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Provider Right to Sue for Adequate Rates in Federal Court Severely Restricted

In Armstrong v. Exceptional Child Center, Inc., the United States Supreme Court found that providers do not have a private right of action under §30(A) of the Medicaid Act to require a state to increase Medicaid payment rates, significantly impacting the ability of providers to sue states in federal court to challenge Medicaid rates. Section 30(A) of the Medicaid Act, often referred to as the "Equal Access Provision," requires states to:

. . . provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan . . . 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 under the plan at least to the extent that such care and services are available to the general population in the geographical area. . .

The providers in Armstrong claimed that the state of Idaho violated the Equal Access Provision by reimbursing providers at inadequate rates. Idaho's state legislature had passed a law requiring the state Medicaid agency to implement a new methodology to determine provider payment rates. The Centers for Medicare and Medicaid Services' (CMS) approved the revisions to the state Medicaid Plan, and the state Medicaid agency published rates based on cost studies under the new methodology. However, the state legislature did not appropriate sufficient funding for the rates. Providers filed suit, alleging that the state's failure to implement the new rates violated the Equal Access Provision. The District Court entered summary judgment for the providers, and the Ninth Circuit affirmed, concluding that the Supremacy Clause of the United States Constitution gave the providers an implied right of action under which they could sue to seek an injunction requiring Idaho to comply with §30(A) of the Medicaid Act.

The Supreme Court came to the opposite conclusion, stating that the Supremacy Clause does not create an implied right of action under which service providers can sue to enforce the Equal Access Provision. According to the Court, the Supremacy Clause creates a rule of decisions and "instructs courts what to do when state and federal laws clash," but it is not the source of any federal right and does not create a cause of action in and of itself.


The Court stated that providers must seek relief through the Secretary of Health and Human Services rather than through the courts. The Court went even further, noting that the Medicaid Act itself cannot be the source of a cause of action as §30(A) "lacks the sort of rights-creating language needed to imply a private right of action." The Court concluded that service providers may seek relief through the Secretary of Health and Human Service, who can provide "relief" by withholding federal matching funds from the state agency.

As a practical matter, this decision severely limits a provider's ability to challenge Medicaid reimbursement rates in federal court. Notably, the Supreme Court's suggested remedy of CMS withholding funds from the state agency punishes not only the agency, but also the very providers that are challenging the adequacy of their rates. It remains to be seen what the next battleground will be in the fight to ensure adequate payment rates. Challenges under the Administrative Procedures Act and the public process provisions of the Medicaid Act are available, but it is questionable how meaningful these options are. For example, a challenge under the Medicaid Act's public process provisions could be remedied simply by the state agency engaging in the appropriate public process. We will continue to monitor this issue for our clients.

If you have any questions regarding reimbursement issues, please do not hesitate to contact Steven M. Montresor or David C. Marshall.

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