9th Cir. opinion in Medi-Cal/Supremacy Clause case

The Ninth Circuit has issued an opinion elaborating its holding this July which it held that Medicaid beneficiaries may sue under the Supremacy Clause to enforce the Equal Access provisions of the Medicaid Act.

The opinion explains that (1) more than a century of jurisprudence has permitted claims for injunctive relief under the Supremacy Clause, without regard to whether statutory “rights” exist, (2) the district court improperly conflated preemption claims with standing principles and the requirements of 42 U.S.C. § 1983, and (3) preemption principles do not differ for laws passed under Congress’s spending power. The court also held that Medicaid beneficiaries and providers had standing. Independent Living Center of Southern California v. Shewry, 543 F.3d 1050 (9th Cir. Sep. 17, 2008) (No. 08-56061).

 

          Provider and beneficiary plaintiffs are challenging California’s Medi-Cal reimbursement cuts as being in violation of 42 U.S.C. § 1396a(a)(30)(A). The district court, 2008 WL 4298223, dismissed on the ground § (30)(A) was not privately enforceable under Sanchez v. Johnson, 416 F.3d 1051 (9th Cir. 2005). The Ninth Circuit reversed on July 11 in a short order, 2008 WL 4327362, explaining that Sanchez reached only claims under § 1983, and stating that it would issue a full opinion later (summary here). The state immediately petitioned for panel and en banc rehearing. On remand, the district court preliminarily enjoined the cuts with regard to most services. 2008 WL 3891211 (summary here). However, on September 15 the district court amended its order to limit the injunction to prescription drugs, physicians, dentists, pharmacies, adult day health care centers, and health clinics. The State is now appealing the injunction.

 

            The district court’s original decision erroneously limited preemption claims to three circumstances: where plaintiffs claim that state law forces them to violate federal law; where plaintiffs contend that their conduct would be restrict by state law that conflicts with federal law, and where state law interferes with federally created rights. In its new opinion, the panel notes that the first two of these conditions really concerned standing, while the third reflected the requirements of § 1983. “The Supreme Court has repeatedly entertained claims for injunctive relief based on federal preemption,” the panel wrote, “without requiring that the standards for bringing suits under § 1983 be met, and without intimating that such claims must fit into one of three categories or ‘circumstances’ in order to be cognizable.” Consequently, the State’s asserted limitations on preemption claims “would work a fundamental change in Supremacy Clause jurisprudence.”

 

            The panel also said that the State provided “little, if any, justification for treating a claim of preemption under a federal statute passed pursuant to Congress’s spending power differently from a claim of preemption under any” other federal law. Indeed, “this argument has also been flatly rejected by the Supreme Court” in Pharmaceutical Res. & Mfrs. of Am. v. Walsh, 538 U.S. 644 (2003). In Walsh, drug companies brought a preemption claim under the Medicaid Act, and the State made the very same argument. This argument was explicitly rejected by the First Circuit, and embraced by Justices Scalia and Thomas. By contrast, the seven other justices reached the merits of the preemption claim, and therefore “necessarily assumed – albeit implicitly” that the Medicaid Act can be privately enforced via the Supremacy Clause. The panel noted that two other circuits have already drawn this implication from Walsh. PhRMA v. Thompson, 362 F.3d 817 (D.C. Cir. 2004); Planned Parenthood of Houston v. Sanchez, 403 F.3d 324 (5th Cir. 2005).

 

            The court noted that “even as the Supreme Court has tightened the requirements for seeking damages under § 1983, it has consistently reaffirmed the availability of injunctive relief to prevent state officials from implementing state legislation allegedly preempted by federal law.” Accordingly, Sanchez v. Johnson was inapplicable here, because it only concerned § 1983. See Lankford v. Sherman, 451 F.3d 496 (8th Cir. 2006) (rejecting Medicaid claims under § 1983 but permitting identical claims under Supremacy Clause). Courts should not conflate claims for prospective relief (under the Supremacy Clause) and retrospective relief (i.e. damages under § 1983), because “a state’s interest in continuing to flout binding federal law is illegitimate.” Green v. Mansour, 474 U.S. 64, 68 (1985).

 

          Because the district court appeared to conflate the existence of a private right of action with plaintiffs’ standing, the panel held explicitly that both the providers and beneficiaries had standing. Providers faced economic injuries directly traceable to the Medi-Cal cuts, while beneficiaries faced lack of access to medical care – both of which would certainly be remedied by injunctive relief.