Acting Solicitor General to Supremes: Close Courthouse Doors to Safety Net Beneficiaries

June 9, 2011
Guest Post

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.

The DOJ brief reverses positions taken by Solicitors General not only in this administration but all previous administrations, Republican as well as Democratic.  

In 2010, the Department affirmed the “important role private parties can and often do play in vindicating federal law,” in recommending that the Supreme Court decline to accept this very case for review. 

In 2002, under the Bush Administration, Solicitor General Ted Olson similarly told the Supreme Court that “Spending Clause enactments preempt inconsistent state law by operation of the Supremacy Clause.” 

Also in 2002, Bush Solicitor General Olson took the same position that Spending Clause statutes are “binding law with the full force and preemptive authority of federal legislation under the Supremacy Clause.” 

The Acting Solicitor General’s argument will eliminate what is often the only practical corrective mechanism for ensuring that federal Medicaid funds actually provide the treatments and services prescribed by Congress. 

This constitutes a de facto move toward the block-granting of Medicaid that the administration strongly opposes on Capitol Hill.

In past cases over three decades, private legal challenges have prevented states from illegally withholding treatment or services in myriad ways, including, for example, denying eligibility to grandparents raising grandchildren; creating waiting lists seven years long to access home and community based benefits; arbitrarily raising eligibility standards for  coverage of nursing home residents (Medicaid supports 70% of nursing home residents): setting reimbursement rates for prescription drugs below costs so that people could not get their medications; and ignoring spousal impoverishment rules. 

If beneficiaries and their advocates have no practical legal recourse, there will be no effective counterweight to financial and political pressures to these and myriad other strategies to illegally short-change beneficiaries of Medicaid and other Spending Clause statutes.

The brief misleadingly contends that more efficacious and cost-effective administration will result from entrusting enforcement of Medicaid statutory guarantees exclusively to HHS’s authority to withhold federal Medicaid funds from non-complying states.

In principle, HHS’s defunding authority is feasible only for flagrant, massive state violations of Medicaid requirements.  In practice, even in such extreme circumstances, this nuclear weapon has almost never been invoked, because it is administratively cumbersome, politically treacherous, and, from a policy standpoint, self-defeating in that cutting off funds will devastate the very populations Medicaid was enacted to serve.

The case pending before the Supreme Court showcases the fecklessness of defunding as a remedy for state Medicaid violations.  The rate cuts in question were enacted by California on February 16, 2008.  Twenty months later, on November 18, 2010, HHS disapproved the amendments to the state’s Medicaid plan incorporating the cuts.  Administrative appeals, still in process, followed.  During the entire period since the disapproved rate cuts took effect on July 1, 2008, the state has continued to implement the rate cuts, except with respect to the parties in the pending cases (which had persuaded the lower federal courts to issue an injunction through their Supremacy Clause-based preemption action).

Precisely because of the manifest inadequacy of defunding as an exclusive remedy, HHS acknowledges, as did the Solicitor General’s December 2010 brief recommending that the Court not grant certiorari, the “important role” of private parties “in vindicating federal law.”  While the Acting Solicitor General’s about-face in the May 26 DOJ merits brief contends that private enforcement undermines effective administration of the Medicaid Act, HHS has strenuously opposed the brief and disputes that assertion.

The Acting Solicitor General’s argument mocks President Obama’s often-proclaimed goal of promoting courts responsive to the needs of ordinary people rather than powerful interests. 

When Justice John Paul Stevens announced his resignation in April 2010, the President stated that he would look for a justice who “like Justice Stevens, knows that in a democracy, powerful interests must not be allowed to drown out the voices of ordinary citizens.”  

The brief charts a path for the Supreme Court to permit federal courts to continue routinely to apply federal supremacy to strike down state laws protecting consumers, workers, retirees, bank depositors and others, alleged by business litigants to conflict with federal laws, while arbitrarily withholding identical protection from the vulnerable populations served by Medicaid and other safety net laws. 

The DOJ brief’s position is difficult to reconcile with the administration’s proclaimed goals and priorities.