A three judge panel of the 9th Circuit reversed and remanded a district court decision that would have required the federal government to reimburse AHCCCS for millions of dollars of state funds spent each year to provide health care services to Arizona Indians.
The dispute between the federal government and AHCCCS, which has been ongoing since 1999, centers around the interpretation of § 402(e) of the Indian Health Care Improvement Act. 
AHCCCS claims the federal government should reimburse the state for 100 percent of health care services provided to Medicaid-eligible Indians by Indian Health Service facilities, as well as under referral agreements between health care service providers and the service. 
Conversely, the Health Care Financing Administration (HCFA), the federal agency that administers Medicaid, argued that it was required to reimburse states only for health care services provided by an Indian Health Services facility.
The district court held that the statutory language was unambiguous and ruled in favor of AHCCCS.   
On appeal, the 9th Circuit on Dec. 3, disagreed with the district court and held that the language of § 402(e) “is ambiguous and not clarified by the usual interpretive aids”; therefore, requiring the application of the “Chevron doctrine.” That doctrine, outlined in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., is a two-step process for reviewing an agency’s interpretation of federal law that requires a court to construe ambiguous statutory language according to the “‘reasonable interpretation made by’ the agency Congress entrusted to implement the legislation.” 
Applying the doctrine, the 9th Circuit determined that the federal government’s interpretation is a “permissible construction of the statute.” 
In an opinion written by Judge Sandra Ikuta, the 9th Circuit found that the argument advanced by the federal health agency was reasonable and permissible and deferred to the agency’s interpretation. The state was hoping to claim a reimbursement in access of $100 million, which has accrued since 1999, according to Rainey Holloway, spokeswoman for AHCCCS.