# Chris Traylor, as Executive Commissioner of the Texas Health and Human Services Commission And the Texas Health and Human Services Commission v. Diana D., as Next Friend of KD, a Child Karen G., as Next Friend of TG and ZM, Children Guadalupe P., as Next Friend of LP, a Child Sally L., as Next Friend of CH, a Child Dena D., as Next Friend of BD, a Child OCI Acquisition, LLC > Texas Court of Appeals, 3rd District (Austin) · November 12, 2015 URL: https://www.frixlaw.com/law-library/cases/4068145 ## Case - **Court:** Texas Court of Appeals, 3rd District (Austin) - **Decided:** November 12, 2015 - **Precedential status:** Published - **Opinion:** Opinion - **Cited by:** 0 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4068145 ## How later opinions describe it (automated extraction) - holding that § 1396a would be unconstitutional as applied to withhold funding from states based on failure to comply with newly imposed Medicaid requirements, absent voluntary state acceptance ## Opinion text ACCEPTED 03-15-00657-CV 7810967 THIRD COURT OF APPEALS AUSTIN, TEXAS 11/12/2015 11:26:21 PM JEFFREY D. KYLE CLERK No. 03-15-00657-CV In the Court of Appeals FILED IN 3rd COURT OF APPEALS for the Third Judicial District AUSTIN, TEXAS 11/12/2015 11:26:21 PM at Austin, Texas JEFFREY D. KYLE Clerk Chris Traylor, as Executive Commissioner of the Texas Health and Human Services Commission, et al. Appellants, v. Diana D., as Next Friend of KD, a Child, et al. Appellees. On Appeal from the 200th Judicial District Court of Travis County, Texas Appellants’ Brief Ken Paxton Scott A. Keller Attorney General of Texas Solicitor General Charles E. Roy Kristofer S. Monson First Assistant Attorney General Assistant Solicitor General State Bar No. 24037129 Office of the Attorney General P.O. Box 12548 (MC 059) Austin, Texas 78711-2548 Tel.: (512) 936-1820 kristofer.monson@texasattorneygeneral.gov Counsel for Appellants Oral Argument Requested Identity of Parties and Counsel Appellants: Chris Traylor, as Executive Commissioner of the Texas Health and Human Services Commission, et al. Lead Appellate Counsel: Kristofer S. Monson Office of the Attorney Assistant Solicitor General General State Bar No. 24037129 P.O. Box 12548 (MC 059) Austin, Texas 78711-2548 [Tel.] (512) 936-1820 kristofer.monson@texasattorneygeneral.gov Appellee: Diana D., as Next Friend of KD, A Child, et al. Lead Appellate Counsel: Daniel R. Richards Richards Rodriguez & Skeith State Bar No. 00791520 816 Congress Avenue Benjamin H. Hathaway Suite 1200 State Bar No. 09224500 Austin, Texas 78701 [Tel.] (512) 476-0005 drichards@rrsfirm.com bhathaway@rrsfirm.com Table of Contents Identity of Parties and Counsel ............................................................................... i Table of Contents .................................................................................................. ii Index of Authorities ...............................................................................................vi Statement of the Case .......................................................................................... xvi Issues Presented ................................................................................................. xvii Statement of Facts ................................................................................................. 2 Summary of Argument.......................................................................................... 14 Standards of Review ............................................................................................. 17 Argument.............................................................................................................. 18 I. The Live Petition Does Not Attempt to Tie the Causes of Action it Pleads to the Remedies it Seeks. ................................ 18 II. Plaintiffs’ Lawsuit Has No Arguable Basis in Law.................... 20 A. Plaintiffs Fail to Address the Distinction Between Review and Adjustment. ................................................................ 20 B. Plaintiffs Fundamentally Misunderstand Rider 50. ............... 22 1. The rider’s plain text is not optional. ......................... 23 2. The post-enactment legislative history proffered by plaintiffs cannot change statutory text. ....................... 26 C. There is No Basis in Texas Law For Obtaining Judicial Review of Medicaid Rates that Are Not Required to be Adopted Through Contested-Case Proceedings. .................. 27 ii 1. Plaintiffs’ approach of using § 2001.038 to attack Medicaid rates has been rejected by the Texas Supreme Court......................................................... 28 2. The ultra vires cause of action cannot be used to retroactively undo rules that became effective on October 1, but for the district court’s improper counter-supersedeas order. ....................................... 29 III. That Texas Law Does Not Provide a Judicial Review Mechanism Under Which Texas Courts Set Medicaid Rates Makes Sense, Because Such a System Would Be Preempted by Federal Law.......................................................................... 30 A. The Medicaid Act Makes Rates Subject to the Exclusive Jurisdiction of the Secretary, Subject Only to Potential Federal-Court Proceedings. ................................................ 31 B. The Medicaid Act Preempts Texas Remedies Related to Medicaid Rates By Creating Exclusive Jurisdiction in the Secretary. .......................................................................... 32 C. Both the Texas and Federal Constitutions Prohibit Judicial Orders that Interfere with the Relationship Between the State and Federal Governments. ......................................... 34 IV. Plaintiffs Lack a Vested Property Right in Medicaid Rates. ..... 36 A. Neither the Providers Nor the Beneficiaries Have a Vested Property Right, and Cannot Raise Either A Due-Course or Inherent-Judicial-Review Claim. ......................................... 36 1. The provider plaintiffs lack a vested property right...... 37 2. The beneficiary plaintiffs lack a vested property right—in fact, they will suffer no cognizable change in their legal status by a change in the rates. ................ 38 B. The Court Should Follow Justice Scalia’s Lead in Armstrong and Hold that Providers and Beneficiaries Lack iii Constitutional Standing to Bring Suit Under the Ratemaking Criteria of the Medicaid Act. ............................ 39 V. Even if plaintiffs have constitutional standing, they cannot successfully invoke § 2001.038 or the Ultra Vires Cause of Action. ...................................................................................... 40 A. Section 2001.038 and the Ultra Vires Cause of Action Cannot Be Used to Obtain Judicial Review........................... 40 1. The ultra vires cause of action does not apply retroactively because it is not a form of judicial review...................................................................... 40 2. Section 2001.038 does not create judicial power to review substantive agency actions, only agency rules. ....................................................................... 41 3. Plaintiffs’ lawsuit is barred because it seeks to use these causes of action retroactively and specifies no remedy appropriate to the causes of action pleaded. ............................................................................... 43 B. Plaintiffs’ § 2001.038 Claims Are Barred. ............................ 44 1. Plaintiffs lack a right or privilege. ............................... 45 2. Plaintiffs have not “identified” an administrative rule.......................................................................... 47 a. Plaintiffs cannot reverse engineer a rule challenge from a rate challenge. ........................ 47 b. Plaintiffs ignore the application of § 355.201(d). .................................................. 48 C. Plaintiffs’ Ultra Vires Claims Would Fail Even if they Had Been Properly Pleaded. ...................................................... 49 iv 1. Plaintiffs’ position regarding § 355.8021 would fail to trigger an ultra vires claim in any event. .................. 50 2. Plaintiffs’ remaining claims likewise cannot describe an ultra vires act. .......................................... 53 VI. Because there is no potential for recovery, the Court Should vacate the Temporary Injunction. ................................................. 55 Prayer ................................................................................................................... 57 Certificate of Service............................................................................................. 58 Certificate of Compliance ..................................................................................... 58 v INDEX OF AUTHORITIES Cases Adams v. Calvert, 396 S.W.2d 948 (Tex. 1965) ........................................................................ 35 Armstrong v. Exceptional Child Ctr., Inc., 135 S.Ct. 1378 (2015)...............................................................2, 31, 32, 35, 39 Butnaru v. Ford Motor Co., 84 S.W.3d 198 (Tex. 2002) ................................................................... 55, 56 Charlie Thomas Ford v. A.C. Collins Ford, 912 S.W.2d 271 (Tex. App.—Austin 1995, writ dism’d) ............................ 42 City of Amarillo v. Hancock, 150 Tex. 231, 239 S.W.2d 788 (1951) ..................................................... 36, 42 City of Austin v. Cannizzo, 153 Tex. 324, 267 S.W.2d 808 (1954) .......................................................... 25 City of Austin v. Chandler, 428 S.W.3d 398 (Tex. App.—Austin 2014, no pet.) .................................... 33 City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) ....................................................................... 41 City of Houston v. Williams, 216 S.W.3d 827 (Tex. 2007) (per curiam) .................................................. 40 Colorado Health Care Ass’n v. Colorado Dep’t of Soc. Servs., 842 F.2d 1158 (10th Cir. 1988) ......................................................................3 Combs v. City of Webster, 311 S.W.3d 85 (Tex. App.—Austin 2009, pet. denied).......................... 36, 47 Creedmoor-Maha Water Supply Corp. v. Tex. Comm’n on Envt’l Quality, 307 S.W.3d 505 (Tex. App.—Austin 2010, no pet.) ...............................29-30 vi Cullen Center Bank & Trust Co. v. Tex. Commerce Bank, 841 S.W.2d 116 (Tex. App.—Houston [14th Dist.] 1992, writ denied)........................................................................................................ 25 Dallas Cnty. Mental Health & Mental Retardation v. Bossley, 968 S.W.2d 339 (Tex. 1998) ...................................................................17, 18 Douglas v. Indep. Living Ctr. of S. Calif., Inc., 132 S.Ct. 1204 (2012) ....................................................................................3 El Paso Cnty. Hosp. Dist. v. Tex. Health & Human Servs. Comm’n, 400 S.W.3d 72 (Tex. 2013) ............................................................. 28, 44, 48 El Paso Hospital District v. Tex. Health & Human Services Commission, 247 S.W.3d 709 (Tex. 2008) ................................................................. 28, 44 Eldercare Props., Inc. v. Dep’t of Human Servs., 63 S.W.3d 551 (Tex. App.—Austin 2001, pet. denied) ................................ 37 Entergy Gulf States, Inc. v. Pub. Util. Comm’n, 173 S.W.3d 199 (Tex. App.—Austin 2005, pet. denied) .............................. 32 Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433 (Tex. 2009) .......................................................................26 Equal Access for El Paso, Inc. v. Hawkins, 509 F.3d 697 (5th Cir. 2007) ........................................................................ 4 Ex Parte Mitchell, 783 S.W.2d 703 (Tex. App.—El Paso 1989, no writ) ................................... 25 Finance Commission of Texas v. Norwood, 418 S.W.3d 566 (Tex. 2013) ........................................................................ 45 Garcia v. Kubosh, 377 S.W.3d 89 (Tex. App.—Houston [1st Dist.] 2012, no pet.) ................. 44 vii Gattis v. Duty, 349 S.W.3d 193 (Tex. App.—Austin 2011, no pet.) ..................................... 17 Gen. Servs. Comm’n v. Little-Tex Insulation Co., 39 S.W.3d 591 (Tex. 2001) ......................................................................... 40 Gerst v. Nixon, 411 S.W.2d 350 (Tex. 1966) ........................................................................ 34 Gulf Land Co. v. Atl. Ref. Co., 134 Tex. 59, 131 S.W.2d 73 (1939) ......................................................... 33, 41 Harris County v. Sykes, 136 S.W.3d 635 (Tex. 2004) ........................................................................ 18 Heckman v. Williamson Cnty., 369 S.W.3d 137 (Tex. 2011) ................................................................... 38, 39 Houston Mun. Emps. Pension Sys. v. Ferrell, 248 S.W.3d 151 (Tex. 2007) .................................................................. 33, 42 In re Doe, 19 S.W.3d 346 (Tex.2000) .................................................................... 26, 27 In re Entergy Corp., 142 S.W.3d 316 (Tex. 2004) ........................................................................ 33 In re Sw. Bell Tel. Co., L.P., 226 S.W.3d 400 (Tex. 2007) ....................................................................... 18 Jessen Assocs., Inc. v. Bullock, 531 S.W.2d 593 (Tex. 1975) ......................................................................... 34 Lopez v. Pub. Util. Comm’n, 816 S.W.2d 776 (Tex. App.—Austin 1991, writ denied) ............................. 42 Mills v. Warner Lambert Co., 157 S.W.3d 424 (Tex. 2005) ........................................................................ 32 viii N. Alamo Water Supply Corp. v. Tex. Dep’t of Health, 839 S.W.2d 455 (Tex. App.—Austin 1992, writ denied) .............................30 Nat’l Fed’n of Indep. Bus. v. Sebelius, 132 S.Ct. 2566 (2012) .................................................................................. 31 Ojo v. Farmers Group, 356 S.W.3d 421 (Tex. 2011) ........................................................................ 27 Pers. Care Prods. v. Hawkins, 635 F.3d 155 (5th Cir. 2011)......................................................................... 37 Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644 (2003) (plurality op. ......................................... 31, 32, 34, 35, 36 Prairie View A&M Univ. v. Chatha, 381 S.W.3d 500 (Tex. 2012) ....................................................................... 42 R.R. Comm’n v. Tex. Citizens for a Safe Future and Clean Water, 336 S.W.3d 619, 624-25 (Tex. 2011) ............................................................ 