Two Wrongs Don't Make a Right: Medicaid, Section 1983 and the Cost of an Enforceable Right to Health Care
October 2003 I 56 Vanderbilt Law Review 1479 I Mark A. Ison
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More than a trillion dollars annually is spent on the health care system .... Despite increases in medical care spending that are greater than the rate of inflation, population growth, and Gross Domestic Product growth, there has not been a commensurate improvement in our health status as a nation .... Despite our Nation's wealth, the health care system does not provide coverage to all Americans who want it.
I. Introduction and Overview
These words capture both the essence of America's public health care dilemma and the frustration felt by many of the lawmakers charged with the duty to solve it. The battle to lower costs and expand access to health care is not limited to the chambers of Congress, however. Recently, the fighting has spilled over into the federal courts as States battle Medicaid beneficiaries over the scope of the cooperative federal-state Medicaid program. For example, in Westside Mothers v. Haveman, Michigan recently defended its Medicaid program against the charge that the State was not doing enough to ensure that Medicaid-eligible children were taking advantage of the medical services required under the program. The plaintiffs, representing Medicaid-eligible children in Michigan, sought to force the State to take steps to promote increased utilization and provision of such services.
The language of the Medicaid Act ("the Act") does not expressly provide beneficiaries with a private cause of action against the State. Accordingly, the district court dismissed the case, concluding that the court did not have jurisdiction and that the plaintiffs did not have standing to sue. The United States Court of Appeals for the Sixth Circuit ("Sixth Circuit"), following the Supreme Court's admittedly confusing precedent in this area, reversed, allowing the plaintiffs to proceed under 42 U.S.C. Section 1983. Section 1983 supplies a cause of action for an individual when anyone, acting under color of State law, deprives that individual of "rights, privileges, or immunities secured by the Constitution and laws" of the United States.
The Sixth Circuit held that the Medicaid Act was within the term "laws" for the purposes of section 1983 because it "was intended to benefit the putative plaintiff," because it placed "a binding [rather than precatory] obligation on a government unit," and because the plaintiffs' asserted interests were not so 'vague and amorphous' that their enforcement would strain judicial competence." One month later, however, in Gonzaga University v. Doe, the United States Supreme Court announced that section 1983 provided a cause of action only for violations of "unambiguously conferred rights," specifically precluding actions seeking to secure mere "benefits" or "interests" created by federal law."
Since the Supreme Court later denied certiorari in both the Westside Mothers case and a similar case from North Carolina, it has not ultimately settled the question of whether private plaintiffs may sue under section 1983 to force a State to comply with specific Medicaid provisions. A State "must comply with certain requirements imposed by the [Medicaid] Act and regulations imposed by the Secretary of Health and Human Services" as long as the State continues to participate in the Medicaid program. The unanswered question is whether Medicaid creates a right to certain enumerated health care services, enforceable by private individuals against participating States.
This Note concludes that the Act does not (and should not) confer an enforceable private right to such services. It further concludes that the federal courts have distorted the important political and financial relationship between Congress and the States by enforcing Medicaid provisions as if a right to such care existed, substantially hindering attempts to ensure some adequate level of health care for all Americans.
Part II briefly discusses the history of Medicaid, describes the financial and political attractiveness of the Medicaid program to both the States and Congress, and explains how the federal courts contribute to the States' present financial crises by imposing precatory federal health care priorities on the States with a vigor that Congress never intended.
Part III discusses the development of the Court's section 1983 jurisprudence as it has been applied to rights created by federal statutes. This Part pays particular attention to the Court's uneasy role in defining the rights of States and individuals within the context of cooperative federal-state programs enacted under the spending clause.
Part IV exposes the conflict between the concept of an enforceable private right to health care under Medicaid and the Supreme Court's decision in Gonzaga University v. Doe, which held that section 1983 provided a cause of action only where "unambiguously conferred rights" were implicated. This Note concludes that the Medicaid Act does not confer such unambiguous rights and that the enforcement of Medicaid provisions should be left solely to the Secretary for Health and Human Services.
Finally, Part V assumes that the Gonzaga decision or its eventual progeny will preclude plaintiffs from using section 1983 to enforce a private right to health care under Medicaid and explains why this is the best result if the United States is to make progress toward providing access to adequate health care for all citizens. The result, while perhaps harsh in the short term, will force Congress to recognize the true economic and political nature of the reforms that must occur if it is to successfully increase access to adequate health care services for an expanding Medicaid population.
II. The Financial and Political Reality of Medicaid: A Deal With the Devil?
Congress enacted the Medicaid Act in 1965 in order to provide medical care to certain low-income persons. The Medicaid Act authorizes Congress to appropriate federal funds for payments to States that have developed approved plans for providing health care to those who cannot otherwise afford it. States choosing to develop health care plans use the congressional funds to pay professionals who provide health care services to Medicaid-eligible individuals. The Act outlines minimum standards for State participation, but the actual implementation of any particular Medicaid program, including the decision whether to pay for certain kinds of treatment authorized by the Act, is largely a State concern. Although Medicaid is, at least theoretically, a voluntary program, every State participates in it to some degree.
A. Federal Financial Participation and the Externalization of Political Costs
The principal allure of the Medicaid program is its funding scheme. The amount of federal funding that a State receives for its Medicaid program is a function of the State's own Medicaid spending and a federal matching formula based primarily on the State's per capita income. Each State's Medicaid budget, therefore, is a combination of actual State funding and some amount of federal assistance, known as "federal financial participation" (FFP). Depending on a State's average per capita income, FFP can range from 50% to 83% of the State's total program costs. Therefore, a State can provide health care services for low-income individuals at a level that greatly exceeds actual State cost, making it economically and politically sensible for a State to expand such services well beyond the limit that cost would normally impose. Unfortunately, this funding scheme creates a political "moral hazard," whereby the States have incentives to expand their Medicaid programs beyond levels that they would be willing or able to fund independently.
