The document summarizes obstacles to enforcing requirements of the Medicaid statute. It discusses how the Supreme Court initially permitted Medicaid enforcement lawsuits in Wilder v. Virginia Hospital Association but has since curtailed this pathway. While §1983 suits could previously challenge state reimbursement rates, Gonzaga v. Doe added new tests making it difficult to use this statute for enforcement. The document outlines failed attempts to use the Supremacy Clause as an alternative enforcement mechanism. As a result, the primary option left for addressing violations is complaining to CMS, though it has limited enforcement powers.

1. Enforcing the Medicaid
Entitlement
Thomas Barker
Sara Rosenbaum
March 22, 2018

2. State Medicaid Plans must comply with
multiple (80+) requirements …
• A state plan for medical assistance must:
Be effective statewide (§ 1902(a)(1)) Make benefits available in the same
amount, duration and scope to all
qualified individuals (§ 1902(a)(10)(B)
Provide opportunity for a fair hearing for
individuals who are denied benefits (§
1902(a)(3))
Provide for a public determination of rates
(§ 1902(a)(13))
Be operated by a single state agency (§
1902(a)(5))
Provide for a free choice of providers (§
1902(a)(23))
Provide medical assistance with
reasonable promptness (§ 1902(a)(8))
Ensure that Medicaid is the payer of last
resort (§ 1902(a)(25))
Provide for making medical assistance
available to qualified individuals (§ 1902(a)
(10)(A))
Provide for paying for FQHC services at
cost (§ 1902(bb))

3. … But a series of obstacles prevents
enforcement of these many
requirements
• The Medicaid statute (title XIX of the Social Security Act)
contains a limited enforcement mechanism.
• The one sanction set forth in the statute is contained in § 1904:
If the Secretary of HHS finds that the state plan no longer
complies with section 1902, the Secretary must:
• Provide notice and an opportunity for a hearing to the state; and
• Make a finding on whether the state is in compliance
• If the state is not in compliance, the Secretary “shall”:
• Notify the state that it will cease funding the state plan; or
• Cease funding for the portions of the plan that are not in compliance
• Until the state comes into compliance
• However, as NFIB v. Sebelius, 567 U.S. 519 (2012), made
clear, there are Constitutional limitations on the ability of
HHS to impose this sanction.

4. Obstacles to enforcement (cont’d.)
• Medicaid is Spending Clause legislation (“Congress
shall have the power to … provide for the … general
welfare of the United States”). (U.S. Const. Art. I, § 8,
Cl. 1).
• But Spending Clause legislation is “much in the nature
of a contract” (Pennhurst State Sch. and Hosp. v.
Halderman, 451 U.S. 1 (1981)).
– Under this analysis, Medicaid is a contract between the
federal government and a state
– And under general principles of contract law, third party
beneficiaries to a contract (beneficiaries, providers)
generally do not have the ability to enforce a contract.

5. Obstacles to enforcement (cont’d.)
• Eleventh Amendment to the U.S. Constitution
– The Eleventh Amendment to the Constitution strips the
federal courts of jurisdiction to hear claims against a state
in federal court.
• The Eleventh Amendment was adopted and ratified after the US
Supreme Court allowed a claim based on diversity jurisdiction to
proceed against the state of Georgia in 1793. Chisolm v. Georgia,
2 U.S. 419 (1793).
• The Eleventh Amendment overruled the opinion, effectively
restoring sovereign immunity to the states.
• In Hans v. Louisiana, 134 U.S. 1 (1890) the Supreme Court applied
the principles of the Eleventh amendment to claims against a state
based on federal question jurisdiction.
– Thus, the Eleventh Amendment acts as a significant bar to
claims against a state in federal court.

6. A Limited Pathway to Enforcement?
• The federal civil rights statute, 42 U.S.C. § 1983,
combined with the Ex Parte Young doctrine, created a
pathway to navigate around the significant barrier
posed by the Eleventh Amendment.
– The federal civil rights statute creates a cause of action
against a state official who has deprived a person who is
physically present in a state of a “right, privilege or
immunity” granted by the Constitution, a federal law, or a
treaty.
– In Ex Parte Young, the Supreme Court permitted a claim
against a state to proceed where the plaintiff sought
equitable relief only and where the claim was filed against
a state official acting in his official capacity.

