U.S. District Court Judge Temporarily Blocks Medi-Cal Cuts

A U.S. District Court judge in Los Angeles temporarily blocked implementation of a proposed 10% cut to Medi-Cal payments for doctors, dentists and pharmacies, stating the changes would violate federal laws and reduce the quality of medical care for millions of people, the Sacramento Bee reports (Yamamura/Sanders, Sacramento Bee, 8/20). The state Legislature in February approved the $1.3 billion Medi-Cal reimbursement reduction, which took effect July 1, as part of a proposal by Gov. Arnold Schwarzenegger (R) to reduce funds for all state services by 10% in an effort to address an estimated $20 billion budget deficit for fiscal year 2009. Medi-Cal, California's Medicaid program, has about 6.7 million beneficiaries. Plaintiffs in the lawsuit include the California Medical Association, the California Hospital Association and the California Association of Public Hospitals and Health Systems.

The lawsuit alleged that the Medi-Cal reimbursement reduction would violate state and federal laws that require payments to remain adequate to ensure beneficiaries receive the same level of access to services as the general public. The state approved the Medi-Cal reimbursement reduction "solely due to state budgetary woes, without regard to the impact on the availability" of the program, according to the lawsuit (Kaiser Daily Health Policy Report, 5/6). Judge Christina Snyder said that because Medi-Cal accepts federal funding, the state must use the money to provide quality health care to low-income residents (Egelko, San Francisco Chronicle, 8/20). Physicians and pharmacists lobbied against the fee cuts, saying many would be forced to stop accepting Medi-Cal beneficiaries (AP/Los Angeles Daily News, 8/19). The ruling restores fee rates for providers who serve Medi-Cal patients. According to the San Francisco Chronicle, most hospitals already were exempt from the cuts (San Francisco Chronicle, 8/20). However, the ruling excluded some hospitals that do not contract with the state and do not provide emergency care (Sacramento Bee, 8/20). Snyder ruled that those hospitals had not shown that the lower fees would compromise the care they provide. The ruling applies to all fees for services provided since July 1.

Reaction
Richard Frankenstein, president of CMA, said the ruling was the third in five years to assert that "the state of California has put at risk the access to health care for millions of Californians by underfunding the Medi-Cal program" (San Francisco Chronicle, 8/20). Anthony Wright, executive director of advocacy group Health Access California, said, "There's no question this is good news. We already have more than half of doctors not taking Medi-Cal patients because of low reimbursement rates, so the additional rate cut was going to further reduce access to care for millions of children, parents, seniors and people with disabilities."

H.D. Palmer, a spokesperson for the California Department of Finance, said the ruling would cost the state $575 million annually. Schwarzenegger spokesperson Lisa Page said, "We've always said these are difficult but necessary cuts" to close the state's $15.2 billion budget shortfall for FY 2009. Page said the governor's office is reviewing the ruling to determine its next step (San Francisco Chronicle, 8/20).

Wright noted that the ruling means lawmakers must find other ways to generate new revenues, or force Medi-Cal to reduce eligibility or benefits (Sacramento Bee, 8/20).