Armstrong v. Exceptional Child Center, Inc.

LII note: The U.S. Supreme Court has now decided Armstrong v. Exceptional Child Center, Inc. .


Does section (30)(A) of the Medicaid Act provide a private right of action for Medicaid providers against states under the Supremacy Clause, even when Congress has not explicitly created the right?

Oral argument: 
January 20, 2015

The Supreme Court will consider whether individual Medicaid providers have a private right of action under the Supremacy Clause to enforce section (30)(A) of the Medicaid Act (“§ (30)(A)”), which requires state Medicaid agencies to take provider costs into account when setting reimbursement rates, when Congress has not explicitly granted a private right of action. Richard Armstrong, the Director of Idaho’s Department of Health and Welfare, argues that individuals do not have a private right of action under § (30)(A) or the Supremacy Clause because a private remedy cannot exist without congressional intent and private litigants should not play a role in determining whether a state gets federal funding. According to Exceptional Child Center, however, when a state law conflicts with federal law, individuals have a private right of action under the Supremacy Clause to bring an injunction and prevent harm that would result from the conflicting state statute. The Court’s ruling will impact the right of individuals to recover under the Supremacy Clause as well as the administration of Medicaid and other statutory schemes that provide funding to states as long as they comply with federal law.

Questions as Framed for the Court by the Parties 

Does the Supremacy Clause give Medicaid providers a private right of action to enforce § 1396a(a)(30)(A) against a state where Congress did not expressly create enforceable rights under that statute?


Exceptional Child Center, Inc., and four other companies (collectively, “ECC”) offer in-home healthcare and other services for those who are Medicaid-eligible in Idaho. Richard Armstrong is the Director of Idaho’s Department of Health and Welfare (“IDHW”), which is Idaho’s Medicaid program. Under Medicaid, the federal government grants funds to states to reimburse medical expenses for individuals with dependent children or individuals who are elderly or disabled. The Medicaid Act provides the requirements for states participating in the Medicaid program. Although Medicaid typically provides only for the institutional care of individuals, if the costs associated with in-home care are equivalent to or less than the cost of institutional care, then states, such as Idaho, may reimburse service providers for the cost of in-home care of Medicaid-eligible individuals, and the federal government will fund the states’ reimbursements. Both the federal government, through the Federal Center for Medicaid and Medicare Services (“CMS”), and Idaho establish reimbursement rates for in-home care providers like ECC.

Under Ninth Circuit precedent, section (30)(A) of the Medicaid Act (“§ 30(A)”) requires that a state agency consider the costs of medical care when creating its rates and conduct studies to determine the true costs of care. The rate must “bear a reasonable relationship to efficient and economical . . . costs of providing quality services.” To deviate from this standard of reasonableness, a state must justify its decisions with more than budgetary reasons. ECC alleged that by failing to alter the reimbursement rates for in-home care, IDHW violated § 30(A). According to IDHW investigations, reimbursement rates that Idaho set in 2006 were below the costs that providers incur for in-home care. The District Court reasoned that in order to satisfy the standards set under § 30(A), the state must take the costs of care into account when setting reimbursement rates, especially when a study demonstrates that costs have been increasing.

The Idaho District Court granted summary judgment in favor of ECC, holding that IDHW did not satisfy the requirements of § 30(A) because IDHW did not consider the cost of providing in-home care when setting its reimbursement rates. According to the District Court, ECC, as a provider of in-home care, had standing under the Supremacy Clause to challenge IDHW’s reimbursement rate decision. The Ninth Circuit upheld the decision of the District Court, ruling that IDHW must consider provider costs when making its decision and that ECC had an implied private right of action under the Supremacy Clause of the United States Constitution to challenge the reimbursement rates set for § 30(A).


The parties in this case disagree over whether Medicaid providers can enforce § 30(A) to uphold a private cause of action for an injunction under the Supremacy Clause against Idaho’s Medicaid officials.

Armstrong asserts that Congress has not permitted private parties, such as Medicaid providers, to enforce § 30(A) against state officials, and therefore under the Supremacy Clause, Medicaid providers have no right to bring this injunction against Idaho officials. Further, Armstrong contends that only Congress has the power to designate private remedies, such as injunctions, to prevent Idaho’s Medicaid from providing low reimbursement rates to Medicaid providers.

ECC counters that due to the new cost analysis that IDHW conducted on their residential habilitation services reimbursement rates, IDHW’s reimbursement rates are preempted by § 30(A) because § 30(A) requires states to establish reimbursement rates in proportion to provider costs and to depend on that cost analysis before lowering rates. ECC argues that IDHW’s rates did not reimburse Medicaid providers enough to cover their expenses, and IDHW did not raise the rates in accordance to the new cost analysis that indicated that the current rates were too low. Further, ECC states that courts have allowed private parties to receive injunctive relief against state laws, such as § 30(A), that are preempted under the Supremacy Clause.


