Starko, Inc. v. New Mexico Human Services Department
333 P.3d 947
N.M.2014Background
- Starko, Inc. and Jerry Jacobs (class representatives) sued, arguing New Mexico statute §27‑2‑16(B) requires pharmacists be reimbursed the statutory wholesale+dispensing fee rate for Medicaid prescriptions even when paid by managed care organizations (MCOs).
- §27‑2‑16(B) (enacted under fee‑for‑service Medicaid) sets reimbursement at the wholesale cost of the less expensive therapeutic equivalent plus a dispensing fee of at least $3.65.
- New Mexico implemented a managed care Medicaid system (1994 onward) in which HSD caps payment to MCOs (capitation) and MCOs contract and reimburse providers directly, bearing cost risk.
- Plaintiffs contend the statute’s plain reference to the “Medicaid program” covers both fee‑for‑service and managed care and thus MCOs must pay the statutory rate; defendants contend the statute applies only where HSD pays providers directly (fee‑for‑service).
- The Court of Appeals held §27‑2‑16(B) applies to MCOs and created an implied cause of action against MCOs; the Supreme Court granted certiorari and reversed on the question whether §27‑2‑16(B) applies to managed care.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §27‑2‑16(B) requires MCOs to pay pharmacists the statutory wholesale + $3.65 dispensing fee | §27‑2‑16(B) uses broad term “Medicaid program,” so it applies to all Medicaid delivery models including managed care | §27‑2‑16(B) was enacted for fee‑for‑service where HSD pays providers directly; managed care shifts payment/responsibility to MCOs so the statute does not apply | Reversed Court of Appeals: §27‑2‑16(B) applies only to fee‑for‑service (HSD direct reimbursements), not to MCOs under managed care |
Key Cases Cited
- Atkins v. Rivera, 477 U.S. 154 (U.S. 1986) (overview of federal Medicaid participation and conditions)
- Montoya v. City of Albuquerque, 82 N.M. 90, 476 P.2d 60 (N.M. 1970) (statutes interpreted as Legislature understood them when enacted)
- State v. Trujillo, 146 N.M. 14, 206 P.3d 125 (N.M. 2009) (prior statute continues to apply when newer statute silent and no conflict)
- Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 146 N.M. 24, 206 P.3d 135 (N.M. 2009) (courts not bound by agency interpretation but may defer)
- Morningstar Water Users Ass'n v. N.M. Pub. Util. Comm'n, 120 N.M. 579, 904 P.2d 28 (N.M. 1995) (courts accord deference to agency statutory interpretations involving agency expertise)