Douglas v. Indep. Living Ctr. of S. Cal., Inc.

Decision Date22 February 2012
Docket Number10–283.,09–1158,Nos. 09–958,s. 09–958
Parties Toby DOUGLAS, Director, California Department of Health Care Services, Petitioner v. INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC., et al. Toby Douglas, Director, California Department of Health Care Services, Petitioner v. California Pharmacists Association et al. Toby Douglas, Director, California Department of Health Care Services, Petitioner v. Santa Rosa Memorial Hospital et al.
CourtU.S. Supreme Court

Karin S. Schwartz, San Francisco, CA, for Petitioners.

Edwin S. Kneedler, for the United States, as amicus curiae, by special leave of the Court, supporting the Petitioners.

Carter G. Phillips, Washington, DC, for Respondents.

Kamala D. Harris, Attorney General of California, Manuel M. Medeiros, State Solicitor General, David S. Chaney, Chief Assistant Attorney General, Douglas M. Press, Julie Weng–Gutierrez, Senior Assistant Attorneys General, Richard T. Waldow, Karin S. Schwartz, Counsel of Record, Susan M. Carson, Jennifer M. Kim, Supervising Deputy Attorneys General, Gregory D. Brown, Carmen Snuggs, Deputy Attorneys General, San Francisco, CA, Dan Schweitzer, of Counsel, Washington, DC, for Petitioners.

Michael S. Sorgen, Law Offices of Michael S. Sorgen, San Francisco, CA, Dean L. Johnson, Dean L. Johnson, Inc., Carlsbad, CA, Carter G. Phillips, Counsel of Record, Eric A. Shumsky, Quin M. Sorenson, Lowell J. Schiller, Amy L. Hanke, Joshua J. Fougere, Lyndsay N. Huot, Sidley Austin LLP, Washington, DC, for Respondents Santa Rosa Memorial Hospital, et al.

Craig J. Cannizzo, Lloyd A. Bookman, Jordan B. Keville, Felicia Y. Sze, Hooper, Lundy & Bookman, P.C., Los Angeles, CA, Deanne E. Maynard, Counsel of Record, Seth M. Galanter, Nicholas George Miranda, Morrison & Foerster LLP, Washington, DC, for Intervenor Respondents and California Pharmacists Respondents.

Stephen P. Berzon, Counsel of Record, Scott A. Kronland, Stacey M. Leyton, Matthew J. Murray, Altshuler Berzon LLP, San Francisco, CA, for Dominguez Respondents.

Stanley L. Friedman, Los Angeles, CA, Lynn S. Carman, Counsel of Record, Novate, CA, for Respondents Independent Living Center of Southern California, Inc., et al.

Justice BREYER delivered the opinion of the Court.

We granted certiorari in these cases to decide whether Medicaid providers and recipients may maintain a cause of action under the Supremacy Clause to enforce a federal Medicaid law—a federal law that, in their view, conflicts with (and pre-empts) state Medicaid statutes that reduce payments to providers. Since we granted certiorari, however, the relevant circumstances have changed. The federal agency in charge of administering Medicaid, the Centers for Medicare & Medicaid Services (CMS), has now approved the state statutes as consistent with the federal law. In light of the changed circumstances, we believe that the question before us now is whether, once the agency has approved the state statutes, groups of Medicaid providers and beneficiaries may still maintain a Supremacy Clause action asserting that the state statutes are inconsistent with the federal Medicaid law. For the reasons set forth below, we vacate the Ninth Circuit's judgments and remand these cases for proceedings consistent with this opinion.


Medicaid is a cooperative federal-state program that provides medical care to needy individuals. To qualify for federal funds, States must submit to a federal agency (CMS, a division of the Department of Health and Human Services) a state Medicaid plan that details the nature and scope of the State's Medicaid program. It must also submit any amendments to the plan that it may make from time to time. And it must receive the agency's approval of the plan and any amendments. Before granting approval, the agency reviews the State's plan and amendments to determine whether they comply with the statutory and regulatory requirements governing the Medicaid program. See 42 U.S.C. §§ 1316(a)(1), (b), 1396a(a), (b) ; 42 CFR § 430.10 et seq. (2010) ; Wilder v. Virginia Hospital Assn., 496 U.S. 498, 502, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990). And the agency's director has specified that the agency will not provide federal funds for any state plan amendment until the agency approves the amendment. See Letter from Timothy M. Westmoreland, Director, Center for Medicaid & State Operations, Health Care Financing Admin., U.S. Dept. of Health and Human Servs., to State Medicaid Director (Jan. 2, 2001), online at (as visited Feb. 17, 2012, and available in Clerk of Court's case file).

