Douglas v. Independent Living Center of Southern California

PETITIONER: Toby Douglas, Director, California Department of Health Care Services
RESPONDENT: Independent Living Center of Southern California, Inc., et al.
LOCATION: U.S. Court of Appeals for the Ninth Circuit, California

DOCKET NO.: 09-958
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 565 US (2012)
GRANTED: Jan 18, 2011
ARGUED: Oct 03, 2011
DECIDED: Feb 22, 2012

Carter G. Phillips - for the respondents
Edwin S. Kneedler - Deputy Solicitor General, Department of Justice, for the United States as amicus curiae, supporting the petitioner
Karin S. Schwartz - for the petitioner

Facts of the case

The California Legislature approved a series of cutbacks in the payments to physicians, hospitals and pharmacies to address the state's budget deficit. In each case, the providers have sued in federal court and won rulings from the United States Court of Appeals for the Ninth Circuit, which blocked the cutbacks on the grounds that they conflicted with the Medicaid law. The providers argued that if the cutbacks were approved, the state would not provide the level of care required under Medicaid.

The Supreme Court agreed to hear three separate appeals from the state, all of which raise the same issue. The lead case is Maxwell-Jolly v. Independent Living Center of Southern California. The other two cases are Maxwell-Jolly v. California Pharmacists Association and Maxwell-Jolly v. Santa Rosa Memorial Hospital. David Maxwell-Jolly served as the director of California's Department of Health Care Services.


Does federal law preempt state reductions in Medicaid payments?

Media for Douglas v. Independent Living Center of Southern California

Audio Transcription for Oral Argument - October 03, 2011 in Douglas v. Independent Living Center of Southern California

Audio Transcription for Opinion Announcement - February 22, 2012 in Douglas v. Independent Living Center of Southern California

John G. Roberts, Jr.:

Justice Breyer has our opinion this morning in Case 09-958, Douglas versus Independent Living Center and the consolidated cases.

Stephen G. Breyer:

The difficult thing is to explain what this case is about.

It's about Medicaid and Medicaid is a cooperative federal state program that provides medical care for needy individuals.

To qualify, a State has to have its Medicaid statutes approved by a federal agency, the one that administers the program, it's called the Centers for Medicare and Medicaid Services or initials are CMS, which reviews the statutes, the states statutes to determine if they comply with the federal law.

The federal law that's involved here is a federal law that says states statutes have to "assure that payments to the ultimate -- to the Medicaid providers like doctors are consistent with the efficiency, economy and quality of care and are sufficient to enlist enough providers to make Medicaid care and services available.

So you have to pay the providers enough money so that -- now, few years ago, California enacted three statutes reducing its payments to various of the Medicaid providers.

The State submitted them to the federal agency for approval, but before the agency finished reviewing them, certain groups of Medicaid providers and beneficiaries filed a series of lawsuits, seeking to enjoin the state statutes on the ground that they didn't -- they conflicted with the statute I just read and that they were so preempted by federal Medicaid law.

In other words, that heart of it, as they were saying the payments that California now wanted to make weren't sufficient to enlist enough providers like the doctors.

The providers and beneficiaries brought their suits based directly on the Constitution's Supremacy Clause which says that federal law takes precedence over state law.

They were saying these California state laws weren't good enough to comply with the federal law which says you have to pay them enough money.

California in response argued that the providers and beneficiaries don't have the right to bring a suit like this.

There is no such thing as a Supremacy Clause action in this situation to enforce this federal law, but the lower court decisions that we were reviewing said, yes, they can.

They can bring this action addressed -- based right on the Supremacy Clause and the other courts like the Ninth Circuit and certain federal courts said, the state statutes are invalid, they do conflict.

And in the meantime, the agency officials, proceeding on a separate agency reviewing track, were reviewing the same statutes to make up their mind whether they could -- they've conflicted.

California initially lost in the agency, but then it sought further administrative tract review in the agency.

That's the posture of the cases wherein when we decided to grant certiorari to decide whether the providers and beneficiaries could mount a Supremacy Clause challenge.

I told it was complicated just to figure out what's going on.

Since we granted certiorari, the relevant circumstances have changed.

After oral argument, the federal agency reversed course and it approved the state statutes.

Now, the agency's approval doesn't moot the case, but it does put them in a different posture.

The agency that's charged with administering the Medicaid statutes has now said that the state statutes do comply with the federal law.

That decision doesn't change the underlying substantive question, namely, whether they really do comply, but it does change possibly the answer.

And it may require the respondents who are trying to attack the state statutes as being inconsistent with federal law that may require them to proceed through a procedure that seeks review of the agency determination under the Administrative Procedure Act, the APA, rather than an action against California under the Supremacy Clause.

And in our opinion, we explain why it might change, how you are supposed to go about getting the review of these state statutes.

We also recognize, however, that the parties have not fully argued the question in the cases' new posture.

So given the complexity of these cases, which you may be convinced about, rather than ordering re-argument here, we vacate the Ninth Circuit's judgment and we remand the cases thereby permitting the parties to argue the matter more fully before that circuit in the first instance.

The Chief Justice has filed a dissenting opinion which Justices Scalia, Thomas and Alito have joined.