Supreme Court Hears Whether Medicaid Recipients and Physician Providers May Invoke the Supremacy Clause to Sue California for Reducing Reimbursement Rates Without Adhering to Medicaid's Statutory Procedures – Douglas v. Independent Living Center of Southern California

Abstract

Supreme Court Hears Whether Medicaid Recipients and Physician Providers May Invoke Supremacy Clause Sue California for Reducing Reimbursement Rates Without Adhering Medicaid's Statutory Procedures - Douglas v. Independent Living Center of Southern California1 - On October 3, 2011, Supreme Court heard consolidated appeal by current Director of California's Department of Health Care Services (Director), defendantappellant in three Ninth Circuit cases.2 The appeal focuses on whether individuals have cause of action under Supremacy Clause enjoin California from implementing Medicaid rate reduction, which does not comply with Federal Medicaid Act's procedures. The named plaintiff, Independent Living Center of Southern California (Independent Living), is joined by a group of pharmacies, health care providers, senior citizen's groups, and beneficiaries of California's Medicaid program, Medicai.3 The plaintiffs in two other consolidated cases are Santa Rosa Memorial Hospital and California Pharmacists Association, which are joined by number of other professional associations.4 Independent Living and its co-plaintiffs seek enjoin state from implementing legislation that would reduce Medicaid reimbursement rate.5 The legislation at issue in Douglas is California's Assembly Bill Five (AB 5), which California Assembly passed on February 16, 2008.6 AB 5 reduced fee-forservice payments physicians, dentists, pharmacies, adult health care centers, clinics, health systems, and [non-contract acute care hospitals] ... by ten per cent.7 Independent Living argued that ten percent rate reduction violates section 1396a(a)(30)(A) of Medicaid Act and is thus invalid under Supremacy Clause.8 Section (3O)(A) requires that state Medicaid plan such methods and procedures ... assure that payments are consistent with efficiency, economy, and quality of care ... so that care and services are available under plan at least extent that [they] are available general population in geographic area.9 The Director contended that only Congress can create private right of action enforce section 30(A) and that Supremacy Clause does not create one by itself.10 The Ninth Circuit applied standard it established in Orthopaedic Hospital v. Belshe, which requires Director rely on responsible cost studies, its own or others', that provide reliable data as basis for its rate setting in order comply with section 30(A). The Ninth Circuit held in Independent Living, case being appealed as Douglas, that Director violated section 30(A) by failing to provide any evidence that Department or legislature studied impact of ten percent rate reduction . . . prior enacting AB 5, and by failing demonstrate that Department considered reliable cost studies.12 Setting substantive violation of section 30(A) aside, Supreme Court will decide on whether private actors have right of action under Supremacy Clause enforce section 30(A).13 In Orthopaedic Hospital, Ninth Circuit ruled that section 30(A) allowed for private right of action under 42 U.S.C. § 1983. 14 This ruling followed Wilder v. Virginia Hospital Association, in which Supreme Court held that Congress did not intend for an administrative procedure replace private right of action under section 1983 for similar section of Medicaid Act known as Boren Amendment.15 In response that decision, Congress repealed Boren Amendment in 1997.16 In Independent Living, however, Ninth Circuit clarified that the repeal of Boren Amendment, 'like its enactment, modified § 13(A) alone; it effected no change § 30(A),' and therefore did not affect Ninth Circuit's prior ruling on section 30(A) in Orthopaedic Hospital.17 The Ninth Circuit also held that purpose underlying section 30(A), as described in Orthopaedic Hospital, remains same regardless of how plaintiff chooses enforce it. …