Armstrong maintains that to create a private right of action Congress must have intended to produce a right and a remedy, and Congress did not stipulate any terms in § 30(A) for private entities to have a right and remedy to enforce § 30(A) under the Supremacy Clause against state officials. As further evidence, Armstrong claims that the language within § 30(A) is broad and is aimed at administering state services as a whole rather than individually. Accordingly, Armstrong maintains that Medicaid providers arguing for their specific reimbursement rates to be higher falls under individual needs. Additionally, Armstrong argues that ECC’s claim that anticipatory enforcement applies to § 30(A), which would allow Medicaid providers suing Idaho officials to argue preemption as a preventative protection against Idaho’s low reimbursement rates, is wrong because Medicaid providers have no federal right of immunity that Idaho law interfered with. Armstrong asserts that § 30(A) governs the relationship between CMS and the state, and thus, CMS rather than the Medicaid providers are the intended beneficiaries of Idaho’s § 30(A) duties. Additionally, Armstrong claims that because a state will only be reimbursed under § 30(A) if it adheres to the required conditions, and the state does not violate federal law if it does not adhere to these required conditions, § 30(A) cannot preempt Idaho’s Medicaid reimbursement rates. Moreover, Armstrong argues that the Supremacy Clause does not provide a federal right of action to plaintiffs, but rather only ensures that federal law has precedence over state law when the laws diverge.

In opposition, ECC argues that because a Medicaid provider’s claim under the Supremacy Clause is for injunctive relief and rooted in equity rather than damages, Medicaid providers do not have to prove that Congress had the intent to create a private right and remedy in § 30(A). ECC claims that injunctive relief suits rarely occur in scenarios where the statute provides the plaintiffs a right and remedy. Instead, ECC argues that often the plaintiffs have no other means for seeking a right and remedy and thus, the proper measure is harm prevention. ECC contends that Idaho officials are harming the Medicaid providers through Idaho’s low Medicaid reimbursement rate, and these providers have no recourse to challenge this law other than under the Supremacy Clause. Additionally, ECC counters that the Supremacy Clause does provide a federal right to the Medicaid providers because through upholding the Supremacy Clause, the United States Constitution is being upheld. ECC also argues anticipatory enforcement applies in this case because Idaho can enforce fines and postpone or end providers’ membership in Medicaid, and thus, the providers are protecting themselves in advance against this potential enforcement action. ECC asserts that many statutes that preempt state law do not have “rights-creating language” and therefore it is not necessary for § 30(A) to have “rights-creating language” for Medicaid providers to have rights under the Medicaid Act. Lastly, ECC counters that § 30(A)’s discretionary nature is irrelevant as to whether § 30(A) can preempt Idaho’s Medicaid reimbursement rates, and that the judiciary can still enjoin Idaho officials from applying reimbursement rates that violate § 30(A) as long as Idaho maintains a Medicaid program.


Armstrong asserts that Congress decides who can enforce federal statutes such as § 30(A), not private parties such as Medicaid providers. Armstrong claims that by producing privately enforceable rights and allocating power to the judiciary, separation of powers would be violated because the judiciary does not have the authority to create private remedies. Armstrong also argues that § 30(A)’s broad language—and language that would make it difficult for courts to interpret § 30(A) in their individualized decision-making—indicates agency authority rather than judiciary authority. Moreover, Armstrong argues that agencies rather than the judiciary are meant to implement § 30(A) because Congress often authorizes an agency to use it’s expertise in overseeing the specifics in Spending Clause statutes such as § 30(A) and here, Medicaid maintains the expertise to implement § 30(A). Further, Armstrong claims that by Congress delegating to Medicaid, § 30(A) will be administered uniformly throughout the states, rather than in fragments by the judiciary. Armstrong also claims that allowing private enforcement of § 30(A) would not notify states regarding standards they need to meet, and judicial remedies not required in § 30(A) or enforced by CMS would be implemented. Armstrong argues that private enforcement would only stifle the aims of § 30(A), which includes promoting dialogue between the states and CMS, not the states and the judiciary.

In contrast, ECC argues that as held in Rosado v. Wyman, courts have the power to enforce injunctions against actions violating statutes that allegedly preempt state law, such as § 30(A). Additionally, ECC argues that the legislative history shows that Congress has not made CMS the only authority on Supremacy Clause preemption, and Congress has not stated that it wants to bar the judiciary from deciding these cases. ECC further claims that Congress had the opportunity to amend § 30(A) to prevent state laws from being preempted by § 30(A) and constrain the role of the judiciary, but Congress did not. Additionally, ECC maintains that the judiciary will not obstruct agency authority in administering § 30(A) because there is still agency deference to CMS in determining whether preemption exists, and if CMS has expressed authority on the preempted issue then CMS’s interpretation is superior. ECC argues that preemption actions are crucial because CMS does not have enough resources to oversee all of the Medicaid programs’ adherence with federal law funding provisions, and to prevent harming Medicaid beneficiaries during lengthy administrative proceedings, the courts must help in overseeing the Medicaid programs. Additionally, ECC argues that § 30(A)’s broad language is irrelevant as to whether the Supremacy Clause provides a private cause of action because the language only speaks to whether § 30(A) preempts Idaho’s reimbursement rate system. ECC maintains that sufficient notice is provided to states because there have been many Spending Clause cases in the courts that implicate statutes such as § 30(A), and thus states should be aware that the judiciary is playing a role.