Medicaid's cooperative financial arrangement works well to a point. The States are understandably eager to accept so generous an offer from the federal government. Congress benefits, too, by expanding access to health care in a way that puts much of the budgetary decision making in the hands of the States-a valuable arrangement when elections draw near. The State's temptation is to expand healthcare coverage, ensuring that program costs will eventually reach a level at which even the State's lesser obligation in the funding of its Medicaid program becomes difficult to pay.
Cutting expenditures matched by FFP is difficult because, for every dollar that a State wishes to save, the State has to cut between $2 and $6 in program costs. Such a decision is politically unpopular for obvious reasons. Professor James Blumstein has referred to this inability to slow the growth of leveraged cooperative programs as the political "narcotic effect." Professor Blumstein's label colorfully describes how participating States become increasingly dependent on federal money in order to meet political and social goals. A State reducing its own Medicaid expenditures must endure a painful economic withdrawal period as it also weans itself off of the accompanying federal funds. The State is then forced to raise taxes or cut other programs in order to make ends meet, alienating important political constituencies in the process.
Congress has used the addictive effects of FFP to aggressively externalize some costs of its own. Once the States were politically and fiscally locked-in to the Medicaid program, Congress began imposing greater obligations on the States in exchange for FFP. Congress thereby squeezed more political capital from every federal matching dollar. Unfortunately, this congressional exploitation of the narcotic effect made the States increasingly desperate to find some way of coping with the growing burdens of Medicaid compliance.
B. Managed Care: A Solution to the Cost Problem?
The Medicaid Act requires participating States to provide care that is deemed "medically necessary" by a treating physician in any given case. While considerable debate rages over the propriety of including economic concerns in treatment decisions, some commentators recognize that the medical necessity standard encompasses not a single level, but a continuum of medical care. One end of the continuum represents the level of care that is medically adequate and economically efficient (in terms of the cost of the care versus the benefit of the care to the patient) for the treatment of a particular condition. The other end symbolizes the level of care that might produce the maximum possible medical benefit to the patient, notwithstanding the marginal cost of that care. Applying this flexible concept of medical necessity, the States found that they could reduce Medicaid expenditures without visibly cutting health care services by encouraging doctors treating Medicaid patients to interpret "medical necessity" as a standard of medical adequacy rather than one of maximum benefit.
The most formidable hurdle that the States faced in their search for Medicaid efficiency was the traditional fee-for-service system of health care delivery, under which a State participating in the Medicaid program was obligated to pay for any care provided or recommended by a physician. The State had but one duty-to write a check. This system created an additional moral hazard in which physicians had incentives to provide more and more care without regard to its cost, maximizing their own profits while maintaining the moral and ethical high ground by also maximizing care to patients. States realized that they would have to replace the fee-for-service health care model if they were to achieve cost-containment goals.
One solution was to administer a State Medicaid plan through a Managed Care Organization (MCO). MCOs are health plans organized in such a way that physicians are encouraged to provide the least expensive medically adequate treatment for a particular condition. A typical MCO receives a periodic, capitated (per head) payment for each person enrolled in its health care program. This arrangement places the MCO at financial risk because it is obligated to provide medical care to members even if the cost of that care exceeds the aggregate capitated payments. If the capitated payments exceed the cost of caring for enrollees, however, the MCO retains a profit.
Physicians participating in an MCO are encouraged to lower the cost of patient care through ownership interests in the MCO, salary and bonus structures, withhold payments contingent on specified economic targets, and other arrangements. The resulting health care model costs less to operate, since over time the combined cost-benefit decisions of the participating physicians tend to push the standard of medical necessity away from the level of all maximum benefit and toward the level of adequate care.
Congress passed legislation in the early 1980s allowing States to require that all Medicaid beneficiaries receive medical care through MCOs. Most States have since implemented such reforms. By allowing managed care in the Medicaid context, Congress acknowledged that economic considerations are an important part of the Medicaid calculus. In the final analysis, however, Congress has shown little sympathy to States increasingly burdened by Medicaid obligations. This tension between federal health care priorities and State economic realities often leads to litigation by private parties seeking some federal health care benefit at State expense.
C. EPSDT, Managed Care, and the Federal Courts: Westside Mothers v. Haveman
- EPSDT and Managed Care
One of the most comprehensive provisions of the Medicaid statute is its Early and Periodic Screening, Diagnostic, and Treatment Services (EPSDT) requirement. The EPSDT provisions list the medical services that a State must provide to Medicaid-eligible children under the age of 21. The list of required services is extensive. Generally, whatever care a child needs, that child gets.
EPSDT requires the State program to provide, at intervals meeting "reasonable standards of medical practice," comprehensive physical examinations, health and developmental histories, blood and laboratory tests, immunizations, vision services, dental services, hearing services, and health education services. Furthermore, States must fund treatment "to correct or ameliorate defects and physical and mental illnesses and conditions discovered by the screening services, whether or not such services are generally covered under the State plan." Federal utilization goals require each State to take steps to ensure that 80 percent of its Medicaid-eligible children are getting these services. Finally, each State is expected to provide transportation, scheduling, and other ancillary services if such services will help the State meet its utilization goals.
The EPSDT provisions requiring States to provide any treatment recognized by the Medicaid Act and recommended by a physician largely thwart attempts to control costs through managed care. A State's decision to exclude certain health services from its Medicaid program is meaningless in the EPSDT context. Where children are concerned, the statute requires the State to provide any treatment within the general Medicaid Act even if the State would not cover the same treatment for an adult. Critically, the operative language of section 1396d(r)(5) requires the State to pay for any "medically necessary" treatment that "correct[s] or ameliorate[s]" medical conditions discovered by the required screenings. This language mandates a standard of medical necessity that strives for maximum benefits without consideration of marginal costs, eviscerating a managed care arrangement.
