Supreme Court Blocks Medicaid Lawsuits

The justices ruled 5-to-4 that providers can't sue over low payment rates.

A guard stands on the steps of the Supreme Court Building, August 20, 2014 in Washington, DC. (Photo by Mark Wilson/Getty Images) (National Journal)

Health care providers can't sue states when feel they're being shortchanged by Medicaid cuts, the Supreme Court said Tuesday.

Federal law places certain requirements on states that participate in Medicaid, and some providers argued that states are violating those requirements by cutting their Medicaid budgets too deeply.

But the Supreme Court rejected that claim Tuesday, saying in a 5-to-4 ruling that providers cannot sue their states in an attempt to enforce federal rules.

The suit was filed by a company in Idaho that provides habilitation services—in-home care for people with mental disabilities.

When Idaho cut Medicaid payments for those services, the company argued, it fell out of compliance with the federal Medicaid Act, which requires the states to "assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available."

They cited the Supremacy Clause of the Constitution, which says federal law trumps conflicting state laws in many cases. But the Supremacy Clause doesn't allow private parties to bring lawsuits, Justice Antonin Scalia wrote for the court's majority Tuesday.

Providers should take up their complaints with the Centers for Medicare and Medicaid Services, which approves states' Medicaid plans, he wrote.

Justice Sonia Sotomayor, writing for the four dissenting justices, said appealing to CMS isn't a good enough alternative, because CMS can only punish the states by withholding their Medicaid funding altogether.

"The Court's error today has very real consequences," Sotomayor said. "Now, it must suffice that a federal agency, with many programs to oversee, has authority to address such violations through the drastic and often counterproductive measure of withholding the funds that pay for such services."