A federal appeals court ruled Thursday that California can cut rates to doctors, pharmacists and other providers for serving Medi-Cal patients, overturning a lower court decision that blocked a 2011 state budget reduction.
A three-judge panel of the 9th U.S. Circuit Court of Appeals determined that the U.S. Health and Human Services secretary has authority to determine whether California and other states can cut Medicaid rates – the federal program of which Medi-Cal is part.
"The Medicaid program is a colossal undertaking, jointly funded by the federal government and the states," the 9th Circuit panel wrote. "Congress explicitly granted the secretary authority to determine whether a state's Medicaid plan complies with federal law."
Secretary Kathleen Sebelius approved California's cuts in October 2011, but U.S. District Court Judge Christina A. Snyder blocked them in December of last year. California appealed the decision, and the 9th Circuit ruled in the state's favor Thursday.
The state can use the cuts to save $330 million in the general fund budget this year and an additional $124 million by imposing cuts retroactively for past Medi-Cal services, according to Department of Finance spokesman H.D. Palmer.
Providers and advocates for the poor, who have repeatedly filed suits blocking state Medi-Cal cuts, argue that lower payments will discourage health care professionals from serving Medi-Cal patients.
They say that will hurt access to doctors, particularly from specialty fields, leaving Medi-Cal patients without care.
It remains to be seen when California will follow through with a 10 percent reduction to provider rates. But Palmer said Gov. Jerry Brown's intention is to continue imposing the cut beyond the current fiscal year despite expected growth in tax revenue.
Lynn Carman, who represents pharmacists as chief counsel for the Medicaid Defense Fund, said plaintiffs plan to ask the full 9th Circuit bench to reconsider Thursday's decision. If that is denied or the review does not block the rate cuts, Carman said his side may ask the U.S. Supreme Court to consider the case.
Plaintiffs have 45 days until the decision becomes final. During that time, the state can't impose cuts, and Brown may rejigger the Medi-Cal reductions in his January budget.
The California Medical Association, which represents 35,000 physicians and was a plaintiff in the case, said it is still contemplating whether to ask for a full 9th Circuit hearing.
Circumstances have changed significantly since Brown and Democratic lawmakers agreed last year to cut Medi-Cal rates while facing a then-$26 billion general fund deficit.
Voters in November approved two statewide tax initiatives, generating several billion dollars annually for the budget, and President Barack Obama's health care overhaul has survived political and legal hurdles en route to wide implementation in 2014. The state is now staring at a more manageable $1.9 billion deficit, according to the nonpartisan Legislative Analyst's Office.
Under the Obama plan, the federal government will raise reimbursement rates for Medi-Cal primary care doctors starting in January 2013, likely sparing them from state rate cuts.
But the health care overhaul also expands Medi-Cal to a new group of uninsured low-income residents, largely able-bodied adults without children, starting in 2014. Meanwhile, Brown officials are pushing hard to move 860,000 lower-middle-class children to Medi-Cal next year.
California Medical Association spokeswoman Molly Weedn said the group hopes the state will reconsider. "The state implemented these cuts when it was in much more dire straits than it is now," she said. "This is going to hugely impact care, especially now that the Healthy Families transition is going to happen."
Brown spokesman Gareth Lacy responded to the ruling in a statement: "The Court of Appeals ruled that trial courts cannot block California from making Medi-Cal cuts that were approved by the federal government. Today's decision allows California to continue providing quality care for people on Medi-Cal while saving the state millions of dollars in unnecessary costs."