Health Law Daily Wrap Up, ADMINSTRATION OF MEDICARE/MEDICAID PROGRAMS—D. Idaho: Absolute immunity bars suit against Idaho health officials over disputed hearing, (Oct 9, 2026)

By Steven Melendez

A federal court found the officials serve functions analogous to a judge and prosecutor, dismissing a federal claim.

A federal judge dismissed Allegiance Behavioral Health LLC’s claim alleging due process violations in an administrative hearing, finding an Idaho administrative law judge and Medicaid program integrity unity manager served functions analogous to a judge and prosecutor and thus are entitled to absolute immunity. The judge also declined to exercise supplemental jurisdiction over an additional state law claim, dismissing it without prejudice (Allegiance Behavioral Health LLC v. State of Idaho, 1:25-cv-00453-AKB (D. Idaho Oct. 7, 2026)).

Background. Allegiance provides behavioral health services to Idaho Medicaid patients. In January 2025, the Idaho Department of Health and Welfare (IDHW) suspended Medicaid patients to Allegiance after receiving what it called a “credible allegation of fraud” in the company’s billings. The suspension was based on a referral report compiled by Magellan, an IDHW contractor.

Allegiance filed an administrative appeal. During the case hearing, Allegiance requested documents, including the Magellan report. IDHW argued it was only required to provide witnesses and documents it intended to present at the hearing, producing more than 1,600 pages of documents, including a “heavily redacted” version of Magellan’s report. Allegiance objected to the redactions and failure to produce over documents.

The administrative law judge (ALJ) presiding over the hearing denied a motion to compel, concluding the agency provided the documents it intended to rely upon at the hearing as required by Idaho Administrative Code. The ALJ issued a preliminary order upholding Allegiance’s suspension.

Allegiance sued in federal court in August 2025 under 42 U.S.C. § 1983, alleging the ALJ violated its right to due process under the Fourteenth Amendment. The company’s lawsuit also includes a second cause of action, seeking judicial review of the agency’s decision pursuant to Idaho law. Allegiance also sought a declaratory judgment concerning an alleged violation of the Idaho Administrative Procedure Act. The ALJ and Medicaid program integrity unit manager were sued in their personal and official capacities.

In December 2025, the defendants in the case moved to dismiss for lack of subject matter jurisdiction and failure to state a claim. They argued the ALJ and Medicaid official are entitled to absolute immunity, that the Eleventh Amendment bars the claims against various officials in their official capacities, and that IDHW was not timely served.

ALJ’s immunity. Precedent, including the Supreme Court ruling in Butz v. Economou, 438 U.S. 478, 513 (1978), holds that state and federal executive officials are entitled to absolute immunity if they are performing functions of a judge or prosecutor that would have been entitled to absolute immunity when Congress passed Section 1983.

Deciding the issue requires considering factors from Butz, including “(a) the need to assure that the individual can perform his functions without harassment or intimidation; (b) the presence of safeguards that reduce the need for private damages actions as a means of controlling unconstitutional conduct; (c) insulation from political influence; (d) the importance of precedent; (e) the adversary nature of the process; and (f) the correctability of error on appeal,” according to the ruling.

In the case of the ALJ, the court found the first factor weighs in the ALJ’s factor, since ruling on enforcement decisions against Medicaid providers “may predictably generate damages actionsM from providers dissatisfied with the Department’s decisions,” and immunity protects hearing officers from harassment and intimidation in resolving such disputes.

With regard to the second factor, Allegiance argued procedural safeguards are not sufficient, citing its inability to obtain more discovery. But, the court found, the Ninth Circuit has found adequate procedural safeguards in circumstances with fewer safeguards than those available in this case. Those include rules providing for administrative and judicial review and requiring the ALJ to “regulate the proceeding to facilitate disclosure of relevant facts and issues and affords the parties an opportunity to respond and present evidence and argument.”

Allegiance also argued that the ALJ functioned more like an executive-agency hearing officer embedded within IDHW. The court found sufficient insulation from political influence in the structure of the Office of Administrative Hearings, which functions as its own entity and is protected by factors entitling it to decisional and organizational independence.

The additional factors also support absolute immunity, the court found, finding an adversarial process with procedures for indexing precedent and multiple levels of review and appeal. The functions the ALJ performed here were also judicial in nature, the court found, even if Allegiance questions the official’s rulings, granting absolute immunity.

Medicaid official’s immunity. Allegiance argued the Medicaid program integrity unit manager is not entitled to absolute immunity because she was not acting as a state prosecutor in the criminal justice system. Courts have extended absolute immunity beyond criminal prosecutors, however, the court found.

In this case, the court found that since the proceedings were “quasi-judicial,” it must also consider whether the officials’ conduct was “functionally comparable” to a judge or prosecutor, including whether the official’s role was as an advocate in the adjudicative process or more administrative or investigative.

Precedent, including Butz, holds that the presentation of evidence in an administrative hearing is a prosecutorial function entitled to absolute immunity. Similarly, the Ninth Circuit has held that a decision about whether to disclose evidence is a prosecutorial function entitled to absolute immunity.

Allegiance alleged that the official was personally responsible for redacting the Magellan report and deciding which documents IDHW would produce in discovery. Those functions were those of an advocate, the court found, and were part of the adversarial process, subject to ruling by the ALJ. The Medicaid official is thus also entitled to absolute immunity, the court found.

Dismissal of claims. The court dismissed the Section 1983 claim with prejudice, finding amendment would be futile due to the absolute immunity issue.

The court then declined to exercise supplemental jurisdiction over the remaining state law claim, dismissing it without prejudice and denying as moot the defendants’ motion to dismiss it on other grounds. The court also declined to consider Allegiance’s request for declaratory relief.

The case is No. 1:25-cv-00453-AKB.

Judge: Brailsford, A.

Attorneys: Jeffrey S. Beelaert (Dorsey & Whitney LLP) for Allegiance Behavioral Health LLC. Brian V. Church, Office of the Attorney General, for Bryan Nickels.

Companies: Allegiance Behavioral Health LLC; State of Idaho; State of Idaho Department of Health and Welfare

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