A district court issued a preliminary injunction prohibiting the California Department of Health Services from implementing a ten percent reduction in the Medi-Cal fee-for-service (FFS) reimbursement rate paid to providers for services on or after July 1, 2008. Petitioners who sought the injunction included health care advocates, Medi-Cal providers and recipients. The prohibition of the cut was not applicable to services provided at acute care hospitals or reimbursements to managed care organizations. The petitioners presented evidence that they will likely succeed on their claim that providers and recipients will suffer irreparable harm if the rate cuts were implemented.
Prior actions
The 9th Circuit Court of Appeals remanded this case back to the district court after overturning a previous denial of the injunction by the healthcare providers. The healthcare providers argued that Federal law was superior to state law and prohibited the implementation of California Assembly Bill X3 5 (AB 5) because it is was preempted by. According to the Ninth Circuit in Orthopaedic Hospital v. Belshe requires the Department to conduct reasonable cost studies that provide reliable data for rate-setting. The record showed that the Department did not conduct the appropriate studies to determine if the rate cut would result in reduced access of care if AB 5 is implemented.
Congressional action
The evidence presented showed that a 10 percent rate cut could cause irreparable harm to beneficiaries particularly with regard to prescription drugs. Although large chain pharmacies would be able to absorb a 10 percent rate cut, it would adversely affect independent pharmacies who constitute 33 percent of community pharmacies in California. Independent pharmacies may limit or cease providing services to Medi-Cal beneficiaries. Several independent pharmacies testified that they would cease selling generic prescriptions to Medi-Cal patients due to cost prohibitive issues in obtaining and dispensing the drugs. In addition, single source or name brand drugs would be reimbursed at an amount below a pharmacy's costs.
The court in Orthopaedic Hospital et al v. Belshe also determined that requires that payment must be a sufficient amount to enlist enough providers who will provide health care access to Medicaid recipients and it is not justifiable for the Department to reimburse providers substantially less than their costs for purely budgetary reasons.
Evidence provided showed that cost reductions if enacted would reduce the availability of health care from physicians, dentists, and others. Provider rates affect access to care. Testimony was delivered that physicians may not accept new patients if the rate cuts were implemented. Further cuts may impact the number of specialists in the Medi-Cal program and increased use of emergency room and other more expensive forms of care would result. However, the court chose not to enjoin managed care plans because they have contractual obligations and non-contract acute care hospitals because other providers would be able to provide outpatient services if certain facilities cease to provide care.
Balancing hardships
The court is mindful of California's fiscal crisis which is estimated to be $14.2 billion over budget, and is mindful of the public interest in ensuring that the state has enough money to meet its financial obligations, but because the state accepts federal funds under the Medicaid Act, it must abide by the regulations imposed by Congress which imposes particular duties such as ensuring access to health care. The court held there is the competing and compelling public interest in ensuring access to health care and in light of the circumstances the court finds that the public's access to health care outweighs fiscal concerns.
Source: Independent Living Center of Southern California v. Shewry, W.D. Cal., Aug. 18, 2008.
For more information on this and related topics, consult the CCH® Medicare and Medicaid Guide.
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