Congress enacted the EPSDT provisions of the Act in 1967, when utilization levels were much lower and fee-for-service was the dominant delivery model for health care. In today's health care environment of skyrocketing costs and increasing utilization of Medicaid services, the standard of medical necessity embodied in the EPSDT provisions is economically unworkable. If managed care is not permitted in the EPSDT context, States cannot effectively control the health care costs incurred by millions of Medicaid-eligible children. - EPSDT and the Courts
Expenditures for EPSDT services, especially those designed to maximize utilization of the services, are closely scrutinized when State officials begin to feel the unpleasant budgetary effects of their increasingly expensive Medicaid plan. The States could simply begin to cut services as fiscally necessary, forcing the Secretary for Health and Human Services and Congress to address the funding and coverage issues. There are grave political and social costs associated with such action, since cutting Medicaid services would only serve to harm those that the program was designed to help. Additionally, as Westside Mothers illustrates, when a State cuts its EPSDT expenditures it risks being sued by welfare-rights groups.
In most cases the federal courts enforce the letter of the EPSDT provisions and, notwithstanding the precatory nature of the Medicaid Act, allow private plaintiffs to force the States to provide the enumerated services. Such judicial action usurps the enforcement role of the Secretary of Health and Human Services and imposes burdens on the States that Congress never intended. Congress is able to watch silently as the courts enforce federal health care policies at the expense of the already economically suffering States. Professor Blumstein refers to this phenomenon as "legislative schizophrenia." - Legislative Schizophrenia and the Westside Mothers Litigation
Legislative schizophrenia is based on the concept that sweeping humanitarian goals "are widely shared in the abstract. In other words, it is hard to argue with the following statement: "Other things being equal, it would be better to provide improved access to medical care to indigent patients." As a result, legislators "are unlikely to strenuously oppose pious aspirational language of a general precatory character in health policy legislation," even if they do oppose mechanisms by which the precatory language could be enforced. Such enforcement gaps are accepted as a necessary part of political compromise, so Congress gives the supervising agency (the Department of Health and Human Services for Medicaid) wide discretion in its enforcement of the statutory language.
Westside Mothers illustrates the reality of legislative schizophrenia and of the State struggle to make ends meet under the increasing pressure of Medicaid obligations. In 1999, several welfare rights groups filed suit in federal court seeking an injunction that would have forced the State of Michigan to spend more money to make sure that EPSDT utilization goals were met. The plaintiffs claimed that only 35 percent of Michigan's eligible children had received the required EPSDT services in 1997, and that this percentage had dropped for the second consecutive year. The lawsuit, in addition to asking for the provision of required medical services for children, sought to force the State to better inform the parents of eligible children about EPSDT services and to provide transportation and scheduling assistance to the children and their parents, making it easier for them to take advantage of such services.
The plaintiffs' most intriguing claim was that Michigan "develop[ed] a program ... lack[ing] the capacity to deliver to eligible children the care required by [Medicaid]." Michigan officials disputed the utilization statistics that the plaintiffs relied upon to make this claim, maintaining that the utilization of EPSDT services had actually increased over the last two years. Crucial to the plaintiffs' argument was the fact that since 1997, Michigan operated on a waiver from the Health Care Finance Administration allowing the State to provide Medicaid services (including EPSDT services) through an MCO. In other words, the plaintiffs were claiming that Michigan's approach to managed care violated the EPSDT provisions of the Medicaid Act.
Interestingly, the plaintiffs' attack on Michigan's Medicaid program focused primarily on Michigan's failure to achieve overall utilization goals for EPSDT services rather than on individual cases in which care was denied. It is true that when a State's Medicaid compliance is in question the relevant inquiry under the Medicaid statute concerns a State's program as a whole and not individual instances of noncompliance. Michigan's Medicaid program as a whole, however, was acceptable to the Secretary of Health and Human Services. Michigan correctly pointed out that it was in weekly contact with federal officials and that the office of the Secretary of Health and Human Services had continually approved the State's ongoing Medicaid program in required quarterly audits. Importantly, the Westside Mothers plaintiffs challenged the actions of the State of Michigan and not the determination of the Department for Health and Human Services that Michigan's Medicaid program was in compliance the Medicaid Act. Under these circumstances, it seems that the plaintiffs would have to extrapolate the existence of a systemic failure of Michigan's EPSDT program from many individual instances of noncompliance rather than from Michigan's failure to meet utilization goals set by the agency. This the plaintiffs did not do.
The plaintiffs claimed that they were asking a simple question of statutory compliance but the case actually presented several larger issues. Should a court, at the request of a private plaintiff, try to "fix" a State's Medicaid program, especially when the Secretary of Health and Human Services has found the program to comply with federal law? Should a court fill in the gaps of precatory federal health care policy with its own ideas, enabling Congress to externalize the political costs associated with making tough, detailed enforcement decisions? Should a court impose a massive financial burden (even a purely prospective one) on a State that has structured its conduct and finances according to its ongoing, functional relationship with the relevant federal officials? This is legislative schizophrenia in action.
III. Section 1983 and the Spending Clause
A. Section 1983 Generally
42 U.S.C. Section 1983 was originally enacted as the Ku Klux Klan Act of 1871. The goal of this act was "to override the corrupting influence of the Ku Klux Klan and its sympathizers on the governments and law enforcement agencies of the Southern States, and of course one strong motive behind its enactment was grave congressional concern that the State courts had been deficient in protecting federal rights." In other words, section 1983 was enacted to protect the civil rights of "newly freed slaves and union sympathizers" by providing "a neutral federal forum" in which an aggrieved citizen could avoid the biases inherent in State courts of the post-Civil War era.
The statute reads, in relevant part, [e]very person who, under color of any [law] of any State... subjects, or causes to be subjected, any citizen of the United States ... to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws [of the United States] ... shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress ....
The statute remains today effectively unchanged from its original version. How did a statute enacted to address civil rights abuses in the Reconstruction Era90 evolve into an instrument by which private plaintiffs may impose judicially created health care policies on the States under the auspices of a voluntary federal-state program enacted under the spending clause?
