Supreme Court Deals Medicaid Blow To Doctors And Health Companies

By Nina Totenberg

Published March 31, 2015 at 4:38 PM CDT

The 5-to-4 vote crossed the court's usual ideological lines.

The U.S. Supreme Court ruled Tuesday that private Medicaid providers cannot sue to force states to raise reimbursement rates in the face of rising medical costs. The 5-to-4 decision is a blow to many doctors and health care companies and their complaint that state Medicaid reimbursement rates are so low that health care providers often lose money on Medicaid patients.

In 2009, Idaho centers that provided care for some 6,200 mentally disabled children and adults went to court to challenge the state's Medicaid reimbursement rates. They contended the state had adopted a Medicaid plan with reimbursement rates set at 2006 levels, despite the fact that costs had gone up significantly over the three intervening years. The lower courts agreed and raised the state's reimbursement rates. But the Supreme Court reversed that ruling, declaring that private Medicaid providers have no right to sue under the Medicaid law. If a state is not providing fair reimbursement rates, the court said, the only recourse Medicaid providers have is to ask the federal Department of Health and Human Services to withhold all Medicaid funds from the state — a step so punitive that it has never happened.

The 5-to-4 vote crossed the court's usual ideological lines, with the liberal Justice Stephen Breyer joining four of the court's conservatives to provide the fifth and decisive vote against such provider lawsuits and the conservative Justice Anthony Kennedy joining three of the court's liberals in dissent.

The majority opinion, written by Justice Antonin Scalia, said that Congress, in creating the Medicaid rate-setting scheme, did not explicitly authorize private suits like the one at issue here. Instead, he said, the law mandates that state reimbursement plans are "consistent with efficiency, economy, and quality of care," all the while "safeguarding against unnecessary utilization of ... care and services."

"It is difficult to imagine a requirement broader and less specific" than that, wrote Scalia. "Explicitly conferring enforcement of this judgment-laden standard upon the Secretary [of Health and Human Services] alone establishes, we think," that Congress wanted to make the agency cutoff of funds the "exclusive" remedy. With such a big financial club, Scalia said, "we doubt that the Secretary's notice to a state that its compensation scheme is inadequate will be ignored."

Joining Scalia in the majority were Chief Justice John Roberts and Justices Clarence Thomas, Samuel Alito and Breyer.

In dissent, Justice Sonia Sotomayor said the ruling would have "very real consequences." Previously, she said, "a state that set reimbursement rates so low that providers were unwilling to furnish a covered service" could be ordered by the courts to provide adequate resources to meet federal requirements. But now, said Sotomayor, "it must suffice that a federal agency, with many programs to oversee, has the authority to address such violations through the drastic and often counterproductive measure of withholding the funds that pay for such services." Joining the dissent were Justices Anthony Kennedy, Ruth Bader Ginsburg and Elena Kagan.