51 Richardson v. First Nat’l Life Ins. Co., 419 S.W.2d 836 (Tex. 1967) ........................................................................ 17 S.C. San Antonio, Inc. v. Tex. Dep’t of Human Servs., 891 S.W.2d 773 (Tex. App.—Austin 1995, writ denied) .............................. 37 Spring Branch Indep. Sch. Dist. v. Stamos, 695 S.W.2d 556 (Tex. 1985) ........................................................................ 36 SSC Mo. City Operating Co., LP v. Tex. Dep’t of Aging & Disability Servs., No. 03-09-00299-CV, 2009 WL 4725286 (Tex. App.—Austin 2009, pet. denied) (mem. op.) ..................................................................... 37 State Bar of Tex. v. Gomez, 891 S.W.2d 243 (Tex. 1994) ........................................................................ 18 State v. Holland, 221 S.W.3d 639, 644 (Tex. 2007) ................................................................ 19 ix Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm’n, 408 S.W.3d 549 (Tex. App.—Austin 2013, pet. denied) ........................19, 37 Tex. A&M Univ. Sys. v. Koseoglu, 233 S.W.3d 835 (Tex. 2007) ........................................................................ 17 Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440 (Tex. 1993) ............................................................ 17, 18, 38 Tex. Comm’n of Licensing & Regulation v. Model Search Am., Inc., 953 S.W.2d 289 (Tex. App.—Austin 1997, no writ) ....................................30 Tex. Comm’n on Envtl. Quality v. Slay, 351 S.W.2d 532 (Tex. App.—Austin 2011, pet. denied) .............................. 45 Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217 (Tex. 2004) ...................................................................17, 18 Tex. Dep’t of Protective & Regulatory Servs. v. Mega Child Care, Inc., 145 S.W.3d 170 (Tex. 2004) .................................................................. 29, 41 Tex. Dep’t of Pub. Safety v. Salazar, 304 S.W.3d 896 (Tex. App.—Austin 2009, no pet.) ................................... 45 Tex. Dep’t of State Health Servs. v. Balquinta, 429 S.W.3d 726 (Tex. App.—Austin 2014, pet. dism’d)....................... 44, 45 Tex. Health & Human Servs. Comm’n v. Advocates for Patient Access, Inc., 399 S.W.3d 615 (Tex. App.—Austin 2013, no pet.)..................................... 56 Tex. Health & Human Servs. Comm’n v. El Paso Cnty. Hosp. Dist., 351 S.W.3d 460 (Tex. App.—Austin 2011) ........................................... 28, 44 Tex. Parks & Wildlife Dep’t v. Sawyer Trust, 354 S.W.3d 384 (Tex. 2011) ....................................................................... 40 Thomas v. Groebl, 147 Tex. 70, 212 S.W.2d 625, 630 (1948) ................................................... 24 x U.S. v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33 (1952) ..................................................................................... 44 Walling v. Metcalfe, 863 S.W.2d 56 (Tex. 1993) (per curiam) ..................................................... 17 Water Dev’pt Bd. v. Hearts Bluff Game Ranch, Inc., 313 S.W.3d 479 (Tex. App.—Austin 2010), aff’d 381 S.W.3d 468 (Tex. 2012) ............................................................................................ 19-20 Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692 (Tex. 2003) ........................................................... 42, 45, 46 Constitutional Provisions, Statutes & Rules TEX. CONST. art. I, § 28 ........................................................................................ 33 TEX. CONST. art. II, § 1 ......................................................................................... 33 TEX. CONST. art. IV, § 10 ..................................................................................... 35 U.S. Const. art. VI, cl. 2 ........................................................................................ 32 1 TEX. ADMIN. CODE § 353.411(a)(5)............................................................... 13, 54 1 TEX. ADMIN. CODE ch. 355 subch. B .................................................................... 6 1 TEX. ADMIN. CODE § 355.201 ...............................................................................5 1 TEX. ADMIN. CODE § 355.201(c) ..................................................................... 8, 10 1 TEX. ADMIN. CODE § 355.201(c)(4) ............................................................ 3, 8, 53 1 TEX. ADMIN. CODE § 355.201(d) .............................................................. 9, 21, 22 1 TEX. ADMIN. CODE § 355.201(d)(1)(A) ......................................... 9, 10, 12, 21, 48 1 TEX. ADMIN. CODE § 355.201(d)(1) (D) ................................... 9, 10, 12, 21, 48 1 TEX. ADMIN. CODE § 355.201(e) ........................................................... 7, 9, 10, 13 xi 1 TEX. ADMIN. CODE § 355.201(f) ................................................................ 7, 10, 13 1 TEX. ADMIN. CODE § 355.8021 ....................................................................... 8, 13 1 TEX. ADMIN. CODE § 355.8021(a)(2) ........................................................8, 22 1 TEX. ADMIN. CODE §355.8021(a)(2)(A) ........................................ 8, 21, 22, 50 1 TEX. ADMIN. CODE §355.8021(a)(2)(B) .............................................. 8, 21, 22 1 TEX. ADMIN. CODE 355.8021(B)........................................................................49 1 TEX. ADMIN. CODE § 355.8063(k)(1)(A) (2010), repealed by 35 TEX. REG. 6511, 6513 (2010) ............................................................................... 28 1 TEX. ADMIN. CODE § 355.8085 ..................................................................... 13 1 TEX. ADMIN. CODE § 355.8085(g)(3) ................................................................... 8 1 TEX. ADMIN. CODE § 355.8441.................................................................. 8, 13 1 TEX. ADMIN. CODE § 355.8441(3)(B) .................................................................. 8 1 TEX. ADMIN. CODE § 355.8441(5)(B) ............................................................. 8 1 TEX. ADMIN. CODE § 355.8441(6)(B) ............................................................. 8 1 TEX. ADMIN. CODE § 355.8441(7)(B) ............................................................. 8 42 U.S.C. § 1396a(a) .............................................................................................. 2 42 U.S.C. § 1396a(a)(3) ..........................................................................................3 42 U.S.C. § 1396a(a)(5) ..........................................................................................5 42 U.S.C. § 1396a(a)(30)(A) ....................................................................... 3, 54, 26 42 U.S.C. § 1396b ............................................................................................31, 53 42 U.S.C. § 1396b(a) ...............................................................................................3 xii 42 U.S.C. § 1396b(m)(1)(A)(i) .............................................................................. 55 42 U.S.C. § 1396c ...............................................................................................2, 4 5 U.S.C. § 702 ...................................................................................................... 41 TEX. CIV. PRAC. & REM. CODE § 37.011 ................................................................ 33 TEX. GOV’T CODE § 2001.022 ......................................................................... 53 TEX. GOV’T CODE § 2001.022(a) ............................................................... 13, 46 TEX. GOV’T CODE § 2001.023(a) .......................................................... 13, 46, 53 TEX. GOV’T CODE § 2001.024 ................................................................... 13, 54 TEX. GOV’T CODE § 2001.038 ......................................................................... 41 TEX. GOV’T CODE § 2001.038(a) .............................................................. 16, 42, 43 TEX. GOV’T CODE § 2001.171 ......................................................................... 42 TEX. GOV’T CODE § 2001.174 .................................................................... 41, 42 TEX. GOV’T CODE § 2006.002 ....................................................................13, 53 TEX. GOV’T CODE § 2006.002(c) ....................................................................46 TEX. GOV’T CODE § 311.016 ................................................................................ 24 TEX. GOV’T CODE § 311.034 ................................................................................ 42 TEX. GOV’T CODE ch. 531 .......................................................................................5 TEX. GOV’T CODE ch. 531 subch. B .........................................................................5 TEX. GOV’T CODE § 531.021(b-1)............................................................................5 TEX. GOV’T CODE § 531.021(d) .......................................................................... 8, 9 TEX. GOV’T CODE § 531.021(e) ........................................................................ 9 xiii TEX. GOV’T CODE § 531.02113.......................................................................... 5, 13 TEX. GOV’T CODE § 531.02113(1) ......................................................................... 53 TEX. GOV’T CODE § 531.0212(b)(2) ...................................................................... 38 TEX. GOV’T CODE § 533.005(a)(21) ...................................................................... 13 TEX. GOV’T CODE § 533.005(a)(21)(c) ................................................................. 54 TEX. HUM. RES. CODE ch. 32 ..................................................................................5 TEX. HUM. RES. CODE § 32.002 ........................................................................5 TEX. HUM. RES. CODE § 32.021 .................................................................. 5, 35 TEX. HUM. RES. CODE § 32.021(a) ..........................................................................5 TEX. HUM. RES. CODE § 32.028 ................................................................... 3, 31, 53 TEX. HUM. RES. CODE § 32.028(a)...................................................................... 5, 6 TEX. HUM. RES. CODE § 32.0281.......................................................................5 TEX. HUM. RES. CODE § 32.0281(b)(1)............................................................. 6 TEX. HUM. RES. CODE § 32.0281(d)....................................................................... 6 TEX. HUM. RES. CODE § 32.0281(e) ............................................................ 6, 29 TEX. HUM. RES. CODE § 32.0282 ................................................................ 6, 10, 52 TEX. HUM. RES. CODE § 32.0282(a) .......................................................................7 TEX. R. CIV. P. 683 ................................................................................................ 56 Rule 24........................................................................................................... 22, 52 xiv Other Authorities 2016-17 Gen. Appropriations Act, 84th Leg., R.S., ch. 1281, art. II, 2015 TEX. SESS. LAW SERV. 4343, 4547 (Health & Human Servs. Comm’n), Rider 50..................................... 11 A DICTIONARY OF MODERN LEGAL USAGE (2d ed. 1995) ................................ 24, 46 AMER. HERITAGE DICTIONARY 691 (4th ed. 1994) ................................................ 21 AMER. HERITAGE DICTIONARY 1612 (4th ed. 1994) ............................................. 24 BLACK’S LAW DICTIONARY 1436 (9th ed. 2009) ....................................................46 Gen. Appropriations Act, 2012-13 Biennium, 82d Leg., R.S., ch. 1355, art. II, § 16, 2011 TEX. GEN. LAWS 4025, 4241 (Special Provisions Re: All Health & Human Servs. Agencies, Provider Rates) ............................... 10 xv STATEMENT OF THE CASE Nature of the Case: Plaintiffs sought to impede the implementation of a set of Medicaid rates for home therapy services that were to go into effect on October 1. They attempted to invoke § 2001.038 of the APA and the ultra vires cause of action, and asked the district court to foreclose the Commission from superseding the judgment. Trial Court: 200th Judicial District Court, Travis County The Hon. Tim Sulak Presiding Trial Court Disposition: The trial court denied the plea, CR.673 (Appendix Tab B),1 and granted a temporary injunction, CR.587-672 (Appendix Tab A). The court foreclosed supersedeas based on a bond of $500; that matter is being challenged by a separate motion in the same cause. 1 References to the Clerk’s Record appear as “CR.__,” with a numeral indicating the page number and, as appropriate, a paragraph reference. References to the Reporter’s Record appear as __.RR.__, with the first numeral indicating a volume and the second a page number, sometimes followed by a line number. The Supplemental Reporter’s Record is referred to as “SRR.” xvi ISSUES PRESENTED Plaintiffs sought ultra vires and declaratory relief under the Administrative Procedure Act related to the Commission’s adjustment of Medicaid rates for certain therapy services, which were arrived at as a rate adjustment triggered by a decreased appropriation for Medicaid funding. Plaintiffs allege in their trial-court briefing (but not in their live petition) that they are entitled to relief related to the rates, because they are implicitly in conflict with separate administrative rules governing periodic rate review related to costs. Claims regarding the amount of Medicaid rates are subject to the exclusive jurisdiction of the federal Secretary of Health and Human Services, and Texas law does not provide for an administrative process or judicial review related to the rate-setting process. 1. Does plaintiffs’ petition establish jurisdiction based on any of the causes of action asserted? Are the jurisdictional defects incurable? 2. Are Texas-law claims and remedies related to the amount of Medicaid rates preempted by the federal Medicaid Act? Does Texas law purport to create an independent basis for challenging Medicaid rates in state court? 3. Do plaintiffs have a standing to challenge the Medicaid rates or a vested right in a particular level of Medicaid rates? 