Right of States to Limit Medicaid Reimbursements Heads to Supreme Court

Advocacy groups have gone to federal court to force states to make higher payments to Medicaid providers to improve access. But a spokesman for state Medicaid officials said the courts are an inappropriate place for such disputes.

Whether states have the right to determine the amount of Medicaid reimbursements, especially as more and more of them move to managed care to keep costs under control, will be decided by the US Supreme Court. The battle is pitting patient advocates against those who say states must have the ability to run their own programs.

In December, a federal judge in Miami found that Florida’s Medicaid program had failed 2 million children because its meager reimbursements meant too few doctors and dentists were willing to see patients who relied on the program for care. And Florida, unlike 37 other states, has not expanded Medicaid under the Affordable Care Act (ACA), although there are groups asking the Florida legislature to revisit this issue.

Florida is among the states where patient advocates or physician groups have sought help from the federal courts to raise Medicaid provider payments. The program, which is jointly run between the federal government and the states, covers about 70 million low-income Americans. Other states that have seen lawsuits include Massachusetts, California, Illinois, Oklahoma, and Texas.

The Supreme Court also agreed to hear a case from Idaho involving payments to centers that care for persons with developmental disabilities. In 2011, a lower court agreed with the centers that Idaho had unfairly frozen reimbursement rates at 2006 levels. That case will be heard January 20, 2015.

Matt Salo, executive director of the National Association of Medicaid Directors, told news outlets that federal courts are an inappropriate venue for such disputes, and that those who seek to raise reimbursement rates should take their complaints to state and federal Medicaid officials.

Meanwhile, an advocacy group said a victory by Idaho would have a “chilling effect” on lawsuits, which have caused higher payments in some jurisdictions. “The record of success in lawsuits … shows that courts found that Medicaid laws were being violated,” Sarah Somers of the National Health Law Program told Kaiser Health News.

Kaiser has previously reported that the movement to Medicaid managed care has passed a “tipping point” as states seek cost savings, especially to handle the influx of enrollees newly eligible under the ACA. This march toward managed care continues despite some well-publicized failures and delays, which typically occur when states have a rapid transition to managed care to deal with budget shortfalls.

An increase in the use of Medicaid managed care, coupled with low reimbursement rates, has created access issues in areas where physician shortages were in place before Medicaid expansion. An op-ed in the Lexington Herald outlined how some Kentucky hospitals are having to shift resources to handle influxes of patients who are newly insured but cannot find a primary care physician willing to accept their Medicaid coverage.

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Medicaid Reimbursement Battle Heads to Supreme Court

Too early to tell if Kynect a success