June 2011

By Simon Lazarus, Public Policy Counsel to the National Senior Citizens Law Center, which is counsel to respondent Independent Living Center in the case discussed in this post, supporting beneficiaries’ right to challenge state violations of spending clause statutes.

On May 26 – seven business days before President Obama’s nominee for Solicitor General, Associate White House Counsel Donald Verrilli, was confirmed by the Senate – Acting Solicitor General Neal Katyal filed an amicus curiae brief in a Supreme Court case, Douglas v. Independent Living Center, asserting that beneficiaries of Medicaid and other safety net laws should no longer be permitted to request federal courts to “preempt” – i.e., invalidate – state laws that violate conflicting federal legal requirements.  That such a position could be taken in the name of this administration “bitterly disappointed” the administration’s most committed friends and supporters, in the words of Representative Henry Waxman.   The brief was filed over sustained opposition from Health & Human Services Secretary Kathleen Sebelius and, according to a “Capitol Hill” source quoted in a Politico story, "California Medicaid Cuts Pit HHS v. DOJ," “every health policy person and lawyer in the administration.”   There are several reasons for the widespread distress about this brief:

First, the Acting Solicitor General’s argument contradicts the law as applied for decades, in scores of cases, by the Supreme Court and the lower federal courts.

Contrary to the DOJ brief, all federal courts of appeal have held that the Supremacy Clause – which mandates that federal law is “the supreme law of the land” – protects safety net beneficiaries from unlawful state action to the same extent and for the same reasons that the clause has been held, over and over, to empower business litigants to seek overturn of state consumer protection and other laws. 

The rule endorsed by the DOJ brief, carving safety net laws and beneficiaries out from the protection of Supremacy Clause preemption, was proposed in concurring opinions in a 2003 case, PHRMA v. Walsh, by Justices Antonin Scalia and Clarence Thomas.  But that is as far as this arbitrary doctrine has gone till now.  It has never been accepted by any other member of either the Rehnquist or the Roberts Supreme Court. 

Hence, in 2005 the Fifth Circuit asserted “little difficulty in holding that [Medicaid beneficiaries] have an implied right of action to assert a preemption claim seeking injunctive and declaratory relief.”   Both the Fifth and DC Circuits ( in 2004) expressly held that the Scalia-Thomas line, embraced in the Acting Solicitor General’s brief,  had been “tacitly reject[ed]” by the other “seven justices,” all of whom reached the merits in PHRMA v. Walsh.  In 2006, the Eighth Circuit – like the Fifth and DC Circuits not known as a bastion of judicial liberalism – concurred that, contrary to the Scalia-Thomas-DOJ line, federal spending clause laws are no less “supreme” than federal regulatory laws:  “While Medicaid is a system of cooperative federalism, the same analysis applies [as under alleged conflicts between federal and state regulatory laws”]; once the state voluntarily accepts the conditions imposed by Congress, the Supremacy Clause obliges it to comply with federal requirements.”  The Ninth Circuit decision currently under Supreme Court challenge was authored by Judge Milan Smith, a George W. Bush appointee and brother of former Republican Senator Gordon Bush of Oregon. 

The DOJ brief asserts that the Supreme Court has never “squarely held” that the Supremacy Clause establishes, in addition to federal jurisdiction to entertain suits, a cause of action as well.  But this is lawyers’ weasel-talk.  The Court has upheld literally scores of suits to invalidate state laws in conflict with federal laws.  The sole doctrinal basis for many, perhaps all of these decisions is Supremacy Clause-based preemption.  The readily apparent reason why the Supreme Court has never “squarely held” that such authority exists, while exercising it repeatedly, is that, to date, the justices have considered the point too self-evident to require explanation.   As stated by Justice Anthony Kennedy in a 1986 opinion, “[P]laintiffs may vindicate .  .  . pre-emption claims by seeking declaratory and equitable relief in the federal district courts through their powers under federal jurisdictional statutes.”  

The Court’s repertoire of preemption decisions include situations materially indistinguishable from the pending case alleging unlawful state rate cuts for Medicaid providers, for example,  a unanimous 2006 decision, Arkansas Dept. of Health & Human Services v. Ahlborn, to invalidate an Arkansas statute that imposed a lien to recoup Medicaid payments from a beneficiary’s estate in violation of Medicaid statutory requirements.