9th Circuit allows cuts to move forward.

The U.S. Court of Appeals for the 9th Circuit lifted a preliminary injunction December 13 that had blocked the state of California from implementing cuts to the rates it pays to Medicaid providers by as much of 10 percent, pursuant to a bill approved by the state legislature in 2011.

Stethoscope on one dollar bills
Court ruling means cuts

A major disability rights organization, the Independent Living Center of Southern California, and a group of pharmaceutical organizations had sought to block the rate cuts, arguing that the rate cuts would lead to a decrease in providers and reduce services to beneficiaries.

The Medicaid Act requiring states to provide rates at a high enough rate to assure that “care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”

The Act expressly delegates authority to the Department of Health and Human Services to approve or disapprove of changes to state reimbursement plans.

Relying on a 1997 9th Circuit case, the plaintiffs argued that the Medicaid Act requires states to analyze the provider’s costs when making this determination.

However, the court deferred to DHHS’ interpretation of the statute: that the Secretary of the DHHS can approve a plan if it analyzes beneficiary accesses using a range of other factors, apart from the costs to the providers. These factors include the total number of provider and beneficiaries, as well as the number of people eligible for different services.

In its decision, the 9th Circuit ruled that it only had the authority to determine whether the Secretary’s final decision to approve the state plan was reasonable, not whether the state used a reasonable methodology.

“The Medicaid program is a colossal undertaking, jointly funded by the federal government and the States,” the court stated. “Congress explicitly granted the Secretary authority to determine whether a State’s Medicaid plan complies with federal law. The Secretary understands the Act and is especially cognizant of the all-important yet sometimes competing interests of efficiency, economy, quality of care, and beneficiary access.”

The federal agency’s interpretation was not a factor in the 1997 case since the federal government had not yet approved the states cuts to reimbursement rates at the time of the lawsuit.

California first tried to cut its Medicaid payment rates in 2008. The cuts were subsequently blocked by the district court and the 9th Circuit. The Supreme Court subsequently held a hearing on the case on a narrower standing issued, but remanded the case to the 9th Circuit. Amid California’s ongoing budget crisis, the state legislature again voted to the cut the rates in 2011, triggering this separate lawsuit.