The other healthcare case with constitutional implications

Another Medicaid case this term also involves constitutional challenges — Douglas v. Independent Living Center of Southern California That certiorari was granted is notable unto itself, as no circuit split existed, the Acting Solicitor General had recommended that the Court deny the petition, and the Court does not seem to relish hearing healthcare cases.  The conflict in Douglas is whether California violated the Medicaid Act by enacting 10% reimbursement rate reductions, but this is not the question before the Court.  The Court will consider whether the plaintiffs (a group of Medicaid providers and enrollees) may privately enforce the Medicaid Act against the state by claiming the state has violated the Supremacy Clause.  Depending upon the timing of the opinion, Douglas may give us hints as to how the Court will decide Florida v. HHS,  even though the United States has taken notably different positions in the two cases (about which I have written more here.)

Medicaid was intended to mainstream the poor into American medicine.  The Medicaid Act thus informs states that they must pay healthcare providers “sufficient[ly]” to ensure the same access to medicine for Medicaid enrollees as others in the geographic region enjoy.  This “Equal Access” provision is a pillar of Medicaid, and it has been a source of litigation against states that pay providers too little.  In fact, before Gonzaga, lower federal courts were in agreement that the Equal Access provision was enforceable via section 1983.  Through this litigation, the circuits developed varying methods for deciding sufficiency of payment, as the Centers for Medicare and Medicaid Services (CMS) has not enforced the Equal Access provision vigorously against the states.  Despite the lack of agency action, “sufficiency” is key to Medicaid’s success; if states do not pay enough for the medical services they buy, Medicaid enrollees will be forced into substandard care or will not be able to find caregivers at all, and the program would be undermined.  Due to Gonzaga, and because CMS infamously does not monitor the states, Medicaid providers and enrollees have sought to enjoin states from violating the Medicaid Act under the Supremacy Clause.

California argued that the Medicaid Act does not include private actions, thus the plaintiffs could not seek an injunction because the statute fails to meet the “unambiguous conditions” element of the Dole test for conditional spending.  This argument speaks to clear statement advocates on the Court (such as Justices Alito, Scalia, and Thomas), because it claims that states do not have clear notice of Medicaid enforcement actions in federal court.  To the surprise of many, the United States’ amicus brief not only supported California but also urged that no private right of action exists for beneficiaries of federal spending programs (generally) to enforce federal standards against states.  The Acting Solicitor General’s brief thus took a much bolder position than was expected.  Remarkably, members of Congress and ex-administrators of the Department of Health and Human Services strongly disagreed with the SG’s position.  In fact, the ex-administrators, which represent both sides of the aisle, insist that CMS relies heavily on private enforcement to police the states.

Douglas may lead the Court to articulate a default rule that ends implied private rights of action under the Supremacy Clause, but Medicaid is a flawed vehicle for such a sweeping, federalism-based decision.  [More after the jump.]

One reason is that CMS has no monetary incentive to enforce the Equal Access provision; the more a state pays its Medicaid providers, the more the federal government is obliged to match with general revenue funding.  Thus, CMS saves money by allowing the states to underpay Medicaid providers in violation of the Equal Access provision, and draft regulations intended to shore up the Equal Access provision do not address this perverse incentive.  So, waiting for CMS to act, as the United States has urged, is futile, and states would be free from enforcement, public or private, judicial or executive.   

Douglas highlights some inconsistencies in the Rehnquist Court’s ‘federalism revolution.’  Even as it revitalized judicial enforcement of the Tenth Amendment in cases such as New York and Printz, the Court treated spending as an exception by stating that the federal government could basically buy state cooperation without running afoul of the Tenth Amendment.  On the other hand, the Rehnquist Court shored up state sovereign immunity through expansive Eleventh Amendment decisions and through limiting implied rights of action, which in combination partially closed the courthouse doors to beneficiaries of federal spending programs.  Douglas gives the Roberts Court a chance to consider directly some formerly peripheral thoughts regarding limiting access to federal courts when the law at issue is an exercise of conditional spending power. 

This leads to another reason Douglas is the wrong vehicle and should be decided narrowly.  In asking the Court to create a severe limitation on Supremacy Clause rights of action in conditional spending schemes, the United States’ brief articulated great deference toward the states in the Medicaid program, especially for their decisions regarding provider payment.  But the U.S. has taken a diametically opposed position in the Florida v. HHS litigation, in which the power to spend has been articulated very broadly in defense of the mandatory Medicaid expansion.  But, if the Court were to adopt the Solicitor General’s position in Douglas, then the Medicaid expansion could be eviscerated.  Here’s how: if the states do not pay Medicaid providers sufficiently, then the 16 million new Medicaid enrollees will have a very difficult time finding anyone to treat them.  PPACA did not add private rights of action to Medicaid, and it did not give CMS new enforcment mechanisms (money, regulatory authority, people power).  So, states could resist the expansion by underpaying Medicaid providers, and Douglas would make it so that no recourse exists (unless Congress acts, which is what the Court is trying to effectuate through clear statement rules).  Further, if the Court decides Douglas broadly, it may signal a willingness to decide both aspects of the Medicaid coercion question broadly, i.e., to expand the coercion doctrine and strike down the expansion itself.  (I know, I predicted a different outcome in my first post on Florida v. HHS….)

It is possible the Court will postpone deciding Douglas until it has heard the Medicaid coercion arguments on March 28th or even until it has decided Florida v. HHS.  Whenever Douglas is decided, the United States has taken a state-deferential position in the case that is at odds with the broad articulation of the spending power in defending the Medicaid expansion.

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