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How the Obama Administration Is Jeopardizing Health Care Reform

In one of its many attempts to get its budget deficit under control, in 2008 California decided to cut its reimbursement rates to medical providers for poor and disabled persons enrolled in the state’s Medicaid program. The result was that providers began to cut back on services, and pharmacists stopped filling prescriptions because the reimbursements came to less than the cost of the drugs. California, for all intents and purposes, was no longer upholding the federal mandate to provide Medicaid patients with “meaningful access” to care. Numerous lawsuits were filed against the state to reverse the cuts, and they are now consolidated into Douglas v. Independent Living Center of Southern California, the first case the Supreme Court will hear today, on the first day of its new term.

As it stands, Douglas is no longer about Medicaid rates or “meaningful access,” but whether Medicaid beneficiaries and providers have the right to sue the state to enforce federal Medicaid statutes—and, in a surprising move, the Obama administration has sided with California, with the Deputy Solicitor General arguing before the Court today that only the Department of Health and Human Services should be able to enforce compliance with Medicaid. “They want the prerogative of when and where to intervene in state conduct matters,” says Sara Rosenbaum, a law professor and health care expert at George Washington University, venturing a guess as to the administration’s motives. California’s backers also worry about court-imposed payment schemes replacing state discretion, as well as a surge in litigation.

But the Obama administration’s position is a big mistake. Not only would rolling back such private rights endanger patients and providers, it could also impede the administration’s own agenda. Because the ability of the federal government to enforce its health care laws through HHS is limited, it often relies on private lawsuits to keep states in check. In fact, the success of the administration’s signature policy achievement, the Affordable Care Act, could depend on exactly the kind of action it’s trying to rule out.

OF THE 32 MILLION Americans the Obama administration’s Affordable Care Act will eventually insure, almost half—15 million—will gain insurance under a massive Medicaid expansion by January 2014. The impact of the ACA, in other words, depends on states complying with Medicaid requirements—the very laws Douglas could effectively end the ability of private citizens to enforce through legal action. Another scenario where you might see the ACA falter is if a state took over responsibility for running a health-care exchange, and then failed to comply with federal requirements in some way. A ruling against providers and beneficiaries in Douglas therefore “limits the options for enforcing the Affordable Care Act,” says Timothy Jost, a law professor at Washington and Lee University School of Law. “At this point the assumption is that the states will implement it and that the federal government will enforce it. The possibility to enforce implementation [either through private actions or HHS] is a fall-back position. But in the future, particularly if Obama loses the 2012 election, it narrows options for making sure implementation goes through.”

Even under a Democratic administration, however, leaving enforcement up to HHS is a disaster waiting to happen. That’s because, historically, HHS has a middling record of enforcing Medicaid’s rules. For instance, the California rate cuts that launched the lawsuit in question are still in effect, points out Rochelle Bobroff, Directing Attorney of the Federal Rights Project at the National Senior Citizens Law Center. “The federal government never goes to court over non-conforming state plans,” says Bobroff. “They just don’t do it.” More importantly, HHS is largely limited to one, very poor enforcement mechanism: the ability to cut off all Medicaid funding to a noncompliant state. If the threat of a cutoff doesn’t scare a state into compliance, following through would only end up hurting the Medicaid recipients HHS is trying to help. Under a president Bachmann or Perry and their HHS Secretary, says Jost, “you’d have a situation where [the ACA] was basically unenforceable with regard to the Medicaid expansion.”

Moreover, the ACA is just one piece of the possible collateral damage from a ruling in favor of California. Under a broad ruling, a whole swath of federal requirements could be endangered. “Every state out there is waiting to see what happens in Douglas to cut access,” says Rosenbaum. “The litany of what kind of bad state conduct could be unleashed is long because the only weapon against it is the risk of injunction. The theory that there’s no right of action will carry over out of the Medicaid Act.”

One area where states would likely begin to move in response to a victory for California is in cutting federal money—like Medicaid and Title X funding—that’s currently directed to abortion clinics and Planned Parenthood. The ability of beneficiaries and providers to stop state laws seeking to defund clinics would likely be impeded, allowing backers of the proverbial “war” on abortion and contraception to score a major victory. And with an especially broad ruling, says Steven Shapiro, legal director for the ACLU, “there would be consequences for a wide-ranging variety for civil liberties and civil rights litigation [including] state and local immigration cases.”

This all depends, of course, on if the state of California wins in Douglas, and then how broad the Court’s ruling actually is. The poor tools at HHS’s disposal are partly a result of the fact that the government has historically relied heavily on private actions to enforce federal laws. For this reason it seems unlikely that the Court will take away private citizens’ cause of action altogether, as a broad ruling would overturn a large number of cases and go against decades of established jurisprudence. But on the other hand, a narrow ruling seems likely. “It’s hard to be optimistic with 32 states and the federal government [on the other side]; this is going to be a difficult case to win,” says Bobroff. “Given this Supreme Court and its hostility to plaintiffs,” Jost notes, “it’s depressing.”

It’s important to note that the Obama administration is taking a more moderate position and is asking the Court for a narrow ruling on the Medicaid Act alone. But its decision to back the state of California over private beneficiaries and providers is still baffling for heath care advocates and experts. Even a narrow ruling could impede the implementation of health care reform. “I have no idea what they were thinking, but it’s a major disappointment,” says Shapiro. “They went against their historic and the legally correct position.” Indeed, when the Supreme Court was deciding whether to hear Douglas, the administration’s position was that private actions were important to carrying out federal law. When the Court took up the case, however, the administration performed a remarkable about-face. “There’s a huge amount riding on this case,” says Rosenbaum, “and the ironies here are phenomenal.”

Pema Levy is an assistant editor at The American Prospect.