Thursday, September 29, 2011

Argument Preview: Standing to Challenge Medicaid Cuts in Douglas

The second case the Court will hear this Term involves a critical question about access to the courts and constitutional enforcement: May a private party sue under the Supremacy Clause to force California to comply with federal Medicaid program requirements?

The case, Douglas v. Independent Living Center, arose out of California’s cuts to its Medicaid program, dubbed Medi-Cal.  In 2008 and 2009, the California legislature slashed Medi-Cal funding in order to help deal with the state’s fiscal crisis.  The legislature cut reimbursement rates for participating Medi-Cal providers by ten percent; it reduced future reimbursement rates by one percent from their pre-2008 levels; and it reduced the maximum contribution paid by Medi-Cal for wages and benefits for in-home supportive services.  The state did not study the impact of these cuts or submit them to federal Medicaid regulators at the Centers for Medicare and Medicaid Services, or CMS, as required by federal law.

Medi-Cal providers and beneficiaries sued in five separate cases in state and federal courts under the Supremacy Clause, arguing that California’s cuts were preempted by federal Medicaid requirements.  In particular, the plaintiffs argued that California’s cuts failed to satisfy the requirements of Section 30(A) of the Medicaid Act, which says that participating states must ensure that state Medicaid payments to health care providers “are consistent with efficiency, economy, and quality of care” and “sufficient to enlist enough providers so that care and services are available . . . to the general population in the geographic area.”  Under Section 30(A), states also have to study the impact of any proposed rate reductions on health care services and submit them to the CMS for review.

In a series of appeals, the Ninth Circuit ruled that the plaintiffs qualified for a preliminary injunction against the state, thus halting the cuts.  The state then appealed to the Supreme Court, arguing that the plaintiffs, as private parties, could not sue under the Supremacy Clause—that private parties could not enforce this structural provision of the Constitution in court without an explicit private right of action or an interference with a fundamental right.

The state argues that the plaintiffs have no private cause of action under either federal law or the Constitution.  As to federal law, the state says that neither Section 30(A), nor any other federal law, explicitly gives plaintiffs a private right of action to enforce Medicaid requirements against a state.  The legislative history of the Medicaid Act only underscores this.  In 1997, Congress revoked the “Boren Amendment,” a portion of the Medicaid Act.  That provision, according to an earlier Supreme Court ruling, gave private parties a right private of action and spawned an explosion of lawsuits challenging state Medicaid rates.  The state argues that Congress’s revocation of the provision suggests that it intended to remove any right of action, not to create one.  Moreover, the state contends, Section 30(A) gives plaintiffs no individual right that they might enforce by way of a civil rights action under Section 1983.

The state says that the plaintiffs also have no right of action under the Supremacy Clause.  The state claims that the Supremacy Clause is not a source of rights but rather a rule of decision for parties already properly before the courts.  The state contends that cases challenging Spending Clause legislation, like the Medicaid Act, which authorizes federal funds only for states that agree to and comply with federal Medicaid requirements, are particularly inappropriate.  This is because state law cannot conflict with federal law under the Spending Clause: any “conflict” only means that the state is not complying with federal requirements and is therefore ineligible for continued federal program funds.  Thus a “conflict” is really no conflict at all; it’s only a state choice to not participate in the program.

Finally, the state notes that the plaintiffs are already participating as amici in an administrative process that tests the Medi-Cal cuts.  The state says that it appealed CMS’s initial rejection of its cuts through an established administrative process; that process is pending.  The state argues that this process is the only appropriate venue for the plaintiffs’ participation in this essentially state-federal dispute.

The plaintiffs counter that the original understanding of the Supremacy Clause and the Court’s subsequent jurisprudence both suggest that they may properly bring their claim.  They say that courts have consistently concluded that a plaintiff could lodge a case against a state for declaratory and equitable relief under the Supremacy Clause—that these claims do not require explicit statutory authorization.  And they say that they need not point to an interference with their rights (to bring a Section 1983 case): their claim under the Supremacy Clause is a constitutional claim that must exist on its own as an incident of the Constitution’s structure and operation.  The plaintiffs claim that they seek to enforce federal preemption under the Supremacy Clause, not (just) the requirements of Section 30(A).

The United States weighed-in on the side of the state.  It argued that the Court could dodge the precise and knotty question by recognizing that this case is special.  This is a Spending Clause case, it says, and, as described above, there simply can be no conflict between state and federal law.  With no conflict, there is no preemption; and with no preemption, there is no Supremacy Clause issue.

The case comes at the complicated intersection of state politics and finance, health care, federalism, and standing—considerations and interests that pull in different directions, at a time when states face increasing fiscal challenges, when health care costs are rising, affecting coverage, and when the other health care issues are on everyone’s mind.  (I need not remind readers that parties on both sides of the Eleventh Circuit ruling overturning the so-called individual mandate filed petitions for review with the Court on Wednesday.) 

For example, a ruling for the state would allow states to continue to balance their budgets on the backs of Medicaid providers and recipients, often their most vulnerable populations, checked only by the administrative process at the CMS, which California has well demonstrated that a state can manipulate (through delay and foot-dragging).  On the other hand, a ruling for the plaintiffs would mean that plaintiffs could tie up states in litigation any time a state wanted to cut Medicaid rates, or to make any other significant changes to their Medicaid programs.  In short, the case is hard.

On a different level, the Court will also have to grapple with private party standing to bring structural claims under the Constitution.  The Court ruled last Term in Bond v. U.S. that a private individual, a criminal defendant, had prudential standing to challenge a federal criminal statute as violating the Tenth Amendment, another structural provision.  If Bond opened the door a little wider for structural claims by private litigants, Reynolds could break it wide open.  That’s because the plaintiffs in Reynolds aren’t already properly before the courts (as Bond was); they are bringing their claim under a structural provision alone.  And they are doing it in the context of a Spending Clause program. 

The Court can easily dodge this bullet, though.  As the U.S. government argues, there really is no conflict in this case between state and federal law that the Supremacy Clause can resolve.  This truth provides the clearest path for a ruling here.  Look for the Court to fall back on it, even if it frustrates private Medicaid providers’ and recipients’ quests to hold their states to federal Medicaid requirements.

SDS

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