1st Cir.: Medicaid wraparound payments enforceable

The First Circuit held that Medicaid’s wraparound payment calculation provisions are enforceable under 42 U.S.C. § 1983, and guarantee a substantive right to adequate payments.

 The court also held that claims for injunctive relief to ensure proper calculation of future payments were not barred by sovereign immunity. While this decision deals solely with the rights of Federally Qualified Health Centers (FQHCs), it is always encouraging to see the courts of appeals treating Medicaid provisions as guaranteeing substantive, enforceable rights. Concilio de Salud Integral de Loiza v. Peréz-Perdomo, --- F.3d ----, 2008 WL 5206398 (1st Cir. Dec. 15, 2008) (No. 07-2012).

          This appeal concerned a long-running dispute over “wraparound” payments to FQHCs in Puerto Rico.  States are required to make these payments to FQHCs to cover the difference between the reimbursement they are owed and what they are paid by managed care organizations (MCOs). 42 U.S.C. § 1396a(bb). Last year, the district court vacated its preliminary injunction, finding that the defendant agency had fully complied with § 1396a(bb) by establishing an office responsible for calculating and making future wraparound payments. 479 F.Supp.2d 247 (D.P.R. 2007). The court did this despite not having resolved significant disputes over the proper calculation method, particularly whether payments were required for services to individuals whose coverage is not mandatory under federal law. The defendant contended that if the amounts were calculated properly, it owed nothing. The court enjoined defendant to continue using “baseline calculation data” that the court had established back in 2001 as an interim measure – and dismissed plaintiffs’ claims as moot. Both sides appealed.

 

          The First Circuit held that § 1396a(bb) “requires not only that the Commonwealth set up a system for making wraparound payments but that these payments be properly calculated and made.” Establishing an office was clearly not sufficient to comply. And because the district court “did [not] fully determine what constitutes compliance” under § 1396a(bb), the panel said it was legal error to dissolve the preliminary injunction and dismiss the case.

 

          The court further held that the wraparound calculation provisions – §§ 1396a(bb)(2), (3) and (4) – are enforceable under § 1983. The court had previously held that subsection (5), which provides that the state plan “shall provide for payment to the [FQHC],” is enforceable under § 1983.  Rio Grande Cmty. Health Ctr., Inc. v. Rullan, 397 F.3d 56 (1st Cir.2005). The panel now held that the subsections (2), (3) and (4), describing how payments are to be calculated, are also privately enforceable, “because it is mandatory and has a clear focus on the benefitted FQHCs, rather than the regulated states.”

 

The court observed that, as in subsection (5), the calculation provisions “are uniformly preceded by the declaration that the state plan ‘shall provide for payment,’” are “highly specific,” and are written in “individualistic terms,” referring to the “center or clinic.” The court also pointed to other circuits that had permitted § 1983 claims under these provisions. Pee Dee Health Care, P.A. v. Sanford, 509 F.3d 204 (4th Cir. 2007) (summary here); Cmty. Health Ctr. v. Wilson-Coker, 311 F.3d 132 (2d Cir. 2002).

 

          The court also held that enforcement of the calculation provisions was not barred by state sovereign immunity. Because plaintiffs claims “are over how the amounts due to them should be calculated in the future,” the court held that they constitute ongoing violations of federal law that could be remedied under Ex Parte Young. See Verizon Md. Inc v. Pub. Serv. Comm’n, 525 U.S. 625, 645 (2002).

 

            In a footnote, the court added that any claims for past non-compliance with the preliminary injunction are also not barred by sovereign immunity. Cf. Frew v. Hawkins 540 U.S. 431 (2004); Hutto v. Finney, 437 U.S. 678 (1978).

 

          The panel reinstated the preliminary injunction and remanded for further proceedings.