Medicaid Providers Can’t Sue Over Frozen Payouts

(CN) - California broke federal law when it unilaterally froze reimbursement rates for Medicaid providers, but the providers have little recourse to the courts, the 9th Circuit ruled Wednesday.

After chastising the state for ignoring long-established federal Medicaid procedures in a rush to balance its budget, the Pasadena-based federal appeals court nonetheless vacated a preliminary injunction.

Several trade associations representing health care providers had no specific right to challenge the move, according to the ruling.

The Developmental Services Network, the United Cerebral Palsy/Spastic Children's Foundation of Los Angeles and Ventura County, and the California Association of Health Facilities filed a federal civil rights lawsuit against the state after officials amended California's Medicaid plan to freeze provider rates at levels set for the years 2008-09. Claiming that California needed prior federal approval for such an amendment, the providers won a preliminary injunction to stop it.

U.S. District Judge Christina Snyder concluded in Los Angeles that the providers were likely to succeed with their civil rights action and that the state had clearly failed to obtain approval for the changes.

While three appellate judges agreed that the state had indeed violated the law, they found that the providers had no "unambiguously conferred right" to challenge the state's actions.

Requiring that states submit Medicaid-plan amendments to federal authority is a "general or administrative" provision, and "an agency cannot create a right enforceable through § 1983 where Congress has not done so," according to the ruling.

"Despite our contrary holdings over the past decades, the state has allowed its economic difficulties to obnebulate its analysis and render it purblind to the simple fact that it cannot properly implement changes to its Medicaid plan before the federal government ... has approved a submitted SPA [state plan amendment]," Judge Ferdinand Fernandez wrote for the three-judge panel. "Yet, while it is regrettable that the state refuses to abide by the law, that does not mean that a right which will support a cause of action under § 1983 has been unambiguously conferred upon thepProviders; they cannot maintain an action under that section. Therefore, we must vacate the preliminary injunction." (Emphasis in original.)

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