Medicaid provides medical services for those U.S. citizens and legal residents who cannot afford it. It is financed by the federal government and the states.
However, a state must submit its Medicaid plan and any amendments for review and approval to the Centers for Medicare & Medicaid Services, commonly called CMS.
Federal law says state plans must "assure that payments are consistent with efficiency, economy and quality care and are sufficient to enlist enough providers" to make Medicaid "care and services" available.
California's cash-strapped Legislature enacted three statutes reducing Medicaid payments. But before CMS could complete its review, Medicaid providers and beneficiaries filed a series of cases asking for an injunction against the rate reductions, saying they were pre-empted by federal Medicaid law.
In seven decisions, a U.S. appeals court ordered the preliminary injunctions preventing California from implementing its statutes. The appeals said the providers and beneficiaries could bring a Supremacy Clause action -- the Constitution's Supremacy Clause tells judges to put federal law above state law.
The appeals court also ruled the state did not show its amended plan would provide sufficient services, and the state law was pre-empted by federal law.
Meanwhile, the CMS disapproved the state's rate reductions. But the U.S. Supreme Court heard argument on whether the Supremacy Clause could be used in the case. At that point outside the court, CMS approved several of the rate reductions, and the state withdrew the remainder.
Writing for the high court majority, Justice Stephen Breyer sent the case back down to the appeals court "thereby permitting the parties to argue before the [appeals court] in the first instance ... whether [the Medicaid providers and beneficiaries] may maintain Supremacy Clause actions now that CMS has approved the state statutes."
Breyer was joined by the court's three other liberals and moderate conservative Justice Anthony Kennedy.
Chief Justice John Roberts led the court's four conservatives in dissent.
"Nothing in the Medicaid Act allows providers or beneficiaries (or anyone else, for that matter) to sue to enforce [the law]." Roberts said. "The act instead vests responsibility for enforcement with a federal agency, the Centers for Medicare & Medicaid Services."