(Bloomberg) -- Hospitals and other health-care providers can’t sue to challenge reimbursement rates set by states under the Medicaid insurance program for the poor, the U.S. Supreme Court ruled.

The 5-4 decision Tuesday is a blow to hospitals, which say that Medicaid rates aren’t covering their costs. Providers now will have to take any objections to rates to the U.S. agency that oversees the joint federal-state program.

Writing for the court, Justice Antonin Scalia rejected contentions that the U.S. Constitution authorized reimbursement lawsuits. Providers pointed to the Constitution’s supremacy clause, which says federal law trumps contrary state requirements.

That provision “instructs courts what to do when state and federal law clash, but is silent regarding who may enforce federal laws in court, and in what circumstances they may do so,” Scalia wrote.

Chief Justice John Roberts and Justices Samuel Alito, Clarence Thomas and Stephen Breyer joined Scalia in the majority. Justices Sonia Sotomayor, Ruth Bader Ginsburg, Elena Kagan and Anthony Kennedy dissented.

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 provider costs.

Hospital Association

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.

California said in court papers that since 2008, litigation over reimbursements has required 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 challenges by providers.

Medicaid is funded by the federal and state governments and administered by the states under federal requirements.

The case is Armstrong v. Exceptional Child Center, 14-15.

Instant Insights /

Supreme Court says providers can&rsquo;t sue over Medicaid reimbursement

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Supreme Court says providers can’t sue over Medicaid reimbursement