Medicaid Access, Rate Setting and Payment Suits: How the Obama Administration is Undermining Its Own Health Reform Goals

85 Pages Posted: 4 Oct 2012 Last revised: 30 Oct 2012

Date Written: October 4, 2012


Medicaid is a critical part of ensuring health care access for vulnerable populations, which is why it was expanded as part of the Affordable Care Act passed in 2010. But many are cautiously optimistic about this expansion. Health care access for Medicaid beneficiaries depends on providers willing to treat them, yet many providers are severely restricting the number of Medicaid patients they see or are dropping out of the Medicaid program altogether. This threat to Medicaid access can be traced to state payment cuts, freezes, or changes in rate-setting methodology that dramatically reduce provider reimbursement. Congress gave states significant flexibility in rate setting in order to encourage them to experiment with health delivery and financing models that would reduce cost and deliver care more efficiently. Nonetheless, there are constraints on this flexibility. Rates must be adequate to ensure timely and equal access to quality care. There are also procedural requirements - states must get federal regulatory approval of rate changes and give the public adequate notice and opportunity to comment on such changes.

Since Medicaid’s enactment, however, providers and beneficiaries have brought payment suits challenging state rate cuts and rate-setting methodology as violating these requirements. In some cases, states ignore clear procedural requirements, making cuts without any consideration of access and quality factors. In other instances, the claim is that a state’s process is inadequate because it does not consider the information necessary to ensure equal access. But the fate of Medicaid payment suits as a tool for protecting health care access and quality is uncertain for a number of reasons. First, the Supreme Court in Douglas v. Independent Living Center has taken up (and just recently remanded to the Ninth Circuit) a case that considers providers’ and beneficiaries’ right to challenge state rate cuts in federal court, as well as the level of review courts must apply to cuts approved by the federal government. Second, the recent Medicaid expansion means that more people will be eligible for Medicaid and will need providers, further exacerbating access concerns. Finally, despite the Obama Administration’s renewed focus on Medicaid access generally, it is sending conflicting signals about its commitment to enforce existing federal access and quality protections. This Article explores the efficacy of payment suits as a tool for Medicaid access enforcement, and it considers the implications of the current regulatory and jurisprudential uncertainty for this important enforcement tool.

Suggested Citation

Clark, Brietta R., Medicaid Access, Rate Setting and Payment Suits: How the Obama Administration is Undermining Its Own Health Reform Goals (October 4, 2012). 55 Howard Law Journal 771 (2012), Loyola-LA Legal Studies Paper No. 2012-38, Available at SSRN:

Brietta R. Clark (Contact Author)

Loyola Law School Los Angeles ( email )

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Los Angeles, CA 90015-1211
United States
213-736-1494 (Phone)
213-736-3769 (Fax)

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