Supreme Court Hears Case on Medicaid Rate Cuts

October 14, 2011, 2:12 PM

On Monday, October 3rd, the United States Supreme Court began a new term by hearing oral arguments on whether Medicaid recipients and healthcare providers can bring a lawsuit against a state for failing to pay the rates required under the federal Medicaid law. The case, Douglas v. Independent Living Centers of Southern California, arises out of the Ninth Circuit and stems from a decision made by the California legislature to cut the rates paid to healthcare providers due to budget concerns.

Under the Medicaid program, the federal government finances a significant portion of costs to doctors who provide healthcare services to the poor. In exchange for receiving the federal funds, states must agree to pay fees to health care providers of an amount sufficient to ensure that indigent patients have access to care. The federal Department of Health and Human Services makes the determination of whether the rates paid to doctors and hospitals are sufficient and any change to those rates must first by approved by the agency prior to implementation. The concern is that lower fees will not cover the costs associated with patient care such that doctors and hospitals will be unable to afford to take care of Medicaid patients. In 2008 and 2009, California cut the fees paid to doctors by 10 percent without first obtaining approval of the federal government. In response, doctors, hospitals, and patients filed suit against the state and won temporary injunctive relief that required California to maintain the higher rate pending trial. The state appealed the decision.

Representing the state was California Deputy Attorney General Karen Schwartz, who argued that patients, doctors, and hospitals lacked standing to challenge the rate cuts in court because Congress had not specifically authorized such private party suits. According to Schwartz, the only available remedy for the unauthorized rate cuts is for the federal government to discontinue funding Californias Medicaid program, a measure Justice Ruth Bader Ginsburg called a very drastic remedy thats going to hurt the people that Medicaid was meant to benefit. In response to Schwartz, the attorney representing the medical providers and patients argued that the Supremacy Clause of the U.S. Constitution permitted the beneficiaries of a federal program to bring a claim against a state to ensure that federal law prevails in instances where a states actions are inhibiting the enforcement of federal law. No clear majority opinion was evident after oral arguments were completed but a decision is expected in the near future. --Meagan J. Thomasson