Casting doubt over California Gov. Arnold Schwarzenegger's aggressive budget-balancing efforts, a federal judge has temporarily blocked part of a measure designed to save hundreds of millions of dollars by cutting reimbursements to physicians who treat low-income residents covered by Medi-Cal, the state's Medicaid program.
In issuing his preliminary injunction, Chief U.S. District Judge David Levi in Sacramento agreed with providers that the 5% cut in payment rates that was set to take effect Jan. 1 would violate the federal Medicaid Act by making it more difficult for Medi-Cal patients to receive quality medical care. A coalition of providers and patient advocates led by the California Medical Association sued the state, arguing that the cuts would force doctors to drop out of the Medi-Cal program and thereby jeopardize patients' access to care (Dec. 22/29, 2003, p. 12).
"This decision will prevent further erosion of access to care for our most vulnerable patients," said Jack Lewin, the CMA's chief executive officer. In his 42-page ruling, Levi wrote that the 5% cut would reduce the number of providers in the program and adversely affect access and quality of care.
The injunction could give weight to a similar lawsuit filed in Arizona last month seeking to block the increased copayments recently imposed on thousands of that state's Medicaid enrollees. The lawsuit claims the new fees, implemented to help balance Arizona's budget, violate the Medicaid Act and that HHS broke the law when it approved them.
Levi's ruling relates specifically to the 5% rate reduction signed into law in August 2003 by then-Gov. Gray Davis. Those cuts were expected to save $245 million in the last half of fiscal 2004, which ends June 30.
But the decision also poses a potential setback in the current administration's efforts to plug a multibillion-dollar gap in the state budget. After taking office in November, Schwarzenegger called for an additional 10% cut in Medi-Cal reimbursement rates designed to save another $623 million over the next 18 months. The state Legislature was expected to consider the cuts after Jan. 10, when the governor unveils his full budget proposal for fiscal 2005.
"The ruling effectively blocks the new administration's additional proposed cuts," said Byron Gross, a principal with the Los Angeles-based law firm Hooper, Lundy & Bookman, which represents the plaintiffs. "If they decided to try implementing the (10%) cut anyway, they would quickly find themselves back in court."
The ruling, however, does not cover Medi-Cal beneficiaries in managed-care plans, or about 51.6% of the state's 6.4 million Medi-Cal beneficiaries. Levi said the injunction will remain in effect until the legal challenge is fully resolved, a process that could take several months. But state officials could appeal the ruling by presenting evidence that the cuts are both necessary and feasible.
Meanwhile, three Arizona legal-service agencies have filed a class-action lawsuit, contending the higher copayments charged by the state's Medicaid program exceed federal limits, which allow only "nominal" amounts. The new rates include $4 for a generic drug, $10 for a brand-name drug, $5 for a doctor visit and $30 for nonemergency use of an emergency room. Previously, there was no charge for prescriptions, a $1 charge per doctor visit and a $5 charge for nonemergency use of the ER.
The new fees went into effect in October after a legislative mandate to implement cost-sharing strategies to help narrow the state deficit. They only apply to about 100,000 beneficiaries, who wouldn't normally meet income requirements for Medicaid but now qualify thanks to a ballot measure passed in 2000 that expanded coverage to all state residents living below the federal poverty level. Arizona has 960,000 Medicaid enrollees.
The higher copayments have impeded beneficiaries' access to quality care, said Ellen Katz, a lawyer with the William E. Morris Institute for Justice, one of the three organizations representing the plaintiffs. Katz said she expects a ruling on the plaintiffs' request for a preliminary injunction by early February.