U.S. Supreme Court justices weighed whether hospitals and other health-care providers have the right to challenge Medicaid reimbursement rates set by states.

A group of health-care providers argued in an Idaho case Tuesday that the U.S. Constitution allows them to contest their reimbursements under the Medicaid health-insurance program for the poor. The position is backed by hospitals, which say that the low rates arent covering their costs.

Chief Justice John Roberts asked during arguments in Washington whether allowing such lawsuits from hospitals and health-care providers would put state budgetary decisions in the hands of federal judges.

The effect here is that federal judges get to decide what the reimbursement rates are in a particular area, Roberts said. Are you aware of any situation where the federal judges get together and try to balance the state budget?

Medicaid is jointly funded by the federal and state governments and administered by the states under federal requirements. The case pits states against hospitals and health-care providers, which want the right to challenge their reimbursements. A federal appeals court ruled against Idaho and said the health-care providers could sue.

Four justices said in a dissenting opinion in a separate 2012 case from California that health-care providers didnt have a right to sue over reimbursement rates.

During arguments, Justice Sonia Sotomayor pressed Idahos lawyer about what recourse providers have.

Lets assume, as inflation is going up constantly, what happens two years into the plan when providers cant work for what the state is giving, or the state is imposing a tremendous hardship on them, which is happening to a lot of providers who are being underpaid, she said. Where do they go?

The dispute stems from reimbursement rates set by Idaho for services provided to people with developmental disabilities. Health-care providers sued the state, claiming the reimbursement rates were too low to comply with the federal Medicaid law. A federal court agreed and said the rates were unlawful because the state didnt consider provider costs.

The American Hospital Association and the Federation of American Hospitals, in a court brief supporting the Idaho health-care providers, said the cost of providing care to Medicaid beneficiaries in 2012 exceeded reimbursements by $13.7 billion.

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Health-Care Providers Challenge Medicaid Rates at High Court