Kicking off its new term Monday morning, the U.S. Supreme Court heard oral argument in a case that tests a state's power to defy federal law. Usually in such cases, the states and the federal government are at loggerheads. The wrinkle in Douglas v. Independent Living Center is that the United States has banded together with California against health care providers that sued to stop the state from slashing its Medicaid program.
The health care providers -- who are supported by their own strange bedfellows, the U.S. Chamber of Commerce and the American Civil Liberties Union -- are trying to contest the California law as a violation of the Constitution's supremacy clause. But the justices proved highly skeptical of that argument over the course of an hour that sometimes veered into academic arcana.
When writing a federal law, Congress can declare that the statute overrides any state laws governing similar subject matter. It can also create a private right of action for individuals -- in other words, grant private citizens the legal right -- to contest state laws that conflict with the federal statute.
The federal Medicaid law, however, contains neither type of provision. Instead, Congress designed Medicaid to be a voluntary program set up through federal-state cooperation in which Congress sends money to the states provided that the states make Medicaid payments that are "sufficient to enlist enough private providers" to deliver care and services to the patients on Medicaid. Further, the law says only that the federal government itself, through the Department of Health and Human Services (HHS), will bring lawsuits against noncompliant states.
In 2008 and 2009, the California Legislature, seeking to save some money, reduced the rates it would pay to health care providers under MediCal, the state's version of Medicaid. In response, those Medicaid providers who believed their bottom lines and their ability to serve the poor and disabled (hence the Chamber of Commerce and ACLU support) would be undermined by the new rates went to federal court to argue that the reduced rates were not "sufficient" under federal law. The U.S. Court of Appeals for the 9th Circuit ultimately agreed, issuing an injunction to stop the cuts.
Arguing in the Supreme Court on Monday, Karin Schwartz of the California Attorney General's Office said there were "many reasons" why the Court should reverse the appeals court and refuse to allow the health care providers to bring suit, including the fact that Medicaid's statutory language gives HHS "broad and undefined" powers to enforce the program without meddling from private parties.
Schwartz's opening led Justice Ruth Bader Ginsburg to note that HHS's broad administrative powers translate, in fact, into one "drastic remedy" for those state programs found to be insufficient: a complete cut-off from all federal Medicaid funding. This option, said Ginsburg, "will hurt the people Medicaid is meant to benefit." The better option, Ginsburg's question implied, was a judicial order requiring the state to return to its original reimbursement rates -- a remedy that HHS is not empowered to provide.
Nevertheless, when Ginsburg followed up her observation with a question about how often HHS has cut off Medicaid funding to a state not fulfilling its side of the agreement, Schwartz's answer of "very rarely" -- given that most issues between states and HHS are consensually resolved within 90 days -- seemed to satisfy the justice, a former ACLU lawyer herself.
Justice Anthony Kennedy had run the numbers on HHS's staffing for such Medicaid claims and suggested that the department could use an assist from the federal courts, regardless of how rarely HHS metes out its ultimate punishment.
"There are almost $400 billion of HHS expenditures that are supervised by  people," Kennedy said. "That works out to 800 million each. ... It's much more consistent with the proper application of federal law to allow this action to be brought in the courts."
Schwartz retorted, "I don't think it is more efficient to have 700 district court judges interpreting a statute that does not have any objective standard."
While Kennedy said that such a "sky-is-falling" argument did not "really work," Justice Stephen Breyer, the Court's most enthusiastic supporter of the administrative state, was more comfortable leaving these determinations up to a relatively small cadre of experts and administrative law judges at HHS. Questioning Carter Phillips, the veteran Supreme Court advocate arguing on behalf of the health care providers and other private plaintiffs, Breyer saw a problem with saying, "Let all the doctors go and sue."
"There are only 50,000 kinds of reimbursement, maybe there are a million," Breyer went on with more than a hint of sarcasm, "and they only take place in like, say, 400,000 counties. And we will have federal judges reaching different views about what is 'sufficient' in each of those different places."
But it was Chief Justice John Roberts who led the Court in piling on Phillips' argument that the supremacy clause gave the plaintiffs the ability to stop the California law from going into effect. Roberts, himself a top-notch Supreme Court advocate before joining the federal judiciary, expressed his exasperation with Phillips' broad argument shortly after the lawyer took to the lectern.
"Your position," the chief justice said, "is that the Constitution prohibits you from doing anything where the state law is pre-empted by the federal law." When Phillips' answer all but agreed with the chief's caricature of the health care providers' position, the stunned chief had to ask again.
"Congress can say in the same statute that confers the allegedly pre-emptive federal standards that we do not want individuals bringing actions in court to enforce this. We want to leave that up to HHS," said Roberts. "And you are saying, even though Congress said that, individuals can nonetheless bring a suit under the supremacy clause, the theory of which is we are making sure that federal law controls."
"Right," Phillips answered.
From here, Ginsburg and Justice Elena Kagan jumped in, but Phillips refused to back down. Breyer took his best shot, as did Justice Sonia Sotomayor. Yet Phillips persisted in his position.
As if exhausted from pummeling Phillips to no avail, the justices then retreated into law professor mode, with Justices Kennedy and Antonin Scalia mentioning common law courts of equity and the doctrine of sovereign immunity.
The chief justice did make his point one more time. Phillips, concluding his argument, rhetorically asked, "Did Congress intend to deprive these plaintiffs of their rights" to restrain a state law? A split second after he declared, "The answer is no," the chief snapped, "The answer is yes."
But when the chief's blunt force proved ineffective, Justice Ginsburg offered a way out of this impasse, despite her own apparent agreement with the chief and a majority of the other justices that Phillips' supremacy clause argument must fail.
Recognizing that HHS had yet to determine whether California's new rates would be "sufficient" under the federal Medicaid law, Ginsburg asked, "You said you would be satisfied with a limitation that the Court can issue an injunction pending the administrative procedure without going on to then the substance of the question?"
"Yes, Justice Ginsburg, I would have been perfectly comfortable with that," Phillips conceded, before closing with one more push for the Supreme Court to accede to his very skilled insistence that the supremacy clause should govern its ultimate opinion.
The Court is expected to hand down its decision in Douglas v. Independent Living Center by the end of the term in June.