The Supreme Court will determine whether Medicaid providers have a private right of action under the Supremacy Clause for a violation of § (30)(A), which requires state Medicaid agencies to take provider costs into account when setting reimbursement rates, even though Congress has not intended to create the right. Exceptional Child Center (“ECC”) argues that states violate the Constitution when they enact laws that conflict with federal laws, and that individuals should have a private right of action under the Supremacy Clause to prevent irreparable harm that may result from unconstitutional state statutory schemes. The Idaho Department of Health and Welfare (“IDHW”) asserts that individuals do not have a private right of action under the Supremacy Clause because a private remedy cannot exist in the absence of congressional intent, and because private litigants should not determine whether a state receives funding as part of a federal statutory scheme. The Court’s ruling impacts the right of individuals to recover under the Supremacy Clause as well as the administration of Medicaid and other statutory schemes that provide funding to states as long as they comply with federal law.


According to amici for ECC, the American Civil Liberties Union and other organizations (collectively, “ACLU”), if the Court rules in favor of IDHW and precludes challenges under the Supremacy Clause, then minorities and low-income individuals would be unable to directly challenge state laws that infringe on individual rights, and would thus have no means for remedying immigration, fair housing, or health care rights violations. The ACLU asserts that the only other available remedy for many preemption claims is to stop federal funding, but the individuals that challenge the state laws are the ones that also benefit from the funding. Because private actions would not require the withdrawal of federal funding to the program and would ensure state compliance with federal law, the ACLU argues that it is a more appropriate remedy.

However, according to California Health and Human Services Agency (“CHHS”), amicus curiae for IDHW, allowing a private right of action under the Medicaid Act prevents Congress from properly regulating the implementation of the Medicaid program. According to CHHS, if private litigation determines the appropriate policy choices for the Medicaid scheme, then federal agencies will be unable to enforce a uniform national reimbursement policy because courts in several jurisdictions will decide which reimbursement rates are proper. In addition, CHHS argues that states will not be able to accurately predict their budgetary needs for Medicaid if they are always subject to suit by private litigants. As a result, CHHS contends that preliminary injunctions preventing the enforcement of new reimbursement rates, which CCHS believes are proper and will save states money, will cause states to cut their already limited funding for other programs.


Amici for IDHW, National Governors Association and Council of State Governments, argue that allowing for private actions arising under the Supremacy Clause would permit litigants to bring claims against states under any federal law because Congress’s intention to create a private right of action would be irrelevant. In addition, the National Governors Association argues that if private causes of action were allowed for Supremacy Clause challenges, then 24 U.S.C. § 1983, which allows individuals to bring suits for violations of federal rights, would be unnecessary and redundant. In support of IDHW, several states assert that individual litigants would be able to challenge all federal laws, treaties, policies, and statutes, which traditionally cannot be challenged by individuals.

Because Idaho can collect money from providers when Medicaid overpays them, ECC asserts that providers have an anticipatory enforcement claim under the Supremacy Clause, which is a traditional circumstance under which the Court has allowed private claims. Although the Medicaid Act deals directly with the relationship between the states and the federal government in providing funding for healthcare for certain individuals, ECC argues that individuals have an interest in remedying unconstitutional statutes, and should have a private right of action when the individual suffers harm as a result of the unconstitutional scheme.


In this case the Court will determine whether Medicaid providers can enforce § 30(A) to enjoin Idaho officials under the Supremacy Clause. Armstrong contends that Medicaid providers cannot enforce § 30(A) because they have no private right and remedy under the Supremacy Clause, and only Congress, not the judiciary, can determine whether Medicaid providers possess this private right of action. However, ECC claims that Medicaid providers can enforce § 30(A) because courts have permitted private parties to receive injunctive relief against state laws that are preempted under the Supremacy Clause, and allowing the judiciary to hear cases under the Supremacy Clause is the only recourse the providers have to avoid harm under the current Idaho reimbursement rates. The Court’s ruling implicates individuals’ rights to receive equitable relief under the Supremacy Clause, and the administration of Medicaid and other cooperative federal-state programs.

Additional Resources 

Robert Pear: As Medicaid Rolls Swell, Cuts in Payments to Doctors Threaten Access to Care, The New York Times (Dec. 27, 2014).

Peyton M. Sturges: High Court to Review Medicaid Dispute, Providers' Rights to Force Higher Payments, Bloomberg BNA's Health Law Reporter (Oct. 9, 2014).

Steve Vladeck: Enforcing Medicaid Against Recalcitrant States: The Former HHS Officials' Amicus Brief in Armstrong, PrawfsBlawg (Dec. 23, 2014).