Courts Split on Whether Private Individuals Can Sue to Challenge States’ Medicaid Defunding Decisions: Considerations for Congress (Part II of II)

Courts Split on Whether Private Individuals Can Sue to Challenge States’ Medicaid Defunding Decisions: Considerations for Congress (Part II of II)

Legal Sidebari

Courts Split on Whether Private Individuals
Can Sue to Challenge States’ Medicaid
Defunding Decisions: Considerations for
Congress (Part II of II)
July 3, 2019
As discussed in Part I of this two-part Legal Sidebar, the Supreme Court recently declined to hear two
cases, Anderson v. Planned Parenthood of Kansas and Gee v. Planned Parenthood of Gulf Coast Inc.,
leaving in place a circuit split on the question of whether private litigants may sue to challenge a state’s
exclusion of Planned Parenthood affiliates from its Medicaid program as a violation of Medicaid’s “free-
choice-of-provider” provision. While Part I addressed the Supreme Court’s evolving jurisprudence
regarding private rights of action generally, this part examines the application of that case law to the free-
choice-of-provider provision and the resulting circuit split on that question.
Private Right of Action to Enforce Medicaid Act’s Free-Choice-of-
Provider Provision
After the Supreme Court’s decision in Gonzaga, which clarified the three-prong test for determining the
existence of a private right of action under § 1983, private plaintiffs continued to file suit to enforce
various requirements of the Medicaid Act under § 1983. In response to these actions, lower courts have
applied the Blessing/Gonzaga test in a way that incorporates Wilder’s general approach and analyzed the
requirements’ enforceability on a provision-by-provision basis, analyzing whether a given provision
contains the necessary rights-creating language that evidences an unambiguous congressional intent to
create an individual right for the plaintiffs. According to one commentator, between mid-2002 and early
2016, federal appellate courts have applied this approach and reviewed the enforceability of 25 Medicaid
requirements, finding 16 of them to be privately enforceable. One of those provisions was the free-choice-
of provider provision, which the Sixth, Seventh, and Ninth Circuits reviewed during that period, with
each court concluding the provision was privately enforceable under § 1983.
Congressional Research Service
https://crsreports.congress.gov
LSB10321
CRS Legal Sidebar
Prepared for Members and
Committees of Congress

Congressional Research Service
2
Armstrong v. Exceptional Child Center, Inc.
While the Supreme Court has not addressed the enforceability of a Medicaid requirement under § 1983
since Wilder, the Court considered the enforceability of such a requirement under the Supremacy Clause
in its 2015 opinion in Armstrong v. Exceptional Child Center, Inc. In Armstrong, providers of habitation
services sued state Medicaid officials alleging that the state reimbursed providers of habilitation services
at rates that violate a Medicaid plan requirement, which directs states to “provide such methods and
procedures to . . . payment for[] care and services available under the plan . . . as may be necessary . . . to
assure that payments are consistent with efficiency, economy, and quality of care ....” The lower court
entered summary judgment for the providers, after concluding that they had “an implied right of action
under the Supremacy Clause to seek injunctive relief against the enforcement or implementation of state
legislation.” The Supreme Court, however, held that the Supremacy Clause creates only a rule of decision
that federal law prevails over conflict state law and does not confer a private right of action.
To reconcile this conclusion with past decisions in which the Court had considered private actions to
enjoin enforcement of state laws that allegedly violated federal laws, the Court explained that those cases
illustrated the exercise of its general equitable power to prevent an injurious act by a public officer. In the
case of Armstrong, the suit could not proceed in equity because two aspects of the provision in question
“establish[ed] Congress’s ‘intent to foreclose’ equitable relief.” First, the Court recognized that the sole
remedy Congress provided for a state’s failure to comply with this and other Medicaid requirements is the
withholding of Medicaid funds by the Secretary. Second, the Armstrong Court considered the requirement
to be “judicially unadministrable.” In the Court’s view, “[i]t is difficult to imagine a requirement broader
and less specific than [the provision’s] mandate that state plans provide for payments that are ‘consistent
with efficiency, economy, and quality of care,’ all the while ‘safeguard[ing] against unnecessary
utilization of . . . care and services.’” By conferring enforcement of this “judgment-laden standard” upon
the Secretary alone, Congress evidenced an intent to make the agency remedy the exclusive one in order
to achieve “the expertise, uniformity, widespread consultation, and resulting administrative guidance that
can accompany agency decisionmaking” and avoid “the comparative risk of inconsistent interpretations
and misincentives that can arise out of an occasional inappropriate application of the statute in a private
action.” As part of this analysis and in a footnote, the Court commented that the plaintiff providers did not
assert a § 1983 claim or sought to rely on Wilder, likely because “our later opinions plainly repudiate the
ready implication of a § 1983 action that Wilder exemplified.” In support of this statement, the Court cited
to Gonzaga with a parenthetical explanation that it ‘“reject[ed] the notion,’ implicit in Wilder, ‘that our
cases permit anything short of an unambiguously conferred right to support a cause of action brought
under § 1983.’”
In the plurality portion of the opinion, then-Justice Scalia, joined by Chief Justice Roberts and Justices
Thomas and Alito, also concluded the Medicaid Act itself does not create an implied cause of action
because the relevant provision “lacks the sort of rights-creating language needed to imply a private right
of action.” Akin to the structural approach advanced in Suter, the plurality looked to the structure of the
Medicaid Act and concluded that because “[t]he Act says that the ‘Secretary shall approve any plan which
fulfills the conditions specified in subsection (a),” and the provision at issue is merely one of the
conditions under subsection (a), the statute “is phrased as a directive to the federal agency charged with
approving state Medicaid plans, not as a conferral of the right to sue upon the beneficiaries of the State’s
decision to participate in Medicaid.” Justice Breyer, who joined the rest of the Armstrong opinion,
declined to address this issue, but concurred to broadly state his concerns about private litigation over a
rate-setting provision that is “complex[] and nonjudicial [in] nature.”
The Circuit Split
While Armstrong was not a § 1983 case and the part of the opinion that would be most relevant to a
§ 1983 analysis—i.e., whether the provision has the relevant “rights-creating” language to create an

