Facts
- Medicaid is a cooperative federal–state program requiring participating states to submit state plans and plan amendments to the Centers for Medicare & Medicaid Services (CMS) for approval.
- Federal law, 42 U.S.C. § 1396a(a)(30)(A) (§ 30(A)), requires state payment methods to be consistent with efficiency, economy, and quality of care and sufficient to enlist enough providers.
- California enacted statutes reducing reimbursement rates for various Medicaid providers and submitted corresponding plan amendments to CMS.
- Before CMS acted, Medicaid providers and beneficiaries sued state officials in federal court to enjoin the rate cuts, alleging the statutes were preempted because they conflicted with § 30(A).
- The Ninth Circuit affirmed or ordered preliminary injunctions, holding that plaintiffs could seek equitable relief under the Supremacy Clause and accepting that the State had not shown the reduced rates would ensure sufficient services.
- While the consolidated cases were pending in the Supreme Court, CMS approved most of the contested plan amendments as consistent with federal law, and California withdrew reductions that were not approved.
Issues
- After CMS approves state Medicaid plan amendments implementing rate reductions, may providers and beneficiaries continue a Supremacy Clause action to enjoin the state statutes as preempted by § 30(A)?
- Alternatively, must challenges proceed, if at all, as judicial review of CMS’s approval under the Administrative Procedure Act (APA)?
Decision
- The Court vacated the Ninth Circuit’s judgments and remanded.
- Because CMS approved the amendments during the Supreme Court proceedings, the case posture shifted from a state-law-versus-federal-statute conflict to a dispute implicating the legality of the federal agency’s approval.
- The Court directed the lower courts to consider whether, in light of CMS’s approval, the claims should be treated as challenges to agency action under the APA rather than as Supremacy Clause claims against state officials.
- The Court declined to decide the broader question whether private parties may bring Supremacy Clause actions to enforce § 30(A) in the absence of final agency action.
- The dissent would have reversed, reasoning that the Supremacy Clause does not create a private cause of action and that any challenge should be to the federal approval decision.
Legal Principles
- When intervening agency action materially changes the posture of a case, appellate courts may vacate and remand for reconsideration under the revised legal and factual setting.
- CMS approval of a Medicaid plan amendment is central to assessing compliance with § 30(A) and may reframe litigation from preemption-based equitable relief against a state to review of federal administrative action.
- APA review may provide a vehicle to contest CMS approval as arbitrary, capricious, or contrary to law, potentially affecting the availability or necessity of equitable Supremacy Clause relief.
- The decision left unresolved whether § 30(A) may be enforced by private parties through a Supremacy Clause action before CMS acts.
Conclusion
The Court vacated and remanded because CMS’s post-certiorari approval of California’s Medicaid rate-reduction amendments changed the dispute’s focus, requiring the lower courts to evaluate whether plaintiffs’ claims should proceed, if at all, as APA challenges to the federal approval rather than as Supremacy Clause suits against the State.