Arizona appeals court to decide fate of Medicaid enrollment freeze

Disputes over payment rates also rage on in California and West Virginia.

By Alicia Gallegos — Posted Nov. 7, 2011

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The Arizona Court of Appeals heard arguments Oct. 19 to determine whether a Medicaid enrollment freeze in the state for childless adults is constitutional. The freeze, which took effect July 8, prevents residents without children from enrolling in a state assistance program that was part of a previous Medicaid coverage expansion.

At the same time, health professionals in California and West Virginia experienced setbacks in their disputes over state Medicaid payment rates. In West Virginia, a judge in September refused to grant an injunction that would have required the state to increase payment rates immediately. In California, doctors were put in line for a 10% rate reduction after the Centers for Medicare & Medicaid Services on Oct. 27 approved a state request to slice payments.

In the Arizona case, opponents of the Medicaid freeze say the enrollment cap violates citizens' rights because residents voted for the coverage expansion in 2000.

The Legislature "can't repeal or amend a voter-initiated measure," attorney Tim Hogan said during the appeals hearing. He is executive director of the Arizona Center for Law in the Public Interest, a law firm that sued the state on behalf of residents. "Look at the [statute's] language. It establishes eligibility at 100%, prohibits caps on enrollment and requires [the assistance] to be funded. There's no ifs, ands or buts about it."

But the initiative passed when the state was able to cover the expanded population, said Joseph Kanefield, an attorney for the state. Requiring the state to cover childless adults now is unenforceable, because there is no funding left, he said.

"It is undisputed that the Legislature's appropriation does not give [the program] sufficient funds to cover this population," Kanefield said. He continued, "It is also undisputed that the [program] cannot be providing coverage to this population without additional funding and that funding can only come from a Legislature appropriation. ... I think the voters understood they could not just obligate the general fund in perpetuity for an unknown amount of money."

Observers expect a ruling in the case within the next few months.

Since the enrollment freeze took effect, about 26,000 people have fallen off the rolls, according to data from the Arizona Assn. of Community Health Centers. The number is lower than expected because of efforts by health centers, doctors and others to remind residents not to let their coverage expire, said Tara McCollum Plese, director of government and media relations for the association. Childless adults who were enrolled in Medicaid before the July cutoff date are grandfathered in, but future access is denied if their enrollment is not renewed.

Still, the number of residents losing health care coverage is expected to grow, Plese said.

"These are people with chronic health conditions, with incurable diseases, people recovering from head trauma," she said. "This is not a population that just doesn't want commercial health insurance. These are people who generally cannot afford commercial health insurance."

Access to care also will suffer without adequate payments for health professionals, she added.

"With no reimbursement, we can't pay our medical professionals. We can't pay the overhead, and then we don't have the capacity to serve the large number of people," Plese said.

Arizona officials said the cuts are needed to deal with a significant budget crisis and will save the state about $500 million the first year.

California doctors resist another cut

In California, doctors are calling the latest 10% Medicaid rate cut to physicians and other health professionals a huge roadblock for health system reform and a direct blow to patient care. The current cut approved by federal officials comes from a budget proposal enacted this year by Gov. Jerry Brown.

"The approval of provider payment reductions will ensure overcrowding in emergency rooms and will absolutely mean less access to care for all Californians," said Dustin Corcoran, CEO of the California Medical Assn. "Of course, these are tough budget times, but the Dept. of Health Care Services and CMS are balancing their budgets on the backs of the most vulnerable Californians."

CMS' decision to allow the reduction to stand came just days after the CMA requested that the agency re-evaluate the state's pay cut request. The association filed a petition with CMS on Oct. 26 asking that "corrective action be taken to address current reimbursement rates and access standards."

In a statement announcing the approval, CMS said the state proved that the rate reductions do not put patient care at risk.

"We are providing California with requested flexibility to address their difficult budget circumstances while protecting the health care needs of Californians served by the Medicaid program," said CMS Deputy Administrator Cindy Mann. "Following review, many of the state's original rate cut proposals are now off the table. While we recognize the remaining cuts will have a significant impact on the affected providers, the state has submitted extensive data demonstrating that the remaining cuts will not jeopardize Californians' access to care, and has agreed to ongoing monitoring of access to care for the affected services."

The California Legislature issued several rounds of cuts beginning in 2008 to offset budget shortfalls. Health professionals sued the state starting that year, and a lawsuit related to those cuts is before the U.S. Supreme Court. At this article's deadline, a decision had not been issued.

The American Medical Association and five other medical and dental associations filed a friend-of-the-court brief on behalf of the physician plaintiffs in that case. The Litigation Center of the American Medical Association and the State Medical Societies also is providing financial support.

Legal battle in West Virginia

The fight over Medicaid payment in West Virginia also is continuing.

Eight West Virginia health care centers sued the state in January, claiming it is calculating Medicaid payments incorrectly. The centers asked a judge to order the state to start paying proper rates immediately. The U.S. District Court for the Southern District of West Virginia, Charleston Division, on Sept. 28 denied the injunction because the centers failed to "demonstrate harm."

But the court allowed the medical centers a chance to refile their motion. The court also denied the state's motion to dismiss the case, allowing the lawsuit to move forward.

"The decision was a positive development. The case can now proceed [on its] merits," Ted Waters, an attorney for the plaintiffs, said in an email. "We had hoped for interim relief, but that is not foreclosed to us if we want to refile our motion for a preliminary injunction, which we are considering."

Attorneys have a status conference before the judge in November. At this article's deadline, the West Virginia Dept. of Health and Human Resources had not returned calls seeking comment.

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