The high court said on Wednesday that after it heard oral arguments in the case on October 3, federal government officials approved the state's statutes as consistent with federal law.

Justice Stephen Breyer said in the majority opinion the case was sent back to a U.S. appeals court based in California to determine whether the recipients and providers may sue in light of the changed circumstances of the federal government's approval.

In sending the case back, the justices set aside a ruling by the appeals court that had blocked the cuts for violating federal law.

The case involved a plan by California's lawmakers in 2008 to slash Medicaid payments to doctors, hospitals and other medical providers to help reduce the state's massive budget deficit.

The providers sued to stop the cuts from taking effect on the grounds it would violate federal law. The cash-strapped state said the cuts of up to 10 percent would save more than $700 million.

The state and the Obama administration argued that only the U.S. government can enforce the federal law and private citizens have no right to sue.

The Supreme Court cases are Douglas v. Independent Living Center, 09-958, Douglas v. California Pharmacists Association, No. 09-1158 and Douglas v. Santa Rosa Memorial Hospital, No. 10-283.

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