February 22, 2012

Today the Supreme Court issued one decision, described below, of interest to the business community.

• Medicaid—Private Right of Action Under Supremacy Clause

Medicaid—Private Right of Action Under Supremacy Clause

Douglas v. Independent Living Center of Southern California, Inc., No. 09-958 (previously discussed in the January 18, 2011 Docket Report).

In Douglas v. Independent Living Center of Southern California, Inc., No. 09-958, and two related cases, the Supreme Court granted certiorari to decide whether the Ninth Circuit correctly held that Medicaid providers and beneficiaries may sue for injunctive relief under the Supremacy Clause to block state statutes that reduce Medicaid payments in alleged contravention of a federal statute. Today, in a 5-4 decision, the Supreme Court did not resolve that issue, but instead vacated the Ninth Circuit’s ruling so that the court of appeals could consider how the case should proceed in light of changed circumstances. 

At the time certiorari was granted, the federal agency in charge of reviewing state Medicaid payment decisions had concluded that the California statutes at issue violated federal statutory requirements. But shortly after the Supreme Court heard oral argument, the agency reversed course and approved several amendments to California’s plan, and California withdrew the rest of its proposed changes.

In an opinion by Justice Breyer, the Supreme Court held today that, although the change in plans did not render the cases moot, it “may require [plaintiffs] now to proceed by seeking review of the agency determination under the Administrative Procedure Act . . . rather than in an action against California under the Supremacy Clause.” Slip op. 6. The Court explained that permitting both “kinds of actions” to proceed at the same time would either be “redundant” or lead to differing results that “subject the States to conflicting interpretations of federal law.” Id. at 9.

Chief Justice Roberts, joined by Justices Scalia, Thomas, and Alito, dissented. They would have reversed the Ninth Circuit’s decision on the ground that there is no “federal statutory right enforceable under the Supremacy Clause[] when there is no such right under the pertinent statute itself.” Slip op. 4 (dissenting opinion). In the view of the dissenting Justices, the final agency determination changed nothing about whether the lawsuits were properly brought under the Supremacy Clause, but only underscored why a Supremacy Clause action was improper to begin with.

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