B. Section 1983 and the Spending Clause
While section 1983 was enacted in 1871, the Supreme Court did not interpret it as protecting statutorily created rights of any kind until 1980. One year later, however, in Pennhurst State School and Hospital v. Halderman, then-Justice Rehnquist addressed the more specific question of whether a statute enacted under the spending clause could create rights enforceable under section 1983. He wrote, "[iun legislation enacted pursuant to the spending power, the typical remedy for State noncompliance with federally imposed conditions is not a private cause of action for noncompliance but rather action by the Federal Government to terminate funds to the State."
Congress can write other remedies into the statute itself, but, as Justice Rehnquist continued, "[1]egislation enacted pursuant to the spending power is much in the nature of a contract: in return for federal funds, the States agree to comply with federally imposed conditions." As such, "if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously. By insisting that Congress speak with a clear voice, we enable the States to exercise their choice knowingly, cognizant of the consequences of their participation."
Only twice since Pennhurst has the Court found legislation enacted pursuant to the spending power to confer private rights enforceable under section 1983: Wright v. City of Roanoke Redevelopment and Housing Authority and Wilder v. Virginia Hospital Association. Even in these two cases, however, the Court avoided a searching inquiry into the source of each asserted "right," leaving serious questions regarding the applicability of section 1983 to legislation enacted under the spending clause.
- Wright v. City of Roanoke Redevelopment and Housing Authority
In Wright, tenants living in low-income housing projects sued the owner of the projects under section 1983, alleging that the owner had violated federal statutes and regulations by overbilling the tenants for their utilities. The Housing Act provided that "[a] family shall pay as rent for a dwelling unit assisted under this chapter [no more than a specified percentage of its income], and that the rent amount included an allowance for "reasonable amounts of utilities" as defined by the Public Housing Authority.
The Court applied a three-part test to determine whether the statute conferred a "right to a reasonable utility allowance" enforceable under section 1983. First, the Court asked whether the language of the statute itself created a private right in the plaintiffs. Drawing from the general language of the statute, the Court of Appeals had held that "the tenants were the intended beneficiaries [of the] Housing Act," and that the tenants had "certain rights" under the Act. The Court accepted this conclusion.
Second, the Court asked whether Congress foreclosed private enforcement through its chosen administrative scheme. In determining that the administrative remedies contained in the Housing Act were not "sufficiently comprehensive to demonstrate congressional intent to preclude the remedy of suits under section 1983," the Court first examined the legislative history of the Act. Comments made during a House subcommittee hearing indicated some recognition of a tenant's right to privately enforce provisions of the Act in the federal courts. More convincing, however, was the fact that Congress enacted but later repealed a provision of the Housing Act that would have limited the judicial review of agency decisions. Furthermore, certain regulations implicitly contemplated judicial review of Public Housing Authority actions. Finally, the Court noted that statutes in which it found congressional preclusion of a remedy under section 1983 had "themselves provided for private judicial enforcement, thereby evidencing congressional intent to supplant the section 1983 remedy."
Third, the Court asked whether the asserted right to a "reasonable allowance for utilities" was so "vague and amorphous" that it was "beyond the competence of the judiciary to enforce." In finding that the right was not "vague and amorphous," the Court held that the relevant regulations "specifically set out guidelines that [local housing officials] were to follow in establishing utility allowances." - Wilder v. Virginia Hospital Association
In Wilder, the Court focused on the language of the 1980 Boren Amendment ("the Amendment") to the Medicaid Act. The Amendment required a participating State to reimburse providers in its Medicaid program at rates that "the State finds, and makes assurances satisfactory to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities." Importantly, neither the Amendment nor any regulations promulgated by the Secretary for Health and Human Services defined "reasonable and adequate" or "efficiently and economically," giving the States the power to interpret these critical terms. Ultimately at issue was whether the language of the Amendment created a substantive right to such "reasonable and adequate" rates enforceable by health care providers under section 1983.
The Court emphasized that section 1983 provided a cause of action only for violations of "rights, privileges, or immunities," not for mere violations of federal law, then applied a three-part inquiry to determine whether the Amendment created such a right. First, the Court asked whether the Amendment "was intended to benefit the putative plaintiff," the individuals and entities providing medical services to the beneficiaries of Virginia's Medicaid program. In a one-paragraph analysis reminiscent of that in Wright, the Court held that health care providers were the beneficiaries of the Amendment because the Amendment was "phrased in terms benefiting health care providers." Specifically, the Amendment "require[d] a State plan to [pay for] ... the hospital services, nursing facility services, and services in an intermediate care facility for the mentally retarded ....
Second, the Court asked whether the Amendment "impose[d] a 'binding obligation' on the States," rather than a mere "congressional preference for a certain kind of conduct." In determining that the Amendment obligated the States to set "reasonable and adequate rates," the Court looked to the text of the Amendment, the Amendment's role as a condition of federal funding, the legislative history of the Amendment, and the history of similar provider lawsuits in federal courts.
Examining the language of the Medicaid Act that provided, "[a] State plan for medical assistance must provide ... for payment... of the [enumerated services] ... through the use of [reasonable and adequate] rates," the Court held that the Amendment spoke in "mandatory rather than precatory terms," which were "wholly uncharacteristic of a mere suggestion or 'nudge." Furthermore, the Court noted that the language of the Medicaid Act and its accompanying regulations conditioned a State's receipt of federal funds on its compliance with the Amendment.
While Virginia conceded that the provisions required it to make a finding regarding the reasonable and adequate level of provider reimbursement for various health services, provide that level of reimbursement, and make the required assurances to the Secretary, the State and the Secretary both argued that the good-faith completion of these procedural requirements discharged the State's obligation. The Court rejected this argument and held that the duty to make findings was distinct from the duty to provide assurances and that "[i]t would make little sense for Congress to require a State to make findings without requiring those findings to be correct," or to require a State to submit assurances "[if] the State's findings [were not] reviewable in some manner by the Secretary." Consequently, by requiring a State to correctly find that its rates are reasonable and adequate, the Court held that "the statute impose[d] the concomitant obligation to adopt reasonable and adequate rates."
