"Supremacy Clause" Cause of Action
Under 42 U.S.C. § 1396a(a)(30)(A) of the Medicaid Act, a state that accepts federal Medicaid funds must adopt a state plan containing methods and procedures to “safeguard against unnecessary utilization of .. . [Medicaid] services and . . . assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available . . . at least to the extent that such care and services are available to the general population." The Ninth Circuit, along with virtually all of the circuits to have considered the issue since this Court's decision in Gonzaga University v. Doe, 536 U.S. 273 (2002), concluded that this provision does not confer any "rights" on Medicaid providers or recipients that are enforceable under 42 U.S.C. § 1983, and respondents do not contend otherwise. Nonetheless, in the present case, the Ninth Circuit held that § 1396a(a)(30)(A) preempted a state law reducing Medicaid reimbursement payments because the State failed to produce evidence that it had complied with requirements that do not appear in the text of the statute, and because the reductions were motivated by budgetary considerations.
The question presented is:
Whether Medicaid recipients and providers may maintain a cause of action under the Supremacy Clause to enforce § 1396a(a)(30)(A) by asserting that the provision preempts a state law reducing reimbursement rates?
NCLC urged the U.S. Supreme Court to hold that the Constitution’s “Supremacy Clause” provides private parties with a right to bring preemption lawsuits against states and municipalities to challenge laws and regulations that are inconsistent or incompatible with federal law. In this case, Medicaid recipients and providers sued California for failing to pay the rates required by the federal Medicaid Act. NCLC argued in its amicus brief that for nearly 200 years, the U.S. Supreme Court has assumed that the Supremacy Clause provides such a cause of action. NCLC also argued that the business community relies on the doctrine of preemption to challenge patchwork state and local regulation in order to promote a unified national marketplace for goods and services. In recent years, NCLC has used the Supremacy Clause to bring its own lawsuits challenging the patchwork of state immigration laws, and to challenge misguided state labor union laws. NCLC also regularly files amicus briefs in support of other groups using the Supremacy Clause to challenge anti-business state and local regulations.
When this case reached the Supreme Court, federal agency officials disapproved the amendments, and California sought further administrative review. After oral argument, CMS approved several of the State’s amendments, and the State withdrew its requests for approval of the remainder. Accordingly, the U.S. Supreme Court vacated the lower court's judgments and remanded the case to the Ninth Circuit with instructions for the parties to argue before the Ninth Circuit whether the plaintiffs could maintain Supremacy Clause actions now that CMS has approved the state statutes.