7. Jurisdictional History
• The federal courts historically permitted
claims against state officials to proceed under
the federal civil rights statute to enforce rights
granted by social welfare legislation. See, e.g.,
King v. Smith, 392 U.S. 309 (1968).
• This principle was affirmed by the Supreme
Court to enforce the entitlement to Medicaid
in Wilder v. Virginia Hosp. Assoc., 496 U.S. 498
(1990).

8. The Wilder decision
• Wilder involved a hospital rate setting statute adopted by the
Virginia Medicaid program that imposed rate caps on hospitals as a
means of constraining hospital costs.
• The Boren Amendment, enacted by Congress in 1981, provided that
state Medicaid payments to institutional providers must be
reasonable and adequate to meet the costs of “efficiently and
economically operated” facilities.
• Virginia hospitals argued that the rate methodology adopted by the
state Medicaid program did not meet their costs and therefore
were adopted in violation of the Boren Amendment.
• The case presented the question: could the federal civil rights
statute be used to sue a state official in federal court to enforce
federal Medicaid law?

9. The Wilder decision (cont’d.)
• By a 5-4 decision (Justice Brennan, with Justice Marshall in the
majority), the Supreme Court held that Virginia hospitals could
maintain their suit against the state’s Medicaid program.
• According to the court, the statute imposed a binding obligation on
the state to pay hospitals – who were, after all, the intended
beneficiaries of the Boren Amendment – at a reasonable rate.
• Moreover, the requirements of the amendment were not so “vague
and amorphous” as to be unenforceable by the judiciary.
• Finally, Congress has not foreclosed enforcement of the Boren
Amendment via the civil rights statute because there is no express
provision foreclosing such a suit and because the Medicaid statute
contains no effectively comprehensive remedial scheme.

10. Post-Wilder
• After Wilder was decided, a series of appellate decisions
throughout the early to-mid 1990s found in favor of hospitals and
nursing homes challenging Medicaid reimbursement amounts.
• Kansas Health Care Assoc. v. Kansas Dept. of Social and Rehabilitation
Services, 958 F.2d. 1018 (10th
Cir. 1992)
• States found to have violated the procedural requirements of Boren
• Temple Univ. v. White, 941 F.2d. 201 (1991)
• Abbeville General Hospital v. Ramsey, 3 F.3d. 797 (5th
Cir. 1993)
• States found to have violated the substantive requirements of Boren
• Colorado Health Care Assoc. v. Colorado Dept. of Social Services, 842 F.2d
1158 (10th Cir. 1988)
• Folden v. Washington Dept. of Social and Health Services, 981 F.2d 1054 (9th
Cir. 1992)
• West Virginia Hosp. v. Casey, 885 F.2d 11 (3rd
Cir. 1989), cert. denied 496 U.S.
936 (1990)

11. Post-Wilder (cont’d.)
• By the late 1990s, Congress, the states, the Administration and the
federal courts began to question the policy basis of the Boren
Amendment and the legal rationale underlying the Wilder decision.
• As a policy matter, Congress and the Clinton Administration agreed
to repeal the Boren Amendment.
• Section 1902(a)(13) was replaced entirely with a procedural
requirement that states must provide a public process before
changing or implementing a new rate structure.
• However, Congress left intact § 1902(a)(30)(A), which provided and
continues to provide that a state plan for medical assistance must
“assure that payments 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 geographic area.”

12. Post-Wilder (cont’d.)
• And as a legal matter, within a decade, the Supreme Court began to chip
away at the Wilder decision.
• In Gonzaga v. Doe, 536 U.S. 273 (2002), the Supreme Court dramatically
curtailed the use of § 1983 to employ the federal courts to enforce federal
law against the states. Notably, Gonzaga did not involve a health care
statute.
• Reciting a series of holdings from cases throughout the 1990s, the
Supreme Court in Gonzaga set forth a three-part test to use § 1983 as an
enforcement mechanism against the states:
• First, the federal law must contain “rights-creating language” and these must
be created in “clear and unambiguous terms.”
• Second, the underlying federal law must focus on the individual rather than
the official who must implement the law.
• Finally, the court must consider the underlying enforcement mechanism.
Where the enforcement mechanism is a loss of funding for a violation of the
federal law, that is strong evidence that Congress did not intend individual
lawsuits.