The Court also held that the legislative history of the Amendment suggested that the Secretary might have the power to enforce the reasonableness and adequacy of the rates. There was evidence that the Amendment was enacted against a background of provider reimbursement lawsuits, and the legislative history indicated that Congress failed to view the Amendment as a replacement for such private actions.
Third, the Court considered whether a right to "reasonable [reimbursement rates] ... adequate to meet the costs which must be incurred by efficiently and economically operated facilities" was "too 'vague and amorphous' to be judicially enforceable." Just like the statute examined in Wright, the Amendment enumerated factors that a State had to consider before setting reimbursement rates. Specifically, a State had to "judge the reasonableness of its rates against the benchmark of an efficiently.., operated facility providing care in compliance with federal and State standards while at the same time ensuring 'reasonable access' to eligible participants." "While there may be a range of reasonable rates," the Court recognized, "there certainly are some rates outside that range that no State could ever find to be reasonable and adequate under the Act."
After holding that the statute created an enforceable right, the Court looked to the statutory and administrative enforcement provisions of the Act and found that Congress did not foreclose private enforcement actions by creating a comprehensive remedial scheme. Because the administrative remedial scheme of the Medicaid Act did not include judicial proceedings, the Court found that the scheme failed to demonstrate Congress' implicit preclusion of private enforcement actions under section 1983.
Four justices vehemently dissented in Wilder, concerned that the Court had manufactured a substantive right enforceable under section 1983 in order that the "policy underlying the Boren Amendment would [not] be thwarted." This concern, coupled with the Court's subsequent decision in Blessing v. Freestone, hinted that the sources of supposed private rights might be subjected to some heightened level of scrutiny in the future. - Westside Mothers v. Haveman
In Westside Mothers, the Sixth Circuit ultimately determined that the EPSDT provisions of the Medicaid Act conferred a private right on beneficiaries enforceable under section 1983. In an analysis spanning less than one-third of a page, the court applied the Wilder test to the relevant statutory language. First, the court decided that the EPSDT provisions were "clearly intended to benefit the putative plaintiffs, children who are eligible for the screening and treatment services," because "[i]t is well settled that Medicaid-eligible children under the age of twenty-one are the intended beneficiaries of the screening and treatment provisions."
Second, the court held that the EPSDT provisions "set a binding obligation on [the State]," since "they are couched in mandatory rather than precatory language, stating that Medicaid services 'shall be furnished' to eligible children ... and that the screening and treatment provisions 'must be provided ..." Third, the court found that the "provisions are not so vague and amorphous as to defeat judicial enforcement, as the statute and regulations carefully detail the specific services to be provided." Finally, the court decided that Congress had not expressly (in a discrete statutory provision) or implicitly (through a comprehensive remedial scheme) precluded private actions seeking enforcement of Medicaid's EPSDT provisions under section 1983.
IV. A Right to Health Care?
When the Sixth Circuit decided Westside Mothers on May 15, 2002, the Wilder test for determining whether a statute enacted under the spending clause conferred a right enforceable by private individuals under section 1983 was relatively clear. First, the court had to find that "the statutory section was intended to benefit the putative plaintiff." Second, the statute had to set "a binding obligation on a governmental unit," rather than merely express a congressional preference. Finally, the interests of the plaintiff must not have been so "vague and amorphous that their enforcement would have strained judicial competence." One month later, however, the Supreme Court changed (or, at least, finally clarified) that test in Gonzaga University v. Doe, placing the Westside Mothers decision and perhaps the entire Medicaid enforcement scheme in jeopardy.
A. Unambiguously Conferred Rights: Gonzaga University v. Doe
In Gonzaga, the Court held that the Family Education Rights and Privacy Act (FERPA) did not create rights enforceable under section 1983. Noting, however, that its previous opinions applying section 1983 to spending clause legislation were not "models of clarity," the Court decided to use Gonzaga to "resolve any ambiguity" in this area, giving the opinion importance far beyond its immediate context. Chief Justice Rehnquist, writing for the Court, reiterated, "[i]n legislation enacted pursuant to the spending power, the typical remedy for State noncompliance with federally imposed conditions is not a private cause of action... but rather action by the federal government to terminate funds to the State." This principle allowed the Court to narrow what it characterized as an erroneous and "relatively loose standard for finding rights enforceable by [section] 1983."
The key inquiry, the Court emphasized, is whether Congress has spoken "with a clear voice" manifesting an "unambiguous intent to confer individual rights." This requires more than a mere showing that Congress intended to "benefit" the putative plaintiff, since "[t]o seek redress through [section] 1983, a plaintiff must assert the violation of a federal right, not merely a violation of federal law." Without such "specific, individually enforceable rights, there [is] no basis for private enforcement, even by a class of the statute's principal beneficiaries." Section 1983 "merely provides a mechanism for enforcing individual rights 'secured' elsewhere, i.e., rights independently 'secured by the Constitution and laws' of the United States."
This clarified standard is strikingly similar to the Court's reasoning in implied right of action cases. In both contexts a court must determine whether the statute in question creates a federal right, as opposed to a mere benefit or interest. The Court's implied right of action cases, therefore, "should guide the determination of whether a statute confers rights enforceable under [section] 1983."
According to these cases, "[t]he question whether Congress ... intended to create a private right of action [is] definitively answered in the negative" where "a statute by its terms grants no private rights to any identifiable class." In other words, a statute creating private rights must be "phrased in terms of the persons benefited." Applying this test, the Court has held that Title VI of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, and section 5 of the Voting Rights Act of 1965 implicitly confer enforceable individual rights. Conversely, the Court has refused to recognize such implied rights under statutes that "create duties ... for the benefit of the public at large." Once a court finds an enforceable right, the two approaches diverge. In the implied right of action context, a plaintiff must further prove that Congress intended to create a private statutory remedy. In contrast, section 1983 supplies a general remedy for the vindication of rights secured by federal statutes.