4. Do plaintiffs have a vested property right on which to base a constitutional due-course-of-law claim or seek inherent judicial review? xvii No. 03-15-00657-CV In the Court of Appeals for the Third Judicial District at Austin, Texas CHRIS TRAYLOR, AS EXECUTIVE COMMISSIONER OF THE TEXAS HEALTH AND HUMAN SERVICES COMMISSION, et al. Appellants, v. DIANA D., AS NEXT FRIEND OF KD, A CHILD, et al. Appellees. On Appeal from the 200th Judicial District Court of Travis County, Texas APPELLANTS’ BRIEF TO THE HONORABLE THIRD COURT OF APPEALS: Plaintiffs seek to challenge the result of a Medicaid rates adjustment, through a series of procedural mechanisms governing the adoption of the administrative rules governing the Medicaid process. The remedy plaintiffs seek—to keep the old rates—is incompatible with the exceptions to sovereign immunity on which they rely. Those exceptions apply at most to rules, not rates; there is no Texas-law mechanism to challenge the amount of Medicaid rates. The lack of a Texas-law remedy for ratemaking is entirely sensible, because federal law preempts all state law remedies that impact the amount of Medicaid fees related to considerations such as access to care. The federal Secretary of Health and Human Services has exclusive authority to review the amount of Medicaid rates, subject to the remedy of withdrawing federal funds if state levels are too low. 42 U.S.C. § 1396c. Because there is no Texas-court lawsuit that can change the rates, plaintiffs should direct their concerns about access to care to the Secretary. The lawsuit should be dismissed. STATEMENT OF FACTS Plaintiffs would engraft a substantive Texas-law access requirement on the federal Medicaid Act, and to establish a new legal basis for judicial review of Medicaid rates through statutes that allow review of the underlying administrative rules. A full understanding of the procedural and jurisdictional issues in this case requires an understanding of the Medicaid Act’s rate structure and the Texas-law requirements for adopting administrative rules, periodically setting Medicaid rates, and adjusting those rates in other circumstances. Medicaid Medicaid is a Spending Clause program, cooperatively managed by the state and federal governments. E.g., Armstrong v. Exceptional Child Ctr., Inc., 135 S.Ct. 1378, 1382 (2015). The program functions as a contract between the states and the federal government: to qualify for funding, the State tenders and the federal government accepts a Medicaid “plan,” see 42 U.S.C. § 1396a(a), to be administered 2 by the State, see Douglas v. Indep. Living Ctr. of S. Calif., Inc., 132 S.Ct. 1204, 1210 (2012) (federal governments’ acceptance of Medicaid plan, within its expertise, precluded rate claim against state and required plaintiffs to go to federal forum). The availability of funds is predicated on the availability of money appropriated to pay Medicaid benefits. 42 U.S.C. § 1396b(a) (setting amount to be distributed to states “[f]rom the sums appropriated therefor”); accord, e.g., TEX. HUM. RES. CODE § 32.028, 1 TEX. ADMIN. CODE § 355.201(c)(4) (requiring consideration of “levels of appropriated state . . . funds . . . that limit, restrict, or condition the availability of appropriated funds for medical assistance”). A shortfall in Medicaid appropriations requires either further appropriations, or, more rarely, cuts to Medicaid rates. E.g., Colorado Health Care Ass’n v. Colorado Dep’t of Soc. Servs., 842 F.2d 1158, 1171-72 (10th Cir. 1988). The state plan must meet a number of requirements, such as providing a hearing before a State agency for any individual whose claim for medical assistance under the plan is denied. E.g., 42 U.S.C. § 1396a(a)(3). One requirement of the Medicaid Act is “access.” Rates must be: sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area 42 U.S.C. § 1396a(a)(30)(A). 3 Consistent with the contractual nature of the program, many of its requirements are subjected to the discretion of the federal Secretary of Health and Human Services, who has ultimate authority to suspend Medicaid payments to the states for non-compliance with the Act, 42 U.S.C. § 1396c. For example, the Fifth Circuit has held that the “access” requirement cannot give rise to a statutory cause of action in federal court, because discretion over setting rates to meet the access requirement is vested in the Secretary, rather than the courts. Equal Access for El Paso, Inc. v. Hawkins, 509 F.3d 697, 701 (5th Cir. 2007). The amount of rates is, ultimately, reviewed by the Secretary through the Centers for Medicare and Medicaid Services (“CMS”). This review currently takes place on an ad hoc basis, but CMS is currently pursuing a formal rulemaking that would standardize the data requirements and standards for demonstrating access to care. Medicaid Program; Methods for Assuring Access to Covered Medicaid Services, 80 Fed. Reg. 67576 (Nov. 2, 2015) (to be codified at 42 C.F.R. pt. 447) (Appendix, Tab C). This new rule will establish specific criteria for establishing access to care, including documentation requirements. Id. Texas Statutes and Rules In Texas, Medicaid is governed by Chapter 32 of the Human Resources Code and some provisions in subchapter B of Chapter 531 of the Government Code. See 4 TEX. HUM. RES. CODE ch. 32., TEX. GOV’T CODE ch. 531 subch. B. The statutory provisions—unsurprisingly—mirror federal law. See TEX. HUM. RES. CODE § 32.002 (requiring Chapter be construed in light of federal law and that any provisions that would render Texas ineligible to receive funds inoperative to that extent). The program is administered by the Health and Human Service Commission, and the Commissioner is charged with adopting the necessary administrative rules to implement the system. See id. § 32.021; see also TEX. GOV’T CODE ch. 531 (setting out Commission’s authority and duties). Consistent with the Medicaid Act, the Commission is charged with presenting the State’s medical assistance plan to the federal government for approval by the Secretary. See TEX. HUM. RES. CODE § 32.021(a) (referring to 42 U.S.C. § 1396a(a)(5)). A separate provision of the Government Code creates a general duty to “optimize” Medicaid financing by, among other things, maximizing the receipt of federal funds, creating incentives to use preventive care, increasing and retaining providers in the system to maintain an “adequate provider network.” TEX. GOV’T CODE § 531.02113. Rulemaking: Rates are adopted under a system set out by administrative rule. TEX. HUM. RES. CODE § 32.028(a), § 32.0281; TEX. GOV’T CODE § 531.021(b-1); see 1 TEX. ADMIN. CODE § 355.201. These rules are promulgated under the formal rulemaking 5 requirements of the Administrative Procedure Act. TEX. HUM. RES. CODE § 32.0281(d).2 Ratemaking: The rate making process, by contrast to the underlying rulemaking, is governed by requirements that are different in form and substance from the APA’s. See TEX. HUM. RES. CODE § 32.0282 (setting out public-hearing requirement, different from APA’s). The Human Resources Code makes clear that something different from formal APA process is required. Id. §§ 32.028(a), 32.0281(b)(1). The Medicaid-rate-specific process further distinguishes between the processes for “establishment” and “periodic review,” on the one hand, and “adjustment” on the other. See 1 TEX. ADMIN. CODE ch. 355 subch. B. 2Somewhat confusingly, § 32.0281 states that the adoption of rules is subject both to the APA’s rulemaking provisions, TEX. HUM. RES. CODE § 32.0281(d), and that the same rules are subject to an “appeal” under the contested-case provisions of the APA, id. § 32.0281(e). Subsection (e) is not implicated in this case, which involves no contested-case proceeding. See infra, n. 9. 6 Ratemaking: Establishment and Periodic Review When a rule is “established,” the Commission considers the information detailed in § 355.201(c). HHSC ratemaking staff regularly review new rates based on all required inputs, and consider stakeholder comments regarding potential access- to-care issues. Periodic rate changes are adopted at a public hearing “to allow interested persons to present comments relating to proposed payment rates for medical assistance.” TEX. HUM. RES. CODE § 32.0282(a). By contrast to public hearing requirements for APA rulemaking, there is no requirement that the Commission respond to public comment before the new rate goes into effect, only a notice requirement. The notice requirement is satisfied by publication in the Texas Register, no later than 10 state working days before the effective date of the adjustment. 1 TEX. ADMIN. CODE § 355.201(e). The published notice must include a description of the specific increase or reduction, the date on which it will take effect, a description of the legal and factual bases therefor, a description of any rate setting requirements that cannot be met, and instructions for interested parties to submit written comments prior to the hearing on the rates. 1 TEX. ADMIN. CODE § 355.201(f). Substantively, periodic rate changes are circumscribed by the Commission’s rules, the requirements of state and federal law, economic factors, and “levels of appropriated state and federal funds or state or federal laws or enactments that limit, 7 restrict, or condition the availability of appropriated funds for medical assistance.” See id. §§ 355.201(c), 355.201(c)(4); see also TEX. GOV’T CODE § 531.021(d). With regard to home health programs, an additional provision § 355.8021, governs rates for establishment and periodic review of services. See 1 TEX. ADMIN. CODE § 355.8021. The Commission will “update” schedules for home care “as needed.” Id. § 355.8021(a)(2). Fees are to be based on an analysis of other fees authorized by the federal government for similar services, Medicaid fees paid by other states, a survey of costs reported by home health agencies, the Medicare Low Utilization Payment Adjustment (LUPA) fees; previous payments for these services, or “some combination thereof.” Id. § 355.8021(a)(2)(A). Periodic rate reviews “include,” but are not “limited to, payments for as well as costs associated with providing” home health services. Id. § 355.8021(a)(2)(B). Rates for early-intervention therapeutic intervention are subject to the same inquiry. See 1 TEX. ADMIN. CODE § 355.8441(3)(B); (5)(B); (6)(B); (7)(B) (referring back to § 355.8021 when discussing “EPSDT”3 services by home health agencies); 1 TEX. ADMIN. CODE § 355.8085(g)(3) (specifying that EPSDT services are governed by § 355.8441). Thus, for services governed by § 355.8021(a)(2), review is related to costs. 3 “EPSDT” stands for “Early and Periodic Screening, Diagnosis, and Treatment.” 8 Ratemaking: Adjustments While rates are ‘established’ and periodically ‘reviewed’ under the relevant administrative rules, separate provisions govern adjusting rates. 1 TEX. ADMIN. CODE §§ 355.201(d)(1)(A), (D) (mirroring factors set out in § 531.021(d) of the Government Code for changing rates notwithstanding other legal requirements), 355.201(e) (discussing procedural requirements therefor). Echoing the Government Code’s requirement that rates be adjusted “[n]otwithstanding any other provision” to accommodate the factors such as reduced appropriations, TEX. GOV’T CODE § 531.021(d), (e), the rules provide: Adjustment of fees, rates, and charges. Notwithstanding any other provision of this chapter, the Commission may adjust fees, rates, and charges paid for medical assistance if: (1) state or federal law is enacted, amended, judicially interpreted, or implemented to: (A) require the Commission to increase or reduce a fee, rate or charge paid to a provider for medical assistance; * * * (D) restrict, limit, or condition the availability of appropriated funds to the Commission for payment or reimbursement of medical assistance. 1 TEX. ADMIN. CODE § 355.201(d). The substantive requirements for an adjustment, under subsection (d), are different from those for establishment or periodic review of a rate, under subsection (c), compare id. (allowing a change in rates when 9 appropriations are cut “notwithstanding” other law), with § 355.201(c) (setting out various data to be considered in establishing rates). Adjustments are subject to the same procedural requirements as the rate establishment and review process; interested parties are entitled to submit written comments and attend a public hearing. Id. § 355.201(f) (requiring same type of hearing as for establishment of rule under TEX. HUM. RES. CODE § 32.0282). The administrative rules expressly contemplate the changes in legislation will require new rates, specifying that such changes will not take effect until the new law does. Id. § 355.201(e). One example of a non-periodic rate adjustment occurred in the 2012-13 biennium, when the Legislature mandated specific cuts to particular rates. Gen. Appropriations Act, 2012-13 Biennium, 82d Leg., R.S., ch. 1355, art. II, § 16, 2011 TEX. GEN. LAWS 4025, 4241 (Special Provisions Re: All Health & Human Servs. Agencies, Provider Rates). By contrast to periodic review based on cost, adjustments are triggered by discreet events such as a decrease in appropriations for Medicaid reimbursement. 1 TEX. ADMIN. CODE §§ 355.201(d)(1)(A), (D); see TEX. GOV’T CODE § 531.021(d), (e). The Current Dispute The current state budget contains a rider cutting $186,500,000 in General Revenue Funds and $249,349,498 in Federal Funds in 2016, and similar numbers in 10 2016. 