You’ve all heard the phrase “cut out the middleman” in advertising or crafty dealmaking. Deal directly and realize a savings, or somehow get a better bargain.
To our eyes, it looks like that’s what the New York legislature might have had in mind when it amended its Medicaid statutes to cut out “a vast network of private organizations, referred to as ‘fiscal intermediaries'” who had handles the administrative, financial and compliance responsibilities when beneficiaries who need help with daily living hire their own personal assistants at public expense. In 2024, the legislature altered this scheme, and “replac[ed] the existing network of fiscal intermediaries with a single, statewide fiscal intermediary.”
We don’t know why the legislature took this route, but it doesn’t so much look like the state eliminated all of the middlemen from a piece of the action, but selected a single beneficiary to get the entire vig.
Well, those who got cut out didn’t appreciate it, and sued. You know the drill: Contracts Clause, equal protection, due process, and the inevitable takings claim.
You probably don’t need to read Principle Homecare, LLC v. McDonald, No. 25-466 (Oct. 21, 2025), to know where the U.S. Court of Appeals for the Second Circuit ended up on these challenges. After all, courts are very reluctant to conclude that you can rely on a government program remaining in place forever — much less that this is a private property interest — and except in rare cases, reject such claims.
No different here. The court concluded that the plaintiffs failed to allege a private property right, relying on (you guessed it) Omnia:
Under the per se theory or otherwise, Plaintiffs’ takings claim fails at the
outset because the CDPAP amendment is not a “government regulation of private property.” Lingle, 544 U.S. at 537. Although contractual rights are forms of
private property that may generally be protected by the Takings Clause, see, e.g.,
Omnia Com. Co. v. United States, 261 U.S. 502, 508 (1923), the CDPAP amendment does not regulate Plaintiffs’ rights in their MMCO contracts as such. The amendment does not, for instance, prevent fiscal intermediaries from demanding the payment of past-due sums or from assigning their rights under those contracts. Nor does the amendment purport to nullify any other right that Plaintiffs are entitled to under their MMCO contracts. While it is true that the amendment “made it impossible for [Plaintiffs] to perform” their MMCO contracts going forward by requiring MMCOs to contract with the new statewide fiscal intermediary instead, the State “did not appropriate any of the rights [Plaintiffs] had under [those] contract[s].” Kearney & Trecker Corp. v. United States, 688 F.2d 780, 783 (Ct. Cl. 1982). Under these circumstances, “the fact that [the CDPAP amendment] disregards . . . existing contractual rights” does not “transform the regulation into an illegal taking.” Connolly v. Pension Ben. Guar. Corp., 475 U.S. 211, 224 (1986).
Slip op. at 9-10.
It isn’t a taking for New York to decline to “perpetuate their participation in CDPAP as fiscal intermediaries.” Slip op. at 10. This is a highly-regulated field, and the plaintiffs should have known that a regulatory scheme can change.
Principle Homecare, LLC v. McDonald, No. 25-466 (2d Cir. Oct. 21, 2025)