Case Study – Private Parties Cannot Sue State for Underfunding of Medicaid

Armstrong v. Exceptional Child Center, Inc., 200 U.S. 321, 337 (March 31, 2015).

In this recent case, the U.S. Supreme Court rendered the decision that individual medical service providers have no constitutional right to sue a state over Medicaid reimbursement rates that are too low. The Federal Medicaid Statute, in §30A, requires all states who have a Medicaid plan to reimburse medical service providers at a rate sufficient to guarantee that enough providers will participate, and be able to provide the same quality of care as the local private market.

Medical service providers in the state of Idaho felt that the state reimbursement rates were too low, and not in compliance with the federal statute. Providers sued Idaho’s Department of Health and Welfare. Providers wanted the federal court to order the State of Idaho to increase the Medicaid reimbursement rates to be in compliance with the Federal Medicaid Statute, so that the providers could afford to continue serving people who rely upon Medicaid.

The Federal District Court found for the service providers. The 9th Circuit Court of Appeals upheld that decision. The Supreme Court overturned the lower court decisions, holding that the Supremacy Clause of the U.S. Constitution (Article VI, Section 2) does not allow a private right of action for individual service providers to sue the state for violations of the Federal Medicaid Statute.

With no right to sue the state for too-low reimbursement rates, the only remedies for service providers are (1) to pursue administrative relief through the Department of Health and Human Services, or (2) to stop providing services to people who rely on Medicaid. The effect of the ruling is likely to be that many service providers who would otherwise offer medical care to impoverished people or people with serious disabilities will be unable to do so, because state reimbursement rates for Medicaid-funded medical care are too low.

For additional information regarding this case, visit the NAELA e-Bulletin from April 8, 2015, and scroll down to paragraph 7.

Read the Supreme Court Decision.

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Technology and the Law – Our Electronic Afterlives

In recent years, with the near-total societal adoption of The Internet as a tool for communication, we have moved many our daily activities from the real world to cyberspace. Now, in addition to owning physical things in the world, many of us also own what have come to be known as “digital assets.” Property rights in digital assets are confusing, and are usually controlled by the terms-of-service agreement of each online company. Facebook, Gmail, Yahoo, Twitter, and most other internet-based applications or companies each have their own terms-of-service agreements.

Problems usually arise when there is a need to delegate management of digital assets to an agent, if you become incapacitated, or to an executor after you die. If the terms-of-service don’t allow you to appoint an agent or executor, and there is no state law in place allowing you to do so (more in this later), your options are to violate the terms-of-service agreement or lose access to your digital assets, possibly forever.

Fortunately, many online companies are offering solutions to this problem. Facebook now allows you to choose a Legacy Contact to manage your memorialized account, after you die. Google will allow you to select an Inactive Account Manager to deal with your data if you die or become incapacitated and unable to continue using Google’s services. Some services, such as Twitter, won’t let you grant management power to an agent or executor, but they will allow a designated person to deactivate your account.

Unfortunately, these new offerings are delivered by individual companies, who can change the rules at any time. Further, there are just so many online companies that the various terms-of-service agreements are very difficult to keep track of. Without a proper legal remedy in place, we are at the mercy of our internet overlords. The legal world has taken notice, and some comprehensive solutions are being proposed. Click here to learn about legislation that has been proposed in Pennsylvania.

Technology and the Law – The Fiduciary Access to Digital Assets Act

Visit here for some background on the definition and legal status of digital assets.

The Uniform Fiduciary Access to Digital Assets Act (UFADAA).

In July of 2014, the Uniform Law Commission completed and approved the UFADAA, which specifically addresses the rights of fiduciaries to access and manipulate digital assets on behalf of principals or decedents. The application of the law is limited to personal representatives of decedent’s estates, court-appointed guardians or conservators, trustees, and agents under powers of attorney. The UFADAA defines a digital asset as an electronic record, which includes any type of information stored electronically on a devise or uploaded to a website, and rights in digital property.

Pennsylvania Senate Bill 518

On February 20, 2015, Pennsylvania Senator and Senate Majority Leader Dominic Pileggi introduced SB518, an addition to the Pennsylvania Probate, Estates and Fiduciaries Code (Title 20 Pa.C.S.A.).

The proposed Pennsylvania legislation is based largely on the UFADAA. Individuals would have authority to appoint fiduciaries to manage digital assets in the same ways such fiduciaries may currently be appointed to manage physical property. The proposed legislation also imposes the same fiduciary duties on agents and personal representatives as currently exist in Pennsylvania law: the fiduciary must still act for the benefit of the principal or estate. In addition, the proposed law offers the same immunity from liability for fiduciary actions taken in good faith.

Interestingly, if you did choose an agent through a terms-of-service agreement with a particular online application or company, the proposed law would defer to your choice. In other words, if you appointed a Facebook Legacy Contact, that person would maintain the ability to serve because you specifically selected them. But if you never appointed someone to manage your digital assets as allowed by a terms-of-service agreement, or you took that step for some internet applications and not others, then the law would allow your agent, guardian, conservator or executor to access and manage your digital accounts.

The proposed law goes a long way toward providing structure and guidance for managing our digital assets, a new form of property that will continue to expand and evolve in the digital age.