Why the Supreme Court's Medicaid Decision Matters

Bloomberg Businessweek reports:

The Supreme Court is hearing arguments in a case that will have big consequences for how an estimated 68 million Americans get health care. More specifically, the case involves whether or not doctors and hospitals can sue states if they feel the rates they get paid by Medicaid, the public insurance program for low-income Americans, are too low.

State Medicaid programs typically pay poorly. On average, reimbursements are one-third lower than those for Medicare, the federal health insurance for older Americans, according to the Kaiser Family Foundation. Both pay less than commercial health plans. And that's a growing challenge for providers: The Affordable Care Act (ACA) widened eligibility for Medicaid to cover more low-income adults, adding 9.7 million people to the program since 2013.

Many doctors won’t take Medicaid patients; those that do often lose money seeing them. If health-care providers think the rates are too low, or that states have cut Medicaid budgets unjustly, they sometimes take the states to court on grounds they're violating the federal law requiring Medicaid to provide adequate coverage. That’s the origin of the current case before the high court, Armstrong v. Exceptional Child Center.

A group of companies that provide services for developmentally disabled Medicaid patients sued Idaho officials when they failed to increase Medicaid payments, even after the state calculated a new method for compensating providers. An appellate court upheld a judgment in favor of the providers last year, noting (PDF) that Idaho had conceded that it held rates flat since 2006 for “purely budgetary reasons."

Is a free society based on contracts compatible with the Welfare State? No.