398 Holding Health Insurance Marketplaces Accountable 2015
formalist approach will win out with the result that “privatization is likely
to result in a denial of state action.”449 The Court’s narrow approach to the
public function test limits finding state action to areas that are “traditionally
and exclusively performed by the government.”450 The Court defined this as
limited not only to services that governments have historically provided but
also services “that the government is required to provide directly.”451 Under
this narrow approach, the Supreme Court made clear in Blum v. Yaretsky
that Medicaid benefits do not fall within this category because states are not
constitutionally obligated to provide the benefits.452 Therefore, the Court
refused to find “state action” in the nursing homes’ decisions to discharge
or transfer Medicaid patients to lower levels of care.453
Given this narrow interpretation of the public function test, it seems unlikely that the Supreme Court will find a private Marketplace’s determination or assessment of eligibility for Medicaid or Marketplace coverage to be
a public function, since neither is constitutionally required. However, the
tax credits are a much closer question. It is unclear what level of abstraction
the Court will use to analyze the tax credits. Collecting taxes is an exclusively government function, and viewed in this light, the Marketplace’s role
in calculating a tax credit amount seems to be a “public function.” However, a more specific description of the function is that the Marketplaces are
tion decisions occurring at the height of the civil rights struggle. Faced with concerted efforts to preserve racial segregation by transferring responsibilities to private hands, the Court
took an expansive view of when private acts triggered constitutional protections. But as state
action issues began to surface in administrative contexts and involve procedural due process
claims, the Court became significantly more unwilling to find state action and hold private
individuals to constitutional requirements. Correspondingly, it began to engage in a far more
449. Id. at 1415.
450. Id.; see also Jackson, 419 U.S. at 352 (defining public functions as those functions that are “traditionally the exclusive prerogative of the State”).
451. Metzger, supra note 403, at 1416; see also Blum, 457 U.S at 1011–12 (Finding
that “nursing homes do not perform a function that has been ‘traditionally the exclusive prerogative of the State’” (quoting Jackson, 419 U.S. at 353)).
452. Blum, 457 U.S. at 1011-12.
. 453. Id at 1012. This holding essentially prevents suing the state Medicaid agency for
the nursing homes’ medical decision to discharge the patients to a lower level of care. Id.
This is a distinct fact pattern from the Medicaid litigation challenging benefit denials, for
example under EPSDT. In those cases, the medical provider has prescribed a certain treatment and the state Medicaid agency, or private managed care company, refuses to cover it.
See generally Jane Perkins, Medicaid EPSDT Case Developments, NAT’L HEALTH L.
PROGRAM 1–2 (July 2007), http://www.healthlaw.org/about/staff/jane-perkins/all-
publications/epsdt-cases#VBhZj2RdXbw (listing cases). Therefore, Blum v. Yaretsky does
not call into question the beneficiaries’ ability to challenge benefit denials made by private
insurers with whom the state has contracted to provide the Medicaid insurance. Blum, 457
U.S.; See also Metzger, supra note 403, at 1420 n.85 (highlighting that managed care organizations in Medicaid and Medicare are an exception to the general trend against finding state