Congressional Research Service
3
enforceable individual right—did not garner the votes of a majority of the Court, some states have sought
to apply the structural argument from Armstrong to bar § 1983 claims seeking to enforce Medicaid
requirements. Courts have generally rejected the states’ invitation to apply Armstrong’s structural
approach and instead continue to analyze whether a given Medicaid provision has the relevant rights-
creating language that would create an enforceable right. With respect to the free-choice-of-provider
provision, a circuit split emerged after the Eighth Circuit’s decision in Does v. Gillespie in 2017.
In Gillespie, relying largely on the plurality portion of Armstrong, the Eighth Circuit concluded that the
free-choice-of-provider provision did not unambiguously create an enforceable federal right. As an initial
matter, the court interpreted Armstrong’s footnote about Wilder as overruling Wilder and its approach
because Gonzaga established a higher standard for the first prong of the Blessing test, requiring an
individual right be “unambiguously conferred” by a statute. As a result, according to the appellate court,
the provision, under Gonzaga, lacks the requisite individual focus because the overall structure of the
Medicaid Act “is two steps removed” from the Medicaid beneficiaries. “Like the provision at issue in
Armstrong,” the provision “is phrased as a directive to the federal agency charged with approving state
Medicaid plans.” Thus, according to the Eighth Circuit, the relevant requirement “focuses neither on the
individuals protected nor even on the funding recipients being regulated, but on the agenc[y] that will do
the regulating.” Second, “Congress expressly conferred another means of enforcing a State’s compliance
with this provision—the withholding of federal funds by the Secretary.” Third, looking at the provision in
the context of the overall structure of the Medicaid Act, the court held that the provision has an
“aggregate” focus because it is part of a statute that “links funding to substantial compliance with its
conditions.”
In the court’s view, other circuits that reached the opposite result gave “insufficient weight to Gonzaga’s
requirement of unambiguous intent and to the overall structure of the provisions.” Even though the
provision itself refers to an “individual,” the Eighth Circuit observed that the provision “is nested within
one of eighty-three subsections and is too far removed from the Act’s focus on which state plans the
Secretary ‘shall approve.’” Because “the structural elements of the statute and language in a discrete
subsection give mixed signals about legislative intent,” Congress has not, in the court’s view, spoken
“with a ‘clear voice’ that manifests an ‘unambiguous intent’ to confer individual rights.”
In addition, Gillespie rejected the argument that 42 U.S.C. § 1320a-2, enacted after Suter, evidenced an
intent to authorize a private right of action under § 1983. Because “§ 1320a-2 was adopted seven years
before Gonzaga clarified the law in this area,” the statute, according to the appellate court, did not address
the “same question that a court must decide today,” i.e., whether a statute “unambiguously confers an
individual right that can be enforced under § 1983.” While recognizing that § 1320a-2 “meant that a
provision of the [Social Security] Act cannot be deemed individually unenforceable solely because of its
situs in a larger regime requiring a State plan or specifying the required contents of a state plan,” the court
nevertheless concluded that “[w]here a provision is included in a section of the Act requiring a state plan
or specifying the required contents of a state plan, Congress still must create new rights in clear terms that
show unambiguous intent before they are enforceable under § 1983.”
Around the time that Gillespie was decided, the Fifth Circuit (in Gee) and the Tenth Circuit (in Andersen)
each also considered the enforceability of the free-choice-of-provider provision under § 1983 and found it
to be enforceable because it “is phrased in individual terms that are specific and judicially administrable,”
evidencing Congress’s intent to grant an enforceable right to that specific class of beneficiaries. In
Andersen, in particular, the court rejected the structural approach advocated by the plurality in Armstrong,
concluding that Wilder and its approach were binding.

