The nightmarish Supreme Court case that could gut Medicaid, explained

Health and Hospital Corporation v. Talevski is the single greatest threat to America’s social safety net since Paul Ryan.

On Tuesday, as millions of Americans cast their ballots in the 2022 midterms, the Supreme Court will hear oral arguments in what could be one of the most consequential health care cases in its history. The defendants in Health and Hospital Corporation of Marion County v. Talevski are asking the justices to fundamentally rework the Medicaid program, which provides health care to over 76 million low-income Americans.

Should the defendants prevail, these tens of millions of patients could effectively be stripped of legal safeguards intended to guarantee them a certain quality of care. In some cases, individual patients may lose their health coverage altogether due to Talevski.

Medicaid is a “conditional grant” program. The federal government offers a truly enormous amount of money to each state — in 2020, total federal Medicaid spending was more than $670 billion — but only if the state agrees to use this money to provide health care to eligible recipients, and to comply with certain other conditions.

These conditions range from broad requirements that state Medicaid programs must cover certain individuals, such as low-income pregnant patients and children, to granular rules governing how Medicaid-funded facilities must operate. The plaintiffs in Talevski, for example, accuse the defendants (an Indiana health system operated by local government officials, and a private company that manages nursing homes) of violating several provisions of federal law governing nursing homes, including one that prohibits those facilities from using psychotropic drugs “for purposes of discipline or convenience and not required to treat the resident’s medical symptoms.”

Currently, at least some of these legal requirements can be enforced through private lawsuits — meaning that a patient who believes their rights under federal Medicaid law have been violated can sue the alleged violator. Rather than litigating whether they did or didn’t violate the laws protecting nursing home patients, the defendant is asking the Supreme Court to strip Medicaid patients of their ability to bring such lawsuits entirely.

As a practical matter, that could render much of federal Medicaid law almost entirely unenforceable — including, potentially, the legal requirement that certain patients must receive coverage.

If private Medicaid suits are forbidden, the federal government would still technically have some tools at its disposal that it could use to discipline noncompliant states and providers, but these tools are unlikely to be effective. For one thing, the federal government has limited resources to investigate Medicaid violations.

Even when it discovers a violation, the primary remedy the federal government may use against a noncompliant state is to cut off some or all of its Medicaid funds. That means that if a state refuses to meet its legal obligation to low-income patients, the consequence will be that the state will receive less money to provide health care to those very same individuals — essentially punishing the patients for the state’s misconduct.

And that’s assuming that the federal government even wants to enforce Medicaid laws. In a post-Talevski world, a Republican administration could potentially stop enforcing Medicaid law and there would be no recourse.

The defendants’ legal arguments are weak, and would require the Court to overrule a half-century of precedents. But the Court’s Republican-appointed majority often decides cases in ways that are out of step with existing law and longstanding legal principles, so there is at least some possibility that the defendants’ most aggressive claims will prevail.

And if they do prevail, by next summer, tens of millions of the most vulnerable Americans could be essentially powerless against abuse from health providers or their state’s health officials.

The Talevski defendants’ legal arguments are very bad

Arguably the most important civil rights law in American history is a statute lawyers refer to as “Section 1983.” This is the law that permits state officials — and, in certain circumstances, private individuals implementing state programs — to be sued in federal court if they deprive someone of “any rights, privileges, or immunities secured by the Constitution and laws.”

The Supreme Court has long held that Section 1983 permits private lawsuits seeking to enforce Medicaid law. As the Court said in Edelman v. Jordan (1974), “suits in federal court under § 1983 are proper to secure compliance with the provisions of the Social Security Act on the part of participating States.” (Nearly a decade earlier, the Social Security Amendments of 1965 had expanded the Social Security Act to include two federal health care programs: Medicare and Medicaid.)

The argument that Section 1983 permits private lawsuits to enforce Medicaid law is extraordinarily straightforward. Section 1983 permits lawsuits against certain individuals who violate rights “secured by the Constitution and laws.” Medicaid laws are laws, even if they only apply to people who take federal Medicaid funding.

As the Supreme Court held in Maine v. Thiboutot (1980), “given that Congress attached no modifiers to the phrase [“and laws”], the plain language of the statute undoubtedly embraces respondents’ claim that petitioners violated the Social Security Act.”

Nevertheless, the Talevski defendants claim that they have uncovered a secret history of Section 1983 that the Court somehow ignored in a long line of precedents stretching back to before Edelman. And they ask the justices to rewrite the bargain Congress established in 1965 when it created the Medicaid program.

Much of these defendants’ arguments rests on a single line in the Supreme Court’s opinion in Pennhurst State School and Hospital v. Halderman (1981), which described conditional grant programs as “much in the nature of a contract” because states agree to comply with certain conditions in return for federal money.

The Talevski defendants argue that, at the time Section 1983 was enacted — it was originally part of the Ku Klux Klan Act of 1871, a Reconstruction-era law that, as the name implies, was intended to halt vigilantism and other attacks on civil rights — contract law strictly limited who was allowed to sue in order to enforce a contract. Specifically, they claim that 19th-century contract law did not allow third parties who were not signatories to the original contract to bring such a lawsuit.

In support of this argument, they cite a hodgepodge of 19th-century legal sources, including an 1881 speech by future Justice Oliver Wendell Holmes, a list of contract cases decided by state courts in the 1800s, and an 1880 book by Harvard Law School dean Christopher Columbus Langdell, which says that “a person for whose benefit a promise was made, if not related to the promisee, could not sue upon the promise.”

