On March 31, 2015, the Supreme Court of the United States issued a 5-4 decision in the case of Armstrong v. Exceptional Child Center, Inc., 575 U.S. __ (2015), holding that health care providers do not have the right to sue a state Medicaid program under Section 30(A) of the federal Medicaid Act (Section 30(A)) for injunctive relief. The ruling, authored by Justice Antonin Scalia, blocked home and community-based providers who asked the federal courts to force Idaho to adequately fund habilitative services in conformance with Section 30(A), a provision within the Medicaid Act that is supposed to “assure that [Medicaid] payments are consistent with efficiency, economy, and quality of care.” 42 U.S.C. § 1396a(a)(30)(A).

The ruling is a blow to health care providers serving Medicaid populations that have used federal courts as a means of last resort to challenge inadequate Medicaid funding under Section 30(A). For the ranks of Medicaid providers, already facing increasing Medicaid enrollment and budgetary and political hurdles undermining state Medicaid program funding, this decision represents yet another obstacle to obtaining improved Medicaid program reimbursement.

Providers Sue State Agency to Enforce Higher Reimbursement Rates

The underlying case was brought by health care providers in Idaho who provide habilitation services covered under Idaho’s Medicaid program. The Idaho Department of Health and Welfare — the state agency responsible for administering the Medicaid program — published new, higher reimbursement rates for Medicaid providers, but the higher rates were never put into effect because the Idaho state legislature failed to provide sufficient funding. The providers sued two officials of the Idaho Department of Health and Welfare, seeking an injunction to enforce the higher reimbursement rates and arguing that the state violated Section 30(A) by reimbursing providers at rates lower than permitted under the Act.

The Supreme Court Holds That Providers Cannot Sue for an Injunction Requiring Compliance with Section 30(A) of the Federal Medicaid Act

The Supreme Court held that the providers had no right to proceed with the lawsuit, stating that “we think that Congress wanted to make the agency remedy that it provided exclusive.” The Supreme Court determined that in order for a third party to bring a lawsuit to enforce a federal law, that right must be “unambiguously conferred” and, in this case, such remedy had not been conferred under the statute. Consequently, there was no private cause of action available to a third party to sue a state Medicaid program or agency officials in order to enforce Section 30(A), nor was there an equitable remedy, since “the Medicaid Act implicitly precludes private enforcement of § 30(A).” Justice Stephen Breyer, concurring with the majority, observed that it is up to the Department of Health and Human Services (HHS) — not private litigants — to enforce compliance with Section 30(A) and that the providers could take up their reimbursement issues with HHS.

The decision reversed the Ninth Circuit Court of Appeals, which held that the “providers had an implied right of action under the Supremacy Clause to seek injunctive relief against the enforcement or implementation of state legislation.” The Supreme Court’s ruling also represented a significant departure from Ninth Circuit precedent, which typically allowed providers to seek injunctive relief against state Medicaid agencies that failed to comply with the Medicaid Act.

The Armstrong Decision Eliminates Providers’ Ability to Seek Judicial Relief to Challenge Medicaid Reimbursement Under Section 30(A)

The impact of the Armstrong decision is that providers that used to be able to turn to the courts to challenge state Medicaid program reimbursement under Section 30(A) are now foreclosed from judicial relief. Consequently, Medicaid providers’ best options for obtaining adequate Medicaid funding are likely through political advocacy and active participation in the Medicaid administrative processes on the state and federal levels.