After the Gonzaga court clearly identified the burden that a section 1983 plaintiff must carry, it examined FERPA's statutory text. First, the Court found that FERPA's provisions "entirely lack the sort of 'rights-creating' language critical to showing the requisite congressional intent to create new rights." FERPA's provision that "[n]o funds shall be made available under any applicable program to any educational agency or institution" is a directive to the Secretary of Education, not a statement creating a private right. Second, the Court found that FERPA's provisions speak "only in terms of institutional policy and practice, not individual instances of disclosure. As such, FERPA has an aggregate focus, indicating that the statute is not concerned with "whether the needs of any given person have been satisfied." Furthermore, the Court noted that an institution does not violate FERPA so long as the institution substantially complies with FERPA's requirements. FERPA's standard of substantial compliance, which requires the Secretary of Education to use his independent judgment in determining whether an institution is in violation of the Act, was strong evidence that Congress did not intend to provide students or their parents with a private right of action under section 1983.
Finally, the Court found that FERPA's enforcement mechanism supported its conclusion that FERPA does not provide a private right of action. FERPA directs the Secretary of Education to deal with violations by creating a review board for investigating and adjudicating violations of the statute. Pursuant to this directive, the Secretary promulgated administrative regulations that allow aggrieved students or their parents to file complaints with administrative officials. Such a complaint, however, does not entitle the parent or student to any individual remedy even if a violation of FERPA is found as a result of the investigation instigated by the complaint. Instead, when the Secretary decides that an institution has violated FERPA he sends that institution instructions as to how it may correct the violation. If the institution fails to correct the violation to the Secretary's satisfaction, the institution becomes ineligible to receive federal funding. By blurring the discrete prongs of the Wright and Wilder tests, the Court broadened the scope of inquiry and made it more difficult for a plaintiff to prove the existence of an alleged statutory right enforceable under section 1983.
B: Why Medicaid Should Be Interpreted as Not Conferring Enforceable Rights
It is extremely unlikely that the Westside Mothers opinion could survive scrutiny under the Gonzaga standard, as the logic of Westside Mothers depends primarily on the Sixth Circuit's determination that Medicaid-eligible children are the beneficiaries of Medicaid's EPSDT provisions. It is true that the Medicaid Act benefits eligible children by allocating federal funds to enable States to provide for the medical needs of such children. However, the Gonzaga standard requires more than a mere showing that the statute is intended to benefit the putative plaintiff to support a claim under section 1983. The standard requires that the statute unambiguously create an enforceable private right in the beneficiary. The Medicaid Act lacks the language necessary to create an enforceable private right. Since section 1983 "merely provides a mechanism for enforcing individual rights 'secured' elsewhere" by the Constitution and laws of the United States, the Court should not allow a section 1983 claim unless Congress, in the statute at issue, has spoken with a clear voice manifesting an "unambiguous intent to confer individual rights." Like the FERPA provisions that the Court examined in Gonzaga, the Medicaid Act does not contain the rights-creating language "critical to showing the requisite congressional intent to create new rights."
A statute creating enforceable rights must be "phrased in terms of the persons benefited." The Medicaid Act, however, consists of directives to the federal government, the Secretary of Health and Human Services, and, perhaps, State officials designing and administering a Medicaid program. Since the Court has repeatedly held that it will interpret any single part of a statute in relation to, and in harmony with, the text and purpose of the statute as a whole, it is instructive to examine the various Medicaid provisions relevant to a Gonzaga analysis of the Westside Mothers case.
The appropriations section of the Act, for example, illustrates the Act's failure to confer enforceable rights. According to that section, the Act's purpose is to enable "each State, as far as practicable under the conditions in each State, to furnish" medical services to the poor. A direct comparison between the aforementioned civil rights statutes and the Medicaid Act exposes the precatory character of this language. Such a comparison is particularly instructive considering that Congress enacted Medicaid during the same period in which it passed these landmark civil rights laws. For example, one cannot imagine Congress enacting legislation providing, "No person in the United States shall, on the ground of race, color, or national origin.., be subjected to discrimination under any program or activity receiving federal financial assistance as far as practicable under the conditions in each State. The Medicaid Act contains no language even approximating that of the contemporaneously enacted civil rights statutes that the Court has held to confer enforceable private rights.
The Medicaid Act is also unable to support a claim under section 1983 because its provisions speak "only in terms of institutional policy and practice" and not in terms of the provision of care to any individual. While the EPSDT provisions do generally operate for the benefit of eligible children, when a State's Medicaid compliance is in question, the focus of the Secretary's inquiry is on the plan or the administration of the plan, not on individual instances of noncompliance. Medicaid, like FERPA, has an aggregate focus, empowers the Secretary to restore payments to a State plan when he is "satisfied that there will no longer be any such failure to comply." The Secretary's wide discretion suggests a congressional intent to foreclose private remedies under section 1983.
The foregoing discussion has focused on demonstrating why the plain language of the Medicaid Act does not create private rights within the meaning of section 1983. The plain language of section 1983, however, presents its own vexing problem. Section 1983, by its terms, is merely a mechanism for the enforcement of individual rights that are secured elsewhere. 208 Section 1983's use of the word "secured" renders it wholly inapplicable to the Medicaid Act.
The district court in Westside Mothers engaged in an analysis of the term "secured" and held, in the context of section 1983, that "to secure" meant "to put beyond hazard of losing or of not receiving." The court further held that a meaningful synonym was the word "guarantee," as in "guarantee the blessings of liberty to ourselves and our posterity."210 If "secure" is given its plain meaning, section 1983 cannot be used to remedy violations of the Medicaid Act, since the Medicaid Act, as an exercise of the spending power, guarantees nothing.