2016-17 Gen. Appropriations Act, 84th Leg., R.S., ch. 1281, art. II, 2015 TEX. SESS. LAW SERV. 4343, 4547 (Health & Human Servs. Comm’n), Rider 50 (“Rider 50”) (Appendix Tab D). The rider specifies cuts for acute care therapy services (including physical, occupational, and speech therapies. Id. It states: HHSC shall reform reimbursement methodology to be in line with industry standards, policies, and utilization for acute care therapy services (including physical, occupational, and speech therapies) while considering stakeholder input and access to care. Out of the amount in subsection (a), in each fiscal year at least $50,000,000 in General Revenue Funds savings should be achieved through rate reductions. Id. (emphasis added). The rider separately addresses $25,000,000 to be made through various medical policy initiatives, setting out initiatives the Commission “may” undertake. Id. Thus, by contrast to the rate cuts, the Commission has flexibility regarding efforts such as “[c]larifying policy language,” Rider 50(c)(1), and requiring “a primary care or treating physician to initiate a signed order or referral prior to an initial therapy evaluation,” id. 50(c)(4). In response, the Commission attempted to change the rates in accordance with Rider 50(c). See CR.18-39. That attempt triggered this lawsuit. The first notice of changed rates under Rider 50 failed to mention the adjustment process, see CR.20 (reciting other rate-related provisions). Following public comment, an internal memorandum suggested that the original rates be 11 changed for various reasons and suggested that the new rates be based on a modification of the prior announcement and hearing, see CR.235-261. As explained above, however, the internal memorandum by Commission staff could not trigger changed rules, because there is no formal requirement or mechanism for addressing the public’s concerns. Accordingly, the Commission withdrew the entire first rate proposal, in light of the internal memorandum plaintiffs describe as a second rate proposal (but which never attempted to meet the procedural requirements to change the rates). CR.235-261. It then proposed the new, October 1, rates. CR.351-373 (Appendix Tab E). The October 1 rates were proposed under the “adjustment” procedure. CR.352 (citing 1 TEX. ADMIN. CODE §§ 355.201(d)(1)(A), (D)). The District Court Plaintiffs instituted suit Travis County district court while the first set of rates was in the administrative process, see CR.4-17, and amended their petition following the internal memorandum, which they have described as a second set of rates, CR.196-210. After the agency announced the October 1 rates, plaintiffs amended their petition again and sought a temporary injunction precluding the Commission from applying the rates while this lawsuit is pending. CR.336-392 (Appendix Tab F). The second amended petition asserted that the providers would go out of business, and the beneficiaries might no longer be able to obtain services. CR.342-43 ¶ 24. They asserted that the rates were adopted without complying with the administrative rules governing establishment and periodic review of rates (1 TEX. 12 ADMIN. CODE §§ 355.8021, 355.8441, 355.8085); several provisions related to formal rulemaking (TEX. GOV’T CODE §§ 2001.022(a), 2001.023(a), 2001.024, 2006.002); that there had been no published notice under the Medicaid Rate setting rule (1 TEX. ADMIN. CODE § 355.201(e), (f)). CR.343 ¶ 25, CR.505 ¶ 2. They further asserted substantive rights to (1) have Medicaid rates ‘maximized,’ CR.343-44 ¶ 26 (citing TEX. GOV’T CODE § 531.02113); and (2) ensure access to care for each beneficiary under the provisions governing MCO rates, CR.344 ¶ 27 (citing TEX. GOV’T CODE § 533.005(a)(21) and 1 TEX. ADMIN. CODE § 353.411(a)(5)). Finally, plaintiffs asserted a due-course of law claim. CR.344-45 ¶ 28. The Commission and Commissioner filed a plea to the jurisdiction and opposed the temporary injunction in the hearing. CR.581-84. The district court granted the temporary injunction and denied defendants’ plea. CR.673, CR.587-672 (Appendix Tab A).The district court’s analysis of the probable right of recovery element accepted plaintiffs’ argument that it is appropriate to enjoin a change in rates because the rate adjustment allegedly violated the administrative rules governing rate establishment and periodic rate review or adoption of an administrative rule under the APA. See CR.591 ¶ 18. The district court incorporated a counter- supersedeas order into the temporary injunction, requiring a bond of $500 to cover the potential expense to the State of not implementing Rider 50(c). CR.596-97. That order is currently being challenged in this Court under Rule of Appellate Procedure 24. 13 While the Rule 24 motion was pending, the trial court heard Appellants’ motion to modify the temporary injunction. The district court denied the motion and stated that the scope of the injunction could be determined in subsequent sanctions proceedings, if the State did not choose to comport with plaintiffs’ view of how rates should be set. SRR.37-39. Summary of Argument Plaintiffs have not stated a claim within either of the exceptions to sovereign immunity they attempt to invoke. That defect is incurable, because (1) Rider 50 mandates the cuts resulting in the rate adjustment that became effective October 1; (2) plaintiffs’ complaints are all about the standards for rate review, not rate adjustment; and (3) consistent with the exclusive federal, executive-department remedy provided by the Medicaid Act, Texas law does not provide judicial review of Medicaid rates. Plaintiffs’ petition avers that the adoption of rates in this case violated several administrative rules (although they never say how), that (implicitly) the adoption of the rate constituted an amendment of some rule (though they don’t say which), and they throw in a substantive argument based on the access requirements for Medicaid-paying managed care organizations (which are not covered by these rates). In short, their petition fails to invoke trial-court jurisdiction regardless of what the record shows. A plaintiff cannot rely on the notice-pleading standard against the 14 State; it must articulate a legal theory within a waiver of immunity from suit and allege facts to support it. The next step would ordinarily be to look at the record to see whether it supports remand for repleading. It does not, as explained below. But the ordinary next step does not apply, because it is first necessary to determine whether plaintiffs can obtain the remedy they seek, regardless of the facts. To the extent plaintiffs complain about the October 1 rates, qua rates, their lawsuit is preempted by federal law. The Medicaid Act preempts contrary state remedies by making claims regarding “access to care”—a claim that is governed exclusively by federal law and is the only cited basis for attacking the substance of the rates—subject to the sole remedy of the federal Secretary of Health and Human Service’s control over rate settings. While the United States Supreme Court has left open the question whether the Secretary’s actions are subject to further federal court proceedings, there can be no doubt that those proceedings must be in federal court, because they will be against, or brought by, the United States. That any right to particular rates is contingent on the Secretary’s actions precludes constitutional standing, any due-course-of-law claim, and any invocation of inherent judicial review. And to the extent plaintiffs complain about the adoption and application of administrative rules, they cannot obtain relief regarding the rate amounts under the causes of action they attempt to invoke. Section 2001.038 cannot be used to 15 challenge particular applications of administrative rules: it is limited to “applicability,” not application, and does not provide for injunctive relief. TEX. GOV’T CODE § 2001.038(a). Nor can the ultra vires cause of action result in the reversal of a particular action taken pursuant to a rule: it operates prospectively only. If plaintiffs’ view of jurisdiction were correct, both § 2001.038 and the ultra vires cause of action would constitute independent bases for judicial review. The Supreme Court and this Court have long rejected both propositions. Finally, the pleadings and evidence affirmatively negate any alternative claim. (1) Plaintiffs have not, as a matter of law, “identified” an administrative rule as required by Third Court precedent, because the only substantive arguments they make are that the rules have been misapplied. That cannot result in a declaration regarding the rules themselves. (2) Their ultra vires claim fails because the Commissioner has done, and threatens to do, nothing that is not provided by law. As with any application of administrative rules, if there is no statutory basis for judicial review and no constitutional basis for inherent review, the defendant’s actions cannot be the basis for an ultra vires claim. And (3), even assuming (in the face of overwhelming precedent), that there could be an ultra vires claim, it fails because as a matter of law the ratemaking was proper exercise of the power to adjust rates pursuant to decreased appropriations. 16 Standards of Review A plaintiff must demonstrate that the allegations in his petition fall within the court’s jurisdiction. Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993) (citing Richardson v. First Nat’l Life Ins. Co., 419 S.W.2d 836, 839 (Tex. 1967). Notice pleading is not enough: the “real substance” of the petition must state a valid legal theory within an exception to sovereign immunity. E.g., Dallas Cnty. Mental Health & Mental Retardation v. Bossley, 968 S.W.2d 339, 343 (Tex. 1998). A defendant’s plea to the jurisdiction based on sovereign immunity is analyzed in two steps: (1) examining the plaintiff’s petition to see if it articulates a claim within the scope of a valid waiver of immunity and (2) determining whether undisputed evidence of jurisdictional facts negates the trial court’s jurisdiction. Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). The legal question whether the alleged facts invoke an exception to immunity can require an inquiry into the merits of the claim; conclusory legal allegations are insufficient, without supporting facts, to establish jurisdiction. E.g., Gattis v. Duty, 349 S.W.3d 193, 201 (Tex. App.—Austin 2011, no pet.) If either the pleadings themselves or the evidence affirmatively negates jurisdiction over the claim, the claim must be dismissed. Tex. A&M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 847 (Tex. 2007). A temporary injunction is reviewed for abuse of discretion. E.g., Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex. 1993) (per curiam). A trial court abuses its 17 discretion when it fails to analyze or apply the law correctly. In re Sw. Bell Tel. Co., L.P., 226 S.W.3d 400, 403 (Tex. 2007). Argument I. THE LIVE PETITION DOES NOT ATTEMPT TO TIE THE CAUSES OF ACTION IT PLEADS TO THE REMEDIES IT SEEKS. To invoke an exception to immunity a petition must, based on alleged facts, articulate a legal theory that falls within an exception to sovereign immunity as a matter of law. E.g., Bossley, 968 S.W.2d at 343. Plaintiffs’ petition makes no such effort: it merely alleges inconsistencies between the rate-adoption and various administrative rules and statutes. Nowhere does it articulate how the alleged facts support a claim within a waiver of sovereign immunity. It is the plaintiffs’ burden to file a petition that invokes the court’s jurisdiction. Tex. Ass’n of Bus., 852 S.W.2d at 446. Jurisdiction must appear based on the allegations, because the defendant is entitled to a ruling on the plea as early as possible. E.g., State Bar of Tex. v. Gomez, 891 S.W.2d 243, 245 (Tex. 1994). The petition is tested to see whether the pleading party has “alleged facts that affirmatively demonstrate a trial court’s subject-matter jurisdiction.” Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). It is not enough merely to mention a cause of action for which immunity is waived: the plaintiff must allege facts sufficient to support the waiver. See Harris County v. Sykes, 136 S.W.3d 635, 639-640 (Tex. 2004) (lawsuit of plaintiff who does not amend petition to include 18 sufficient facts to trigger immunity waiver must be dismissed); see also State v. Holland, 221 S.W.3d 639, 644 (Tex. 2007) (dismissing takings claim that was based on invalid legal theory). More specifically, if the case involves an ultra vires claim against an official, the plaintiff must plead acts that are, as a matter of law, ultra vires. E.g., Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm’n, 408 S.W.3d 549, 557-58 (Tex. App.—Austin 2013, pet. denied) (ultra vires analysis involves legal inquiry to determine whether alleged acts are prohibited). In sum, a petition that merely names a waiver of immunity, but does not attempt to allege facts and assert a legal claim invoking that waiver of immunity, must be dismissed on a plea to the jurisdiction. The live petition makes no attempt to tie the relief it requests to the legal theories or causes of action invoked in the petition (and is thus jurisdictionally defective), plaintiffs try to circle the square in their trial-court briefing and in the district court’s temporary-injunction order. There, they assert that the adoption of the rules manifests an implicit amendment of the administrative rules. That briefing can’t fix the disconnect between the waivers of immunity plaintiffs invoke and the legal theories on which they rely. The proper inquiry in this lawsuit is not whether plaintiffs’ allegations in the petition successfully trigger jurisdiction, but whether there is any basis for repleading. Holland, 21 S.W.3d at 643, 644; Water Dev’pt Bd. v. Hearts Bluff Game Ranch, Inc., 313 S.W.3d 479, 485, 490 (Tex. App.—Austin 2010), 19 aff’d 381 S.W.3d 468 (Tex. 2012) (no takings claim asserted in pleadings where State’s actions were subsidiary to actions of federal government). II. Plaintiffs’ Lawsuit Has No Arguable Basis in Law. The core of plaintiffs’ lawsuit—which is found not in their live petition but rather in their briefing, CR.509 ¶ 6, and in the text of the temporary injunction order, CR.590 ¶ 11—is that the rate adjustment resulting in the October 1 rates implicitly invalidates the underlying administrative rules by amending them to reach the current rates. Thus, plaintiffs seek to use the mechanism for challenging formal administrative rules under the APA as a collateral vehicle for obtaining judicial review when there is none. And even if they had pleaded a valid rule challenge— which they have not, see infra, Part V.B.2—it would fail as a matter of law because plaintiffs allege violations of the APA and the administrative rules relating to the establishment and periodic review of Medicaid rates. The October 1 rates, however, result from a rate “adjustment” triggered by Rider 50. CR.352. So even if plaintiffs’ view of the procedural requirements of Texas law were correct, there lawsuit would fail for want of jurisdiction. A. Plaintiffs Fail to Address the Distinction Between Review and Adjustment. Plaintiffs’ view of this case depends primarily on the assertion that the October 1 rates are invalid because there is evidence that the Commission did not comply with § 355.8021 and, by extrapolation, with various other procedural 20 requirements and with the APA. CR.343 ¶ 25. They suggest that § 355.8021 has been violated because the rates have not been set according to a particular “formula” set out therein.4 CR.508 ¶ 2. More specifically, plaintiffs appear to suggest that there is a violation of § 355.8021(a)(2), which relates to the periodic review of rates. 1 TEX. ADMIN. CODE § 355.8021(a)(2)(A), (B). Those provisions do not apply at all. And if they did apply, plaintiffs’ lawsuit would nonetheless be jurisdictionally barred because plaintiffs misconstrue their requirements. See infra, Part V.C.1. The October 1 rate notice references §§ 355.201(d)(1)(A) and (D). CR.352. Those provisions are triggered when state law is amended to (1) require the Commission to increase or reduce a rate, 1 TEX. ADMIN. CODE § 355.201(d)(1)(A), or when a law restricts the availability of appropriate funds to the Commission for the payment or reimbursement of medical assistance, 1 TEX. ADMIN. CODE § 355.201(d)(1)(D). When § 355.201(d) is triggered, the Commission may “adjust” rates “notwithstanding any other provision” in the administrative rules. 1 TEX. ADMIN. CODE § 355.201(d) (“Adjustment of fees, rates, and charges”). 