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Medicaid Providers Lose Bid to Force States to Raise Rates

By Melanie Zanona, CQ Roll Call

March 31, 2015 -- The Supreme Court ruled last week that health care providers cannot force states to raise their Medicaid reimbursement rates in an effort to keep pace with rising medical costs.

Justices ruled 5–4 that companies do not have a private right to sue a state for not adequately reimbursing them for services provided under the federal–state health insurance program for the poor.

At issue was whether private companies had legal recourse to enforce federal laws. Providers maintained that the Constitution's Supremacy Clause, which states that federal law preempts state law, allows them to sue for higher rates so Medicaid beneficiaries can receive equal access to care, as mandated by federal law (PL 89-97).

But a majority of the justices disagreed with the core of that argument.

"[The Supremacy Clause] instructs courts what to do when state and federal law clash, but is silent regarding who may enforce federal laws in court, and in what circumstances they may do so," Justice Antonin Scalia said in the majority opinion of the court.

Justices John G. Roberts, Stephen G. Breyer, Samuel Anthony Alito, Jr., and Clarence Thomas joined Scalia in favor of the states. Justices Sonia Sotomayor, Anthony M. Kennedy, Ruth Bader Ginsburg, and Elena Kagan dissented.

"We 'have long held that federal courts may in some circumstances grant injunctive relief against state officers who are violating, or planning to violate, federal law,'" Sotomayor said in the dissent.

The case originated with a group of private health care providers serving disabled adults and children in Idaho that filed a lawsuit against the state's Health and Welfare Department for freezing Medicaid reimbursement rates at 2006 levels, despite a study showing that medical costs had risen.

In 2011, a U.S. district judge ordered Idaho to raise Medicaid payments, which was upheld by the 9th U.S. Circuit Court of Appeals in 2013. Idaho officials estimate that it cost an extra $12 million in 2013 to increase reimbursements.

Justices heard an appeal of that outcome in January, ultimately siding with Idaho officials who said that it is up to federal agencies, not private parties, to determine whether states are in compliance with federal Medicaid statutes.

"The dissent speaks as though we leave these plaintiffs with no resort. . . .That is not the case," Scalia said. "Their relief must be sought initially through the Secretary rather than through the courts."

Trade and hospital groups like the American Medical Association (AMA) and the U.S. Chamber of Commerce backed providers in the case, contending that a ruling against the health care industry would unfairly suppress reimbursement rates and inhibit Medicaid patients from receiving care.

"Non-compliance with Medicaid's equal-access mandate will likely continue unabated," said AMA President Robert M. Wah in a statement. "The secretary of Health and Human Services has rarely, if ever, cut funding to a state for violating the equal-access mandate."

Sotomayor echoed the concerns over the "very real consequences" of "reimbursement rates so low that providers were unwilling to furnish a covered service for those who need it."

The outcome of the case could also have broader implications for whether private parties can bring such suits against states in the future.

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