Capitol Alert: Federal appeals court OKs lower payments to Medi-Cal providers

The U.S. Court of Appeals for the 9th Circuit ruled today that California can cut rates to doctors, pharmacists and other providers for serving Medi-Cal patients, overturning a lower court decision that blocked a state budget cut from last year.

A three-judge appeals court panel determined that U.S. Health and Human Services Secretary Kathleen Sebelius has authority to determine whether California and other states can cut Medicaid rates -- the federal program of which Medi-Cal is part -- and still comply with the program's rules.

"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."

Sebelius approved California's cuts in October 2011, but U.S. District Court Judge Christina A. Snyder blocked them in December of last year. At the time, the cuts were expected to save $623 million annually.

California appealed the decision, and the 9th Circuit ruled in the state's favor today. It remains to be seen whether California will follow through with a 10 percent reduction to provider rates, and when that might occur.

Lynn S. Carman, who represents pharmacists as chief counsel for the Medicaid Defense Fund, said plaintiffs plan to ask the court for en banc review, meaning the full 9th Circuit bench would reconsider today's decision. If that is denied or the review does not block the rate cuts, Carman said his side would ask the U.S. Supreme Court to consider the case.

Circumstances have changed significantly since Gov. Jerry Brown and Democratic lawmakers agreed last year to cut Medi-Cal rates. 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 Obama plan calls for increasing rates paid to Medi-Cal primary care physicians starting in January 2013 to the higher Medicare rate, presumably sparing them from state rate cuts.

But it 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.

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.

"Our hope is the state will reconsider," said California Medical Association spokeswoman Molly Weedn. "The state implemented these cuts when it was in much more dire straits than it is now. 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."

Updated Thursday afternoon with comments from plaintiffs' attorney and Brown spokesman.

PHOTO CREDIT: Dr. Douglas Tolly, right, chats with Medi-Cal patient Carissa White, 22 who is 21 1/ 2 weeks pregnant in his office. Tolly says 70 percent of his patients are Medi-Cal recipients. Photo taken September 15, 2011 in Yuba City, California. The Sacramento Bee / Renee C. Byer