Congressional Research Service
4
Considerations for Congress
Whether Medicaid beneficiaries may enforce the free-choice-of-provider provision of the Medicaid Act
through § 1983 is principally a question about whether Congress intended to provide an individually
enforceable right under this provision. Absent express congressional clarification, the Supreme Court’s
analysis—should it choose to take up the issue in the future—would likely focus on at least two issues:
(1) the extent to which the overall structure of the Medicaid Act—as Spending Clause legislation
requiring states to submit and maintain compliant state Medicaid plans—should be relied upon in
discerning congressional intent; and (2) whether the applicability of this structural approach, in the
Medicaid context, is limited by Wilder and § 1320a-2 after Gonzaga.
On the one hand, there is an argument that Congress, in enacting § 1320a-2, unambiguously rejected the
structural approach in the Medicaid context and sought to preserve availability of a private right of action
for these state plan requirements to the extent permitted under the general standards and approach set
forth under Wilder, subject to further judicial refinement of the relevant standards. Congress enacted
§ 1320a-2, after some lower courts began interpreting Suter as adopting the structural approach, to
expressly reject Suter to the extent it applied such an approach and to preserve the availability of private
right of action as provided under then-existing case law, including Wilder. Section 1320a-2 otherwise
expressly states that it does not overturn Suter, which could be more narrowly construed as a case
clarifying the relevant standard on juridical administrability. Section 1320a-2 thus could be interpreted as
evidencing a clear congressional intent to preserve a private right of action under § 1983 to enforce state
plan requirements under the Social Security Act, provided that the specific provision at issue meets the
standards set forth under Wilder and subsequent cases that clarify those standards. Under this
interpretation, Gonzaga could be read as a subsequent case that clarified the standard governing when a
statute intends to benefit an individual plaintiff. As a case that considered a Spending Clause statute
unrelated to the Social Security Act, Gonzaga, under this analysis, could not alter § 1320a-2’s specific
expression of congressional intent with respect to that statute.
On the other hand, as the Gillespie court concluded, the significance of § 1320a-2 as an indicator of
congressional intent may be limited after Gonzaga. Under this interpretation (and as intimated by the
dictum in Armstrong), Gonzaga, in clarifying the standard governing the “intended benefit” prong,
implicitly overruled Wilder inasmuch as it authorized private suits by individuals (i.e., health care
providers) who were merely within the “zone of interest” of the Medicaid Act. Thus, to the extent
§ 1320a-2 sought to preserve the availability of a private right of action under a now-overruled case, its
exact import is no longer clear and as such, it falls short of “unambiguously conferring” an individually
enforceable right. Without a clear expression of congressional intent from § 1320a-2, one is left with the
text and structure of the Medicaid Act itself to discern the relevant congressional intent. Under this
approach, the Supreme Court may follow the roadmap laid out in the plurality portion of Armstrong and
formally adopt the structural approach. Under this approach, because the free-choice-of-provider
provision is merely one of many conditions of approval embedded within an overall directive to the
Secretary to approve compliant state plans, it could be viewed to not “unambiguously confer” upon the
beneficiaries an individually enforceable right.
Until the Supreme Court decides to take up the issue, it is unclear which approach the courts in the
remaining five circuits that have not addressed this issue would follow. Under the former approach,
private enforcement of a particular Medicaid provision would be permitted if it “unambiguously confers”
an enforceable right. The availability of private enforcement means that courts reviewing the same
provision may reach different conclusions, resulting in variations in the availability of a private right of
action across jurisdictions for a particular provision. Additionally, where courts have determined that a
privately enforceable right exists as to a provision and consider an alleged violation on its merits, they
could also reach inconsistent results as to the scope and nature of the right, particularly if the provision
includes certain discretionary components (e.g., a reasonableness determination). Under the latter

Congressional Research Service
5
structural approach adopted by the Eighth Circuit, all private rights of action under Medicaid and other
similarly structured federal-state programs would likely be precluded. Because the Medicaid Act’s
statutory structure is common to other federal-state programs enacted under the Social Security Act (such
as the Aid to Families with Dependent Children program and the Adoption Assistance and Child Welfare
Act), the application of the structural approach has a potentially wide-reaching effect of broadly
precluding private rights of action to enforce those program requirements. Following Gillespie, lower
courts in the Eighth Circuit have applied its reasoning to reject private claims seeking to enforce
requirements of the Adoption Assistance and Child Welfare Act. Thus, under the structural approach, the
principal and perhaps only enforcement mechanism for a state’s violation of a Medicaid requirement is
the withholding or reduction of federal Medicaid funds by the Secretary. While this centralized
enforcement is likely to produce more uniformity in the interpretation of the relevant statutes and
regulations, it may result in under-enforcement. Because the withholding or reduction of Medicaid funds
is a drastic remedy that could, at least temporarily, lead to a broader loss of services to vulnerable
populations, the Secretary has historically been reluctant to invoke this authority. The effectiveness of this
enforcement mechanism also depends significantly on the availability of resources to the Secretary to
monitor for, investigate, and review potential violations.
Because the availability of a private right of action to enforce the free-choice-of provider provision (and
potentially other Medicaid provisions) is fundamentally a question about congressional intent, Congress
could address this uncertainty directly by amending existing state plan provisions, or enacting separate
provisions (as it had with § 1320a-2) to better clarify whether and to what extent it intends to provide
enforceable rights under the Medicaid Act and perhaps other state plan provisions.

Author Information

Wen S. Shen

Legislative Attorney

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

LSB10321 · VERSION 1 · NEW