Should Medicaid health providers in California have the right to sue the state alleging its provider payment rates are too low, violating federal law and even depriving some Medicaid recipients of life-saving drugs?
You’d think the answer would obviously be “yes” – most people would say the right to sue is fundamentally American. But in differing contexts, the question isn’t a new one. And the answer is actually “maybe.”
That’s why the case over California Medicaid reimbursement rates argued last week before the United States Supreme Court, on opening day of the Court’s current term, is an important one.
The issue has a new gloss in the case, though, because it involves an interrelationship between possibly conflicting state and federal law. Medicaid entwines historically separate state and federal constitutional powers in unprecedented ways. Resolving this case, whichever way it goes, will set precedent for decades to come on similar federal laws, most notably Obamacare, which also extensively entwines federal and state powers in unprecedented ways.
The drafters of the U.S. Constitution envisioned a system in which a fairly bright line separates federal governmental powers from governmental powers reserved to the states. Under the Constitution, the federal government has only limited, enumerated powers. These powers are related to national issues such as the money supply, the national defense, the post office, and regulation of interstate commerce. So long as the federal government stays within these enumerated limits, its law under the Constitution’s Supremacy Clause is supreme. But all other remaining governmental powers – typically called “police” powers relating to the health, safety, and welfare of state residents – belong to the 50 states.
Increasingly, however, Congress has deliberately exceeded its limited federal role by using federal funds to hijack state powers by buying them from cash-strapped states. For example:
Congress uses the highway fund alternately as a billy club and a convenient pot of money for pushing agendas. Consider how, through the years, Congress has threatened to withhold highway funding unless states adopt a 55 mph speed limit or enact a 0.08 percent blood-alcohol limit for drunken driving. Efforts have been under way recently to use this same tactic to force states to raise the minimum driving age to 18. The Constitution grants Congress no authority to directly interfere with states in this way, but precious highway funds have become the perfect end-around.
And so it is with Medicaid. The federal government provides substantial funding to states in return for the state agreements to follow federal law governing provision of free health care to the indigent. States set the rates at which providers are paid, but the federal government via the U.S. Department of Health and Human Services (HHS) must approve them.
In the Medicaid case now before the Supreme Court, California approved a ten percent cut in payment rates due to help reduce its budget deficit.
Providers sued, alleging these rates violate the federal requirement that rates be “sufficient” to pay for “meaningful access” to health care. Some providers may go out of business, they say. And in the case of some drugs, rates are below-cost, they allege, which may mean recipients won’t get them. The Ninth Circuit Court of Appeals issued an order stopping the California rates from going into effect, and the Supreme Court case followed.
The problem is Congress was silent on whether the federal Medicaid law includes the right for private parties to sue the government to enforce it. Congress envisioned a system in which disputes would be resolved administratively before HHS. It is not enough that there is an “injury” from the California rate reduction, California’s lawyer told the Court at oral argument in this case, known as Douglas. There must be a “right” to sue, she said.
The health care providers, however, argued there is an implied private right of action under the Constitution against California, which is available to all citizens under the Supremacy Clause. The federal Medicaid law is the supreme law of the land, their lawyer argued, especially because “life-and-death” patient survival issues are involved here. Contrary state laws are pre-empted, he said. Congressional silence cannot deprive citizens of this right.
“Yes” it can, said Chief Justice John Robert during oral argument. “[Congress] intended to deprive them of the right to sue under the statute.”
“I am not certain,” said Justice Stephen Breyer. “I find this a difficult case.”
Maybe Congress can, Justice Ruth Bader Ginsburg seemed to say, but maybe it cannot. The federal government has limited powers over California rate-setting, she observed. If HHS disapproves the California rates but California refuses to repeal them, the only remedy HHS has is to withdraw all Medicaid funds from the state. “[T]hat’s a very drastic remedy that’s going to hurt the people that Medicaid was meant to benefit,” she said. Finding a right to sue would provide an intermediate remedy, she suggested.
From a free-market perspective, a limited government perspective, what’s the right way to resolve this case? I can see both sides. Ben Domench laughed when I said this, as I knew he would. I usually have pretty decisive opinions, but it’s not this time.
Consider this. As of 2010, there were 678 district court judgeships in the 50 states, including vacancies. So there could be 678 different rulings on whether Medicaid are “sufficient” or not. By any measure, this possibility is unacceptably chaotic.
On the other hand, states like California facing extreme budget deficits are taking the easy way out. Rather than directly confronting the fact that they are running out of money for an unsustainable program, they cut reimbursement rates for providers. Congress does the same thing with Medicare. Giving individual recipients and health care providers the right to sue would, as more cases are brought over time, force legislators to confront their broken promises and find ways to openly abandon or limit them.
If I were on the Supreme Court, I’d vote for the latter.