US Supreme Court Rules - Providers Cannot Challenge Medicaid Reimbursement Rates

In a 5-4 decision, the US Supreme Court released an opinion today, holding private healthcare providers cannot sue the state over low reimbursement rates (Armstrong v Exceptional Child Center Inc.).  By way of background, in 2009, private healthcare providers delivering residential care to disabled patients in Idaho, sued the state alleging that it was illegally keeping Medicaid reimbursement rates at 2006 levels despite data showing that the cost of providing services had significantly increased. A Federal  District Court judge sided with the providers, holding that the Idaho Medicaid rates weren’t in line with the federal law’s requirements that states “assure that payments are consistent with efficiency, economy and quality of care and are sufficient to enlist enough providers” to ensure adequate access to care.  The District Court decision was upheld by the US Court of Appeals for the Ninth Circuit.  As a result of that ruling, Idaho was forced to pay an additional $12 million in 2013 reimbursements.  Idaho appealed the ruling to the US Supreme Court. 

On appeal to the US Supreme Court, healthcare providers argued that the courts are an important venue for challenging low reimbursement rates, which often are the only way to enforce federal payment requirements.  Furthermore, providers argued when reimbursement rates are too low, there is lower provider participation in the Medicaid program, which can lead to less access to care for Medicaid beneficiaries. The Idaho Medicaid officials countered those arguments asserting that Congress had not authorized lawsuits under the Medicaid Act, codified under Title XIX of the Social Security Act, and that allowing such a course of action would result in endless litigation.  The majority of the US Supreme Court Justices agreed with the state of Idaho, and concluded that a private cause of action is not permitted under the U.S. Constitution’s Supremacy Clause.  Further, Title XIX does not allow private parties to enforce the provision in the Medicaid Act that requires state plans to “assure that payments are consistent with efficiency, economy, and quality of care” while “safeguard[ing] against unnecessary utilization of . . .care and services.” Rather, only CMS may scrutinize rate adequacy following its process for reviewing state plan amendments (SPA) pertaining to reimbursement.  CMS guidance on SPA review is located here in a State Medicaid Directors’ Letter. 

AHCA/NCAL Advocacy To-Date
AHCA/NCAL submitted an amicus brief in support of the Idaho providers in Armstrong v Exceptional Child Center Inc., and the Association is greatly disappointed in the US Supreme Court decision released today.  As you know, AHCA has ample data demonstrating nursing facility Medicaid rates do not cover  allowable costs.  To view the 2015 Medicaid Shortfall Report, click here.  As a result of this decision, providers with insufficient Medicaid rates may continue to address rate complaints to the Single State Medicaid Agency (SSMA) as under current state practice but now have little hope of judicial relief. 

Advocacy Next Steps
In the last year, recognizing existing challenges with court action related to rate adequacy, the Association opened a dialogue with CMS and the National Association of Medicaid Directors (NAMD) on a revised Medicaid SPA process which would allow providers and other stakeholders to engage in a standardized and CMS-regulated rate development and SPA submission process.   AHCA has developed and vetted through the Legal Committee, Finance Committee and State Executives a preliminary SPA approach which has been shared both with CMS and the National Association of Medicaid Directors (NAMD).  Next week, AHCA/NCAL staff are meeting with the Acting Deputy Administrator for the Center for Medicaid and CHIP Services (CMCS), Tim Hill, to review our proposed framework and highlight Medicaid rate issues including the annual Shortfall Report and news articles indicating physician and hospital withdrawal from the Medicaid program due to inadequate reimbursement.  The goal is to accelerate and influence CMS promulgation of key parts of is long languishing proposed “Equal Access Rule” which includes helpful provisions on rate development and related SPA submission.  Click here to view the proposed rule.  In the upcoming months, AHCA’s Legal Committee will review the US Supreme Court opinion carefully and will work with the Finance Committee, Reimbursement Cabinet and State Executives to develop other strategic action steps.   If you have questions, suggestions or concerns, please contact Dianne De La Mare at ddmare@AHCA.org.