Given declining state revenues and increased demand for public programs like Medicaid, states have been faced with difficult choices about how to allocate limited funds. To address budget shortfalls, many states have sought to trim down their Medicaid costs in various ways, including reducing the rates at which Medicaid health care providers are reimbursed. In several instances, providers and others have argued that these reductions make reimbursement rates inadequate and have turned to the courts to challenge these reductions. When challenging these reimbursement rates, plaintiffs have often claimed that the rates violate the requirements of Section 1902(a)(30)(A) of the Social Security Act, often referred to as Medicaid's "equal access provision," which requires a state Medicaid plan to
provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan…as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area....
Medicaid beneficiaries and others have claimed that because of inadequate Medicaid reimbursement rates, the requirements of the equal access provision are not met (e.g., the state did not consider, or the state plan's methods or procedures do not assure, that Medicaid payments are consistent with efficiency, economy, quality of care, or are sufficient to enlist providers to provide Medicaid services). In determining whether a state's provider reimbursement rates violate the equal access provision, a significant question arises in these cases: whether private parties can sue to enforce these requirements. Because the Medicaid Act contains no express language that allows private parties to challenge reimbursement rate cuts, plaintiffs desiring to challenge cuts in Medicaid payment rates under the equal access provision have sought out other legal vehicles to bring their claims. Based on this section, plaintiffs have alleged that state officials violated their rights because the reimbursement rates did not comply with the requirements of the equal access provision. Nevertheless, the Court granted certiorari on one of the two issues presented to the Court—whether Medicaid recipients and providers can bring an action under the Supremacy Clause to enforce the equal access provision by asserting that the federal provision preempts a state law reducing reimbursement rates. Observations

Some commentators have noted that the Court's decision in Douglas may be important, as the case could determine whether the Supremacy Clause provides a basis for court review of various issues related to a state's Medicaid program—issues that may have been immune from review because, for example, there appeared to be no private right of action. In addition, it has been observed that the potential significance of Douglas goes beyond the Medicaid program, as the Court's decision could determine whether a private party may bring a preemption challenge under other federal statutes that these parties could not otherwise enforce. On April 29, 2011, CMS issued proposed regulations that address the equal access provision.
Given declining state revenues and increased demand for public programs like Medicaid, states have been faced with difficult choices about how to allocate limited funds. To address budget shortfalls, many states have sought to shrink their Medicaid costs in various ways, including reducing the rates at which health care providers are reimbursed for the services they provide to Medicaid beneficiaries. In several instances, providers and others have argued that the reduced rates do not comply with federal Medicaid requirements and have turned to the courts to challenge these reductions.
When challenging these reimbursement rates, Medicaid providers have often claimed that the rates violate the requirements of Section 1902(a)(30)(A) of the Social Security Act, commonly referred to as Medicaid's "equal access provision." This provision compels state Medicaid programs to assure that Medicaid payments "are consistent with efficiency, economy, and quality of care," and are "sufficient to enlist enough providers" so that care and services are available at least to the extent that they are available to an area's general population. Based on this provision, Medicare providers have argued that because of cuts in reimbursement rates, the state Medicaid program does not provide the level of care or services to beneficiaries that is required under federal law.
However, an important question arises in these cases: whether Medicaid beneficiaries and health care providers can sue state officials to enforce the equal access provision. Because the Medicaid Act contains no express language that allows private parties to challenge reimbursement rate cuts, plaintiffs desiring to challenge cuts in Medicaid payment rates under the equal access provision have sought out other legal vehicles to bring their claims. Since 2002, courts have often barred these suits when based on "section 1983." But on January 18, 2011, the Supreme Court granted certiorari in Douglas v. Independent Living Center of California, a set of consolidated cases in which plaintiffs took a different approach to challenging provider reimbursement rates. In Douglas, health care providers and Medicaid beneficiaries challenged cutbacks in reimbursement rates for certain health care providers, arguing that since the reduced reimbursement rates do not comply with Medicaid's equal access provision, they are preempted under the Supremacy Clause of the Constitution. The Ninth Circuit agreed, and blocked implementation of the reduced rates, explaining that the Supremacy Clause provides a basis for challenging a state's purported failure to abide by Medicaid's equal access provision.
Some commentators have noted that the Court's decision in Douglas may be significant, as the case could determine whether the Supremacy Clause provides a basis for judicial review of various issues related to a state's Medicaid program—issues that may have been immune from review because, for example, there appeared to be no private right of action. It has also been observed that the possible implications of Douglas go beyond the Medicaid program, as the Supreme Court's decision could determine whether a private party may bring a preemption challenge with respect to federal statutes that these parties could not otherwise enforce. This report provides relevant background on the Medicaid program and an overview of the Douglas case.
In addition, it may be noted that the Centers for Medicare and Medicaid Services (CMS) recently issued proposed regulations that address the equal access provision. Although proposed regulations do not address whether a private party may bring an enforcement action under the equal access provision, the regulations do provide guidance on how states can comply with it.