The Medicaid Act has no effect in a State until that State implements a health care plan meeting Medicaid requirements and accepts federal funds. Until both requirements are met, the otherwise Medicaid-eligible citizens of a State have no guarantee that they will receive anything under the federal statute. Even if the subsequent accrual of benefits to eligible individuals is characterized by the State as a right, privilege, or immunity, these benefits are not secured within the meaning of section 1983 because the State could alter or end its participation in the Medicaid program at any time. Medicaid, like all legislation enacted under the spending clause, has at best a tenuous relationship with section 1983.
V. Life After Section 1983: The Good, the Bad and the Ugly
Medicaid as it currently exists simply cannot support a private right to health care enforceable under section 1983. This result is simultaneously intellectually satisfying and socially troubling. While States freed from the financial uncertainties of private lawsuits could more aggressively restrain costs in the face of their current fiscal crisis, Medicaid beneficiaries would have no recourse if State officials wrongfully denied them benefits. Importantly, the Supreme Court has not yet spoken conclusively on the issue, giving Congress a rare opportunity to proactively reform the Medicaid program.
Congress could expressly authorize private plaintiffs to enforce the Medicaid Act against the States in one of three ways. First, it could amend the Medicaid statute to explicitly and unambiguously confer enforceable private rights. Second, it could force the States to voluntarily abrogate their sovereign immunity as a condition of participating in the Medicaid program. Finally, Congress could create a comprehensive enforcement scheme within the federal government that is accessible by beneficiaries. Each of these congressional actions would likely establish some sort of an enforceable right to health care under Medicaid. Unfortunately, the economic reality of the current Medicaid program demonstrates that the United States simply cannot afford such a right.
If the underlying economic dimension of the Medicaid program, and of public health care generally, is to be addressed in a principled fashion, Congress cannot continue to externalize political costs at the public expense. Instead, Congress must implement disciplined Medicaid reforms that address the causes, rather than the symptoms, of the system's failure.
A. The Good: Gonzaga Could Provide the States with Much-Needed Fiscal Relief
The cost of Medicaid is staggering. Medicaid's cooperative financial structure has led to double-digit growth of the program in almost every year since its inception. The cost of Medicaid has risen dramatically, from $770 million in its first year to over $270 billion today. Medicaid expenditures grew by over 11% in 2001 alone. Designed as a health care safety net for the deserving poor, Medicaid has reached proportions never imagined by its creators. On average, Medicaid spending now accounts for approximately 20% of all State budgets, ranking second only to education.
A recent study by the National Health Policy Forum indicated that nearly every State is experiencing a financial crisis. Medicaid expenditures are a major cause of these budgetary troubles. In 2001, for example, Medicaid expenditures exceeded budgeted amounts in 37 States.
The Gonzaga decision may be just what the States need to remedy their financial crisis. States freed from the specter of private lawsuits could act more aggressively to streamline Medicaid programs. Each State would have more freedom to work with the Department of Health and Human Services in an attempt to balance the costs and benefits of its Medicaid program. The Department would naturally be hesitant to find a State's program insufficient, since the resulting withdrawal of FFP would only harm those that the Medicaid Act was designed to help. A Medicaid system without enforceable private rights would more closely resemble the program envisioned by its authors, who wished to enable "each State, as far as practicable under the conditions in each State, to furnish [medical services to the poor]."
Some commentators cringe at the thought of allowing the States more latitude with regard to the specifics of their Medicaid programs, but their concerns are unfounded and fail to address the economic and social realities of modern medicine. First, the States are deeply concerned with the health of their citizens, and while States may require federal funds to help them achieve their public health goals, they do not need Congress to tell them what those goals should be. Second, the Medicaid Act was not designed to provide all desired care to all needy people. It was designed to help fulfill State health care priorities, to the extent practicable in each State. Consequently, the mere existence of a disparity between State and Federal public health care priorities does not require the imposition a unitary federal public health policy. If Congress has additional health care priorities, Congress should fund those priorities directly, outside of the Medicaid program, rather than abdicate its responsibilities to the courts.
Third, health care is a business, and as such there are economic dimensions to every treatment and coverage decision. If judicial action were limited, the citizens of each State would have to focus their health care reform efforts on legislators rather than on judges. The increased political activity, conducted in a public forum, would provide citizens and legislators with a better opportunity to accurately define the level of public health for which they are willing to pay. Presumably, such preferences would be embodied in State laws. Congress, in turn, could see more clearly the differences between State and federal health care priorities and allocate scarce resources more efficiently. Most importantly, the ensuing public debate over additional funding and the socially acceptable scope of services would restore political accountability to the Medicaid program.
B. The Bad: Individual Instances of Noncompliance Could Be Catastrophic for Beneficiaries
Medicaid itself does not provide for a private right of action, and the Court has held that no implied right of action exists. The complete preclusion of section 1983 actions could create a significant bar to enforcement in certain rare situations where a private enforcement action is the only means to compel the provision of wrongfully denied care. Depending on the nature of the services involved, a wrongful denial of care could result in a medical and human tragedy. The challenge is to develop a public health system that properly allocates scarce economic resources while avoiding tragic denials of necessary care.
Severe injuries or deaths resulting from the denial of medical care, also known as tragic choices, focus public attention on an issue in a way that rhetoric and abstract discussion cannot. If politicians and voters are to reduce public health care costs in any meaningful way, however, occasional tragic choices are inevitable. Health care resources are finite and no program can provide every beneficiary with all the care that he or she wants. Realistic Medicaid reformers must ask, "What level of tragedy should an enlightened and compassionate society accept in the face of the economic realities of public health care?"
Since the socially acceptable minimum level of public health care is probably that which provides the most protection against tragic choices for the most people, each beneficiary of a public health program must be willing to sacrifice some measure of health care for the overall good. The resulting level of public health resembles the standard of adequacy contemplated by managed care. Section 1983 actions and legislative schizophrenia largely thwart attempts to push this unpleasant issue into the arena of reasoned public debate. If, through principled public debate over the cost of health care, the public's expectations with regard to public health care could be aligned more closely with the public's willingness to pay for that care, the required baseline of public health care would shift. The States and the federal government would then be able to openly and prospectively allocate the resources necessary to achieve the popularly dictated level of public care. In such a fully funded and politically and economically accountable public health care system, the need for private enforcement actions would necessarily decrease. The preclusion of section 1983 enforcement actions, therefore, could actually help to eliminate the need for such actions by keeping the discussion of public health care priorities in the democratic process where it belongs.
