The first case that the Supreme Court heard when the term began in October will not be decided on its merits. As we discussed last fall, in Douglas v. Independent Living Center of California, the court heard arguments that Medicaid rate reductions required by the state legislature violated federal Medicaid law. To reach that question, the Court first would have to decide that the providers could sue directly under the Supremacy Clause of the United States Constitution even though they could not have used a typical civil rights action to do so. The Court has now decided not to reach that issue.
On October 27, 2011, shortly after the Court heard oral argument, CMS decided that the state plan amendments based on the challenged state laws meet the requirements of the federal statute and approved them. Because the Social Security Act gives CMS the authority to exercise discretion and to interpret the law, the agency’s interpretation is relevant. In addition, the providers may challenge the agency’s action under the Administrative Procedure Act and do not need to rely on the Supremacy Clause. Therefore, a majority of the Court voted to vacate the 9th Circuit’s previous ruling and direct that court to reconsider it in light of these developments.