Can providers take states to court on Medicaid cuts? Supreme Court will decide.

September 15, 2011

Can providers turn to the courts to block states from making drastic cuts to Medicaid payments? That is the issue to ultimately be decided by the US Supreme Court. The case involves California?s 10% rate cut for Medi-Cal in 2008, which providers claim violates the federal Medicaid Act?s guarantee of equal access to health care. Find out why this case is important and what could happen to Medicaid payments in your state if the court rules in favor of California.

Can providers turn to the courts to block states from making drastic cuts to Medicaid payments? That is the issue ultimately to be decided by the US Supreme Court, which has agreed to hear 3 consolidated lawsuits on its first day of oral arguments this fall.

In that case, Douglas v Independent Living Center of Southern California, health care providers allege that California’s 10% rate cut for Medi-Cal in 2008 violates the federal Medicaid Act, which guarantees that public health program recipients have equal access to health care.

In an appeal of a decision by the US Court of Appeals, Ninth Circuit, the nation’s highest Court is being asked to decide whether, under the Supremacy Clause, health care providers and beneficiaries can sue in federal court to enforce federal Medicaid law. Numerous medical provider groups, including the American Academy of Pediatrics and the American Medical Association, have filed friend-of-the-court briefs in the ongoing cases, supporting the right of providers and beneficiaries to challenge state action and arguing that “there is a well-established and predictable correlation between Medicaid provider payments and physicians’ willingness to treat Medicaid recipients.”

If the Supreme Court rules in favor of California, it would "allow not only California, but all states, to defy federal law with virtual impunity," states a brief filed by the American Hospital Association and other groups representing health care institutions. The state of California is arguing that only the Secretary of Health and Human Services is empowered to review state conduct.

In a recent issue of the New England Journal of Medicine, Sara Rosenbaum, JD, said, “In a shocking move, the solicitor general of the United States, representing the Obama administration, has entered the case on the side of the state, arguing that the courts are closed to private individuals where Medicaid-access litigation is concerned.”

Rosenbaum argues that a recently issued proposed access rule, “rather than being a forceful implementation of the law...is a model of inaction. The first sign of the administration’s refusal to intervene appears in the explanatory materials that accompany the rule, which emphasize that the administration does not intend to stop reductions in Medicaid provider payments.”

The National Conference on State Legislatures (NCSL) does not agree and adamantly opposes the proposed Methods for Assuring Access to Covered Medicaid Services, saying it “would severely limit the ability of state legislators to propose and carry out rate reductions for Medicaid providers.”

NCSL, a bipartisan organization that serves state legislators and staffs, maintains that the rule ignores the state budget process and imposes requirements that would favor the federal and state executive branch over the state legislature. The group also says that federal court rulings have deterred some states from also reducing rates.

In addition to California, among the states considering changes that would effectively lower Medicaid payments to providers include many of the nation’s largest: New York, Georgia, Texas, and Florida.

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