Healthcare Business News

Calif. Medicaid case heads back to lower court

By Gregg Blesch
Posted: February 22, 2012 - 12:45 pm ET

(Story updated with comment at 1:45 p.m. ET.)

The U.S. Supreme Court sent a widely watched California Medicaid case back to a lower court, declining to rule whether providers can sue states to enforce the federal statute.

The California Medical Association, however, viewed the decision as a “win for physicians and their patients” because the opinion suggests that providers may have a mechanism to challenge Medicaid policies in the courts, according to a news release.

California physicians, hospitals and other providers argued in five lawsuits that state amendments to the Medicaid program, including a 10% reimbursement cut, violated language in the federal law that payments are sufficient to sustain quality and access for beneficiaries. The 9th U.S. Court of Appeals agreed and issued injunctions blocking the state from making the changes.

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In the meantime, however, the CMS approved some of the plan amendments and the state withdrew most of the others.

“While the cases are not moot, they are now in a different posture,” Justice Stephen Breyer wrote in an opinion for a 5-4 majority. “The providers and beneficiaries continue to believe that the reductions violate the federal provision the agency's view to the contrary notwithstanding.” The 9th Circuit's injunctions remain in place.

Breyer noted, however, that the providers may now more appropriately seek review of the CMS' decisions rather than basing their challenge on the supremacy of federal law over the state actions. Breyer noted that the administrative review requires deference to the agency's decisions and “to permit a difference in result here would subject the states to conflicting interpretations of federal law by several different courts (and the agency), thereby threatening to defeat the uniformity that Congress intended.”

The Supreme Court remanded the case to the 9th Circuit.

Lloyd Bookman, a lawyer representing several of the provider groups in the case, including the California Hospital Association, said in an e-mailed statement that the plaintiffs are “very pleased that the Supreme Court appears to have recongmized the ability of beneficaries and providers to challenge Medicaid rate reductions under the” Administrative Procedures Act.

California providers recently won injunctions blocking subsequent reimbursement cuts based on the argument that the CMS' approval of them was “arbitrary and capricious.”

“Our view is that this approach is a viable one to obtain judicial review of the rate cuts,” Bookman said in the e-mail.

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