Supreme Court: Medicaid Doctors Can't Sue for Higher Pay

In a 5-4 decision, justices ruled medical providers can’t sue state Medicaid agencies over low payment rates -- a strategy doctors and patient advocates have used for decades.
by | March 31, 2015

The U.S. Supreme Court narrowly ruled Tuesday that doctors and other medical providers can’t sue state Medicaid agencies for higher pay, a practice which has been long supported by doctors and patient advocates.

In its 5-4 decision in Armstrong v. Exceptional Child Center, the court ruled that the U.S. Constitution doesn’t grant private groups a right to sue when states run afoul of federal law. Justice Stephen Breyer joined the court’s conservative wing to form a majority, which also rejected the possibility to sue under a section of federal Medicaid law that specifically deals with payment rates, arguing it would lead to a flood of litigation.

Medical providers, patient advocates and a list of former federal health officials argued lawsuits to boost pay were necessary to improve access for patients. State Medicaid directors disagreed, arguing that courts weren't the right venue for doctor grievances. They have argued the right to sue could restrict policy choices and care in difficult budget years. It’s not clear how frequently private groups sue Medicaid agencies in federal courts, but several states had suits in recent years.

In the case of Armstrong, multiple groups of providers who care for developmentally disabled Medicaid patients sued Idaho, which failed to implement a new payment structure it agreed upon with the federal government in 2009. A financial analyst at Idaho's health agency estimated the rate structure would require the state to boost pay by $4 million, but it refused.

The law for Medicaid, the low-income health program paid for by the states and federal government, requires states to set rates that are “sufficient to enlist enough providers” to meet patient demand. Failure to do so violates federal law and the Constitution’s Supremacy Clause, which holds federal law above state law, argued the group of Idaho providers.

The court rejected that argument.

“If the Supremacy Clause includes a private right of action, then the Constitution requires Congress to permit the enforcement of its laws by private actors, significantly curtailing its ability to guide the implementation of federal law,” said Justice Antonin Scalia, writing for the majority. “It would be strange indeed to give a clause that makes federal law supreme a reading that limits Congress’s power to enforce that law, by imposing mandatory private enforcement--a limitation unheard-of with regard to state legislatures.”

Scalia said the dissenting liberal wing of the court agreed on that point, though the wording of the dissenting opinion is less clear and some legal experts said that interpretation goes too far. Writing the dissenting opinion, Justice Sonia Sotomayor said, “Even though the Court is correct that it is somewhat misleading to speak of ‘an implied right of action contained in the Supremacy Clause’… that does not mean that parties may not enforce the Supremacy Clause by bringing suit” against state actions that violate federal law.

The majority also ruled that Congress didn’t intend for private groups to be able to sue over section 30(A) of the Medicaid law, which requires states to set rates that are “consistent with efficiency, economy, and quality of care.” It called that section “judicially unadministratable” because it’s so broad and noted that Congress allows the secretary of Health and Human Services to hold states accountable for violating the law by withholding Medicaid funding.

Advocates for low-income people said HHS withholding funding that would punish patients as well as doctors. The dissenting justices, joined by frequent swing vote Anthony Kennedy, apparently agreed, calling such action “self-defeating.” Those justices also argued there were plenty of examples of suits challenging a state law without the relevant federal law specifically granting people a right to sue, and the majority only identified one prior decision where congressional intent prohibited such action. “Even the most cursory review of that decision reveals how far afield it is from this case,” wrote Justice Sonia Sotomayor for the minority.  

A group of former HHS officials went as far as to say not only does the department accept private enforcement of Medicaid rates but the department “has come to rely on that fact” in legal briefs supporting the Idaho doctors. Jane Perkins, the legal director for the National Health Law Program, argues the majority is mistakenly assuming declaring private suits legal will prompt waves of litigation.

“The idea” that Supremacy Clause actions would open the “floodgates to 30(A) litigation ignores the reality that Medicaid providers have brought section 30(A) cases for decades without a resulting flood of litigation,” she said by email. “And while 30(A) is broadly written and complex, courts deal with broad, complex statutes all the time. Easy cases settle.”