Court Blocks 10 Percent Medi-Cal Payment Cut

     (CN) – California can’t cut Medi-Cal payments by 10 percent to reduce the state’s $26 billion budget gap, the 9th Circuit ruled. “A budget crisis does not excuse ongoing violations of federal law,” wrote Judge Milan Smith, Jr.

     In February 2008, state legislators passed a law that sliced 10 percent off reimbursement rates under California’s Medicaid program, Medi-Cal.
     The bill cut Medi-Cal payments to doctors, dentists, pharmacies, adult health-care centers, clinics, health systems and others, and mandated the same 10 percent cut for inpatient services provided by acute-care hospitals that weren’t contracted by the state.
     The rate reductions took effect on July 1, 2008.
     A group of pharmacies, health-care providers, senior citizens’ groups and Medi-Cal beneficiaries sued the California Department of Health Care Service, claiming the cuts violated federal laws requiring state payments to be “consistent with efficiency, economy and quality of care.”
     They said the state’s health-care agency implemented the cuts without considering reliable cost studies.
     U.S. District Judge Christina Snyder granted a partial injunction, blocking the 10 percent cut for all but managed-care plans and acute-care hospitals not under contract with the state.
     David Maxwell-Jolly, director of the state’s health-care department, argued that the injunction should apply only to payments for services provided on or after Aug. 18, the day the judge issued the order.
     Snyder agreed and modified the order accordingly, prompting appeals from both sides.
     The director appealed the underlying injunction, while the plaintiffs challenged the modification order and asked the court to block the rate reduction retroactively.
     The challengers won in the 9th Circuit. A three-judge panel not only upheld the injunction, but also determined that it should reach back to July 1, when the rate cuts first took effect.
     The Department of Health Care Services failed to rely on cost studies in determining how the rate cuts would affect the efficiency, economy, quality and access to health care, the court ruled.
     Judge Smith acknowledged California’s budget crisis, but said state budgetary concerns can’t be “the conclusive factor in decisions regarding Medicaid.”
     Smith said the balance of hardships “tips sharply” in the plaintiffs’ favor, “as the 10 percent reduction threatens access to much-needed medical care.”
     The court added: “[T]here is a robust public interest in safeguarding access to health care for those eligible for Medicaid, whom Congress has recognized as ‘the most needy in the country.'”

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