Armstrong v. Exceptional Child Center

Do Medicaid healthcare providers have a private “private right of action” to enforce Medicaid law, specifically reasonable payment requirements? On January 20, 2015, the Supreme Court is set to hear arguments in  Armstrong v. Exceptional Child Center (No. 14-15).  The case involves “Supremacy Clause” (Art. 6, Clause 2 of the U.S. Constitution) and whether it gives Medicaid healthcare providers a “private right of action” to enforce Medicaid law.

This case may affect providers in Minnesota and around the country.  USA Today reported from Kaiser Health News that medical providers have seen a decrease in Medicaid payments following the temporary bump from Congress.  Will providers received the “reasonable” payment they are entitled to, and, if not, can they sue to enforce the “reasonable” payments?

Armstrong will seek to address this issue.  The case originated when providers in Idaho sued the state directors responsible for Medicaid in the state.  The Idaho Federal District Court ruled in favor of the providers, and the state appealed to the Ninth Circuit Court of Appeals which affirmed the district court.

In an unpublished opinion, the Ninth Circuit held that Section 30(A) of the Medicaid Act (42 U.S.C. § 1396a(a)(30)(A)) “requires that state Medicaid plans contain procedures to ensure that reimbursement rates for healthcare providers ‘are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers’ to meet the need for care and services in the geographic area.”  The Ninth Circuit had previously held that  “Section 30(A) to require that reimbursement rates bear a reasonable relationship to provider costs[,]” and that “‘Where rates fail to “substantially reimburse providers their costs,’ there must be some justification other than ‘purely budgetary reasons.'”

The stipulated facts were that the directors did not implement proposed rate changes because the Idaho legislature did not appropriate the necessary funds, and, as such and because the directors left the old rates in place for “purely budgetary reasons,” the Ninth Circuit held reimbursement rates failed to “substantially reimburse providers for their costs.”  Ultimately, the court held: “The Providers have an implied right of action under the Supremacy Clause to seek injunctive relief against the enforcement or implementation of state legislation.”

The Supreme Court will now have to decide whether healthcare providers have a private cause of action to sue state officials to require them to comply with Section 30(A) of the Medicaid Act.