The federal statutory provision relevant here says that a State's Medicaid plan and amendments must:

"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 ." 42 U.S.C. § 1396a(a)(30)(A) (emphasis added).

In 2008 and 2009, the California Legislature passed three statutes changing that State's Medicaid plan. The first statute, enacted in February 2008, reduced by 10% payments that the State makes to various Medicaid providers, such as physicians, pharmacies, and clinics. See 2007–2008 Cal. Sess. Laws, 3d Extraordinary Sess. ch. 3, §§ 14, 15. The second statute, enacted in September 2008, replaced the 10% rate reductions with a more modest set of cuts. See 2008 Cal. Sess. Laws ch. 758, §§ 45, 57. And the last statute, enacted in February 2009, placed a cap on the State's maximum contribution to wages and benefits paid by counties to providers of in-home supportive services. See 2009–2010 Cal. Sess. Laws, 3d Extraordinary Sess. ch. 13, § 9.

In September and December 2008, the State submitted to the federal agency a series of plan amendments designed to implement most of the reductions contained in these bills. Before the agency finished reviewing the amendments, however, groups of Medicaid providers and beneficiaries filed a series of lawsuits seeking to enjoin the rate reductions on the ground that they conflicted with, and therefore were pre-empted by, federal Medicaid law, in particular the statutory provision that we have just set forth.

They argued that California's Medicaid plan amendments were inconsistent with the federal provision because the State had failed to study whether the rate reductions would be consistent with the statutory factors of efficiency, economy, quality, and access to care. In effect, they argued that California had not shown that its Medicaid plan, as amended, would "enlist enough providers" to make Medicaid "care and services" sufficiently available. 42 U.S.C. § 1396a(a)(30)(A).

The consolidated cases before us encompass five lawsuits brought by Medicaid providers and beneficiaries against state officials. Those cases produced seven decisions of the Court of Appeals for the Ninth Circuit. See 572 F.3d 644 (2009) ; 342 Fed.Appx. 306 (2009) ; 596 F.3d 1098 (2010) ; 563 F.3d 847 (2009) ; 374 Fed.Appx. 690 (2010) ; 596 F.3d 1087 (2010) ; and 380 Fed.Appx. 656 (2010). The decisions ultimately affirmed or ordered preliminary injunctions that prevented the State from implementing its statutes. They (1) held that the Medicaid providers and beneficiaries could directly bring an action based on the Supremacy Clause; (2) essentially accepted the claim that the State had not demonstrated that its Medicaid plan, as amended, would provide sufficient services; (3) held that the amendments consequently conflicted with the statutory provision we have quoted; and (4) held that, given the Constitution's Supremacy Clause, the federal statute must prevail. That is to say, the federal statute pre-empted the State's new laws.

In the meantime, the federal agency was also reviewing the same state statutes to determine whether they satisfied the same federal statutory conditions. In November 2010, agency officials concluded that they did not satisfy those conditions, and the officials disapproved the amendments. California then exercised its right to further administrative review within the agency. The cases were in this posture when we granted certiorari to decide whether respondents could mount a Supremacy Clause challenge to the state statutes and obtain a court injunction preventing California from implementing its statutes.

About a month after we heard oral argument, the federal agency reversed course and approved several of California's statutory amendments to its plan. See Letter from Donald M. Berwick, Administrator, CMS, to Toby Douglas, Director, Cal. Dept. of Health Care Servs. (Oct. 27, 2011); Letter from Larry Reed, Director, Division of Pharmacy, Disabled and Elderly Health Programs Group, CMS, to Toby Douglas, Director, Cal. Dept. of Health Care Servs. (Oct. 27, 2011). In doing so, the agency also approved a limited retroactive implementation of some of the amendments' rate reductions. The State, in turn, withdrew its requests for approval of the remaining amendments, in effect agreeing (with one exception) that it would not seek to implement any unapproved reduction. See Letter from Michael E. Kilpatrick, Assistant Chief Counsel, Cal. Dept. of Health Care Servs., to Benjamin R. Cohen, Director, Office of Hearings, CMS (Oct. 27, 2011). (The exception consists of one statute for which California has submitted no amendment and which, by its own terms, cannot take effect unless and until this litigation is complete, see 2010 Cal. Sess. Laws ch. 725, § 25.)


All parties agree that the agency's approval of the enjoined rate reductions does not make these cases moot. For one...

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