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Supreme Court Considers Medicaid Reimbursement

AARP asked the U.S. Supreme Court to preserve the right of medical service providers to challenge inadequate reimbursement rates in court. At issue are the State of Idaho’s rates for paying home care workers that fall below the actual costs of providing care to Medicaid beneficiaries.


Five Idaho corporations that provide residential rehabilitation services to Medicaid beneficiaries sued the Idaho Department of Health and Welfare (IDHW), the agency that administers the state’s Medicaid program. They alleged that the IDHW set reimbursement rates too low, and that actual costs exceeded those rates. The providers pointed out that the 2006 study that set these rates was outdated, and that in 2009 IDHW submitted a plan to the federal government to increase these rates. The federal government approved the plan but the new rate structure was never implemented by the state. IDHW took the position that it was unable to implement these rates because of inadequate appropriations from the legislature.

Medicaid is a federal-state partnership in which states administer the programs, tailored heavily to each state’s individual needs.  States must receive approval of their plans from the federal government, which in return picks up a substantial share of the program’s cost.

After a court ruled in favor of the providers and the Ninth Circuit Court of Appeals affirmed, the state appealed to the U.S. Supreme Court. The central question before the Court is whether the Idaho plaintiffs have standing to sue the state to enforce the Medicaid Act’s provisions that require a state to set rates at an adequate level to ensure that beneficiaries have access to sufficient numbers of providers to meet their needs.  The state claims that only the federal government can enforce these requirements in the Medicaid Act.
AARP’s friend-of-the-court brief, filed by attorneys with AARP Foundation Litigation in conjunction with more than a dozen organizational advocates for Medicaid beneficiaries, reviews the history and purposes of the Medicaid program, which was designed to provide health care to the most vulnerable Americans.  Medicaid relies on private enforcement of its provisions in order to ensure its promises are kept. Moreover, by voluntarily entering the federally funded program, states implicitly agree to be held accountable in federal court.

What’s at Stake

The question of standing to bring private rights of action in Medicaid rate cases is now a hotly contested one. AARP has participated in several cases across the country supporting the right to bring such legal challenges.  With Medicaid under budgetary attack in every state, the issue gains increasing prominence. A Medicaid program that underfunds service providers will result in either fewer providers who are able and willing to provide medical care to Medicaid beneficiaries, or a decline in quality of providers, or both.

Case Status

Armstrong v. Exceptional Child Center is before the U.S. Supreme Court.