13. The Courts begin to apply Gonzaga
• Notably, in the Gonzaga decision, Congress never overruled its
holding in the Wilder case.
• As the appellate courts began to apply Gonzaga in Medicaid cases,
however, it became evident that Wilder was a shell of its former
self.
• Virtually every appellate court agreed that § 1902(a)(30)(A)’s equal
access provision could not be enforced via a § 1983 lawsuit. See, e.g.,
Long-Term Care Pharmacy Alliance v. Ferguson, 362 F.3d 50 (1st
Cir.
2004); Sanchez v. Johnson, 416 F.3d 1051 (9th
Cir. 2005).
• Poor payments may violate the law, but are not a right. E.g.,:
• Requirement that payments must be “sufficient” is hardly clear and
unambiguous.
• Statute is directed at the state (“a state plan for medical assistance must”);
not the intended beneficiary.
• Enforcement mechanism is via § 1904 – loss of federal funding.

14. CMS response
• CMS responded to these lower court decisions by
announcing a new review method to assess state
compliance with the equal access requirements.
• Under the final rule, states are required to
establish and implement an “access monitoring
review plan” with opportunities for public input.
– However, very much a process-driven system with no
enforcement teeth other than disapproval of an SPA.
– CMS noted that “provider and beneficiary challenges
are not available to supplement CMS review and
enforcement.” 80 Fed. Reg. 67576, 67578 (Nov. 2,
2015).

15. Supremacy Clause Enforcement Tool
• As a result of the loss of § 1983 to challenge state compliance with
the equal access requirements, providers and beneficiaries in the 9th
Circuit tried an alternative pathway to enforcement.
• Under the Supremacy Clause of the Constitution, the Constitution
and laws enacted ”pursuant thereof” is the “Supreme Law of the
Land” and the lower courts are bound thereby.
• Under the pre-emption doctrine, a state law that is inconsistent
with the Medicaid statute (which is, after all, enacted pursuant to
the Spending Clause of the Constitution) ought to be pre-empted
due to the Supremacy Clause.
• In other words, if § 1902(a)(30)(A) says that Medicaid payments must
be “sufficient” to enlist enough providers, and a state enacts a
payment scheme that is “insufficient,” shouldn’t the state law be
superseded by the Medicaid statute?

16. Supremacy Clause (cont’d.)
• That was the issue presented to the Supreme Court for
review in Douglas v. Independent Living Centers of
Southern California, 565 U.S. 606 (2012).
• In Douglas, the state of California had implemented a
rate cut for human services providers in the state.
They submitted a state plan amendment to CMS for
review, then implemented the rate cut. After the cut
went into effect, CMS approved the SPA.
• The Supreme Court held by a 5-4 vote (Justice Breyer,
with Kennedy in the majority) that CMS’ approval of
the SPA made the case premature for review.
• APA challenge to CMS approval?

17. Supremacy Clause (cont’d.)
• Three years later, in Armstrong v. Exceptional
Child Center, 135 S. Ct. 1378 (2015), the Supreme
Court was squarely presented with the question.
• This time, again by a 5-4 vote (Justice Scalia, with
Justice Breyer concurring in part and Justice
Kennedy dissenting), the Supreme Court
concluded that the Supremacy Clause is not an
available avenue to challenge a state putative
violation of § 1902(a)(30)(A).
– Justice Breyer did not join the part of the opinion that
would have effectively overruled Wilder.

18. What Options Are Left?
• For alleged violations of § 1902(a)(30)(A), clearly no judicial
enforcement.
• Aggrieved parties can complain to CMS, based on standards in
2015 Federal Register notice.
• But CMS has little recourse even if a state is in violation.
• For alleged violations of other provisions of § 1902, an
evaluation of the requirement at issue under the Gonzaga
standard to assess whether the Federal Civil Rights statute
is an available tool.
• Does the requirement contain “rights creating language” and
are the requirements “clear and unambiguous”?
• Does the requirement focus on the individual or entity Congress
intended to benefit?
• What is the means of enforcement?

19. Post-Armstrong decisions
• Free choice of providers: likely not
enforceable (8th
Circuit).
• Reimbursement rates to providers (FQHCs):
likely enforceable (5th
Circuit; other circuits).
• Nevertheless, the Supreme Court is clearly
one vote away from overruling Wilder and
had the opportunity to do so in Armstrong.

20. Thank you!
Thomas Barker
Partner, Co-Chair, Healthcare Practice
Foley Hoag LLP
202.261.7310
tbarker@foleyhoag.com
Sara Rosenbaum, JD
Harold and Jane Hirsh Professor of Heath Law & Policy
Founding Chair of the Department of Health Policy
Milken Institute School of Public Health
George Washington University
202.994.4230
sarar@gwu.edu