Impact of California's Medicaid physician pay cut wasn't assessed properly, state court judge says

The decision comes after a federal appeals court ruled similarly in a case that sought to prevent a 5% reduction to pharmacists.

By Doug Trapp — Posted Nov. 15, 2010

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Emergency physicians and other California health professionals recently received a second favorable ruling this year in their legal efforts to block Medicaid reimbursement cuts.

Los Angeles Superior Court Judge Ann I. Jones ruled on Oct. 26 that the California Dept. of Health Care Services did not conduct the reviews state law requires to determine if state Medicaid reimbursement rates are high enough for physicians and other health professionals to participate, ensuring that enrollees have adequate access to medical and dental care. DHCS is considering appealing the state court ruling but declined to comment on the lawsuit, said agency spokesman Anthony Cava.

The ruling comes nearly eight months after a federal appeals court ruled similarly in a case filed in federal court to prevent a 5% Medicaid pay cut to pharmacists.

The state complaint -- filed in January 2009 by members of the California Chapter of the American Academy of Emergency Physicians (CAL/ACEP) -- asks the Los Angeles court to compel the state to conduct annual Medicaid pay reviews required under state law. According to the ruling, California law requires the state to review Medicaid rates and adjust them annually based on, in part:

  • Physician reimbursement levels for Medicare, Blue Shield and other third-party payers.
  • Prevailing physician charges within the state and other geographic areas.
  • Medical services the current Medicaid population needs.
  • The consumer price index.

Although DHCS has compared Medicaid pay with Medicare rates for certain codes, the agency may not have conducted Medicaid rate reviews that meet these requirements, according to the ruling.

Emergency physicians in California want to maintain adequate Medicaid pay in part because the law requires them -- unlike other physicians -- to see Medicaid patients. If other physicians limit their mix of Medicaid patients because the program's pay does not cover physicians' costs, those patients end up in emergency departments, said Elena Lopez-Gusman, CAL/ACEP executive director.

"Somebody had to stand up and say, 'This can be no more,' " she said.

Medicaid pay for primary care in California is about 60% of Medicare rates, according to Andrew LaMar, spokesman for the California Medical Assn., which has advised CAL/ACEP on the lawsuit. These rates already are too low to ensure that Medicaid provides the legally mandated levels of access to care, he said.

Lopez-Gusman said: "In some parts of the state, [Medicaid enrollees] can't see a specialist at all."

Driven by deficits

California leaders have struggled to close annual budget deficits of $20 billion or more in recent years. Gov. Arnold Schwarzenegger has enacted billions of dollars in cuts to health care, education, and other state spending. He also considered ending the state's Children's Health Insurance Program, but decided such a drastic measure was not necessary to balance California's budget. The state delivered its fiscal year 2011 budget 100 days late -- a record -- and stopped Medicaid pay for community health centers and clinics for several weeks during the budget stalemate.

But California could be on the hook for hundreds of millions more in Medicaid spending, depending on the outcome of the emergency physicians' lawsuit and similar cases pending in other courts.

Physicians, hospitals, independent living centers, pharmacists and other health professionals in 2008 filed a lawsuit challenging a 10% across-the-board California Medicaid reimbursement cut that went into effect in July 2008. Federal court decisions forced the state to reverse the cuts. The state has asked the U.S. Supreme Court to hear the case. In May, the Supreme Court requested an opinion from Acting Solicitor General Neal Kumar Katyal, an indication that the court may be interested in hearing the case, according to Rebecca MacLaren, spokeswoman for California Attorney General Jerry Brown.

Another CMA-backed lawsuit may be heard by the U.S. Supreme Court. The lawsuit was filed to block Medicaid reimbursement cuts of 5% to pharmacists and hospitals and 1% to physicians to take effect in March 2009. The 9th U.S. Circuit Court of Appeals in March 2010 agreed with a lower federal court ruling that California did not conduct the necessary review of Medicaid pay rates needed to allow the reimbursement cuts.

In an Oct. 29 letter to Katyal, American Medical Association Executive Vice President and CEO Michael D. Maves, MD, MBA, said a Supreme Court hearing is not necessary because the 9th Circuit and U.S. District Court for the Central District of California offered similar judgments against the Medicaid cuts. Dr. Maves told the acting solicitor general that a ruling in favor of California could make Medicaid "an empty benefit without actual access to care."

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Case at a glance

Did California adequately review the potential impact of Medicaid reimbursement cuts as state law requires?

The Los Angeles Superior Court said no.

Impact: Emergency physicians say the state has underfunded its Medicaid program to a point where it is not ensuring enrollees' reasonable access to medical and dental care, a standard that state law requires. The court ordered the state to annually review Medicaid rates and increase them if necessary to help provide adequate access to care.

Centinel Freeman Emergency Medical Associates et al. v. David Maxwell-Jolly et al., Los Angeles Superior Court

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