4 Far from imposing a formula, § 355.8021 (and its dependent provisions, § 355.8441 and § 355.8085) creates no substantive requirement except that the Commission consider various data in some combination and form. A list of data, stating that it can be considered in any combination, is hardly a “formula.” See AMER. HERITAGE DICTIONARY 691 (4th ed. 1994) (“A method of doing or treating something that relies on an established uncontroversial model or approach.”). 21 All the procedural rules invoked by plaintiffs, CR.343 ¶ 25, expressly apply to the establishment and periodic review of Medicaid rates. E.g., 1 TEX. ADMIN. CODE §§ 355.8021(a)(2) (the Commission will “update the fee schedules . . . as needed); (a)(2)(A) (fee schedules arrived at in these reviews will be made using a list of data “or some combination thereof”); (a)(2)(B) (the Commission “may conduct periodic rate reviews that will include, but not be limited to, payments for as well as the costs associated with providing” these services). Those provisions do not on their face apply to the adjustment of the rates resulting in the October 1 rates because § 355.8021(a)(2) expressly relates to periodic review of rates. By contrast, when the Legislature changes the underlying funding for Medicaid, the adjustment process occurs “notwithstanding” the other requirements of the chapter. 1 TEX. ADMIN. CODE § 355.201(d). To sum up: Rider 50 triggered the adjustment process of § 355.201(d), which occurs notwithstanding other requirements of the Commission’s rules. Plaintiffs complain exclusively about rules that apply to the periodic review of rules based on cost, not the adjustment of rules based on a change in appropriations. B. Plaintiffs Fundamentally Misunderstand Rider 50. Plaintiffs suggest that Rider 50 creates the option to cut the rates, not a mandate to do so. See Rule 24 Resp. at 5 n.2, 6 ¶ 8. Not so: Rider 50(c) made rate cuts for these services a mandatory element of the broader cuts to the Medicaid reimbursement program. 22 1. The rider’s plain text is not optional. The rate cuts in Rider 50(c) are not optional. Part 50(a) makes clear that funding has already been cut from the Medicaid portion of the budget. Rider 50(a). (“Included in appropriations above in Goal B, Medicaid, is a reduction of . . . a biennial total of $373,000,000 in General Revenue Funds and $496,570,428 in Federal Funds.”) Portions of this larger cut “may” include various initiatives. Rider 50(b) (“This reduction shall be achieved through the implementation of the plan described under subsection d which may include any or all of the following initiatives:”). Rider 50(c) is the kicker. After requiring a change in reimbursement methodology to meet industry standards, “while considering stakeholder input and access to care,” the Rider makes specific requirements regarding Medicaid therapy rates: Out of the amount [already cut] in subsection (a), in each fiscal year at least $50,000,000 in General Revenue Funds savings should be achieved through rate reductions. . . . . Rider 50(c). Plaintiffs’ view that the rate cuts are optional hangs entirely on the word “should,” which addresses “rate cuts” that are to be used to account for money that 23 was already cut from the budget, according to Rider 50(a).5 In this context, the word “should” creates a mandatory obligation. Rider 50(a), not Rider 50(c), cuts funds from the budget. The word “should” is an instruction to the Commission regarding the proportion of the total cuts that are to be directed to Medicaid therapy rate reductions. A sentence containing “should” can, in context, create a mandatory obligation. The word “should” is not included in the list of words given a background meaning by the Code Construction Act, see TEX. GOV’T CODE § 311.016, nor is there a large body of case law governing its use as opposed to the more common statutory terms “shall” and “may,” see Thomas v. Groebl, 147 Tex. 70, 78-79, 212 S.W.2d 625, 630 (1948) (“shall” can mean “may,” and vice versa). “Should” is the past tense of “shall,” and, though it is sometimes used to express “probability or expectation,” it also serves to indicate “obligation or duty.” AMER. HERITAGE DICTIONARY 1612 (4th ed. 1994). Thus, like “shall” and “may,” the word “should” can create a mandatory standard in some contexts. See A DICTIONARY OF MODERN LEGAL USAGE (2d ed. 1995) (“Oddly, should, like may . . . is sometimes used to create 5The response suggests that the word “may” also applies to the rate cuts. Resp. at 16 ¶ 21. This is wrong. The word “may” applies to the various initiatives in which the Commission is empowered to initiate to cut an additional $25 million in funding. Rider 50(c). Moreover, while the later reference in Rider 50(d) to Rider 50(c) addresses some optional programs, it is referring to the optional programs to cut the additional $25 million. Rider 50(d) does not make the rate cuts in Rider 50(c) optional, contrary to the plain text of Rider 50(c) and its reference back to Rider 50(a). 24 mandatory standards, as in the ABA Code of Judicial Conduct”). Texas courts have routinely applied decrees using the word “should” as creating mandatory duties in statutes, orders, and instructions.6 It makes sense to treat ‘should’ as mandatory in this context. Rider 50(a) sets out a total amount of cuts, and Rider 50(c) sets out instructions for how to achieve at least $100,000,000 of those cuts during the biennium. Given that the word “should” is directed at a portion of the cuts already made, nothing in the context suggests that the cuts themselves, or their amount, is either conditional or conditioned upon any particular data or analysis. Plaintiffs have implied that the reference to “access to care” impacts the rate changes. See Resp. at 16 ¶ 21 (putting “access to care” next to the rate cuts with an ellipsis). This is misleading: Rider 50 ties access to reformation of reimbursement methodology, not to rate cuts. Rider 50(c). The rate cuts are in a separate sentence. And even if the rate cuts were subject to procedural requirement to perform an “access to care” inquiry, the reference to “access to care” necessarily invokes the 6 See City of Austin v. Cannizzo, 153 Tex. 324, 331, 267 S.W.2d 808, 813 (1954) (“Whatever distinctions may be made between the words will and should by lexicographers and between the phrases ‘the price which the property will bring’ and ‘the price which the property should bring’ by grammarians, the ordinary signification of the latter word and phrase would, by contrast at least, be calculated to lead the jury to award a greater sum, including purely speculative elements of damages.”); Ex Parte Mitchell, 783 S.W.2d 703, 705 (Tex. App.—El Paso 1989, no writ) (support order enforceable even though it says obligor “should” pay); Cullen Ctr. Bank & Trust Co. v. Tex. Commerce Bank, 841 S.W.2d 116, 125 (Tex. App.—Houston [14th Dist.] 1992, writ denied) (use of word “should” does not render finding speculative). 25 Medicaid Act’s interpretation of the term, because there is no contrary definition in Texas law and because Medicaid is a Spending Clause program. 42 U.S.C. § 1396a(a)(30)(A). Thus, the only potential legal question is whether the data supporting the adjustment pass muster under federal law—and that inquiry is in the hands of the Secretary. 2. The post-enactment legislative history proffered by plaintiffs cannot change statutory text. Plaintiffs appear to believe that the number of legislator signatures they can marshal in support of their lawsuit changes the law. E.g., CR.679 ¶ 14, 731-32.7 But such letters are of little, or no, value in determining the meaning of a Legislative enactment. In re Doe, 19 S.W.3d 346, 352 (Tex. 2000) (“[C]ourts construing statutory language should give little weight to post-enactment statements by legislators. Explanations produced, after the fact, by individual legislators are not statutory history, and can provide little guidance as to what the legislature collectively intended.”). “The very notion of ‘subsequent legislative history’ is oxymoronic.” Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 470 n.46 (Tex. 2009). Like all post- 7 Plaintiffs attach even more letters to their response to the Commission’s rule 24 motion. These examples prove the rule: far from indicating the Legislature’s intent, these letters include policy statements from members of the Legislature and even letters from a members of Congress, who have no insight whatsoever into the intent behind Rider 50. Medicaid policy is beyond the judicial power. 26 enactment legislative history, the Legislator letters are of little use to the courts, because they represent the views of the Legislators, not the Legislature as a body at the time of enactment. See Ojo v. Farmers Group, 356 S.W.3d 421, 433 (Tex. 2011) (using Commissioner of Insurance report implemented pursuant to statute as evidence of Legislature’s knowledge of report’s contents). The letters attached to plaintiffs reply are the type of oxymoronic attempt to sway the outcome of a case on political grounds the Supreme Court has long decried: they “are not statutory history.” Doe, 19 S.W.3d at 352. They should not sway the Court to take an unrealistic view of the word “should,” read—as it must be—in light of the Legislature’s choice to cut far more money from the Medicaid budget and dedicate $100 million of that cut to rate cuts—as opposed to other aspects of therapy provision, which are subject to separate cuts of different amounts of money— addressed to home therapy. C. There is No Basis in Texas Law For Obtaining Judicial Review of Medicaid Rates that Are Not Required to be Adopted Through Contested-Case Proceedings. Plaintiffs have repeatedly asserted, though curiously enough not in their live petition, that it is permissible to bring suit to challenge the amount of Medicaid rates through the vehicle of §2001.038, which governs rule challenges. The district court’s temporary-injunction order erroneously presupposes that a rule challenge 27 can be used to obtain injunctive relief requiring a change in Medicaid rates. CR.592- 93. The Supreme Court has expressly rejected that proposition. 1. Plaintiffs’ approach of using § 2001.038 to attack Medicaid rates has been rejected by the Texas Supreme Court. Plaintiffs justify their attempt to obtain substantive relief regarding Medicaid rates through the vehicle of a § 2001.038 suit based on El Paso Hospital District v. Tex. Health & Human Services Commission, 247 S.W.3d 709, 711, 714-15 (Tex. 2008) (“El Paso Hospital District I”). The Supreme Court held that the plaintiff hospitals could seek review of their rates in already-pending, exhausted administrative proceedings based on a new rule. Id. at 715 (allowing Hospitals to obtain “review of the disputed calculation” under then-existing administrative rule, former 1 TEX. ADMIN. CODE § 355.8063(k)(1)(A) (2010), repealed by 35 TEX. REG. 6511, 6513 (2010)). The crux of plaintiffs’ argument is that, by challenging a rule, a plaintiff can necessarily obtain judicial relief regarding the rates adopted under that rule. E.g., CR.507-508. That is precisely the approach that this Court and the Supreme Court rejected following remand. El Paso Cnty. Hosp. Dist. v. Tex. Health & Human Servs. Comm’n, 400 S.W.3d 72, 81 (Tex. 2013) (“El Paso Hospital District II”) (“our prior opinion and judgment did not create a remedy for the hospitals’ past reimbursement claims”); see also Tex. Health & Human Servs. Comm’n v. El Paso Cnty. Hosp. Dist., 351 S.W.3d 460, 487 (Tex. App.—Austin 2011) aff’d 400 S.W.3d 72 (Section 28 2001.038’s scope is limited “solely to the extent of permitting suits against state agencies for declaratory relief concerning the validity or applicability of their rules”).8 The former rule gave the only relief related to rates, not § 2001.038. 2. The ultra vires cause of action cannot be used to retroactively undo rules that became effective on October 1, but for the district court’s improper counter-supersedeas order. Plaintiffs’ argument appears to be that, because they believe that the rates were improperly adopted, they are entitled to injunctive relief against the Commissioner to prevent his implementation of the rates. E.g., CR.246 ¶ 34. But the Commissioner is expressly entitled to implement the Medicaid plan according to the rates adopted through the ratemaking process. Thus, even if the rates were wrong, there could be no ultra vires claim based upon them, because the Commissioner is expressly entitled by law to implement the existing rates.9 An ultra vires claim must be based on an act outside the defendant official’s discretion. E.g., Creedmoor-Maha Water Supply Corp. v. Tex. Comm’n on Envt’l 8Tellingly, in plaintiffs’ sur-reply related to the Rule 24 motion, the only response to this point about El Paso Hospital District II is to double down on El Paso Hospital District I. See Rule 24 Sur- Reply (served but not yet filed) at 5 ¶6. 9 The Human Resources Code includes a provision, now superseded by case law, see see Tex. Dep’t of Protective & Regulatory Servs. v. Mega Child Care, Inc., 145 S.W.3d 170, 198 (Tex. 2004) (providing that if a statute requires a contested-case proceeding, the APA allows judicial review), mandating judicial review when rates are required to be adopted through contested-case procedures, TEX. HUM. RES. CODE § 32.0281(e). The rates in question are not subject to contested-case proceedings by the current text of the Code, but rather to the non-APA “review” and “adjustment” procedures. See supra, n.2. 29 Quality, 307 S.W.3d 505, 517-18 (Tex. App.—Austin 2010, no pet.). The violation must be more than a mistake in judgment: mistaken exercise of a clear grant of executive power is not subject to common-law judicial remedy. Tex. Comm’n of Licensing & Regulation v. Model Search Am., Inc., 953 S.W.2d 289, 292 (Tex. App.— Austin 1997, no writ) (that officials “might decide ‘wrongly’” does not vitiate its authority to act (quoting N. Alamo Water Supply Corp. v. Tex. Dep’t of Health, 839 S.W.2d 455, 459 (Tex. App.—Austin 1992, writ denied)). If the Commission acted consistent with the adjustment rules and Rider 50(c) (which requires that access be considered, but does not mandate a particular form that analysis will take), the Commissioner cannot act ultra vires in implementing the resulting rates. III. That Texas Law Does Not Provide a Judicial Review Mechanism Under Which Texas Courts Set Medicaid Rates Makes Sense, Because Such a System Would Be Preempted by Federal Law. The reason that plaintiffs allege a series of causes of action in state law related to administrative rules, but then seek a series of remedies related to rates based upon those rules, is that Texas law allows challenges to the rules but not the rates. See supra, Part II.A. While there is no jurisdiction over plaintiffs’ claims by operation of Texas law, there could be no jurisdiction over plaintiffs’ only requested relief— declarations regarding the amount of money in the rates and injunctive relief foreclosing application of a particular rate—because any claim related to the amount of Medicaid rates themselves is preempted by federal law. 30 A. The Medicaid Act Makes Rates Subject to the Exclusive Jurisdiction of the Secretary, Subject Only to Potential Federal- Court Proceedings. Armstrong rejected the idea that there is a free-standing right to sue in federal court to enforce provisions of the Medicaid Act that are not, themselves, amenable to judicial enforcement, 135 S.Ct. at 1385, 1387 (judicial right of action must be “unambiguously conferred” in Spending Clause context). This makes sense in light of the broad discretion given to the Secretary to determine whether Medicaid rates meet the Act’s requirements. Moreover, rates are always subject to prior appropriations, which means that there is not only executive discretion in play, but also legislative discretion. 