(Bloomberg) — U.S. Supreme Court justices weighed whether hospitals and other health care providers have the right to challenge Medicaid reimbursement rates set by states.
Hospitals, saying that low rates aren't covering their costs, argued in an Idaho case Tuesday that the Constitution allows them to contest their reimbursements under the Medicaid health insurance program for the poor.
Chief Justice John Roberts asked during arguments in Washington whether siding with hospitals and allowing such lawsuits from health care providers would put state budgetary decisions in the hands of federal judges.
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"The effect here is that federal judges get to decide what the reimbursement rates are in a particular area," Roberts said. "Are you aware of any situation where the federal judges get together and try to balance the state budget?"
Medicaid is jointly funded by the federal and state governments and administered by the states under federal requirements. Today's case pits states against hospitals and other health care providers, which want the right to challenge their reimbursements. A federal appeals court ruled against Idaho and said the health care providers could sue.
Four justices said in a dissenting opinion in a separate 2012 case from California that health care providers didn't have a right to sue over reimbursement rates.
Justice Sotomayor
During arguments, Justice Sonia Sotomayor pressed Idaho's lawyer about what recourse providers have.
"Let's assume, as inflation is going up constantly, what happens two years into the plan when providers can't work for what the state is giving, or the state is imposing a tremendous hardship on them, which is happening to a lot of providers who are being underpaid," she said. "Where do they go?"
The dispute stems from reimbursement rates set by Idaho for services provided to people with developmental disabilities. Health-care providers sued the state, claiming the reimbursement rates were too low to comply with the federal Medicaid law. A federal court agreed and said the rates were unlawful because the state didn't consider actual provider costs.
The American Hospital Association and the Federation of American Hospitals, in a court brief supporting the Idaho health-care providers, said the cost of providing care to Medicaid beneficiaries in 2012 exceeded reimbursements by $13.7 billion.
'Unsustainable' losses
"Without recourse to the courts to enforce the conditions Congress set in place, hospitals and other providers will continue to bear losses that for some are unsustainable," the organizations said.
California said in court papers that since 2008, litigation over reimbursements has forced the state to give Medicaid providers more than $1.5 billion in "excess payments" that are unnecessary to ensure beneficiaries receive quality care. The federal appeals circuit covering California allowed provider challenges.
Attorney James M. Piotrowski, arguing for the Idaho health- care providers, said they can sue under the Constitution's provision establishing that federal laws take precedence over state laws.
Justice Antonin Scalia told Piotrowski that Congress didn't intend for them to have a right to sue.
"When Congress wants the scheme that you desire, it creates a private cause of action," Scalia said. "It has not created a private cause of action here."
The case is Armstrong v. Exceptional Child Center, 14-15.
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