Supreme Court Dubious on Right to Sue Over Low Medicaid Fees

Alicia Ault

January 20, 2015

Washington, DC — Several US Supreme Court justices expressed skepticism that physicians have the right to sue if they believe states have set Medicaid rates too low.

The Justices were responding to oral arguments held today in Armstrong v Exceptional Child Center, Inc. et al.

Exceptional Child Center, along with four other Idaho centers that serve developmentally disabled children and adults, contended that the state had set reimbursement rates that were lower than the cost of care. Low rates could lead to fewer physicians participating, and thus, less access for patients, which violates an equal access provision of the Medicaid statute, they said. Several lower courts agreed with the healthcare providers. Idaho subsequently appealed to the Supreme Court.

Chief Justice John Roberts said that the Court giving its blessing to suits challenging state-set rates could lead to a crush of litigation asking the federal government to assert its supremacy over state law.

Noting that there are "dozens of different types of providers," he said, "what do you do if, if each of those providers bring a lawsuit similar to yours?" Not only would it put federal judges in charge of setting state budgets, he said, "it seems to me that this is a prescription for budget-busting across the board."

Justice Samuel Alito also expressed concern about paving the way for more lawsuits. "What effect would private suits like this have on [Health and Human Services'] ability to do its job?" he asked Edwin S. Kneedler, the US deputy solicitor general.

"I think there's a substantial potential to interfere, or at least complicate," said Kneedler. The Obama Administration, along with 27 states and the National Governors Association, supported the Idaho appeal.

Concern "Unfounded"

But American Academy of Pediatrics (AAP) Immediate Past President James Perrin, MD, said that there would not be a flood of lawsuits. Roberts' concern is "unfounded," because providers already have this ability and "there has not been chaos," Dr Perrin told Medscape Medical News.

"We are strongly supporting the opportunity for physicians, physician groups, and other providers to continue to have this legal redress to ensure the federal programs are being appropriately used in the states," said Dr Perrin.

"State Medicaid programs are required by law to pay physicians enough to ensure that we have enough participating doctors to see Medicaid patients," said Reid Blackwelder, MD, board chair of the American Academy of Family Physicians.

"When state Medicaid programs are out of compliance with the law, providers and patients ought to have the right to bring a case to enforce their rights," he told Medscape Medical News.

Is There a Right to Sue?

Private suits have for years been the main avenue for physicians and other healthcare providers to challenge Medicaid reimbursement, as the Centers for Medicare & Medicaid Services (CMS) rarely enforces the equal access provision. That's according to a friend of the court brief filed by the AAP, the American Academy of Family Physicians, the American Congress of Obstetricians and Gynecologists, the American College of Emergency Physicians, the American Dental Association, the American Medical Association, and the California Medical Association.

"The federal government has rarely, if ever, cut funding to a state for violating the equal-access mandate," wrote the providers' lawyers in the brief. "States know that federal enforcement is a paper tiger."

Congress, meanwhile, did not give physicians or any other entity the express right in the Medicaid statute to sue over reimbursement rates.

Justice Sonia Sotomayor expressed concern that without the right to sue there may be no other avenue for physicians to seek redress.

"What happens two years into the plan when providers can't work for what the state is giving or the state is imposing a tremendous hardship on them, which is happening to a lot of providers who are being underpaid. Where do they go? They can't go to the federal agency because there's no action to challenge. So what do they do?" asked Sotomayor.

Idaho Deputy Attorney General Carl J. Withroe said that providers could complain to state Medicaid agencies, or to a CMS regional office. "They can bug CMS and get CMS to take an action," said Withroe.

Justice Antonin Scalia said providers could also "petition for a new rulemaking." According to Scalia, "Congress did not give a right to the providers" to sue. Instead, "It provided a remedy through the federal agency."

A "Nuclear Option"

But James M. Piotrowski, attorney for Exceptional Child Center, said that the right to sue was implied by Congress.

Several justices noted that CMS had the option to cut off federal funds to states that did not comply with Medicaid's equal access provision.

"It is a nuclear option, and one that the agency has never used so far as we know," said Piotrowski.

The AAP would not support such an option, said Dr Perrin. "The courts are the best strategy for going forward to try to seek redress," he said. The AAP wants to ensure that the financing of children's health programs like Medicaid is "sufficient to give kids the right kind of access, and to recruit physicians and other providers into the program, which they aren't going to do if they can't get adequate payment."

Dr Blackwelder said that "CMS sometimes lacks the resources necessary to police more than 50 separate Medicaid programs," so "a court order can bring much swifter and targeted relief."

Even though bringing a court case can be expensive and time-consuming, "Medicaid-participating physicians ought to have the right to enforce violations, especially when CMS cannot," he said.

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