D.Haw. rejects § 1983 for Medicaid HMO suit, misses Supremacy Clause

Hawaii’s federal district court held that an HMO cannot seek injunctive relief for violations of the Medicaid Act because the provisions at issue do not provide enforceable rights for health care providers under 42 U.S.C. § 1983. AlohaCare v. Hawaii Dept. of Human Services, 2008 WL 2605208 (D. Haw. Jul. 2, 2008) (No. 08-00212).

           The court did not address whether the Act could be enforced through a preemption claim under the Supremacy Clause. Instead, it suggested that § 1983 is the only basis for enforcing federal statutes absent an express cause of action.  

            AlohaCare has been a Medicaid HMO in Hawaii since 1994. But early this year, it lost out to two other companies on a contract to extend managed care to the state’s aged, blind and disabled (ABD) recipients. In addition to due process and First Amendment retaliation claims (the latter based on a 2000 suit against the state), AlohaCare claimed that the award violated several Medicaid provisions.

 

            While the district court found that AlohaCare had Article III standing to sue, it concluded that the company lacked “statutory standing” to enforce the Medicaid provisions. The court said that

because § 1983 is the vehicle by which a private citizen may seek recovery against public entities or officials for violations of federal laws that do not otherwise provide for lawsuits … the court construes AlohaCare's statutory claims as asserting claims under § 1983….

As none of the federal statutes that AlohaCare relies on provides for direct actions under those statutes, AlohaCare must establish that those statutes can be enforced under § 1983.

The court is simply wrong when it states that in the absence of a direct cause of action a plaintiff must proceed under § 1983. The court failed to note numerous decisions that have recognized an implied right of action under the Supremacy Clause to enforce Medicaid and similar laws, irrespective of whether enforceable rights exist under § 1983. See, e.g., Lankford v. Sherman, 451 F.3d 496 (8th Cir. 2006); Planned Parenthood of Houston & Southeast Tex. v. Sanchez, 403 F.3d 324 (5th Cir. 2005); Pharmaceutical Res. & Mfrs. v. Walsh, 538 U.S. 644 (2003).

 

Curiously, the district court did not discuss Walsh, but cited the opinion concurring in the judgment by Justice Thomas, for the simple proposition that “[t]he Medicaid Act was promulgated under Congress's spending power.” Thomas goes on in that opinion to suggest that he believes such legislation can never be privately enforced, a proposition implicitly rejected by the Walsh plurality and dissenters. See Planned Parenthood, 403 F.3d at 332.

 

The district court concluded that none of the Medicaid provisions cited gave rise to a § 1983 claim under Gonzaga Univ. v. Doe, 536 U.S. 273 (2002).

 

·        42 U.S.C. §§ 1396b(m), whereby Medicaid HMOs must provide services to the same extent they are available to non-HMO-enrolled recipients: The court held that this provision was not intended to benefit providers.

·        42 U.S.C. § 1396u-2 (b)(5), whereby Medicaid HMOs must provide adequate assurances that they can provide adequate services: The court held that providers could not enforce this provision because it imposes obligations rather than benefits on providers.

·        42 U.S.C. § 1396u-2 (a)(1)(A)(ii), allowing states to restrict the number of managed care provider agreements if access to services is not impaired: The court said there was “no indication” that this provision was meant to benefit providers, and it was not clear whether it in fact benefitted them.

·        42 U.S.C. § 1396b(m)(2)(B) and (G), stating conditions for reimbursement: The court concluded that although this provision allows reimbursement of entities receiving small grants, such as AlohaCare, without some conditions imposed on other entities, it was not intended to benefit providers but to give states flexibility. The court compared this to the “equal access” provision held unenforceable under § 1983 in Sanchez v. Johnson, 416 F.3d 1051 (9th Cir.2005), stating that they “[do] not focus on any individual's rights but instead on a state's obligation to develop methods and procedures for providing Medicaid services.”

·        42 U.S.C. § 1396u-2 (a)(2)(A), whereby states cannot require that children with special needs enroll with an HMO: “This provision protects the interests of children,” not providers.

 
       AlohaCare also asserted third-party standing to enforce the law on behalf of the Medicaid ABD population. The court said it was “unclear whether the doctrine of third-party standing applies to allegations of statutory violations,” as opposed to constitutional claims. In any event, AlohaCare could not demonstrate the required “close relationship” to beneficiaries, or that it shared common interests with them.

 

      Because it held that AlohaCare lacked “statutory standing” to enforce Medicaid requirements either on behalf of beneficiaries or on its own behalf through § 1983, the court dismissed these claims. The court left open the question of whether beneficiaries themselves could enforce those provisions, which will be decided in Hawaii Coalition. It also dismissed the constitutional claims on the merits.

 

      Arguably, this judge's decision does not in any way detract from the viability of preemption claims under the Supremacy Clause, because the opinion does not consider this possibility.  Advocates in such cases should be sure to invoke the Supremacy Clause as the basis for a cause of action distinct from § 1983.