Lawsuit filed to stop 10% Medicaid provider payment rate reduction in California

A number of groups that represent hospitals, physicians, dentists and other health care providers in California on Monday filed a lawsuit in Los Angeles Superior Court to prevent a scheduled 10% reduction in reimbursements under Medi-Cal, the state Medicaid program, the Wall Street Journal reports.

The state Legislature in February approved the $1.3 billion Medi-Cal reimbursement reduction, which would take effect on 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 (Rundle, Wall Street Journal, 5/6). Medi-Cal has about 6.7 million beneficiaries (Tayefe Mohajer, AP/San Jose Mercury News, 5/6). Plaintiffs in the lawsuit include the California Medical Association, the California Hospital Association and the California Association of Public Hospitals and Health Systems (Fernandez, San Francisco Chronicle, 5/6).

According to the lawsuit, 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 (Lin, Sacramento Bee, 5/6).

The lawsuit states that the Medi-Cal reimbursement reduction would prompt fewer physicians to accept beneficiaries as patients. "The exodus of providers from the program is leaving massive numbers of Californians without access to critical services or is forcing them to obtain care in the already overcrowded and increasingly scarce emergency departments of hospitals throughout the state," according to the lawsuit. In addition, the Medi-Cal reimbursement reduction would force the closure of some health care facilities, such as hospitals and skilled nursing facilities in rural areas, and would affect pharmacies and adult day care centers, the lawsuit states (San Francisco Chronicle, 5/6).

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Craig Cannizzo, an attorney for the plaintiffs, said state officials consider Medi-Cal a "pot of money they can steal from anytime things get tight" with the budget. According to Cannizzo, the plaintiffs will file declarations from individual patients, physicians and other providers who will testify about the current problems with Medi-Cal, as well as the potential effects of the reimbursement reduction. He said, "The situation has gotten worse, and an extremely small number of providers are providing virtually all care" (Wall Street Journal, 5/6).

Lisa Paige, a spokesperson for Schwarzenegger, said, "The governor fully understands the devastating impact of these cuts, which is why he continues to push for health care reform and structural budget reform," adding, "Together, they will bring stability to Medi-Cal budgeting and ensure that the state never has to make such drastic cuts again" (San Francisco Chronicle, 5/6).