Importantly, the level of public health for which the public is willing and able to pay is a flexible concept. It is entirely possible, and indeed likely, that an informed public would want to provide as much care as possible for Medicaid-eligible children. As such, the public could direct lawmakers to allocate the resources necessary to pay for that care. This funding priority would likely necessitate a reduction in the level of care provided to other Medicaid-eligible individuals. For example, the elderly might find themselves facing decreased public health services. It is also possible that the public would decide to fully fund public health care programs at the expense of other budgetary items or through higher taxes. Perhaps some citizens view public health as more important than education or national defense. Regardless, the point is that citizens, not courts, should weigh the costs and benefits of public health decisions.
C. The Not-So- Ugly: A Proactive Approach to Medicaid Reform
The Gonzaga decision gives political actors a rare opportunity to make proactive changes in the cooperative Medicaid scheme and avoid the consequences of a sudden change in the Act's enforcement mechanism. By gradually addressing the funding, coverage, and enforcement issues that prevent the Medicaid program from providing adequate care to all eligible citizens, society as a whole can capture the benefits of an economically balanced health care system without harming those individuals that the program was designed to protect. While a comprehensive solution to the Medicaid funding problem will be incredibly complex, several key issues must figure into any reforms.
First, Congress must provide States with the funding that they need to substantially comply with current Medicaid standards. While Congress will have to risk political accountability in order to do so, political accountability is an important check on runaway Medicaid spending that enables the program to function properly.
Second, Congress must both clarify the Medicaid enforcement scheme and phase out private enforcement actions under section 1983. Any Medicaid reform effort will fail without the uniformity of treatment and the policy-making expertise that only a wholly administrative enforcement scheme can provide. A gradual move away from private enforcement will reduce the impact of this change in the short term, when the risk of tragic choices will be the highest.
Third, Congress and the States need to engage in open dialogue about a feasible scope of coverage for the Medicaid program. The current system pits the States against Congress in a battle to maximize political gain and externalize political cost. Such an arrangement ignores Medicaid's cooperative purpose in which the States and the federal government are supposed to work together for the benefit of vulnerable citizens. State governments are fully capable of identifying the health care priorities of their citizens, and Medicaid was designed to help them fulfill those priorities. One alternative that recognizes this reality would require the federal government to directly and fully fund certain health care priorities enumerated in the Medicaid statute. The federal government could then use Medicaid FFP as a means of encouraging States to exceed this level of care.
Fourth, the most important change that must be made to the Medicaid statute is the establishment of bright-line health care priorities. Since society cannot pay for all the health care that all the people want, there must be some objective method to determine what society should provide. This will be the most painful part of the reform process but citizens must fully understand the economic consequences of their health care choices.
The enemy of any attempt to clearly define the scope of a health care program is the concept of medical necessity. It may seem obvious that a physician would only prescribe treatment that is medically necessary, but the use of this term carries significance far beyond the truism that unnecessary or harmful care should be avoided. The real problem with the use of the term "medical necessity" in the Medicaid statute (or any other medical coverage context) is that the term has an inherent meaning independent of any contractual or statutory definition. This meaning, derived solely from the professional standards of the medical community, effectively requires the provision of all beneficial care without regard to the marginal cost of that care. This conception of medical necessity eliminates the cost-benefit analysis that is vital to any efficient health care model.
The concept of medical necessity must be removed from the Medicaid statute if Congress is to adopt bright lines of health coverage. The task of creating such bright lines will most likely result in a pair of lists: one for covered services and one for services not covered. Additionally, there may be a desire to cover certain services in some circumstances but not in others, subject to the requirements of the Americans with Disabilities Act and the Rehabilitation Act of 1973, both of which limit the circumstances under which differences in the provision of medical services are permitted.
Finally, all Medicaid funding must contemplate the cost-saving characteristics of managed care. The big question is "not whether, but how, to make managed care serve the needs of the Medicaid population." Managed care is necessary because Medicaid is publicly funded and susceptible to the moral hazard of over utilization by beneficiaries. Congress should provide funding on a prospective payment basis and assume that each State program will be administered through an MCO in order to maximize the purchasing power of every health care dollar.
VI. Conclusion
After Gonzaga, it appears clear that the language of the Medicaid Act does not support an enforceable private right to Medicaid services under section 1983. The logic of the Westside Mothers decision and of similar private enforcement actions, therefore, is potentially invalid. Some commentators fear that such a result will hinder progress toward the goal of providing health care to all who need it. Gonzaga, however, may ultimately encourage principled and responsible political debate on the topic of Medicaid reform by preventing Congress from relying on private plaintiffs to enforce precatory federal health priorities against the States.
If Congress is to proactively and seriously address the impact of Gonzaga, it must also examine the causes and effects of decades of runaway health care spending as well as the economic impact of a health care delivery model limited at the bottom but not at the top. A serious look at the economic realities of public health care will require belt-tightening and soul-searching by State and federal officials as well as a basic change of attitude and a new health care vocabulary.
Current political rhetoric about providing each citizen with all the health care that he needs addresses the normative and ethical dimensions of health care but ignores the critical economic consequences of a supposed right to health care. Health care resources are finite while demand for health care is potentially infinite. Rationing of services, in the form of managed care decisions contemplating a standard of adequacy, must occur now and in the future.
Presented honestly, the debate is about what degrees of difference [in public health care] society will allow, what obligation society has to finance care for those unable to pay, and who should benefit from public subsidy and in what magnitude. [S]erious analysts cannot persuasively defend the principle of total equality of end result.
The Gonzaga decision may mean that Congress has no choice but to address Medicaid reforms according to these principles, but it will require painful intellectual honesty and vigorous, unfettered public debate to get it right.
