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Supreme Court: Providers Can’t Sue States over Medicaid Payment Rates

On March 31, the U.S. Supreme Court released its decision in Armstrong v. Exceptional Child. The court ruled 5-4 that Medicaid providers do not have a right to sue states over the adequacy of Medicaid reimbursement. Instead, providers must rely on the U.S. Department of Health and Human Services (HHS) to ensure rates are adequate. The decision forecloses an important avenue of relief for providers and increases the need for HHS to strengthen the agency’s standards for and oversight of Medicaid rates.

Justice Antonin Scalia, who wrote the court’s majority opinion, stated that while the Supremacy Clause of the U.S. Constitution does require that federal law be given priority over conflicting state decisions, it does not grant providers the right to sue when states violate the Supremacy Clause. Instead, Scalia said that HHS is the party responsible for enforcing states’ compliance with the Medicaid statute (Section (a)(30)(A)). Scalia further explained that Congress provided a “sole remedy”— the withholding of federal funds by HHS — to ensure uniformity in decision making. By contrast, courts would inconsistently apply the law if private lawsuits were permitted.

In short, Scalia told providers that rather than using the court system, they must petition the federal government to enforce federal Medicaid requirements by withholding federal funds from the states.

The Armstrong decision is a significant blow to Medicaid providers and patients, as it effectively leaves providers with no legal recourse when states adopt low payment rates that threaten to jeopardize patients’ access to care. The opportunity to seek help from the courts, even if only as a last resort, has been an important potential avenue for relief. America’s Essential Hospitals’ will continue to demonstrate to HHS and Congress the critical need for strengthened federal standards for and oversight of the adequacy of Medicaid payment rates.

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About the Author

Walsh is the senior manager of legislative affairs for America's Essential Hospitals.