42 U.S.C. § 1396b; TEX. HUM. RES. CODE § 32.028. Spending Clause preemption entails the very specific question whether the State has agreed to the condition of the federal-law remedy by accepting federal funds. See Nat’l Fed’n of Indep. Bus. v. Sebelius, 132 S.Ct. 2566, 2606 (2012) (holding that § 1396a would be unconstitutional as applied to withhold funding from states based on failure to comply with newly imposed Medicaid requirements, absent voluntary state acceptance). There is no doubt that Spending Clause statutes have preemptive effect. See Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 661- 69 (2003) (plurality op.). Supremacy Clause provisions preempt state law, although statute in question was not preempted); id. at 684-690 (O’Connor, J., dissenting on ground that statute was preempted); id. at 675 (Scalia, J., concurring on ground that 31 exclusive remedy of § 1396c has preemptive effect); id. at 683 (Thomas, J., concurring, expressing doubt that private parties have standing to enforce Spending Clause program requirements). But the scope of that preemption must be tied to the State’s acceptance of funding. B. The Medicaid Act Preempts Texas Remedies Related to Medicaid Rates By Creating Exclusive Jurisdiction in the Secretary. The Supremacy Clause makes federal law “the supreme Law of the Land.” U.S. Const. art. VI, cl. 2. The existence of an exclusive federal forum deprives the Texas courts of jurisdiction over a claim. See Mills v. Warner Lambert Co., 157 S.W.3d 424, 427-28 (Tex. 2005). Accordingly, federal statutes that empower federal executive department agencies to act impose a remedy regarding a particular subject matter preempt Texas judicial proceedings. E.g., Entergy Gulf States, Inc. v. Pub. Util. Comm’n, 173 S.W.3d 199, 207 (Tex. App.—Austin 2005, pet. denied) (Texas agency’s failure to give effect to federal agency’s action within its exclusive jurisdiction was preempted). The only potential for judicial action regarding Medicaid rates would be recourse to the Secretary, see Armstrong, 135 S.Ct. at 1385, or potentially a suit in federal court against the Secretary or, hypothetically, the State, id. at 1389 (Breyer, J. concurring) (discussing same process). That exclusive remedy, regardless of whether it allows ancillary federal-court proceedings involving the United States as a party, necessarily preempts any state-law remedy. 32 This result is, likewise, compelled by Article II, § 1 of the Texas Constitution, which prohibits the judicial branch from exercising authority conferred on the executive. TEX. CONST. art. II, § 1. The Texas statutes and rules related to Medicaid mirror the federal Act, which, in turn, creates an exclusive remedy in the federal executive branch. Implying a judicial cause of action in contravention of the Legislature’s choice not to create one would violate the separation of powers. E.g., In re Entergy Corp., 142 S.W.3d 316, 321-22 (Tex. 2004) (rejecting separation-of- powers argument regarding executive exercise of putatively judicial determination on ground that there is no general right to judicial review of executive-department action). Put another way, some executive-department actions are necessarily unreviewable by the judiciary. E.g., Gulf Land Co. v. Atl. Ref. Co., 134 Tex. 59, 73-74, 131 S.W.2d 73, 82 (1939). This is particularly true when a procedure is created by statute, because a statute that creates rights can place them outside judicial review. Houston Mun. Emps. Pension Sys. v. Ferrell, 248 S.W.3d 151, 157-58 (Tex. 2007). And a statute can be designed to incorporate federal standards. E.g., City of Austin v. Chandler, 428 S.W.3d 398, 411 (Tex. App.—Austin 2014, no pet.). Texas law incorporates federal law in this context and, as a result, the exclusive remedy of federal law. Similarly, there are constitutional limitations on the Legislature’s power to impose remedies on the Legislative branch. The suspension of laws provision, TEX. CONST. art. I, § 28, affirmatively limits the judiciary’s power to exercise policy 33 discretion to avoid executive-branch action. E.g., Gerst v. Nixon, 411 S.W.2d 350, 354 (Tex. 1966) (striking down statute allowing court to determine the public good by preponderance of the evidence). Accordingly, the courts lack power to change the budget adopted by the Legislature absent a finding of a constitutional violation. E.g., Jessen Assocs., Inc. v. Bullock, 531 S.W.2d 593, 601-02 (Tex. 1975) (declining to change effect of constitutionally valid budget rider). Judicial review of the October 1 rates would subject a federal decision to state- court second-guessing, transfer executive department functions to the judiciary, and result in non-constitutional review (and suspension) of Rider 50’s spending cuts. The claims related to the amount of rates are preempted. C. Both the Texas and Federal Constitutions Prohibit Judicial Orders that Interfere with the Relationship Between the State and Federal Governments. Put another way, the Secretary’s exclusive remedy powers make Medicaid, like all Spending Clause programs, a continuously negotiated contract between the state and federal governments. As Justice Thomas pointed out in his Walsh concurrence, the Secretary’s power to terminate Medicaid funding carries with it the power to forgive or accept particular policy outcomes for the purpose of encouraging the state to perform better in other areas, or as a recognition of the particular health challenges facing individual states, 538 U.S. at 680-81 (Thomas, J., concurring). Judicial interference with Medicaid rates would mark a direct 34 interference with that discretion. Accordingly, Justice Thomas has questioned whether Medicaid providers and beneficiaries have constitutional standing to complain about the Secretary’s actions. Walsh, 538 U.S. at 683 (Thomas, J., concurring); see also Armstrong, 135 S.Ct. at 1387 (Scalia, J.); see infra, Part IV.B. A cognate provision of the Texas Constitution precludes Texas courts from issuing judgments in this area. The Texas Constitution requires that the Governor “conduct, in person, or in such manner as shall be prescribed by law, all intercourse and business of the State with other States and with the United States.” TEX. CONST. art. IV, § 10. The Legislature has designated the Commission as the Governor’s agent. TEX. HUM. RES. CODE § 32.021. So long as the Commission’s state rates are acceptable to the Secretary, and are not subject to additional, separate requirements of Texas law, they are binding on the courts. Adams v. Calvert, 396 S.W.2d 948, 950 (Tex. 1965) (Governor’s decisions within gap between requirements of state law and of federal law unassailable). This is the flip side of the Secretary’s discretion. If the Commissioner and CMS agree on rates, it would violate the Constitution for a court to set rates differently. Any judicial remedy that does not take into account that rates are the subject of continuous back and forth between the Commission and the federal government violates Article IV, § 10. 35 IV. Plaintiffs Lack a Vested Property Right in Medicaid Rates. The amount of Medicaid rates is always contingent. It is contingent on Legislative and Congressional appropriations. It is contingent on the Secretary’s view of the federal Medicaid Act’s requirements. It is contingent on changes in the market. It is contingent on the State maintaining its current model of providing Medicaid care, and not changing to another. A contingent right is insufficient to invoke the Texas Constitution’s due- course provision. Spring Branch Indep. Sch. Dist. v. Stamos, 695 S.W.2d 556, 560-62 (Tex. 1985); Combs v. City of Webster, 311 S.W.3d 85, 92 (Tex. App.—Austin 2009, pet. denied). And a contingent right as a third-party beneficiary to a government contract may preclude any assertion of constitutional standing. Walsh, 538 U.S. at 680-81 (Thomas, J., concurring). A. Neither the Providers Nor the Beneficiaries Have a Vested Property Right, and Cannot Raise Either A Due-Course or Inherent-Judicial-Review Claim. Any due-course claim must be predicated on a vested right. Stamos, 695 S.W.2d at 560-62. Likewise, inherent review under the Texas Constitution requires a vested right. City of Amarillo v. Hancock, 150 Tex. 231, 233, 239 S.W.2d 788, 790 (1951). If plaintiffs lack a vested right, there is no due-course protection and no inherent review available. 36 1. The provider plaintiffs lack a vested property right. A Medicaid provider has no vested interest in a particular level of Medicaid rates. See S.C. San Antonio, Inc. v. Tex. Dep’t of Human Servs., 891 S.W.2d 773, 778 (Tex. App.—Austin 1995, writ denied) (dismissing rate challenge because plaintiff provider had no vested right in amount of payment, apart from right to reimbursement under applicable rate for services already rendered); Pers. Care Prods. v. Hawkins, 635 F.3d 155, 158-59 (5th Cir. 2011) (no vested right in future rates). It does not have a vested right in avoiding a decrease in rates or profitability based on statutory changes to the Medicaid program. Sw. Pharmacy Solutions, 408 S.W.3d at 564. Nor does it have a cognizable interest in its business model based on an earlier set of rates or rules. Eldercare Props., Inc. v. Dep’t of Human Servs., 63 S.W.3d 551, 556 (Tex. App.—Austin 2001, pet. denied). This does not leave providers without recourse. They have, for example, a vested property interest in remaining part of the Medicaid system and cannot be ejected without process. But it leaves them without a trigger for constitutional protections in this circumstance, where they can easily remain part of the Medicaid program, but complain that their profitability will be impaired by lower Medicaid rates. SSC Mo. City Operating Co., LP v. Tex. Dep’t of Aging & Disability Servs., No. 03-09-00299-CV, 2009 WL 4725286, at *6 (Tex. App.—Austin 2009, pet. denied) (mem. op.) (mere expectation of providing services insufficient to trigger providers’ inherent review claim). The lack of a vested right is fatal to their due-course claim. 37 2. The beneficiary plaintiffs lack a vested property right—in fact, they will suffer no cognizable change in their legal status by a change in the rates. There is a difference between the beneficiary plaintiffs’ asserted potential injuries and their legal rights under Texas law and the Medicaid Act. To be clear, the Commission does not dispute that plaintiffs’ allegations of decreased access are within the scope of the courts’ constitutional authority and, therefore, legally cognizable in the abstract. But it does not follow that they have a sufficient interest to trigger the due-course provision. Moreover, the beneficiaries nonetheless lack standing because their alleged injuries are non-redressable. See Heckman v. Williamson Cnty., 369 S.W.3d 137, 155 (Tex. 2011). Failure to establish redressability is a jurisdictional bar. Tex. Ass’n of Bus., 852 S.W.2d at 446. There is no change in the beneficiaries’ legal status to be redressed. Nothing in the Medicaid Act or the cognate Texas statutes creates a right to care, or a right to access care. They are entitled to have the costs of care reimbursed if they seek care from a participating health care provider, and a “reasonable opportunity to choose a health care plan and primary care provider,” not an absolute right See TEX. GOV’T CODE § 531.0212(b)(2). That is all. That status will not change under the new rates. Accordingly, their due-course claim, and any inherent-review claim, fail. 38 B. The Court Should Follow Justice Scalia’s Lead in Armstrong and Hold that Providers and Beneficiaries Lack Constitutional Standing to Bring Suit Under the Ratemaking Criteria of the Medicaid Act. In part IV of the Armstrong opinion, Justice Scalia referred back to a prior concurrence by Justice Thomas suggesting that private parties cannot establish standing to challenge Medicaid rates because they are merely third-party beneficiaries to the ongoing contractual arrangement between the states and the federal government, 135 S.Ct. at 1387 (Scalia, J.) (plurality op.). This renders any claim non-redressable in the courts, which is a jurisdictional bar to standing. See Heckman, 369 S.W.3d at 155. That view should prevail here. For the same reasons neither the providers nor the beneficiaries have a vested right—primarily that the rates are subject to constant change based on legislative appropriation and other factors, and that the Medicaid Act contemplates resolution of those issues through the Executive Department, see supra, Part III.C—they cannot establish constitutional standing to challenge the amount of Medicaid rates. While they may have demonstrable inconvenience or even injury related to the plan, there can ultimately be no judicial redress because the Executive Department remains free to adopt a contrary view. 39 V. Even if plaintiffs have constitutional standing, they cannot successfully invoke § 2001.038 or the Ultra Vires Cause of Action. Even assuming plaintiffs’ asserted injuries trigger standing, their lawsuit would be barred by sovereign immunity in any event. Plaintiffs attempt to create judicial review of Medicaid rates through the mechanism of § 2001.038 and the ultra vires cause of action, in derogation of the common law and the plain text of the APA. A. Section 2001.038 and the Ultra Vires Cause of Action Cannot Be Used to Obtain Judicial Review. Plaintiffs rely on the ultra vires cause of action and § 2001.038 to seek relief regarding the Commission’s application of its rules to adopt the October 1 rates. A claim for a remedy that is not supported by the invoked waiver of immunity from suit is jurisdictionally barred. E.g., Tex. Parks & Wildlife Dep’t v. Sawyer Trust, 354 S.W.3d 384, 388 (Tex. 2011) (citing City of Houston v. Williams, 216 S.W.3d 827, 828-29 (Tex. 2007) (per curiam)). Plaintiffs cannot achieve judicial review of the rate determination through causes of action that don’t allow this form of relief. 