In response to this historical evidence, both the Talevski plaintiffs and the Justice Department cite their own list of sources indicating that third parties were, in fact, allowed to sue to enforce contracts around the time when Section 1983 became law. They quote their own mix of 19th-century legal treatises. And they argue that many of the historical quotes that the defendants rely upon were taken out of context.

The plaintiffs and the Justice Department also cite one particularly devastating piece of evidence: an 1876 Supreme Court decision that disagrees with the defendants’ historical claims. In Hendrick v. Lindsay (1876), the Supreme Court said that “the right of a party to maintain assumpsit,” an antiquated term for breach of contract lawsuits, “on a promise not under seal, made to another for his benefit, although much controverted, is now the prevailing rule in this country.“

At most, in other words, the historical record shows that some 19th-century legal authorities believed that third-party suits were not allowed, while other authorities — including the Supreme Court of the United States — believed that permitting third-party suits was the “prevailing rule in this country.” That sort of record hardly justifies overruling a half-century of precedent and rendering federal Medicaid law largely unenforceable.

There are numerous other problems with the Talevski defendants’ arguments — so many that it would be tedious to list them all here.

But suffice it to say the Talevski defendants’ legal arguments are a mess. They mangle the text of Section 1983. They rely on dubious historical evidence that the plaintiffs and the Justice Department easily rebut. They place a simply astounding amount of weight on a metaphorical statement in Pennhurst, demanding that the Court read that metaphor hyperliterally. They insist that the Court must overrule a long line of precedents stretching back to shortly after Medicaid was enacted. And they seek an outcome that could destroy much of Medicaid’s ability to function.

No reasonable judge could possibly take these arguments seriously.

Some members of the Supreme Court have already endorsed the Talevski defendants’ arguments

The one Supreme Court opinion that should keep every Medicaid beneficiary up at night is the late Justice Antonin Scalia’s concurring opinion in Blessing v. Freestone (1997). There, Scalia suggested that Section 1983 cannot be used to enforce conditions imposed on federal grants because “until relatively recent times, the third-party beneficiary was generally regarded as a stranger to the contract, and could not sue upon it.” He based this argument largely on a citation to one of the 19th-century treatises that the Talevski plaintiffs rely upon.

Ominously, this opinion was joined by now-retired Justice Anthony Kennedy, a relatively moderate conservative who is well to the left of every single one of the current Supreme Court’s six Republican appointees.

Even more alarmingly for Medicaid beneficiaries, three current justices — Chief Justice John Roberts and Justices Clarence Thomas and Samuel Alito — joined Scalia’s opinion in Armstrong v. Exceptional Child Center (2015), which argued that “the modern jurisprudence permitting [Medicaid] beneficiaries to sue does not generally apply to contracts between a private party and the government.”

There are reasons to believe, after reading the well-argued briefs filed by the Talevski plaintiffs and the Justice Department, that at least some members of the Court’s conservative bloc will have second thoughts about dropping a bomb on Medicaid. Scalia’s Blessing opinion is only three paragraphs long, and it is possible he reached the conclusion he did because he was unaware of the historical evidence that rebuts his argument. Armstrong, meanwhile, was not a Section 1983 case. So it’s unclear if the justices who joined Scalia’s opinion in Armstrong intended to cut off suits filed under the Reconstruction-era law.

Should five justices ultimately embrace Scalia’s approach in Blessing, however, the result would be catastrophic for Medicaid and for millions of Americans who depend on the program.

Here’s an example of how bad things could get: Imagine that Florida Gov. Ron DeSantis (R) announces that Florida’s Medicaid program will no longer provide coverage to transgender people, and that any Medicaid beneficiary who openly identifies as transgender will immediately lose their health benefits. Such a policy would violate federal law, which mandates that state Medicaid programs must cover a long list of groups who qualify based on their income, age, disability, or family circumstances.

But if no one who loses benefits because of DeSantis’s new policy can sue to reinstate their benefits, then it is far from clear that they will have any recourse. As a group of former high-level federal health officials explain in an amicus brief, the federal government “lacks the statutory authority to pursue tailored judicial remedies.” To the contrary, its authority “is largely limited ... to ‘wield[ing] only the blunt and politically dangerous club of withholding federal funding.’”

Of course, the Biden administration could threaten to cut off some or all Medicaid funding to Florida, but that approach is likely to make the situation even worse. If Florida has less Medicaid funding, it will most likely have to kick even more people off of its Medicaid rolls or diminish the services it provides to beneficiaries. And if President Joe Biden is succeeded by a Republican, the new administration could simply announce that it will do nothing to sanction Florida for its actions.

It’s worth noting that there is an off-ramp that the Supreme Court could take that would effectively shut down this particular lawsuit, but without doing extensive violence to Medicaid as a whole.

The plaintiffs allege that Gorgi Talevski, a dementia patient, was abused by a nursing home in violation of Medicaid law. This includes allegations that his caregivers unlawfully kept him docile using psychotropic drugs. The Justice Department’s brief argues, however, that federal Medicaid law sets up an alternative dispute resolution process — including a process for filing grievances and a process for filing complaints with their state government— that nursing home patients must rely on in lieu of a Section 1983 suit.

If the Justice Department’s argument prevails, that would result in a narrow loss for the Talevski plaintiffs, but it would also allow the Court to stay away from the broader questions of whether Section 1983 suits may ever be filed to enforce Medicaid law.

For the sake of everyone who depends on Medicaid, here’s hoping the Court’s current majority, which has shown little interest in judicial restraint, chooses to exercise some here.