Managed Pharmacy Care v. Sebelius

Congress expressly granted the Secretary of Health and Human Services the authority to reasonably decide under federal law the reimbursement rate that states may set in managing their Medicaid programs.

Plaintiffs were granted an injunction by the district court to stop a rate reduction, approved by the Secretary of Health and Human Services (HHS) and the Director of California Health Care Services (DHCS), to California’s Medicaid program. The district court determined that the plaintiffs were likely to succeed on the merits that the Secretary’s approval of rate reductions violated the Administrative Procedures Act (APA) and the Director’s approval violated the Supremacy Clause of the Constitution. The Secretary of HHS argued that the Congress expressly granted her the authority to approve state Medicaid plans, and her discretion is entitled to deference and complies with the APA. The Ninth Circuit held that Orthopaedic Hospital v. Belshe does not control because in that case the federal government was not a party. Furthermore, the Secretary’s interpretation of § 30(A) of the challenged statute was not addressed in Orthopaedic. Also the Secretary’s authority is entitled to deference, and decisions made by her in granting state’s rate reductions do not violate the APA. The Supremacy Clause claim against DHCS is likely to fail because the Secretary approval was based on her reasonable decision that the reductions complied with federal law. Finally, on cross appeal plaintiffs argued that the reduction violated the Takings Clause, but the Ninth Circuit held that because Medicaid is a voluntary state program it does not confer any property rights, and these cross appeals were dismissed as moot. REVERSED, INJUNCTIONS VACATED, and REMANDED.