California doctors sue to block Medicaid cuts

California doctors have sued the state to stop an across-the-board Medicaid payment cut of 10% that they say further would damage patients' access to care.

The California Medical Assn. led a coalition of physicians, hospitals and other health care groups in a class-action lawsuit filed May 5 to block the payment reductions, which total $600 million. The decreases, authorized by Gov. Arnold Schwarzenegger and the Legislature in February, are scheduled to take effect July 1.

Doctors worry that the problem will be compounded if the state adopts the governor's revised fiscal 2008-09 budget proposal, which would cut $3.4 billion from California Health & Human Services Agency programs. This figure includes the already approved physician cuts. The new plan would reduce eligibility for Medi-Cal, the state's Medicaid program, to 61% of the federal poverty level for two-parent households and would pare services.

State officials say the move is part of an across-the-board effort to plug a projected $17 billion budget shortfall, avoid tax hikes and establish a rainy-day fund to avoid future crises.

But in their lawsuit, doctors say the planned rate decreases violate state and federal laws requiring that Medicaid payments be adequate to enlist enough doctors and other health care professionals to ensure the availability of basic services promised under the program.

In addition, the Dept. of Health Care Services has failed for the last 15 years to audit Medi-Cal annually to make sure it meets the mandated access-to-care criteria, states the complaint, filed in Los Angeles County Superior Court. During that time, doctors saw payments increase just once, in 2001.

Low rates continue to force many physicians to close their doors to Medi-Cal patients, and the cuts would throw access to care into further turmoil, said Dev GnanaDev, MD, president-elect of the California Medical Assn.

"California already has another half million uninsured who end up in the emergency room for routine care. Add Medi-Cal patients to that, and it becomes unmanageable," said Dr. GnanaDev, a trauma and vascular surgeon and chief of surgery at Arrowhead Regional Medical Center in Colton, Calif. He said patients come to the facility's emergency department from 200 miles away with broken bones because they cannot see a local doctor for an x-ray. About 70 emergency departments across the state have closed in the past 10 years or so, he added, which hurts access for private-paying patients, as well.

"We have to put the state on the spot and say you have to follow the law, and if they do, they would realize there is not decent access for Medi-Cal patients," Dr. GnanaDev said.

The pay reductions could jeopardize as much as $1.3 billion in Medicaid funds, including matching federal dollars, said Craig J. Cannizzo, the attorney representing the CMA, the state chapter of the American College of Emergency Physicians, the California Hospital Assn. and the other plaintiffs in the case. CMA data show that California ranks last in the nation for Medicaid physician payment, he said.

Average per-enrollee Medicaid spending in California was $2,701 in 2005, compared with $4,662 nationwide, according to Kaiser Family Foundation data.

Health system reform on horizon?

State officials declined to comment on the lawsuit. Regarding the pay reductions, Schwarzenegger said he hopes they force the state toward health system reform.

"The governor fully understands the devastating impact of these cuts, which is why he continues to push for comprehensive health care reform and structural budget reform," spokeswoman Lisa Page said. "Together, these reforms will bring stability to Medi-Cal budgeting and ensure the state never has to make such drastic cuts again."

A health system reform plan backed by Schwarzenegger and passed by the state assembly included a 23% increase in doctors' Medicaid rates. But the proposal fell apart in the Senate earlier this year due to cost concerns once the budget deficit figures came out. The governor hopes to avoid a similar outcome in the future by establishing a savings account to sustain health care programs during a budget crisis.

Dept. of Health spokesman Anthony Cava agreed that reform is the end goal. Meanwhile, "Medi-Cal is the second largest state-funded program behind education, and we had to be part of the solution."

Some doctors say they will stick with the program.

San Bernardino, Calif., pediatrician Albert H. Arteaga, MD, said he has been fortunate not to have to turn away Medi-Cal patients. He has scaled down his practice and let some employees go in the past two years to cut back on costs.

"Times of crisis call for innovation," Dr. Arteaga said. He added that he will do what he can to keep his doors open to Medicaid patients.

Still, doctors say the planned reductions cannot come at the expense of patient care.

"[The state] has to be brave and come up with better solutions rather than just cutting across the board," Dr. GnanaDev said. "It's unfair to these poor people who have to jump through all these hoops to get simple care."

The lawsuit is not the first time doctors have rallied to stave off impending Medi-Cal cuts. The case follows a similar one the CMA and others brought against the state in 2003. They eventually succeeded in halting a 5% rate reduction sought by then-Gov. Gray Davis.