With states seeking flexibility to implement Obamacare as they see fit, the Supreme Court sent the states an important message in its ruling on March 20 in Wos v. E.M.A. that states’ implementation of federal health care programs must comply with the requirements of federal Medicaid law.  As millions more are expected to be added in 2014 to the more than 62 million Americans already covered by the Medicaid program, the Court’s decision this past Wednesday could not be more timely in clarifying that states are accountable in the courts should they flout the federal statute’s protections for low-income and disabled beneficiaries.

More broadly, this decision sets a highly auspicious benchmark in a long-running, contentious, and consequential debate about the ability of beneficiaries of “Spending Clause” statutes, like Medicaid, to obtain a remedy in court for state violations of their statutory rights.  A decade ago, it appeared that the conservative majority on the Rehnquist Court had all but closed off all avenues for private enforcement of such federal statutory mandates on the states.  This meant that if states weren’t doing what federal law required them to do, the federal government could pull their money, but individuals who received Medicaid benefits, or doctors treating these patients, could not sue states for noncompliance.  In response, advocates filed lawsuits directly under the Constitution’s Supremacy Clause as a vehicle for bringing these claims back into court, winning acceptance of this approach from all Federal circuit courts of appeal.  But the Supreme Court had not ruled definitively on the question. 

The E.M.A. case was brought by the family of E.M.A., a young girl allegedly injured at birth by an obstetrician with a history of drug abuse.  North Carolina’s Medicaid program helped pay for some of the girl’s medical care, while the family sought compensation from those they alleged had injured her.  When a settlement was reached, North Carolina placed a lien on the compensation, relying on a state law that imposes an irrebutable presumption that one-third of the settlement covered medical expenses.  The family then had to fight North Carolina in a separate lawsuit, protesting that the state’s lien violated the Medicaid anti-lien provision, which limits liens to the actual portion of the settlement that covered medical expenses. 

When the case reached the Supreme Court, eleven conservative states, led by Texas, filed a brief asserting that it did not matter whether North Carolina law complied with federal law.  These states argued that private individuals, such as E.M.A., had no right to ask for judicial intervention when a state ignored Medicaid requirements.  The Texas brief claimed that whether a state’s law conflicted with federal law was a matter solely between the state and the supervising federal agency.  As a result, argued Texas and its allies, states have flexibility to simply assume the amount attributable to medical expenses, rather than undergo a more costly individual assessment of each case.  These states echoed arguments in earlier opinions by Justices Antonin Scalia and Clarence Thomas, suggesting that mandates imposed upon states as a condition upon federal spending can never be enforced in court by private parties. 

Constitutional Accountability Center (CAC) filed a brief in E.M.A. on behalf of CAC and AARP, countering the radical argument made in the Texas brief.  CAC’s brief explains that the Constitution gives individuals the right to petition the courts for redress when states pass laws in conflict with federal law.  The Medicaid statute, like all other federal laws, is enforceable under the Constitution’s Supremacy Clause.  This means that individuals, like E.M.A., who are harmed by state laws in conflict with federal law can seek the protection of the courts.

In its 6-3 ruling in E.M.A. in favor of the young girl, the Supreme Court did not feel the need even to respond to Texas’ exposition of the Scalia-Thomas courthouse door-closing argument  In an opinion written by Justice Anthony Kennedy and joined by, among others, Justice Samuel Alito, not only did the Court rule in favor of a Medicaid beneficiary bringing a preemption challenge against a state, but the Court’s basis for this result unambiguously tracked the rationale for private enforcement of Medicaid that advocates for Medicaid patients and providers had successfully deployed in the lower courts:

Under the Supremacy Clause, “[w]here state and federal law ‘directly conflict,’ state law must give way.”  [citing cases]  . . . . North Carolina’s statute . . . is pre-empted for that reason.  

Justice Kennedy’s decision for the Court found that the state’s lien provision conflicted with the Medicaid anti-lien provision, and emphasized that the Supremacy Clause displaces any state law that “would operate” in conflict with the federal Medicaid statute.  Because the North Carolina law “sets forth no process” for assessing the portion of the settlement attributable to medical expenses, the state was not in compliance with federal requirements.  North Carolina protested that the setting of an irrebutable presumption was not explicitly prohibited by federal law.  The Supreme Court responded: “A State may not evade the pre-emptive force of federal law by resorting to creative statutory interpretation or description at odds with the statute’s intended operation and effect.”  The Court also dismissed North Carolina’s argument that the higher cost of individual assessment provided a basis for simply assuming the amount owed to the state.  Justice Kennedy stated that even if compliance with the law is more costly, the added cost does “not relieve the State of its obligation to comply with the terms of the Medicaid anti-lien provision.”

Chief Justice Roberts dissented, joined by Justices Scalia and Thomas, complaining that the majority opinion “has the unfortunate consequence of denying flexibility to the States.” The dissenters praised North Carolina’s approach for being “easy” and “cheap” and suggested that the entire process should be left to the “prerogative” of the states, under the supervision of the federal government.  Significantly, however, Chief Justice Roberts’ dissent did not brandish the Texas-Scalia-Thomas claim that private preemption challenges are unavailable to beneficiaries of Spending Clause statutes; the dissenters simply argued that the particular North Carolina statutory provision at issue did not, in fact, conflict with the pertinent Medicaid provision, to which the Chief Justice gave a relatively loose interpretation.

But the majority of the Court hewed to the text of the Medicaid law, without accomodating state demands for “flexibility” to save money.  The Court’s decision is just what the doctor ordered for the millions of Americans relying on Medicaid to provide them with access to health care, and it will be of immeasurable benefit to the millions more who will gain Medicaid coverage for the first time under Obamacare.  Upholding the Constitution’s directive that conflicting state laws are displaced by federal law, the Court in E.M.A. met its constitutional responsibility as established by the Framers.