Medicaid pay cut fight finds Justice Dept. at odds with doctors

The solicitor general speaks out in favor of states in a pending case, saying medical professionals have no right to sue over rate reductions.

By Alicia Gallegos — Posted June 13, 2011

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The Justice Dept. has sided against physicians in a pending U.S. Supreme Court case challenging Medicaid cuts to California doctors and other medical professionals.

In a brief to the high court, Acting U.S. Solicitor General Neal Katyal said private citizens and health care officials shouldn't be able to sue states for cutting their Medicaid payments. The sentiments contrast with an earlier opinion by Katyal, in which he appeared to agree with earlier court decisions allowing legal challenges over the cuts.

"It seems like a turnaround. [The administration] told the Supreme Court not to take the case, and then once the Supreme Court took the case, they sided with the states on the subject matter," said Francisco Silva, general counsel for the California Medical Assn. " 'Disappointment' is not the word. It's disheartening."

The Justice Dept. and the solicitor general's office did not return messages seeking comment by this article's deadline.

The case stems from several lawsuits fighting pay cuts in California's Medicaid program, Medi-Cal. California lawmakers proposed the cuts to close annual budget deficits of $20 billion or more in recent years. Physicians, hospitals, pharmacists and other health professionals in 2008 filed a lawsuit fighting a 10% cut scheduled for July of that year. Two other health care organizations also filed suit over the reductions.

Newly installed California Gov. Jerry Brown this year proposed shearing another 10% off payments to doctors and other health professionals, in the anticipation that the high court will allow the cuts to proceed.

California already has one of the lowest Medicaid payment rates in the nation, Silva said. Further payment reductions will exacerbate the shortage of medical professionals willing to accept Medicaid and further impair access to care for patients, the plaintiffs in the case say.

A lower court blocked the 2008 Medicaid pay reductions. California appealed to the U.S. Supreme Court.

Katyal initially advised the high court not to consider the state's appeal, according to California officials. He noted that other courts addressing similar issues have affirmed the right of individuals to sue in federal court over matters of state law. But after the high court agreed to hear the case, Katyal said in a May 26 friend-of-the-court brief that physicians and others have no right to sue over the pay cuts.

In reference to Medicaid's goal of providing equal access to care, the brief said the Dept. of Health and Human Services and other federal agencies -- not the courts -- are better equipped to evaluate and ensure that objective.

"Lack of understanding"

The solicitor general's opinion is "devoid of facts" and reflects a lack of understanding of the consequences of cutting Medicaid pay rates, the CMA's Silva said.

"We're talking about protecting the most vulnerable and underserved communities in California, and this brief indicates that we do not have the right to file a lawsuit standing up for their well-being," he said."We will continue to work ... to fight this issue because reimbursement cuts like this will only limit the number of physicians available to help those in need."

The California Dept. of Health Care Services declined to comment on the Justice Dept. brief. Norman Williams, a department spokesman, previously has said legal rulings for years have hindered the state's efforts to construct a balanced budget.

The California Hospital Assn., another plaintiff in the California case, expressed disappointment with the solicitor general's position.

"Ensuring Medicaid beneficiaries equal access to care without the ability to challenge cuts to existing low payment levels will leave many providers with no option but to no longer participate in the Medicaid program or limit, close, or even restructure services," Jana DuBois, CHA's vice president and legal counsel said in a statement. "Hospitals are forced to suffer the rate cuts in order to remain open."

The American Medical Association also has weighed in on the Medi-Cal cuts case. In an Oct. 29, 2010, letter to Katyal, AMA Executive Vice President and CEO Michael D. Maves, MD, MBA, said a high court hearing was not necessary because previous courts have ruled that the Medicaid cuts could not go through. Dr. Maves said a ruling in favor of California could make Medicaid "an empty benefit without actual access to care."

At this article's deadline, the Supreme Court had not yet set a date to hear the case. The CMA anticipates the case will be heard by October. Justices have consolidated three separate Medicaid lawsuits for their review.

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