Sidelining the courts in Medicaid enforcement

The legal dispute at the core of last week’s Supreme Court decision in Armstrong v. Exceptional Child Center, Inc. is arcane, but the real-world consequences are not. After Armstrong, it’ll be easier for states to slash their Medicaid payment rates, even where the cuts make it difficult or impossible for Medicaid beneficiaries to find a doctor.

What’s Armstrong all about? The states have loads of discretion in how they run their Medicaid programs and, specifically, in how much to pay for medical services. But that discretion is cabined by the terms of the federal Medicaid statute, which says, in section 30(A), that states can’t drop their payment rates so low that Medicaid beneficiaries find it harder than the rest of us to get needed care. (I first wrote about Armstrong-type cases a couple of years ago.)

The question in Armstrong is whether the courts can enforce section 30(A) at the behest of private parties—typically providers who are upset at payment cuts. Before Armstrong, the answer was yes. The circuit courts were generally willing to invoke their equitable powers to enjoin state Medicaid officials from implementing spending cuts that conflicted with 30(A). The idea, conventionally traced back to the 1908 case of Ex parte Young, is that the federal courts won’t stand for it when state officials flout federal law.

When it comes to Medicaid, however, neither the states nor the federal government were happy with this arrangement. In their view, the federal government—specifically, the officials within CMS who review and approve state Medicaid plans—has sole responsibility for holding states’ feet to the fire. If CMS says that state payment rates comply with 30(A), courts can’t second-guess that determination in a lawsuit against state officials.

That argument makes a lot of sense to me. It also made a lot of sense to a five-justice majority on the Supreme Court. How are judges supposed to know if payment cuts will drive too many providers out of the Medicaid market? To decide that question, as Justice Breyer explained in a concurring opinion, you’d have to know something about “the actual cost of providing quality services, including personnel and total operating expenses; changes in public expectations with respect to delivery of services; inflation; a comparison of rates paid in neighboring States for comparable services; and a comparison of any rates paid for comparable services in other public or private capacities.”

Courts aren’t well-equipped to undertake this kind of inquiry. Better to leave the question to an agency with expertise in payment rates. The decision in Armstrong elevates that idea into a holding: given the open-endedness of 30(A), Congress must have “implicitly preclude[d]” private enforcement.

That’s where I start to have qualms about Armstrong—qualms that the four dissenting justices emphatically share. When Congress enacted 30(A) in 1989, it did so knowing that Ex parte Young would allow courts to enforce the provision directly against state officials. Congress could have—but did not—close the courthouse doors to such lawsuits. Nor has it done so in the twenty-six years since.

A compelling amicus brief from former HHS officials explains that, as a result, “[e]very aspect of [CMS’s] administration of the Medicaid program—from its regulations to its annual budget—is premised on the understanding that private parties will shoulder much of the enforcement burden.” With private enforcement as a backstop, Congress hasn’t funded CMS at anywhere near the levels necessary to enforce 30(A).

In other words, it’s fine and good to say that CMS should enforce the Medicaid statute. But what if it doesn’t? What if it can’t? And what if Congress never expected it to?

That’s the quandary of Armstrong. For what it’s worth, I think it’s a genuinely hard case. I’m sympathetic with the view that the courts shouldn’t be responsible for enforcing 30(A) against the states. The question of how much to spend on Medicaid beneficiaries ought to be hashed out in negotiations between the states and the federal government, not in a courtroom.

But I fear that the Supreme Court may have substituted its own views about sound enforcement strategy for the strategy that Congress actually adopted. In so doing, the Court has created an enforcement vacuum—one that cash-strapped states could exploit to make life even harder for Medicaid beneficiaries.


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