1. The ultra vires cause of action does not apply retroactively because it is not a form of judicial review. The background presumption of Texas administrative law is that there is no judicial review absent a vested property right or another basis for constitutional inquiry. Gen. Servs. Comm’n v. Little-Tex Insulation Co., 39 S.W.3d 591, 599 (Tex. 2001). The ultra vires cause of action is an exception to this general principle, 40 allowing prospective relief to foreclose action in contravention of law. City of El Paso v. Heinrich, 284 S.W.3d 366, 372 (Tex. 2009) (plaintiff must “allege” and “ultimately prove” act that is outside defendant official’s authority); id. at 376 (relief must be prospective). Ultra vires relief cannot reach back in time to undo past executive action, even by prospectively enjoining the results of an administrative proceeding, without becoming a common-law basis for judicial review—which Little- Tex and Heinrich teach us does not exist. 2. Section 2001.038 does not create judicial power to review substantive agency actions, only agency rules. By contrast to the federal system, in which the federal APA provides a general right to review of executive-department action, see 5 U.S.C. § 702, Texas has a limited system of review, in which some executive department determinations are not subject to judicial review, e.g., Gulf Land Co, 134 Tex. at 73-74, 131 S.W.2d at 82, and the others are generally reviewable only if the government’s actions take (or should take) the form of a formal contested-case proceeding or rulemaking, TEX. GOV’T CODE §§ 2001.038, 2001.174; see Tex. Dep’t of Protective & Regulatory Servs. v. Mega Child Care, Inc., 145 S.W.3d 170, 198 (Tex. 2004) (judicial review triggered by requirement that agency proceed under APA). That the Legislature provided for formal administrative rules, but not a contested-case proceeding, to govern Medicaid rates dovetails neatly with the preemptive effect of the Medicaid Act: federal law 41 does not permit judicial review of rate determinations, and Texas law does not contemplate such review. E.g., Ferrell, 248 S.W.3d at 157-58. The two review structures of the APA are a statutory exception to this bar on review, but they are narrow in scope. Because the remedies are statutory, not common law, they are subject to restrictions on statutory waivers of immunity. E.g., City of Amarillo, 150 Tex. at 233, 239 S.W.2d at 790. Ambiguities are resolved in favor of immunity. Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 697 (Tex. 2003); TEX. GOV’T CODE § 311.034. And the pleading requirements are jurisdictional. Prairie View A&M Univ. v. Chatha, 381 S.W.3d 500, 510-513 (Tex. 2012). Section 2001.038 applies to rules. TEX. GOV’T CODE § 2001.038(a). Section 2001.174 applies to contested-case proceedings applying those rules. Id. § 2001.174. The text of § 2001.038 forecloses its use to attack action taken under rules: it addresses the “applicability” of rules, not their application, for a reason. See Id. § 2001.038(a). Contested-case judicial review is subject to strict exhaustion rules. Id. § 2001.171. If § 2001.038 could be used retroactively to challenge application of a rule, it would be an ancillary form of judicial review and render § 2001.171’s exhaustion requirement meaningless. See Charlie Thomas Ford v. A.C. Collins Ford, 912 S.W.2d 271, 275 (Tex. App.—Austin 1995, writ dism’d); Lopez v. Pub. Util. Comm’n, 816 S.W.2d 776, 782 (Tex. App.—Austin 1991, writ denied). 42 3. Plaintiffs’ lawsuit is barred because it seeks to use these causes of action retroactively and specifies no remedy appropriate to the causes of action pleaded. Plaintiffs’ petition relies on these two causes of action to enjoin the outcome of the rate adjustment that resulted in the October 1 rates. Plaintiffs, strikingly, recite only past actions as the basis for their ultra vires claim. See CR.346 ¶ 34 (“the actions of Commissioner Traylor are ultra vires in that his actions taken in promulgating the Rates are outside his statutory and legal authority”). The Commissioner’s actions had already been taken. To the extent that the petition seeks to reach back and undo past action, it is jurisdictionally defective. The ultra vires cause of action cannot be used to obtain that remedy, because it cannot be a form of judicial review: allowing injunctive relief based on an alleged error in past action would render the remedy retroactive, in contravention of Heinrich, and turn it into a basis for common-law judicial review, in derogation of Little-Tex. And § 2001.038 cannot be used to review the application of a rule, because to do so would ignore the text of the APA and vitiate that statute’s exhaustion requirement.10 Because the remedy plaintiffs seek is incommensurate with the either § 2001.038 or the ultra vires cause of action. 10 Nor does § 2001.038 provide a basis for injunctive relief. Compare TEX. GOV’T CODE § 2001.038(a) (providing for declaratory, not injunctive relief) with TEX. CIV. PRAC. & REM. CODE § 37.011 (expressly providing for injunctive relief ancillary to declaratory relief). Because the Legislature provides a statutory basis for injunctive relief when it intends declaratory and injunctive relief to be issued together, § 2001.038’s remedy cannot implicitly allow injunctive 43 To be clear, § 2001.038 does provide a remedy with regard to past actions related to Medicaid rules: they can be declared invalid despite the fact that they were implemented in the past. E.g., El Paso Hosp. Dist. I, 247 S.W.3d at 711, 714-15. But it does not follow that invalidity triggers a right to different rates. El Paso Hosp. Dist. II, 400 S.W.3d at 81. Likewise, the ultra vires cause of action would be available to enjoin the Commissioner from proceeding to adopt rates without regard to the relevant statutes and rules, but it would do so only prospectively. In each circumstance, the invalidity of the rule or the injunction against extra-legal activity is prospective from issuance of the mandate. B. Plaintiffs’ § 2001.038 Claims Are Barred. As explained above, plaintiffs’ theory that they can obtain relief related to the rates, as opposed to prospective relief related to the underlying administrative rules, has been expressly rejected by this Court and the Texas Supreme Court, which have both held that § 2001.038 addresses only rules, not the resulting rates. El Paso Hosp. Dist. II, 400 S.W.3d at 81; El Paso Hosp. Dist. II, 351 S.W.3d at 487; see supra, Part II.C. The next question is whether the jurisdictional defect caused by plaintiffs’ relief. Recognizing that the Court has relied on El Paso Hospital District I for the proposition that injunctive relief is appropriate, Tex. Dep’t of State Health Servs. v. Balquinta, 429 S.W.3d 726, 749- 750 (Tex. App.—Austin 2014, pet. dism’d, the Commission asks the Court to reconsider that view. The issue of injunctive relief was raised sua sponte in El Paso Hospital District I, which means that the parties did not brief it and the issuance of injunctive relief is, as a result, non-precedential. See U.S. v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 38 (1952); Garcia v. Kubosh, 377 S.W.3d 89, 106 (Tex. App.—Houston [1st Dist.] 2012, no pet.). 44 misplaced reliance on a foreclosed legal theory is incurable. The defect cannot be cured. 1. Plaintiffs lack a right or privilege. To be clear, constitutional standing does not require a vested property right; the Commission does not challenge plaintiffs’ asserted injury to their businesses, nor does it suggest that the beneficiary plaintiffs will not be inconvenienced if they have to find new providers. In some legal contexts, those injuries would be sufficient to trigger constitutional standing. However, for the same reason plaintiffs have no vested property interests, they cannot articulate a “right or privilege” sufficient to trigger the waiver of immunity in § 2001.038. Because § 2001.038 is a statutory waiver of immunity, e.g., Tex. Comm’n on Envtl. Quality v. Slay, 351 S.W.2d 532, 543 (Tex. App.—Austin 2011, pet. denied), its requirements are strictly construed in favor of preserving immunity, Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 697 (Tex. 2003).11 Thus, failure to meet the pleading requirements of § 2001,038 is a jurisdictional bar. 11The Commission acknowledges this Court’s prior holding that the “right or privilege” inquiry extends to any claim for which there is constitutional standing. Balquinta, 429 S.W.3d at 742-43. Balquinta wrongly extends Finance Commission of Texas v. Norwood, 418 S.W.3d 566, 582 n.83 (Tex. 2013). Footnote 83 of Norwood merely rejected the argument that there is a lower standing requirement for §2001.038 claims than is required by the constitution; it did not address whether the “right or privilege” requirement is more restrictive than the scope of allowable constitutional standing, id. This Court has previously held that a § 2001.038 claim based on something that is not a right or privilege results in dismissal; that is the appropriate rule. Tex. Dep’t of Pub. Safety v. Salazar, 304 S.W.3d 896, 907-08 (Tex. App.—Austin 2009, no pet.). The issue is not squarely 45 A “right” is “an interest or expectation guaranteed by law.” A DICTIONARY OF MODERN LEGAL USAGE 772 (2d ed. 1995). “Privilege” is generally defined as a “person’s legal freedom to do or not to do a given act.” Id. at 693.12 In either case, to be a basis for a § 2001.038 suit, a claim would have to be presently enforceable, not merely legally cognizable; having a legal existence, not merely legal potential. That standard is more narrow than constitutional standing. The temporary injunction order fleshes out plaintiffs’ administrative-law claim, with the assertion that there are formal defects in the ratemaking that render the rates improper because the Commission did not comply with formal requirements for adopting new administrative rules. See CR. 590-91 (asserting that rate adoption requires application of TEX. GOV’T CODE § 2001.022(a) (employment impact statement); § 2001.023(a) (30 days’ notice); § 2006.002(c) (small-business impact statement)). Even assuming plaintiffs’ request for relief threads the two needles of preemption and the prohibition on implied judicial review of past actions, plaintiffs’ legal theory is insufficient to trigger jurisdiction. presented here, because the claims are barred by standing and failure to invoke §2001.038, but the analysis of each claim should be distinct. 12 Accord BLACK’S LAW DICTIONARY 1436 (9th ed. 2009) (defining a “right” as “a legally enforceable claim that another will do or will not do a given act; a recognized and protected interest the violation of which is a wrong”), 1316 (defining “privilege” as a “special legal right, exemption, or immunity granted to a person or class of persons; an exception to a duty”). 46 The providers have no legally cognizable interest in their business model or the continued receipt of particular rates; the only recourse regarding the amount of rates is the discretion of the Secretary. See supra, Part III. The beneficiaries’ situation is not changed at all: they are entitled to have payments made to providers on their behalf, at the rate indicated by law. See supra, Part IV.A. Accordingly, they have no “interest” that can be “affected” by the relevant administrative rules or their application in a ratemaking. For the same reason that these claims are unredressable, they cannot trigger jurisdiction under § 2001.038. 2. Plaintiffs have not “identified” an administrative rule. Nor have plaintiffs successfully identified a particular administrative rule that has been violated. City of Webster, 311 S.W.3d at 101. This is a rate adjustment, not a rulemaking, so none of the Government Code provisions they cite apply. They have cited only administrative rules that govern periodic rate review. See supra, Part II.C. Their jurisdictional hook is that the Commission’s proceedings implicitly amended those rules. But, if completely different rules applied, then plaintiffs have not “identified” a rule the validity or applicability of which they challenge. Under City of Webster, their § 2001.038 claim must be dismissed. a. Plaintiffs cannot reverse engineer a rule challenge from a rate challenge. Plaintiffs seek to strike at the rates by arguing that the issuance of a rate within which they disagree implicitly amends the requirements of the underlying 47 administrative rules. CR.509 ¶ 6. Raising that issue in the briefing does not “identify” it in the petition; plaintiffs have asserted only a potential, contingent application of a rule that they assert, without merit, has been violated. In fact, the Commission’s actions were based on different rules governing the adjustment process, see supra, Part II.C. There is, as a result, no jurisdictional hook based on implied amendment to support plaintiffs’ lawsuit. Certainly, that is the position taken by the Texas Supreme Court when it held that a § 2001.038 proceeding did not entitle plaintiffs to a change in already-final rates. El Paso Hosp. Dist. II, 400 S.W.3d at 81. b. Plaintiffs ignore the application of § 355.201(d). The first defect in plaintiffs’ claim is that it relies on rules that do not apply to rate adjustments triggered by changes in appropriations. Plaintiffs cite § 355.8021 and provisions that refer to it, as well as the reporting requirements for rule adoption under the APA. CR.343 ¶ 25. That argument fails to take into account that the adjustment was made under § 355.201(d), which provides for rate adjustments “notwithstanding” any other statutory or rule-based requirement, when, among other things, the Legislature cuts funding. CR.352 (citing 1 TEX. ADMIN. CODE §§ 355.201(d)(1)(A), (D)). Plaintiffs also assert that there was improper notice of the October 1 rates. CR.343 ¶ 25. The proper notice standard is set out in §§ 355.201(e) and (f). The Commission tendered evidence showing that the notice was properly published on 48 September 4, 2015, in the Texas Register and on the Commission’s website, setting the hearing for September 18, 2015. CR.577-580. Because the relevant statute requires nothing more, the existence of adequate notice is a jurisdictional fact issue that plaintiffs have failed to controvert. C. Plaintiffs’ Ultra Vires Claims Would Fail Even if they Had Been Properly Pleaded. As explained above, the Commissioner cannot act ultra vires in implementing Medicaid rates that are already final: that is his job. See supra, Part II.A. Plaintiffs’ claim might be construed to construed to be that, in issuing the current rates, the Commission’s cost analysis includes none of the data included in § 355.8021(a)(2)(A), or that it is a “periodic rate review” that includes, but is not limited, to analysis of payments and costs for therapy. See CR.591-92. Even if these claims were framed prospectively—applied to future ratemaking, an ultra vires claim could result in relief preventing the Commissioner from acting contrary to statute or rule in future proceedings, see supra, Part II—they would nonetheless be jurisdictionally barred, and the defect is incurable. As explained above, the Commission was not circumscribed by § 355.8021(a)(2)(A), complied with its requirements by providing a “combination” of the data required, and is entitled to do so under deference principles. And § 355.8021(B) cannot be applied to rate adjustments triggered by legislative action. At most, plaintiffs complain that information was not in a particular format (which the rule does not in 49 fact require) and that it was not analyzed using a particular methodology (even though the rule imposes no particular methodology, but rather allows consideration of “some combination” of data). Accordingly, implementation of the October 1 rates is not, as a matter of law, ultra vires. And because the act described is intra vires, suit against the Commissioner must be dismissed. 