A recent United States Supreme Court decision suggested, in a remand back to the Ninth Circuit Court of Appeals, that once the Centers for Medicare and Medicaid Services (CMS) approve a Medicaid state plan amendment, a provider’s “likely” available remedy is under the federal Administrative Procedure Act. That process, the Court clarifies, would allow for judicial review of whether the plan approval is arbitrary and capricious or contrary to law. However, the Court preserved for another day the question of whether a provider has a private right of action in federal court to challenge a pre-approval implementation of a state plan amendment under the Supremacy Clause of the U.S. Constitution. Medicaid providers who are contemplating a challenge to a state’s administration of the Medicaid program should consider the reasoning of the Court’s decision and applicability to the facts of the situation when deciding whether and through what avenue to pursue such a challenge.

Background

In 2008 and 2009, California passed three laws reducing Medicaid payment for nearly all Medicaid providers in the State. A combination of Medicaid providers and recipients filed lawsuits in federal district court to enjoin implementation of the Medicaid payment changes. They argued that pursuant to the Supremacy Clause, the statutes were inconsistent with and preempted by federal law requiring that the state Medicaid agency develop “methods and procedures” to ensure that Medicaid “payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population.” The Ninth Circuit Court of Appeals enjoined the implementation of the California statutes finding that the providers could bring an action to enforce section (30)(A) under the Supremacy Clause and that California violated section (30)(A) because it had failed to consider the necessary factors before passing the legislation in question.