Challenges to Medicaid Cuts Come Before Supreme Court
Sep 15, 2011
By Kristen Friend, staff writer – September 15, 2011
The U.S. Supreme Court will open its 2011 October Term by hearing arguments in a Medicaid funding case that could have an impact on future enforcement of the Affordable Care Act.
As states contend with mounting budget shortfalls in the face of an economy still struggling to recover, many are choosing to cut funding for assistance programs like Medicaid to help balance the books. Patients’ rights advocates argue that it is wrong to balance budgets by taking benefits away from those that need them the most.  In the case of Medicaid, those more affected by funding cuts are the poor, pregnant women, children, individuals with disabilities and seniors. Medicaid funding is also in peril in part because changes to Medicaid affect fewer people than those made to other programs, like Medicare and Social Security, and the people such changes do affect are least able to challenge the new rules.
At issue in the case coming before the Supreme Court is whether private parties have the legal standing to challenge cuts to state Medicare funding under the Supremacy Clause of the Constitution. The case is a consolidation of three cases filed in reaction to proposed cuts in California’s Medicaid payment disbursements.
In 2008, the California Assembly passed legislation that amended the California Welfare and Institutions Code by reducing payments made to health care providers under Medi-Cal, California’s Medicaid equivalent, by 10 percent.  Independent Living, a coalition of health care providers, senior citizen’s groups and other beneficiaries of Medi-Cal, filed suit asking for an injunction prohibiting the director of the California Department of Health Care Services from enforcing the cuts. 
The funding cuts, they argued, violated the Medicaid Act (Title XIX of the federal Social Security Act) because they were so severe they would limit access to services Medicaid is federally mandated to provide.  Specifically, they stated that the cuts are incompatible with 42 U.S.C. § 1396(a)(30)(A), known as the Equal Access Provision, that requires state plans to provide payment for care and services, and states that such payments be “consistent with efficiency, economy and quality of care” and “sufficient to enlist enough providers so that care and services are available under the plan.”  States must administer the program in an economical manner but are also required to take into consideration how funding levels affect health care quality and access.
Initially, a federal court denied Independent Living’s request. However, the Ninth Circuit held that the state was in violation of the Equal Access Provision and sent the case back to the district court for reconsideration.
The case raises two distinct issues relating to the Equal Access Provision of the Medicaid Act. One is the question of what does and does not constitute a violation of the statute. At what level do cuts constitute a violation of federal law? This is an issue that states must tackle as they evaluate budget priorities. The second is the question of who has standing to challenge funding cuts under the Supremacy Clause, which states that federal law trumps state law when the two are in conflict.  The U.S. Supreme Court will not be discussing the legal determinations as to what constitutes a violation of the Equal Access Provision, but will only be ruling on the standing issue.
Medicaid is a joint federal-state program that gives states leeway to determine their own eligibility standards and funding structure. Medicaid programs are funded predominately by states with the help of contributions from the federal government. State plans must cover certain procedures such as vaccines for children, prenatal care, and inpatient and outpatient hospital visits in order to be eligible to receive federal funds. 
Medicaid is means tested; only a small group of low income individuals qualify for benefits. States are traditionally given broad leeway to organize and administer their Medicaid programs. Courts have been hesitant to decide on cases involving Medicaid funding since it is seen to be more of a political rather than a legal question.
The courts’ hesitation to decide the issue has not prevented private groups across the country from challenging cuts to Medicaid rates. Medicaid advocates and patients’ rights groups argue that such cuts limit access by forcing providers out of the program, and making it harder for beneficiaries to find doctors and hospitals willing to provide care.  When states pull money from their Medicaid programs, the reductions often come in the form of rate cuts to doctors and other providers of medical care. Such cuts have sparked legal battles as patients and providers file suit to block cuts to the program on the basis that they limit coverage in violation of federal law.
For the past several decades, plaintiffs have filed challenges to changes in state Medicaid rules as section 1983 cases. 42 U.S.C. § 1983 was passed as a part of the Civil Rights Act of 1871, largely in response to the actions of the Ku Klux Clan. Section 1983 states that anyone who deprives a United States citizen of his or her rights under the Constitution or federal laws can be held legally liable by the injured party. 
