raise Reimbursement Rates

On Tuesday, January 20, 2015, the United States Supreme Court heard oral argument in a case brought by providers of residential rehabilitation services to Medicaid eligible individuals against the Director and Deputy Director of Idaho’s Department of Health and Welfare (IDHW) challenging IDHW’s failure to raise Medicaid reimbursement rates that had been in effect since July 1, 2006. The question the Supreme Court is considering is whether Medicaid providers may sue state officials under Section 30(A) of the Medicaid Act, 42 U.S.C. §1396a(a)(30)(A), which requires states accepting federal Medicaid funding to establish a “state plan,” which, among other things, provides “methods and procedures relating to the utilization of, and the payment for, care and services available under the plan … as may be necessary to assure that payments are consistent with efficiency, economy, and quality of care.”

The case, Armstrong v. Exceptional Child Center, Inc., was instituted by the residential rehabilitation service providers in 2009 after the IDHW failed to raise reimbursement rates consistent with studies commissioned by IDHW because Idaho’s Legislature did not appropriate $4 million in funding necessary to cover the increased rates. The providers sued the IDHW for maintaining the July 2006 reimbursement rates on the ground they did not take into account providers’ actual costs, and, accordingly, violated Section 30(A)’s requirement that “payments [to providers] are consistent with efficiency, economy, and quality of care.” The United States District Court for the District of Idaho granted summary judgment to the providers, citing precedent from the Ninth Circuit Court of Appeals, which had previously held that Section 30(A) requires a state Medicaid agency to consider actual provider costs when setting rates.

The Ninth Circuit upheld the district court’s judgment, and the IDHW petitioned the U.S. Supreme Court, which granted the petition solely on the question of whether the providers could even bring an action against the state Medicaid agency to enforce Section 30(A) when Congress had not expressly authorized such an action in the federal Medicaid statute.  The providers take the position that the Supremacy Clause of the United States Constitution affords them a private right of action to enjoin a state law or regulation that is inconsistent with federal law, in this case Section 30(A) of the Medicaid Act.  The Attorneys General of 27 states, including Delaware, filed an amicus brief with the Supreme Court urging it to reject the providers’ position, arguing principally that private rights of action to enforce federal law must be created by Congress.

The Supreme Court’s decision is expected to have an impact, one way or the other, on providers’ ability to bring legal challenges against state Medicaid agencies regarding reimbursement rates. DE Health Law Blog will report on the Supreme Court’s opinion when it is issued.

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