Supreme Court weighs right to object to Medicaid cuts

ByABC News
October 3, 2011, 8:53 PM

WASHINGTON -- The U.S. Supreme Court opened its new term Monday with an important Medicaid case that could impact poor people, facilities that provide care and financially strapped states that reimburse providers under the joint federal-state program.

The California dispute started in 2008 when the state Legislature began cutting Medicaid reimbursement rates by up to 10% to try to solve the state's budget crisis. Medicaid patients and health care providers sued California, arguing that the cuts violated federal law requiring payments sufficient to assure access to and quality of care.

A U.S. appeals court blocked the rate cuts.

The Obama administration is supporting California, arguing that the Department of Health and Human Services has the sole responsibility to determine whether a state's reimbursement rate meets federal law.

The administration contends that even if a state defies federal rate policy, Medicaid patients and providers lack authority to go to court.

State officials say unless Congress specifically writes it into a law, private parties cannot invoke the constitutional principle that federal law trumps state policy.

No consensus emerged among justices Monday in the case being followed by the majority of the states, business groups and civil rights organizations — all of which say much is at stake at a time of tight budgets and severe medical need among the poor, elderly and disabled.

Some justices, including Chief Justice John Roberts and Justice Stephen Breyer, voiced concern that if they allow the private groups to challenge state reimbursement rates, the court would open the door to a rush of lawsuits whenever state policy conflicts with federal law. "A principle that says you can do that anytime you want," Breyer said, "seems to me … far-reaching … a mess."

Lawyer Carter Phillips, representing Medicaid beneficiaries, insisted such lawsuits would happen only in limited circumstances and declared, "My people have a life-and-death problem."

Phillips said lower court judges should be able to hear such claims until federal regulators can review rates and possibly reject them.

"We're talking about a situation where the state, solely for budgetary reasons, without regard to federal law whatsoever, simply made a slash in the reimbursements," he said.

Karin Schwartz, a California deputy attorney general, said private parties should not be able to intervene in what is a deal between the federal government and a state. "Congress controls who can enforce federal law. If Congress wants to provide for private party litigation, it must do so clear and unambiguously, and it has not done so in this case."

Schwartz disputed Justice Elena Kagan's assertion that the state had tried an "end run" by putting its rate cuts in place before review by Health and Human Services.

"We did not do an end run around anything," Schwartz said, saying federal law allows a plan to take effect while it is awaiting review. (A compliance review is still pending.)

Kagan and Justices Ruth Bader Ginsburg and Samuel Alito were among those most skeptical of California's broad argument that people cannot sue to block new reimbursement rates.

Thirty-one states, led by Michigan, have joined California; they say their costs under Medicaid have become "astronomical" and that if the lower court ruling stands it would invite private lawsuits over a host of federal-state welfare programs.

On the other side are a diverse collection of groups that want to ensure that reimbursements are not sliced, including AARP, the Chamber of Commerce and the American Civil Liberties Union. The ACLU says the case could have implications for other state-federal conflicts and that it is important for low-income people, racial minorities and others who lack a strong voice in the political process to get into court when hurt by state policy.

A ruling in the case of Douglas v. Independent Living Center of Southern California is likely by next summer.