This avenue of petition was closed in 2002 with the Supreme Court’s decision in Gonzaga University v. Doe. While the case did not directly involve Medicaid, it drastically changed the way that section 1983 cases are interpreted. In Gonzaga, the Court held that section 1983 did not confer any enforceable rights under the Spending Clause.  Since Medicaid was enacted under the Spending Clause, neither Medicaid recipients nor providers could continue to claim any rights under section 1983.
Courts have historically placed no such limit on cases involving federal preemption. Over 200 years of case law indicate that individuals do have legally enforceable rights when state and federal laws conflict.  Patients’ rights activists and advocates for Medicare beneficiaries are hopeful that the Supreme Court will apply this standard to Medicare recipients and providers as well.
The Obama administration surprised many of those watching the case by filing an amicus brief in support of the position of the director of the California Department of Health Care Services. Initially, acting Solicitor General Neal Katyal urged the Court not to take the case, an action that would have allowed the Ninth Circuit’s decision favoring Medicaid beneficiaries to stand.  However, when the Court did take the case, Katyal filed an amicus brief taking the opposite position, a move that has worried many Medicaid supporters.
In the brief, the Solicitor General recognizes precedent, stating that the Court’s decisions, “…reflect a longstanding practice of permitting private parties to bring suit in federal court to enjoin state regulatory action from which the plaintiffs claim immunity under federal law.”  However, the brief then makes a distinction because Medicaid imposes obligations under the Spending Clause and because it is a joint federal-state program. As such, the brief argues, the Medicaid program acts more like a contract between the states and the federal government that confers no third party rights. The Solicitor General also argues that Congress could have specified certain rights in the Medicaid Act, but chose not to do so.
Several members of Congress filed a brief opposing Katyal’s position. They state that the Solicitor General is wrong in concluding that just because Congress did not specifically delineate enforceable rights in the statute, these rights do not exist. Congress, they argue, relies on the Court’s practice of granting rights under the Supremacy Clause. Because Congress understands such rights exist, they do not necessarily have to be outlined in every law. Congress, they claim, “…has long understood that an action for equitable relief will be available to individuals harmed by state law that is inconsistent with federal law.”  This, they say, applies to Medicaid beneficiaries as well.
If the Court agrees with California and the U.S. Solicitor General, advocates for Medicaid recipients worry that it will be difficult to force states to fulfill their obligations under federal law. The only recourse if states fail to comply with the law will be for the federal government to withhold Medicaid funds from the state. This action will only hurt those who need relief the most by continuing the downward spiral of benefit cuts.
Others who are watching the case also worry that a broad decision against Medicaid recipients and providers could undermine the Patient Protection and Affordable Care Act. The Affordable Care Act relies on states to carry out and enforce new federal rules. Executive director of the Tennessee Justice Center, Gordon Bonnyman, said of the Solicitor General’s argument, “What is more remarkable … [is that] they took a position that was antithetical to the effective implementation of the Affordable Care Act and they addressed questions that were somewhat gratuitous in doing that.” 
The case is Douglas v. Independent Living Center of Southern California. Arguments are scheduled for October 3.
3. Brief for Respondent Independent Living Center of Southern California, Inc., et al., online at http://www.americanbar.org/content/dam/aba/publishing/previewbriefs/Other_Brief_Updates/09-958_respondentindependentlivingctr.pdf
11. Opinion of the Ninth Circuit No. 08-56422, online at http://www.ca9.uscourts.gov/datastore/opinions/2009/07/15/08-56422.pdf
13. Brief for the United Statesin Support of Petitioner, online at http://www.americanbar.org/content/dam/aba/publishing/previewbriefs/Other_Brief_Updates/09-958_petitioner_amcu_unitedstates.pdf
14. Brief for Members of Congress in Support of Respondents, online at http://sblog.s3.amazonaws.com/wp-content/uploads/2011/08/09-958-09-1158-AND-10-283-bsac-Members-of-Congress.pdf
The SEO | Law Firm™ News Center extends editorial freedom to their staff writers thus the views expressed in this column may not reflect the views of SEO | Law Firm™, Adviatech Corp., or any of its holdings, affiliates, or advertisers.