On March 31, 2015, the Supreme Court issued the first of several expected decisions that will impact the healthcare industry this year, ruling that Medicaid providers have no constitutional or statutory right to challenge a state’s Medicaid reimbursement rates. In Armstrong v. Exceptional Child Center, Inc., a group of Idaho Medicaid providers had challenged the states’ reimbursement rates as violating the federal laws that govern the program, commonly known as the Medicaid Act.

Under the Medicaid Act, both the federal government and the individual states fund and administer the Medicaid program. Each state establishes the rates and other parameters within its Medicaid program, subject to overall federal approval. Each state must submit a plan outlining its Medicaid program to the Department of Health and Human Services (HHS). The Plan, among other things, is supposed to meet the Medicaid Act’s requirements that payments are sufficient to enlist enough providers so that covered care and services are available to Medicaid beneficiaries.

A group of Idaho Medicaid providers challenged Idaho’s Medicaid rates as violating this provision of the Medicaid Act. The Idaho Department of Health and Welfare had proposed rate increases which had been approved by HHS as part of the state’s overall Medicaid plan. However, the increases were never funded by the Idaho state legislature and thus never implemented. The providers filed a lawsuit seeking to impose higher Medicaid reimbursement rates on the grounds that Idaho had failed to follow its approved plan and had set reimbursement rates so low that providers were unwilling to enroll in the Medicaid program, denying Medicaid beneficiaries access to effective care.

Two lower courts had ruled in favor of the providers. However, the Supreme Court ruled that only HHS is entitled to enforce the requirements of the Medicaid Act. It is important to note that the case was purely procedural. While the Supreme Court held that Medicaid providers did not have a constitutional or statutory right to challenge a state’s Medicaid reimbursement rates, it did not rule on whether or not Idaho’s Medicaid reimbursement actually complies with the Medicaid Act requirements.

The increasing downward pressure on Medicaid reimbursement shows no signs of stopping, even as the Affordable Care Act expands Medicaid enrollment in many states. This case is a reminder that providers seeking to increase Medicaid reimbursement will need to also focus on obtaining federal and state legislative, not just judicial, solutions.