In Gonzaga v. Doe, 536 U.S. 273 (2002), the Supreme Court limited the ability of private parties to enforce federal statutes to situations in which Congress expressly and unambiguously granted such a cause of action. However, the U.S. Court of Appeals for the Ninth Circuit has allowed plaintiffs with no standing under § 1983 to circumvent the requirement of an explicit cause of action by hearing similar suits as challenges under the Supremacy Clause of the Constitution. In California Pharmacists v. Maxwell-Jolly, the Ninth Circuit has continued a series of rulings blocking California’s attempts to reduce its budgetary woes (by about $2 billion) through a reduction in Medicaid-related spending.  That decision is a follow-on to another Ninth Circuit ruling involving Medicaid spending, Independent Living v. Maxwell-Jolly, from July of last year. California has appealed both losses to the U.S. Supreme Court, which is currently considering the petitions.

The California Pharmacists case, decided in March, involved various rate reductions passed by the California legislature in 2008 in an attempt to stem its budget crisis. However, the Ninth Circuit has allowed preliminary injunctions to be issued based on the budget cuts conflicting with 42 U.S.C. § 1396a(a)(30)(A), which requires states to “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 under the plan at least to the extent that such care and services are available to the general population in the geographic area.”

Essential to the plaintiffs’ claim, however, is the Ninth Circuit’s interpretation of § 30(A). The Ninth Circuit does not analyze the actual substantive effects of the budget cuts, but instead demands that states adhere to procedural requirements not found in the statute:  “the final body responsible for setting Medicaid reimbursement rates must study the impact of the contemplated rate reduction on the statutory factors of efficiency, economy, quality of care, and access to care prior to setting or adjusting payment rates.” Through the Supremacy Clause, therefore, the Ninth Circuit has created a private enforcement mechanism to allow Medicaid healthcare providers and beneficiaries to enforce § 30(A) absent any explicit indication by Congress that such enforcement should be allowed.

With the new federal health care law poised to increase the already burdened state Medicaid rolls, states should be concerned with how easily their budget decisions can be challenged. Any budgetary reduction that “conflicts” with federal law, or the Ninth Circuit’s interpretation of it, can be challenged by any plaintiff who “can show harm to Medi-Cal service providers or their members.” According to the Ninth Circuit, this allows anyone with Article III standing to act as a “private enforcer[ ] of the Supremacy Clause.” In order to show irreparable harm, as required for a preliminary injunction, plaintiffs need not show substantive harm under the federal statute. Instead of having to demonstrate that benefits have dipped below federally required levels, plaintiffs only need to prove, essentially, that benefits have decreased.

Not only has the Ninth Circuit given Medicaid beneficiaries a backdoor through which they can enforce entitlements not specifically granted by Congress, but it has also severely limited states’ ability to deal with their Medicaid budgets. The California Department of Healthcare Services has sought Supreme Court review of both the July 2009 and March 2010 decisions. Twenty-two states filed an amicus brief in support of the petition in the Independent Living case, and the Court on May 24 sought the views of the Solicitor General on the questions before the justices. The state agency argues that if private rights of actions not found in statutes may nonetheless be enforced through the Supremacy Clause, then any conflicting state law will lead to such a right. Certainly, if the Ninth Circuit’s position stands, § 1983 actions will give way to actions under the Supremacy Clause. The Supreme Court should grant the petition not only to affirm Gonzaga, but also to keep states free to reduce entitlements not guaranteed by state or federal law.