Brief Fact Summary. The California Legislature passed three statutes changing the state’s Medicaid plan by reducing payments to Medicaid providers and beneficiaries (Plaintiff).Â The Medicaid providers and beneficiaries (Plaintiff) sued California’s Director of State Health Care Services (Defendant) arguing the state law was preempted by federal enactments under the Supremacy Clause.
Synopsis of Rule of Law. Once a federal agency has approved state statutes, Medicaid recipients and providers cannot maintain a cause of action under the Supremacy Clause by declaring that federal law preempts a state law reducing reimbursement rates without seeking review under the Administrative Procedure Act (APA) because of the issue of ripeness.
Issue. Once a federal agency has approved state statutes, can Medicaid recipients and providers maintain a cause of action under the Supremacy Clause by declaring that federal law preempts a state law reducing reimbursement rates without seeking review under the Administrative Procedure Act (APA) because of the issue of ripeness?
Held. (Breyer, J.)Â No.Â Once a federal agency has approved state statutes, Medicaid recipients and providers cannot maintain a cause of action under the Supremacy Clause by declaring that federal law preempts a state law reducing reimbursement rates without seeking review under the Administrative Procedure Act (APA) because of the issue of ripeness.Â
Â This Court granted certiorari in these cases to decide whether Medicaid providers and recipients may maintain a cause of action under the Supremacy Clause to enforce a federal Medicaid lawâ€”a federal law that, in their view, conflicts with (and preempts) state Medicaid statutes that reduce payments to providers.Â However, the relevant circumstances changed with the grant of certiorari.Â CMS has now approved the state statutes as consistent with the federal law.Â Due to the changed circumstances, the Court believes the question that is before us now is whether, upon the agency’s approval of the state statutes, groups of Medicaid providers and recipients may still maintain a Supremacy Clause action claiming that the state statutes are not consistent with the federal Medicaid law.
Â While the cases are not moot, they are now in a different position.Â CMS has determined that the challenged rate reductions comply with federal law.Â The decision of CMS does not change the underlying substantive question, specifically whether the State’s (Defendant) statutes are consistent with a specific federal statutory provision (requiring that reimbursement rates be “sufficient to enlist enough providers”).Â But it may change the answer.Â And it may require the Medicaid providers and beneficiaries (Plaintiff) now to go forward by seeking review of the agency determination under the APA, rather than in an action against the State (Defendant) under the Supremacy Clause.
Â For one thing, the APA would probably permit the Medicaid providers and beneficiaries (Plaintiff) to get an authoritative judicial determination of the merits of their legal claim.Â The APA provides for judicial review of final agency action.Â It permits any individual negatively affected or injured by agency action to obtain judicial review of the lawfulness of that action.Â And it requires a reviewing court to set aside agency action found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”Â For another thing, the Medicaid providers’ and beneficiaries’ (Plaintiff) basic challenge now presents the kind of legal question that usually calls for APA review.Â The Medicaid Act commits to the federal agency the power to administer a federal program.Â In this case the agency has acted under this grant of authority.Â That decision carries weight.Â Finally, to allow a Supremacy Clause action to proceed once the agency has reached a decision could cause potential inconsistency or confusion.
Â The parties have not explained why courts should not now (in the changed posture of these cases) apply those ordinary standards of deference.Â The parties have also not explained why, once the agency has taken final action, a court should reach a different result in a case like this one, depending on whether the case goes forward in a Supremacy Clause action rather than under the APA for review of an agency decision.Â Certainly, to allow a difference in result here would subject the states to conflicting interpretations of federal law by several different courts (and the agency), thereby threatening to defeat the uniformity that Congress intended by centralizing administration of the federal program in the agency and to make unnecessary or to undermine traditional APA review.Â The Supremacy Clause, at best, is redundant if the two kinds of actions should reach the same result.Â And to allow the continuation of the action in that form would seem to be inefficient, as the agency is not a participant in the pending litigation below, litigation that will decide whether the state rates approved by the agency violate the federal statute.
Â In addition, it must be noted that the parties have not argued this question fully.Â Therefore, it may be that there are more considerations yet to be presented to this Court, or in the arguments addressed to and considered by the appellate courts, that may bear upon resolving the issue properly.Â Due to the complexity of these cases, rather than ordering re-argument, this Court vacates the judgments of the Ninth Circuit and remands the cases.
Discussion. In a peculiar twist, this 5-4 decision whose majority opinion was written by Justice Breyer, vacated and remanded the consolidated cases on the basis of the issue of ripeness.Â This is not to be confused with the issue of mootness, which all of the parties agree has not occurred simply because of the federal agency’s determination that a State’s rate reductions are proper.Â Chief Justice Roberts’ dissent got right to the main point which is whether or not the federal Medicaid legislation permits a private right of action, which he argues it does not.