1. Plaintiffs’ position regarding § 355.8021 would fail to trigger an ultra vires claim in any event. The temporary-injunction order incorrectly suggests that there has been a violation of § 355.8021(a)(2)(A). CR.590 ¶ 9. Not so. Section 355.8021(a)(2)(A) requires the Commission to address a series of data in setting rates or “some combination thereof.” 1 TEX. ADMIN. CODE § 355.8021(a)(2)(A). Regardless of the methodology, there is no dispute that the report incorporates at least some of the elements of § 355.8021(a)(2)(A). And that fact precludes jurisdiction, because the rule does not require consideration of all the data listed in (a)(2)(A), nor does it require it to be in any given format. It requires only “some combination thereof.” If the report aggregates any of the (a)(2)(A) data, in any form, it complies with (a)(2)(A).13 13Plaintiffs’ petition might be read to imply an argument that Rider 50(c) itself requires an independent access analysis. As explained above, that language does not apply to the rate cuts. See supra, Part II.B & n.5. Of course, the federal access requirement still applies. But both the substance and remedy for the access requirement preempt state law either because there is no judicial recourse, per Justice Scalia, or because the only available judicial proceedings are a federal APA 50 Consider how this issue would be resolved if the Legislature had provided judicial review under the APA. The Commission would be entitled to deference on its construction of the technical requirements of its own rule. E.g., R.R. Comm’n v. Tex. Citizens for a Safe Future and Clean Water, 336 S.W.3d 619, 624-25 (Tex. 2011). Because the words “some combination thereof” cannot be read to require, unambiguously, that all the data in (a)(2)(A) be considered, or that it be considered in some particular format, the Commission would prevail. This aspect of plaintiffs’ petition highlights the degree to which they ask for something procedurally new: to invalidate the rule under § 2001.038, based not on the rule itself but on its application, thereby sidestepping the Commission’s discretion—which is entitled to deference—to interpret its own rules. There is no viable rule challenge hidden in plaintiffs’ attack on the October 1 rates. The weakness of plaintiffs’ position is underscored by their trial court briefing. At the end of the day, all of plaintiffs’ jurisdictional allegations boil down to the assertion that the administrative rules impose a particular formula for funding, when in fact they require only that the Commission consider certain information in no particular format, giving none of it a particular weight. See CR.343 ¶ 25. Without a “formula,” the Gordian knot of plaintiffs’ lawsuit is cut, and it must be dismissed. suit against the Secretary, per Justice Breyer, see supra, Part III.B. Under neither view of the law would it be appropriate for a Texas court to answer an access question. 51 They do not require the Commission to respond to public comment regarding this data. They do not require the Commission to publish the contents of any studies on which it relies. And that makes sense, because (1) there is no administrative process in which the public can contest the studies, only a requirement of comment, TEX. HUM. RES. CODE § 32.0282; (2) that requirement is entirely consistent with the Medicaid Act’s provision of an exclusive executive-department remedy for access- to-care issues, see supra, Part III; (3) and it is mandated by the Legislature’s choice, consistent with the Medicaid Act and two centuries of Texas law, not to provide judicial review of rate setting. What matters, at the end of the day, is whether the Secretary is satisfied with the Commission’s access-to-care analysis. There is no Texas-law vehicle for addressing the issue. The temporary injunction order likewise invokes § 355.8021(a)(2)(B). CR.590 ¶ 10; see also Rule 24 Resp. at 5 ¶ 6 (citing testimony at 3.RR.229-230 to effect that October 1 rates were not required to be based on § 355.8021(a)(2)(B)). The easy response to this is that § 355.8021(a)(2)(B) expressly applies only to periodic reviews, not to adjustments. See supra, Part II.A. That Commission employees voluntarily used data that complied with § 355.8021(a)(2)(A) goes only to their efforts to ensure that the rates are acceptable to the Secretary. And that distinction makes sense: periodic rate review updates costs, while adjustment respond to changes made by Congress and the Legislature. A cost study is not necessary to carry out the Legislature’s instruction in Rider 50. 52 2. Plaintiffs’ remaining claims likewise cannot describe an ultra vires act. In addition to the notice and data requirements that directly apply to home care Medicaid rights, plaintiffs raise a number other claims, based on broader statutory requirements. Those claims necessarily fail, both as § 2001.038 and as ultra vires claims Plaintiffs invoke § 531.02113 of the Government Code, which requires “Optimization of Medicaid Financing” and instructs the Commission to “maximize the state’s receipt of federal funds.” TEX. GOV’T CODE § 531.02113(1); CR.343-44 ¶ 26. Plaintiffs appear to view the section as creating a generic vehicle for judicial review of the policy behind setting Medicaid rates. That view is untenable in light of Rider 50(c): the Commission cannot increase the amount of federal Medicaid funds spent contrary to the budget. Nor can the term “maximize” be extended to create a judicial right to a particular amount of funding to set rates at a particular level— Medicaid rates are always subject to being cut by Congress and the Legislature. 42 U.S.C. § 1396b; TEX. HUM. RES. CODE § 32.028, 1 TEX. ADMIN. CODE § 355.201(c)(4). Plaintiffs cite several reporting requirements related to the formal rulemaking process. CR.343 ¶ 25 (referring to TEX. GOV’T CODE § 2006.002 (economic impact analysis and regulatory flexibility analysis for “rules with adverse economic effect”); §§ 2001.022 (local employment impact statement for rulemaking); 2001.023(a), 53 2001.24 (requiring 30 days’ notice before rulemaking, implementing requirements notice)). None of these statutes apply, because ratemaking is not subject to the APA’s formal rulemaking process. To the contrary, as explained above, rates are subject to a shorter, less-involved notice requirement, do not require response to public input, and need not be justified after the public comment period is over. See supra, Part II.A. Finally, plaintiffs suggest that various statutes and rules create a separate “access to care” requirement under Texas law that is independently actionable. CR.344 ¶ 27 (invoking 1 TEX. ADMIN. CODE § 353.411(a)(5) (requiring MCOs to “ensure reasonable availability of specialists); TEX. GOV’T CODE § 533.005(a)(21)(c) (providing that “health care services will be accessible . . . to a comparable extent that health care services would be available to recipients under a fee-for-service or primary care case management model”). Plaintiffs suggest that, because the rates will put the beneficiaries’ current care providers out of business, it will violate this statute. CR.344 ¶ 27. That argument fails. It attempts to cherry-pick language that, when excerpted, gives the impression that there is a separate, greater Texas requirement of access to care that supplements the federal standard. But each of these provisions is entirely coterminous with the federal standard. The federal standard requires rates be set at a level that gives beneficiaries access to care that is comparable to patients with private insurance in the same geographic area. 42 U.S.C. § 1396(a)(30)(A). Each MCO is created to cover a particular geographic area. 54 Indeed, the Texas law provisions on which plaintiffs rely merely echo the language of the Medicaid Act provision that authorizes MCOs. See 42 U.S.C. § 1396b(m)(1)(A)(i).14 And the Medicaid Act requires only that rates be set to ensure there is similar provider availability as would otherwise be available under private insurance, not a general right of all beneficiaries to access care qua care. See supra, Part III. VI. BECAUSE THERE IS NO POTENTIAL FOR RECOVERY, THE COURT SHOULD VACATE THE TEMPORARY INJUNCTION. A temporary injunction must be reversed if the trial court’s decision was so arbitrary that it exceeds the bounds of reasonable discretion. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). An element of that discretion requires the court to determine whether there is a cause of action against the defendant. Id. That this lawsuit is barred by immunity in its entirety, yet was allowed to proceed, is an arbitrary abuse of discretion and a failure to determine whether there is a cause of action against defendants. So is issuing an order restraining a change in the amount of Medicaid rates in contravention of the Medicaid Act’s exclusive remedy provision. See supra, Part III. Indeed, the district court has underscored the impropriety of its order in denying 14An MCO “makes services it provides to individuals eligible for benefits under this subchapter accessible to such individuals, within the area served by the organization, to the same extent as such services are made accessible to individuals (eligible for medical assistance under the State plan) not enrolled with the organization.” 42 U.S.C. § 1396b(m)(1)(A)(i). 55 defendants’ motion to modify the temporary injunction. See SRR.37-39. To be enforceable a temporary injunction—indeed any injunction in the Texas system— must “describe in reasonable detail . . . the act or acts sought to be restrained.” TEX. R. CIV. P. 683; Tex. Health & Human Servs. Comm’n v. Advocates for Patient Access, Inc., 399 S.W.3d 615, 628-29 (Tex. App.—Austin 2013, no pet.) (vacating portions of temporary injunction that did not adequately put Commission on notice of its obligations under the injunction). The district court suggested that it was appropriate to require the Commission to confer with plaintiffs before taking future action, and stated that whether the Commission had violated the injunction could be decided at the sanctions hearing. SRR.38. Taking discretion over Medicaid rates from both the Commission and the Secretary and predicating that usurpation of power on a $500 bond, was arbitrary. Likewise, it was an abuse of discretion to treat plaintiffs’ assertions of harm— many of which were contingent on the acts of third parties, e.g., CR.342-43 ¶ 24 (asserting that beneficiaries will lose treatment because providers will go out of business)—as satisfying the probable-right-of-recovery requirement, see Butnaru, 84 S.W.3d at 204. Plaintiffs’ claims are non-redressable as a matter of law, because their legally protected rights and vested interests have not been impacted. See supra, Part IV.A. Accordingly, there is no probable right of recovery. 56 Prayer The Court should render judgment dismissing plaintiffs’ lawsuit. It should also reverse and vacate the temporary injunction. Respectfully submitted. Ken Paxton Attorney General of Texas Charles E. Roy First Assistant Attorney General Scott A. Keller Solicitor General _/s/ Kristofer S. Monson_ Kristofer S. Monson Assistant Solicitor General State Bar No. 24037129 OFFICE OF THE ATTORNEY GENERAL P.O. Box 12548 (MC 059) Austin, Texas 78711-2548 Tel.: (512) 936-1820 Fax: (512) 474-2697 kristofer.monson@texasattorneygeneral.gov Counsel for Appellants 57 CERTIFICATE OF SERVICE On November 12, 2015 this document was served via File&Serve Xpress on: Daniel R. Richards Benjamin H. Hathaway Richards Rodriguez & Skeith LLP 816 Congress Avenue Suite 1200 Austin, Texas 78701 drichards@rrsfirm.com bhathaway@rrsfirm.com Counsel for Appellees /s/ Kristofer S. Monson CERTIFICATE OF COMPLIANCE In compliance with Texas Rule of Appellate Procedure 9.4(i)(2), this brief contains 14,002 words, excluding the portions of the brief exempted by Rule 9.4(i)(1). /s/ Kristofer S. Monson Kristofer S. Monson 58 APPENDIX TABLE OF CONTENTS Tab CR.587-672 Order Granting Temporary Injunction and Denying Supersedeas .....................................................................................................A CR.673 Order Denying Defendants’ Plea to the Jurisdiction ......................................................................................................................... B Medicaid Program; Methods for Assuring Access to Covered Medicaid Services, 80 Fed. Reg. 67576 (Nov. 2, 2015) (to be codified at 42 C.F.R. pt. 447) ................................................................................................................C 2016-17 Gen. Appropriations Act, 84th Leg., R.S., ch. 1281, art. II, 2015 Tex. Sess. Law Serv. 4343, 4547 (Health & Human Servs. Comm’n), Rider 50 ..........................................................................................................D CR.351-73 Tex. Health & Human Servs. Comm’n Rate Analysis Dep’t: Notice of Proposed Adjustments .................................................................... E CR.336-92 Plaintiffs’ Second Amended Original Petition and Application for Injunctive Relief ........................................................................................ F Relevant State Statutes and Rules.................................................................. G Relevant Federal Statutes............................................................................... H A DC BK15274 PG1420 CAUSE NO. D-1-GN-15-003263 DIANA D., as next of friend of KD, a child, § IN THE DISTRICT COURT KAREN G., as next friend of TG and ZM, § children, GUADALUPE P., as next of friend § of LP, a child, SALLY L., as next of friend of § CH, DENA D., as next friend of BD, a child, § Filed in The Distiict Court of Travis County, Texas OCI ACQUISITIO [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4068145. Public record. Not legal advice.