Federal court rules Oklahoma Medicaid doctor pay too low

In what Oklahoma physicians are calling a landmark victory, a federal court recently ruled that the state's Medicaid program did not ensure equal access to eligible children because of insufficient payments to doctors.

The decision last month by U.S. Chief District Judge Claire Eagan sets the stage for fundamental changes to the Oklahoma Medicaid system that should result in better reimbursement rates and more doctors accepting Medicaid patients, physicians said.

The medical community also hopes it could spur changes in other states.

"The AMA is grateful that the court has recognized the impact of haphazard state budget cuts on the vulnerable Medicaid population," said American Medical Association President John C. Nelson, MD, MPH. "The court ruling demonstrates that state lawmakers must be accountable to the beneficiaries of Medicaid who often desperately depend on its comprehensive protection. It's time for state legislators to take a hard look at the consequences of dwindling reimbursements paid for Medicaid care."

Carol Berkowitz, MD, president of the American Academy of Pediatrics, said she hoped the court ruling would send a message to state programs to "accept their responsibilities under federal mandates."

"If physicians are receiving a payment that meets the costs of the office, it would guarantee more physicians will participate and there will be more access," said Dr. Berkowitz, a pediatrician in Torrance, Calif.

The judge found the Oklahoma program to be in violation of federal law because Medicaid reimbursement rates were not high enough to generate a suitable participation rate among physicians and care was not being delivered to the state's eligible Medicaid recipients "with reasonable promptness."

The decision "will compel the Oklahoma Health Care Authority and the state to deal seriously with this problem," said Ken Setter, MD, a pediatrician in Tulsa and president of the Oklahoma chapter of the AAP. "This will compel them to devise a program that includes physicians and provides better access to care."

While it does not order the health care authority to raise physician payment to a prescribed level, the ruling points out that the agency "admits that, to comply with the federal equal access mandate, physician reimbursement rates need to be at least 100% of the Medicare fee schedule. The evidence also shows that they may need to be higher to attract and retain sufficient specialists and subspecialists."

In a statement, the Oklahoma State Medical Assn. said the decision would have a broad impact.

"Not only will our physicians benefit, but the real success in this ruling is the benefits their patients will receive," the association said.

The case began in 2001, when the Oklahoma chapter of the AAP and the Community Action Project of Tulsa County, a nonprofit community assistance agency, filed a lawsuit against the state's health care regulatory body. At that time, pediatricians were forced to drop out of Medicaid due to low reimbursement rates, and it was taking months in some cases for patients to get in to see a specialist.

In 2003, the lawsuit was certified as a class action, filed on behalf of the thousands of children enrolled in and eligible for Oklahoma Medicaid. The AMA and the AAP, among other groups, have assisted the plaintiffs in their case.

In her ruling, the judge instructs the plaintiffs and the state health care authority to meet with a magistrate judge and agree on an injunctive order that would address the points of her decision. In a surprising development for physicians, however, the Oklahoma chapter of the AAP was dismissed as a plaintiff because the judge ruled that the pediatricians did not have "enforceable rights" under federal law.

Tulsa attorney Louis Bullock, who represents the plaintiffs, said he would ask the court to reconsider the matter because physician involvement "has been critical in getting us to where we are today."

"It would be wise on the part of the state to include us in the solution," said Stillwater, Okla., pediatrician Robert "Buck" Wright, MD, immediate past president of the Oklahoma chapter of the AAP. "If physicians are not included, the state will have more difficulty meeting the judge's order."

State plans its next moves

Physicians who participate in the state Medicaid program currently receive between 71% and 90% of Medicare's rates for their services, said Andrew Tevington, deputy general counsel for the Oklahoma Health Care Authority. But university-based physicians receive 140% of Medicare for services provided to Medicaid patients, he said.

That rate shows that the state is trying to improve pay and access to care, Tevington said. The state is planning to ask the judge to reconsider the ruling. If she does not reconsider, he added, it will appeal the decision to the 10th U.S. Circuit Court of Appeals in Denver.

If appeals are exhausted and the current ruling stands, the state might be forced to raise taxes to cover higher reimbursement rates or reduce Medicaid eligibility standards, Tevington said. Currently, the state sets the eligibility line at 185% of the federal poverty level, but it could reduce it to 100% or 133%, depending on the characteristics of the recipient, he said.

Attorney Bullock called the two state scenarios "hollow threats." But the plaintiffs had concerns of their own about the decision, he said. They disagree with the judge's rulings that the state's auto-enrollment system for Medicaid recipients did not violate federal law and that the Early Periodic Screening, Diagnosis and Treatment program is in "substantial compliance" with federal mandates.

Physicians had said errors and the bureaucracy of the enrollment system were hindering access for some children, and many patients were not being screened according to schedule.

Still, physicians were happy with the court's ruling on the access-to-care issue, although some were hesitant to say it would have a dramatic impact on their practices.

Joseph E. Leonard, MD, an otolaryngologist in Norman, Okla., dropped out of Medicaid several years ago because of low reimbursement rates. He said he probably wouldn't jump back in immediately just because rates could increase to Medicare's level.

"Medicare is not a good bellwether," Dr. Leonard said. "The system still remains underfunded and overburdened."